This HTML version is machine-generated. Always consult the original document.

INTERNATIONAL CENTRE FOR SETTLEMENT OF INVESTMENT DISPUTES
1818 H STREET, NW | WASHINGTON, DC 20433 | USA
TELEPHONE +1 (202) 458 1534 | FACSIMILE +1 (202) 522 2615
WWW.WORLDBANK.ORG/ICSID

CERTIFICATE

RASIA FZE AND JOSEPH K. BORKOWSKI

V.

REPUBLIC OF ARMENIA

(ICSID CASE NO. ARB/18/28)

I hereby certify that the attached document is a true copy of the Tribunal’s Award dated January 20, 2023.

Signature

Meg Kinnear
Secretary-General

Washington, D.C., January 20, 2023

INTERNATIONAL CENTRE FOR SETTLEMENT OF INVESTMENT DISPUTES

In the arbitration proceeding between

RASIA FZE AND JOSEPH K. BORKOWSKI

Claimants

and

REPUBLIC OF ARMENIA

Respondent

ICSID Case No. ARB/18/28

AWARD

Members of the Tribunal
Ms. Jean E. Kalicki, President
Mr. John Beechey CBE
Mr. J. Christopher Thomas KC

Secretary of the Tribunal
Ms. Martina Polasek

Assistant to the Tribunal
Dr. Joel Dahlquist

Date of dispatch to the Parties: 20 January 2023

[Page i]

REPRESENTATION OF THE PARTIES

*(at Skadden, Arps, Slate, Meagher & Flom LLP in New York from September 2022)

[Page ii]

[Page vi]

TABLE OF SELECTED ABBREVIATIONS/DEFINED TERMS

[Page vii]

[Page viii]

[Page 1]

I. INTRODUCTION AND PARTIES

1. This case concerns a dispute submitted to the International Centre for Settlement of Investment Disputes (“ICSID” or the “Centre”) on the basis of:

(i) the 2012 Southern Armenia Railway Concession Agreement, 28 July 2012 (the “Railway Concession”);¹

(ii) the 2012 Southern Armenia High Speed Road Concession Agreement, 28 July 2012 (the “Road Concession”);²

(iii) the Treaty Between the United States of America and the Republic of Armenia Concerning the Reciprocal Encouragement and Protection of Investment, which was signed on 23 September 1992 and entered into force on 29 March 1996 (the “BIT”);³ and

(iv) the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, which entered into force on 14 October 1966 (the “ICSID Convention”).

2. The Claimants are Rasia FZE (“Rasia”), a company incorporated in the United Arab Emirates, and Mr. Joseph Borkowski (“Mr. Borkowski”), a natural person having the nationality of the United States of America (together, the “Claimants”).

3. The Respondent is the Republic of Armenia (“Armenia” or the “Respondent”).

4. The Claimants and the Respondent are collectively referred to as the “Parties.” The Parties’ representatives and their addresses are listed above on page (i).

5. Rasia submits a dispute with Armenia under the Railway Concession and Road Concession (together the “Concessions”), which contain the following identical provisions at Article XVII, Section 66:

¹ C-1, Railway Concession. ↩
² C-2, Road Concession. ↩
³ CLA-1, BIT. ↩

[Page 2]

66.1 The Parties shall first attempt amicably to settle all disputes arising out of or relating to this Agreement.

66.2 Should the Parties not be able to do so within 30 (thirty) days of the declaration of a dispute, then they shall refer the matter for resolution to the Minister of Transportation and Communication of the Republic of Armenia and Chief Executive Officer of the Concessionaire.

66.3 Should the Minister of Transportation and Communications of the Republic of Armenia and the Chief Executive Officer of the Concessionaire not be able to resolve the dispute within 30 (thirty) days, the Government and the Concessionaire stipulate that the transaction to which this Agreement relates is an investment and hereby consent to submit to the International Centre for Settlement of Investment Disputes (“ICSID”) any dispute arising out of or relating to this Agreement, including any question regarding its existence, validity or termination, for settlement by arbitration pursuant to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (“ICSID Arbitration”) ....⁴

6. Mr. Borkowski submits a dispute with Armenia under Art. VII of the BIT, which provides as follows:

1. For purposes of this Article, an investment dispute is a dispute between a Party and a national or company of the other Party arising out of or relating to (a) an investment agreement between that Party and such national or company; (b) an investment authorization granted by that Party’s foreign investment authority to such national or company; or (c) an alleged breach of any right conferred or created by this Treaty with respect to an investment.

2. In the event of an investment dispute, the parties to the dispute should initially seek a resolution through consultation and negotiation. If the dispute cannot be settled amicably, the national or company concerned may choose to submit the dispute for resolution:

(a) to the courts or administrative tribunals of the Party that in a Party to the dispute; or

(b) in accordance with any applicable, previously agreed dispute-settlement procedures; or

(c) in accordance with the terms of paragraph 3.

3. (a) Provided that the national or company concerned has not submitted the dispute for resolution under paragraph 2 (a) or (b) and that six months have elapsed from the date on which the dispute arose, the national or

⁴ C-1, Railway Concession, Article XVII, Section 66; C-2, Road Concession, Article XVII, Section 66. ↩

[Page 3]

company concerned may choose to consent in writing to the submission of the dispute for settlement by binding arbitration:

(i) to the International Centre for the Settlement of Investment Disputes (“Centre”) established by the Convention on the Settlement of Investment Disputes between States and Nationals of other States, done at Washington, March 18, 1965 (“ICSID Convention”), provided that the Party is a Party to such Convention; or

(ii) to the Additional Facility of the Center, if the Center is not available; or

(iii) in accordance with the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL); or (iv) to any other arbitration institution, or in accordance with any other arbitration rules, as may be mutually agreed between the parties to the dispute.

(b) once the national or company concerned has so consented, either Party to the dispute may initiate arbitration in accordance with the choice so specified in the consent.

4. Each Party hereby consents to the submission of any investment dispute for settlement by binding arbitration in accordance with the choice specified in the written consent of the national or company under paragraph 3. Such consent, together with the written consent of the national or company when given under paragraph 3 shall satisfy the requirement for:

(a) written consent of the parties to the dispute for purposes of Chapter II of the ICSID Convention (Jurisdiction of the Centre) and for purposes of the Additional Facility Rules; and

(b) an “agreement in writing” for purposes of Article II of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, done at New York, June 10, 1958 (“New York Convention”).

II. PROCEDURAL HISTORY

7. On 24 July 2018, ICSID received a request for arbitration dated 19 July 2018 from Rasia and Mr. Borkowski against Armenia (the “Request for Arbitration”), along with exhibits C-1 through C-60 and legal authority CL-1.

8. On 3 August 2018, the Secretary-General of ICSID registered the Request in accordance with Article 36(3) of the ICSID Convention and notified the Parties of the registration. In the Notice of Registration, the Secretary-General invited the Parties to proceed to constitute an arbitral tribunal

[Page 4]

as soon as possible in accordance with Rule 7(d) of ICSID’s Rules of Procedure for the Institution of Conciliation and Arbitration Proceedings.

9. By letters of 31 July 2018 (Claimants), 28 August 2018 (Respondent), 6 September 2018 (Claimants), 13 September 2018 (Respondent), 24 September 2018 (Respondent) and 25 September 2018 (Claimants), in accordance with Article 37(2)(a) of the ICSID Convention, the Parties agreed that Tribunal would consist of three arbitrators, to be appointed as follows:

The Claimants shall appoint an arbitrator as soon as possible and notify the Respondent of the appointment.

The Respondent shall appoint its arbitrator and notify the Claimants of the appointment within 45 calendar days of the Claimants notifying the Respondent of the appointment of their arbitrator. In the event the Respondent fails to appoint an arbitrator within 45 calendar days of receipt of [ICSID’s letter of September 20, 2018], the Claimants may request the Chairman of the Administrative Council of ICSID to make an appointment on the Respondent’s behalf. The Claimants will entertain any reasonable request for an extension of time before making such a request.

Within 30 calendar days of the appointment of the Respondent’s arbitrator, the two party-appointed arbitrators shall attempt to agree on the appointment of a third arbitrator to serve as the President of the Tribunal, with each party-appointed arbitrator consulting with the party having made the appointment; and

In the absence of agreement between the two party-appointed arbitrators within 30 calendar days as described in paragraph (3) above (or such other period agreed by the parties), the parties shall, through the Secretary-General, jointly request in writing that the Chairman of the Administrative Council designate an arbitrator to be the President of the Tribunal.

10. By letter of 6 September 2018, the Claimants appointed Mr. John Beechey CBE, a British national, as arbitrator. On 28 September 2018, after the Parties had confirmed their agreement on the method of constitution of the Tribunal, ICSID sought the acceptance of Mr. Beechey’s appointment. By letter of 12 October 2018, ICSID informed the Parties that Mr. Beechey had accepted his appointment.

11. By letter of 18 October 2018 (received by the ICSID Secretariat on 22 October 2018), the Respondent requested an extension of time to appoint its arbitrator. By letter of 22 October 2018, ICSID invited the Parties to communicate any agreement on such extension made pursuant to paragraph (2) of the Parties’ agreement on the method of constitution of the Tribunal. The Parties did not revert regarding any agreement, however, the Claimants did not object to an extension.

[Page 5]

12. By letter of 5 November 2018, the Respondent appointed Mr. J. Christopher Thomas KC, a national of Canada, as arbitrator. By letter of 12 November 2018, ICSID informed the Parties that Mr. Thomas had accepted his appointment and that, in accordance with the Parties’ agreed method, the co-arbitrators would proceed with the appointment of the President of the Tribunal.

13. By email of 26 December 2018, Armenia informed ICSID that it was revoking the power of attorney previously granted to Cleary Gottlieb Steen & Hamilton LLP and appointing Baker & McKenzie LLP as counsel. An updated power of attorney was provided.

14. By email of 20 January 2019, the co-arbitrators informed the Parties of their appointment of Ms. Jean E. Kalicki, a national of the United States, as President of the Tribunal. On 22 January 2019, ICSID sought Ms. Kalicki’s acceptance of her appointment.

15. On 23 January 2019, in accordance with Rule 6(1) of the ICSID Rules of Procedure for Arbitration Proceedings (the “Arbitration Rules”), the Secretary-General of ICSID notified the Parties that all three arbitrators had accepted their appointments and that the Tribunal was therefore deemed to have been constituted on that date. Ms. Milanka Kostadinova, ICSID Senior Legal Adviser, was designated to serve as Secretary of the Tribunal.

16. The Tribunal is thus composed of Ms. Jean E. Kalicki, President, appointed by her co-arbitrators; Mr. John Beechey, appointed by the Claimants; and Mr. J. Christopher Thomas, appointed by the Respondent.

17. In accordance with ICSID Arbitration Rule 13(1), the Tribunal held a first session with the Parties on 4 March 2019, by teleconference.

18. Following the first session, on 13 March 2019, the Tribunal issued Procedural Order No. 1 recording the agreement of the Parties on procedural matters. Procedural Order No. 1 provides, inter alia, that the applicable Arbitration Rules are those in effect from 10 April 2006, that the procedural language is English, and that the place of proceeding is Frankfurt, Germany. Procedural Order No. 1 also set out the agreed schedule for the proceedings.

19. In accordance with the agreed procedural calendar, on 7 June 2019, the Claimants filed their Memorial on the Merits (the “Memorial”) with the expert report of Kiran Sequeira, including appendices A through E and exhibits KS-1 through KS-189; the witness statement of Andrew Thornber; the witness statement of Chad Tappendorf with exhibits CT-1 through CT-10; the

[Page 6]

witness statement of Joseph Borkowski with exhibits JB-1 through JB-4; exhibits C-61 through C-222; and legal authorities CL-2 through CL-70.

20. The procedural calendar contemplated that the Respondent file any request for the bifurcation of the proceeding relating to issues of jurisdiction and admissibility by 15 July 2019. On 15 July 2019, the Respondent confirmed that it would not submit such a request.

21. By letter of 2 December 2019, the Claimants informed the Tribunal that Quinn Emanuel Urquhart & Sullivan LLP would replace Sherman & Sterling LLP as counsel of record. By letter of 9 December 2019, ICSID transmitted additional disclosures from Ms. Kalicki and Mr. Beechey based on the Claimants’ notification of new counsel.

22. On 9 December 2019, the Respondent filed its Counter-Memorial on the Merits (the “Resp. Counter-Mem.”) with the expert report of John H Winner with appendices 1 through 4 and exhibits JW-1 through JW-59; the witness statement of Artur Arakelyan with exhibits AA-1 through AA-7; exhibits R-1 through R-63; and legal authorities RL-1 through RL-58.

23. By letter of 13 January 2020, the Tribunal asked the Parties to confirm, by 21 January 2020, if they would consent to the appointment of Dr. Joel Dahlquist as Assistant to the Tribunal. The Parties confirmed their agreement to the appointment of Dr. Dahlquist by emails of 24 January 2020 (Claimants) and 25 January 2020 (Respondent). By email of January 28, 2020, ICSID transmitted Dr. Dahlquist’s signed declaration.

24. Following exchanges between the Parties concerning their respective requests for production of documents, the Parties’ completed schedules were transmitted to the Tribunal on 17 February 2020.

25. On 26 February 2020, the Tribunal issued Procedural Order No. 2 concerning the production of documents. Annex A to the Order set out the Tribunal’s decisions on the Claimants’ requests and Annex B set out the decisions on the Respondent’s requests.

26. By letter of 31 March 2020, the Parties informed the Tribunal that, due to the COVID-19 pandemic, they had agreed to extend the time limits for document production and their remaining submissions. Additionally, the Claimants requested the Tribunal to (i) order the Respondent to comply with Procedural Order No. 2 with regard to the organization of document production; and (ii) approve the Claimants’ appointment of Dr. Aram Orbelyan, a former Deputy Minister of Justice of the Republic of Armenia, as co-counsel.

[Page 7]

27. By letter of 1 April 2020, the Tribunal approved the revised calendar and invited the Respondent’s observations on the Claimants’ two applications by 8 April 2020.

28. By letter of 8 April 2020, the Respondent filed its observations, objecting to the Claimants’ applications. In response to the Tribunal’s invitation, on 16 April 2020, the Claimants submitted their reply. On 17 April 2020, the Respondent sought the Tribunal’s permission to submit to the Tribunal only an allegedly privileged document relevant to the application concerning Dr. Orbelyan. By email of 20 April 2020, the Claimants stated that they were content for the Tribunal to review the document proposed by the Respondent to determine its relevance to the case and whether it properly was subject to privilege.

29. Based on the Claimants’ consent, by letter of 21 April 2020, the Tribunal invited the Respondent to provide the proposed document to the Tribunal for in camera review in connection with its privilege claims. On 22 April 2020, the Respondent provided the document, a 29 December 2011 email from Dr. Orbelyan, in English and Armenian, and indicated the portions that it contended were subject to privilege.

30. By letter of 23 April 2020, the Tribunal upheld the claim to privilege on certain portions of the document and directed the Respondent to produce it (redacted for the privileged portions) to the Claimants. The redacted document was produced to the Claimants on the same date.

31. On 27 April 2020, the Tribunal issued Procedural Order No. 3, denying the Claimants’ two applications of 16 April 2020 and deferring to a later stage in the proceeding the Respondent’s request for a decision on costs concerning the Claimants’ applications.

32. By letter of 19 May 2020, the Claimants requested that the Tribunal order the Respondent to produce a further limited category of documents. By letter of 22 May 2020, the Respondent objected to the Claimants’ request. On 2 June 2020, the Tribunal ordered the Respondent to produce, by no later than 12 June 2020, three of the categories of documents requested by the Claimants. The remainder of the Claimants’ requests were denied.

33. By letter of 25 June 2020, the Claimants requested that the Tribunal (i) invite the Respondent to call Messrs. Gagik Grigoryan and Gagik Beglaryan as witnesses or, should the Respondent decline to do so, compel their testimony as non-party witnesses; and (ii) direct the Respondent to explain whether it had searched the files of Messrs. Grigoryan and Beglaryan to identify documents responsive to the Tribunal’s order of 2 June 2020 for the production of documents.

[Page 8]

34. By letter of 1 July 2020, the Respondent asked the Tribunal to deny the Claimants’ requests of 25 June 2020 and requested the Tribunal to order the Claimants to provide information with respect to their own document searches. After seeking leave to do so, the Claimants filed further observations on these matters by letter of 7 July 2020.

35. On 10 July 2020, the Tribunal issued Procedural Order No. 4 in which it (i) denied the Claimants’ request concerning Mr. Beglaryan; (ii) called upon the Respondent to locate Mr. Grigoryan, but deferred its decision on whether he should be called to provide testimony until after completion of the written phase of the proceedings; (iii) denied both Parties’ requests for further document production orders or regarding compliance with previous orders; and (iv) deferred until a later stage in the proceedings both Parties’ requests that costs be awarded in connection with these matters. In accordance with the Tribunal’s directions, the Respondent subsequently informed the Tribunal that Mr. Grigoryan was residing in Yerevan, Armenia.

36. On 13 July 2020, the Respondent filed a Request for Security for Costs with exhibits R-64 through R-66 and legal authorities RL-59 through RL-64. The Tribunal invited the Claimants’ comments on the Request for Security for Costs by 30 July 2020.

37. By letter of 19 July 2020, the Claimants informed the Tribunal that the Parties had agreed to a three-day extension for the filing of the Reply and Rejoinder on Jurisdiction and the Merits until 23 July 2020 and 24 December 2020, respectively. The Tribunal approved the extension on 20 July 2020.

38. On 24 July 2020, the Claimants filed their Reply on Jurisdiction and the Merits (the “Reply”) with the expert report of Thomas Harrison with exhibits TH-1 through TH-83; the second expert report of Kiran Sequeira with appendices F through I and exhibits KS-190 through KS-245; the second witness statement of Andrew Thornber with exhibits AT-1 through AT-8; the second witness statement of Chad Tappendorf with exhibits CT-11 through CT-13; the second witness statement of Joseph Borkowski with exhibit JB-5; exhibits C-223 through C-318; and legal authorities CL-71 through CL-132.

39. On 30 July 2020, the Claimants filed their Response on Security for Costs with legal authorities CL-133 through CL-137.

[Page 9]

40. Following leave granted by the Tribunal, on 6 August 2020, the Respondent filed a Reply on Security for Costs with the witness statement of Van Krikorian with exhibit VK-1, and legal authority RL-61.

41. The Claimants were also granted leave to file a Rejoinder on Security for Costs and submitted it on 13 August 2020, together with the third witness statement of Joseph Borkowski with exhibits JB-6 through JB-19; exhibit C-319; and legal authority CL-138.

42. After considering a request from the Respondent to file further comments on security for costs and the Claimants’ objection to the request, the Tribunal granted a final, short round of submissions on security for costs.

43. On 19 August 2020, the Respondent filed its Further Comments in Support of Respondent’s Request for Security for Costs with the second witness statement of Van Krikorian with exhibits VK-2 and VK-3; exhibits R-67 through R-69; and legal authorities RL-65 and RL-66.

44. By email of 21 August 2020, on the date due for its further comments on security for costs, the Claimants stated that they were awaiting a final piece of evidence and asked the Tribunal for an extension until 25 August 2020. The Tribunal granted the Claimants’ request.

45. On 26 August 2020, the Claimants filed their Further Comments in Response to the Respondent’s Request for Security for Costs with the fourth witness statement of Joseph Borkowski with exhibits JB-20 through JB-33; exhibits C-320 and C-321; and legal authorities CL-139 through CL-145.

46. By email of 14 September 2020, the Tribunal asked the Parties to provide their comments on the possibility of holding the hearing on jurisdiction and the merits by remote video conference technology, in light of “ongoing developments in relation to COVID-19, including both health and safety developments and various governmental and other restrictions on movement and gatherings that have been put in place in the various countries in which counsel for the Parties and members of the Tribunal reside.” The Tribunal offered additional days should a hearing by video conference prove necessary.

47. On 14 September 2020, the Tribunal issued Procedural Order No. 5 with its Decision on the Respondent’s Request for Security for Costs. The Tribunal denied the Respondent’s request and deferred the question of costs for a later stage in the proceedings.

[Page 10]

48. By joint email of 7 October 2020, the Parties confirmed their availability for a remote hearing and asked that the Tribunal add 16, 20 and 27 February 2021 as possible hearing dates. The Parties asked that ICSID nevertheless proceed with arrangements for an in-person hearing in Frankfurt in case travel restrictions were lifted by February 2021.

49. By email of 8 October 2020, the Tribunal confirmed that, in accordance with the Parties’ agreement, it had reserved the additional hearing dates and instructed ICSID to proceed with in-person arrangements in Frankfurt. It expected to make a final decision on the format of the hearing by late November 2020.

50. By email of 23 November 2020, the Tribunal informed the Parties that due to ongoing travel restrictions and the Frankfurt International Arbitration Centre’s inability to host a hearing in compliance with local health regulations, it would proceed with plans for a remote hearing.

51. By email of 18 December 2020, the Tribunal circulated a draft Procedural Order No. 6 to facilitate the Parties’ discussions on the organization of the hearing and invited the Parties to file comments by 8 January 2021.

52. By email of 24 December 2020, the Respondent requested an extension to file its Rejoinder until 28 December 2020 and stated that the Claimants had agreed to this request. By email of the same date, the Tribunal granted the extension.

53. On 28 December 2020, the Respondent filed its Rejoinder on the Merits (the “Rejoinder”) with the second expert report of John H. Winner with appendices 7 and 8 and exhibits JW-60 through JW-81; the witness statement of Gagik Grigoryan with exhibits GG-1 through GG-7; the second witness statement of Artur Arakelyan with exhibits AA-8 through AA-10; exhibits R-70 through R-150; and legal authorities RL-67 through RL-91.

54. On 11 January 2021, the Parties notified the Tribunal of the witnesses they intended to call for cross-examination at the hearing.

55. By joint email of 15 January 2021, following an extension granted by the Tribunal, the Parties submitted their points of agreement and disagreement on draft Procedural Order No. 6.

56. On 20 January 2021, the Tribunal held a pre-hearing organizational meeting with the Parties by video conference. Following the meeting, on the same date, the Tribunal issued directions

[Page 11]

concerning the hearing and invited the Parties to confer and revise draft Procedural Order No. 6 considering the discussions at the meeting and the Tribunal’s directions.

57. By letter of 27 January 2021, the Claimants requested (i) the deferral of the testimony of Mr. Thomas Harrison and Mr. John Winner to April 2021; (ii) leave to submit additional documents into the record, and (iii) that the Tribunal order the Respondent to stop using confidential information submitted in the arbitration to conduct discovery against the Claimants. The Tribunal invited the Respondent’s comments on the Claimants’ 27 January 2021 letter by 1 February 2021.

58. By letter of 28 January 2021, the Secretary-General of ICSID informed the Parties that due to Ms. Milanka Kostadinova’s upcoming retirement from the Centre, Ms. Martina Polasek, ICSID Deputy Secretary-General, would take over as Secretary of the Tribunal in this case.

59. By email of 29 January 2021, the Parties submitted a revised draft Procedural Order No. 6, with a point of disagreement concerning the order of witnesses who would testify at the hearing.

60. By email of 30 January 2021, the Tribunal directed the Parties on the order of the witnesses, noting that each side was free to determine the order of its witnesses and experts.

61. By letter of 1 February 2021, the Respondent objected to the Claimants’ application of 27 January 2021 and requested the Tribunal to order Mr. Borkowski to permit KPMG to respond to a request for information made by the Respondent.

62. By email of 2 February 2021, the Claimants requested permission to respond to the Respondent’s letter of 1 February 2021. The Tribunal granted the Claimants until noon ET on 3 February 2021 to provide their comments.

63. By email of 2 February 2021, ICSID asked the Parties to provide further details about the organization of the hearing, including their agreement regarding the use of a 360-degree camera and their availabilities for a Zoom test call.

64. On 2 February 2021, the Tribunal issued Procedural Order No. 6 concerning the organization of the hearing.

65. By letter of 3 February 2021, the Claimants provided their comments on the Respondent’s letter of 1 February 2021. On the same date, the Respondent sought permission to respond to the Claimants’

[Page 12]

letter. The Tribunal granted the Respondent until noon ET on 5 February 2021 to submit its comments. The Respondent filed its comments accordingly.

66. On 6 February 2021, the Tribunal issued Procedural Order No. 7: (i) admitting certain documents proposed by the Claimants into the record; (ii) admitting one item subject to the fulfillment of certain conditions (including the filing of a witness statement by Mr. Weixin and making him available for cross-examination), to be accepted by the Claimants by 9 February 2021; and (iii) granting the Respondent’s request to have KPMG confirm the authenticity of exhibit JB-17.

67. On 8 February 2021, ICSID, FTI, the court reporter, interpreters and the Parties held a test video conference on Zoom.

68. On 8 February 2021, the Claimants submitted documents responsive to paragraph 34(b) of Procedural Order No. 7 and stated they would revert as soon as possible on paragraphs 34(a) and (d). By email of 9 February 2021, the Claimants asked for an extension until 10 February 2021 to file these documents. The Tribunal granted the extension.

69. On 10 February 2021, the Claimants filed their documents responsive to paragraphs 34(a) and (d) of Procedural Order No. 7. On the same date, the Respondent noted that the Claimants had indicated that they would not submit a witness statement or make available for cross-examination Mr. Weixin, contrary to the condition for admitting certain of the documents. The Respondent therefore requested that the Tribunal not admit into evidence exhibits C-344 through C-362. The Claimants responded to the Respondent’s objections on the following day.

70. On 11 February 2021, the Tribunal issued Procedural Order No. 8, in which it (i) admitted exhibits C-344 through C-346, exhibits C-350 through C-360, and exhibit C-362 into the record; (ii) invited the Respondent to file any responsive evidence to these exhibits by 11 March 2021; (iii) invited the Parties to confirm their availability for an additional Hearing Day on 29 April 2021 to allow additional time for the examination of Mr. Borkowski on Exhibit C-231 and the evidence in paragraph 21 of the Order, as well as any potential testimony by Mr. Weixin and the evidence in paragraph 19 of the Order; (iv) requested the Claimants to provide the ICSID Secretariat with Mr. Weixin’s contact details immediately upon receipt of the Order to enable the Secretary of the Tribunal to invite Mr. Weixin to testify as the Tribunal’s witness; and (v) directed Mr. Borkowski to refrain from any contact with Mr. Weixin until Mr. Weixin had either declined to testify or concluded his testimony at the April Hearing.

[Page 13]

71. By email of 12 February 2021, the Respondent informed the Tribunal that it was not available for an additional hearing day on 29 April 2021. The Respondent requested permission to cross-examine Mr. Borkowski on the newly admitted documents in February rather than April.

72. By email of 12 February 2021, the Tribunal took note that the additional hearing day in April would not be necessary.

73. A hearing on jurisdiction and the merits was held by video conference in two parts, the first from 16-26 February 2021 (the “February Hearing”) and the second on 26 and 27 April 2021 (the “April Hearing”), see paragraphs 88 and 89 below. The following persons were present at the February Hearing:

Tribunal:
Ms. Jean E. Kalicki President
Mr. John Beechey CBE Arbitrator
Mr. J. Christopher Thomas KC Arbitrator

ICSID Secretariat:
Ms. Martina Polasek Secretary of the Tribunal
Ms. Elizabeth Starkey Paralegal
Mr. Oscar Figueroa ICSID Intern

Assistant to the Tribunal:
Dr. Joel Dahlquist Assistant to the Tribunal

For the Claimants:
Mr. Mark McNeill Quinn Emanuel
Ms. Hanna Roos Quinn Emanuel
Ms. Laila Hamzi Quinn Emanuel
Ms. Ashley Hammett Quinn Emanuel
Ms. Athina Manoli Quinn Emanuel
Mr. James Phillips Quinn Emanuel
Mr. Varoujan Avedikian TK & Partners
Mr. Martin Stepanyan TK & Partners
Ms. Larisa Gevorgyan TK & Partners

For the Respondent:
Mr. Grant Hanessian Hanessian ADR, LLC
Ms. Kristina Fridman Baker & McKenzie LLP
Ms. Marlena Harutyunyan Baker & McKenzie LLP
Mr. Victor Dumler Dumler & Partners
Mr. Hayk Pogosyan HAP LLC
Mr. Hayk Hovhannisyan HAP LLC
Mr. Yeghishe Kirakosyan Party Representative

[Page 14]

Mr. Liparit Drmeyan Party Representative
Ms. Kristine Khanazadyan Party Representative
Ms. Mariam Tarverdyan Party Representative
Ms. Parandzem Mikayelyan Party Representative
Mr. Alan Grigorian Party Representative

Court Reporter:
Ms. Laurie Carlisle Hendrex Court Reporter (February 16, 2021)
Ms. Diana Burden Court Reporter (February 17-26, 2021)
Ms. Ann Lloyd Assistant to the Court Reporter

Interpreters:
Ms. Elena Edwards Interpreter
Ms. Helena Bayliss Interpreter

FTI Hearing Coordinators:
Mr. Jamey Johnson FTI
Mr. David Brodsky FTI

74. During the February Hearing, the following persons were examined:

On behalf of the Claimants:
Mr. Joseph K. Borkowski Party and Witness
Mr. Andrew J. Thornber Witness
Mr. Chad L. Tappendorf Witness
Mr. Kiran Sequeira Expert
Mr. Thomas Harrison Expert

On behalf of the Respondent:
Mr. Artur Arakelyan Witness
Mr. Gagik Grigoryan Witness
Mr. John H. Winner Expert
Mr. Pamy J. S. Arora Expert

75. By email of 15 March 2021, the Parties informed the Tribunal that the Parties had agreed to a schedule for post-hearing submissions.

76. By email of 1 April 2021, the Parties informed the Tribunal of their agreement on certain adjustments to the post-hearing submission deadlines. By email of the same date, the Tribunal agreed to the Parties’ modifications.

77. By emails of 9 April 2021, the Parties transmitted their respective demonstrative exhibits.

78. By further email of 9 April 2021, the Claimants, on behalf of the Parties, submitted the Parties’ agreed and disputed corrections to the transcripts.

[Page 15]

79. By email of 13 April 2021, the Claimants informed the Tribunal that the Parties had agreed to postpone the deadline for their first post-hearing briefs until 19 April 2021 and sought the Tribunal’s approval of the adjustment. By email of the same date, the Tribunal confirmed its agreement.

80. By email of 18 April 2021, the Claimants submitted legal authorities CL-147 through CL-150, as well as a revised version of legal authority CL-5.

81. On 19 April 2021, the Tribunal issued Procedural Order No. 9 concerning the Parties’ disputed transcript corrections.

82. On 19 April 2021, the Parties submitted their First Post-Hearing Briefs (“Cl. First PHB” and “Resp. First PHB”).

83. By email of 20 April 2021, ICSID requested the Parties’ comments on the organization of the remainder of the hearing including, inter alia, a revised schedule.

84. By emails of 22 April 2021 (from the Respondent) and 23 April 2021 (from the Claimants), the Parties provided their responses to ICSID’s 20 April 2021 email.

85. On 24 April 2021, the Claimants filed a request for the Tribunal to decide on the admissibility of new evidence. By email of the same date, the Tribunal requested the Respondent’s comments by 3 pm EST on 25 April 2021. By email of the same date, the Respondent objected to the Claimants’ request. By email of 25 April 2021, the Respondent provided further comments on the Claimants’ request.

86. By email of 25 April 2021, the Claimants responded to the Respondent’s emails of 24 and 25 April 2021 and reiterated their request to submit new evidence.

87. On 25 April 2021, the Tribunal issued Procedural Order No. 10 denying the Claimants’ 24 April 2021 application.

88. The April Hearing, the second part of the hearing on jurisdiction and the merits, was held on 26-27 April 2021 by video conference. The following persons were present at the April Hearing:

Tribunal:
Ms. Jean Kalicki President
Mr. John Beechey CBE Arbitrator

[Page 16]

Mr. J. Christopher Thomas KC Arbitrator

ICSID Secretariat:
Ms. Martina Polasek Secretary of the Tribunal
Ms. Elizabeth Starkey Paralegal

Assistant to the Tribunal:
Dr. Joel Dahlquist Assistant to the Tribunal

For the Claimants:
Mr. Mark McNeill Quinn Emanuel
Ms. Hanna Roos Quinn Emanuel
Ms. Laila Hamzi Quinn Emanuel
Ms. Ashley Hammett Quinn Emanuel
Ms. Athina Manoli Quinn Emanuel
Mr. James Phillips Quinn Emanuel
Mr. Varoujan Avedikian TK & Partners
Mr. Martin Stepanyan TK & Partners
Ms. Larisa Gevorgyan TK & Partners
Mr. Joseph K. Borkowski Party Representative

For the Respondent:
Mr. Grant Hanessian Hanessian ADR, LLC
Ms. Kristina Fridman Baker & McKenzie LLP
Ms. Marlena Harutyunyan Baker & McKenzie LLP
Mr. Victor Dumler Dumler & Partners
Mr. Hayk Pogosyan HAP LLC
Mr. Hayk Hovhannisyan HAP LLC
Mr. Yeghishe Kirakosyan Party Representative
Mr. Liparit Drmeyan Party Representative
Ms. Kristine Khanazadyan Party Representative
Ms. Mariam Tarverdyan Party Representative
Ms. Parandzem Mikayelyan Party Representative
Mr. Alan Grigorian Party Representative

Court Reporter:
Ms. Diana Burden Court Reporter
Ms. Ann Lloyd Assistant to the Court Reporter

Interpreters:
Ms. Elena Edwards Interpreter
Ms. Helena Bayliss Interpreter

FTI Hearing Coordinators:
Mr. Jamey Johnson FTI
Mr. Jeff Herzka FTI

89. During the April Hearing, the following persons were examined:

[Page 17]

On behalf of the Claimants:
Mr. Chad L. Tappendorf Witness
Mr. Andrew J. Thornber Witness
Mr. Thomas Harrison Expert
Ms. Frances Hale Expert
Mr. Kiran Sequeira Expert
Ms. Yelena Aleksandrovich Expert
Ms. Caroline Wilczynski Expert
Mr. Greg Johnson Expert

On behalf of the Respondent:
Mr. John H. Winner Expert
Mr. Pamy J. S. Arora Expert

90. By email of 17 May 2021, the Parties submitted their agreed corrections to the transcripts.

91. By email of 20 May 2021, the Parties informed the Tribunal that they had agreed to a 25,000-word limit for their second post-hearing briefs, to be submitted on 18 June 2021, and a 2 July 2021 deadline for their costs submissions. By email of the same date, the Tribunal confirmed its approval.

92. By email of 13 June 2021, the Claimants informed the Tribunal that the Parties had agreed to an extension until 28 June 2021 for the filing of their second post-hearing briefs and until 12 July 2021 for the filing of their costs submissions. By email of 14 July 2021, the Tribunal confirmed its agreement to the extensions.

93. By email of 27 June 2021, the Claimants sought to add Article 289 of the Armenian Civil Code onto the record as legal authority CL-151. By email of 28 June 2021, the Respondent confirmed its agreement. On 29 June 2021, the Tribunal confirmed its approval of the Parties’ agreement.

94. On 28 June 2021, the Parties filed their Second Post-Hearing Briefs (“Cl. Second PHB” and “Resp. Second PHB”).

95. By email of 8 July 2021, the Respondent informed the Tribunal that the Parties had agreed to a one-week extension for the filing of their costs submissions. By email of the same date, the Tribunal confirmed its agreement.

96. The Parties filed their submissions on costs on 19 July 2021.

97. The proceeding was closed on 18 January 2023.

[Page 18]

III. FACTUAL BACKGROUND

98. The following is a summary of the facts as pleaded by the Parties or established by the evidence, without prejudice to any legal conclusions by the Tribunal, which will be addressed in later sections. The summary is not intended to be exhaustive, and the absence of reference to particular facts or assertions, or to the evidence supporting any particular fact or assertion, should not be taken as an indication that the Tribunal did not consider those matters. The Tribunal has carefully considered all evidence submitted to it in the course of these proceedings.

99. The present dispute concerns two separate projects, one for road construction in southern Armenia (the “Road Project”) and the other for a railway in the same part of the country (the “Railway Project”). These two projects are collectively referred to as the “Projects” in this Award.

A. COUNTRY CONTEXT – THE IMPORTANCE OF IMPROVED NORTH-SOUTH TRANSPORT

100. Well prior to Armenia’s discussions with Rasia, the Government of Armenia had been exploring ways of developing better transport routes to link the north of the country (which borders Georgia) and the south (which borders Iran). As a result of international conflicts, Armenia’s borders to the east (with Azerbaijan) and the west (with Turkey) have been closed since the early 1990s. As a result, the only borders open to Armenia are with Georgia and Iran.⁵

101. The southern region of Armenia has been particularly affected by these events. Although the border with Iran remains open to road traffic, there is no current rail access to Iran; the railway network in the rest of Armenia, which is operated by the South Caucasus Railway Closed Joint-Stock Company (“SCR”), a subsidiary of Russian Railways OJSC, does not extend to the Iranian border. As for road traffic, the existing road from the capital Yerevan to Meghri at the Iranian border (about 385 km) is not suitable for high speed traffic. For these reasons, Armenia has long aspired to build both a north-south railway and a modern high speed road connecting the north and south of the country.⁶

102. With respect to road development, well before the events at issue in this case, Armenia was in discussion with international development banks about the “North-South Road Corridor” (“NSRC”), an ambitious road development project for which Armenia required outside funding. In 2009, Armenia obtained multi-tranche facility financing of up to USD 500 million from the

⁵ Resp. Counter-Mem. ¶¶ 21-22. ↩
⁶ Id. ¶¶ 24-26. ↩

[Page 19]

Asian Development Bank (“ADB”).⁷ The NSRC was to be carried out in different tranches, of which the southern portion (Tranche 4) was considered to be the most difficult.⁸ In 2009, the ADB approved a loan of $60 million for Tranche 1, and a feasibility study for subsequent tranches.⁹ In May 2010, PADECO Co. Ltd (“PADECO”) prepared a report for ADB in which, among other things, it proposed a private-partnership model to finance Tranche 4 in a manner that would limit Armenia’s financial exposure and its need to borrow from ADB and/or other development banks.¹⁰ This possibility of involving the private sector in the financing of the southernmost portion of the NSRC provides background to the discussions that ultimately progressed between Armenia and Rasia in connection with the Road Project.

B. THE BACKGROUND TO THE CONCESSION AGREEMENTS (2011-2012)

103. The initial steps towards the Projects were taken in 2011. On 3 October 2011, Rasia signed a confidentiality agreement with Armenia, represented by the then-Minister of Transport and Communication (hereafter the “Minister/Ministry of Transport”), Mr. Manuk Vardanyan. The confidentiality agreement was signed “[i]n connection with the pursuit of the development and financing of a road and railway in Armenia.”¹¹ Later that same month, Mr. Borkowski and Minister Vardanyan met in Armenia, together with then-Prime Minister Mr. Tigran Sargsyan, to discuss the Projects.¹²

104. Also in late October 2011, Mr. Borkowski approached Mr. Chad Tappendorf and Mr. Brandt Mowry, representatives of the United Arab Emirates sovereign wealth fund, Aabar Investments PJS (“Aabar”), about potentially involving Aabar as an investor in the Projects. Aabar and Rasia had previously collaborated on a number of potential investment opportunities, including proposed deals to acquire an NBA basketball team and a Formula One racetrack in New Jersey (neither of

⁷ R-4, ADB, Proposed Multitranche Financing Facility and Administration of Cofinancing, Republic of Armenia: North-South Road Corridor Investment Program, September 2009. ↩
⁸ First Arakelyan Statement ¶¶ 12-13. ↩
⁹ C-265, Email from Mr. J. Borkowski to Mr. G. Grigoryan (attaching Letter from Mr. J. Borkowski to Mr. G. Beglaryan), p. 6 (attaching 18 March 2014 letter from Mr. D. Dole of ADB to Mr. J. Borkowski). ↩
¹⁰ R-5, PADECO Co., Ltd., Armenia: Preparing the North-South Road Corridor Development Project, May 2010, ¶¶ 128-129. ↩
¹¹ C-85, p. 1. ↩
¹² First Borkowski Statement ¶¶ 14-18. ↩

[Page 20]

which came to fruition), and the restructuring of Gobi Coal, a portfolio company with interests in a coal mining venture in Mongolia.¹³

105. Armenia and Rasia entered into a framework agreement on 30 December 2011 (the “Framework Agreement”),¹⁴ in which Rasia was defined as the “Sponsor” and Mr. Borkowski was identified as Rasia’s CEO.¹⁵ Under the Framework Agreement, each Party undertook to “negotiate in good faith with the other on an exclusive basis” with respect to the Projects, with the goal of developing a concession agreement, with associated engineering, financial and environmental feasibility studies, all of which “must be bankable.”¹⁶

106. With respect to the Road Project, the Framework Agreement recited that Armenia “wishes to grant a concession to design, build, finance, operate and maintain ... a new high speed road from Sisian to Megrhi.”¹⁷ The Framework Agreement stated that the terms of a future concession agreement for this new high speed road “may include (i) road availability payments from the Ministry of Transport and Communications, and/or (ii) tolls,” with the concession agreement accordingly also addressing “the Sponsor’s right to freely fix ... tolls, in reasonable profit margins considering Project circumstances.”¹⁸

107. With respect to the Railway Project, the Framework Agreement referred to a potential concession “to design, build, finance, operate and maintain a new railway link between the existing operating railway system in central Armenia and the Southern Armenia border near Meghri.”¹⁹ The terms of a future concession agreement for the railway would have to address “the Sponsor’s right to freely fix ... freight rates ... in reasonable profit margins considering Project circumstances,” as well as “the terms applicable to ... passenger rail transportation, if any,” which “may include cost sharing payments” from the Ministry of Transport.²⁰

108. Mr. Borkowski and the Government of Armenia (the “Government”) then engaged in negotiations during the first half of 2012 over the terms for two concessions for the Projects. During these

¹³ First Borkowski Statement ¶¶ 11, 26; First Tappendorf Statement ¶¶ 17-22; First Thornber Statement ¶ 18; Resp. Counter-Mem. ¶¶ 48-50; February Tr. Day 5 Tappendorf 829:22-8:31:25. ↩
¹⁴ C-52, Framework Agreement between the Republic of Armenia and Rasia FZE, 30 December 2011. ↩
¹⁵ Id. p. 1; Resp. Rej. ¶ 294. ↩
¹⁶ C-52, Framework Agreement, ¶¶ 2, 3, 6. ↩
¹⁷ Id. p. 1. ↩
¹⁸ Id. ¶ 3(k), (m). ↩
¹⁹ Id. p. 1. ↩
²⁰ Id. ¶ 3(k), (l). ↩

[Page 21]

negotiations, Armenia’s lead representative was Minister Manuk Vardanyan, while Rasia, in addition to Mr. Borkowski, was assisted by several law firms, as well as by representatives from Aabar. Rasia contends that during this period, the Government requested an official letter of support from Aabar that would confirm Aabar’s interest in investing in the Projects, and it performed national security checks on Aabar.²¹

109. On 21 May 2012, Mr. Chad Tappendorf of Aabar wrote directly to Minister Vardanyan.²² Mr. Tappendorf was then an Investment Associate at Aabar, responsible for “analyzing business proposals, building presentations and supporting” Mr. Brandt Mowry, then Aabar’s Chief Financial Officer (“CFO”) and Chief Investment Officer (“CIO”), in connection with “deal execution and balance sheet restructuring initiatives.”²³ Mr. Tappendorf’s letter to Minister Vardanyan stated that “[t]his letter serves as a reference of support for Rasia.” He referred to past Aabar dealings with Rasia, stated Aabar’s awareness of Rasia’s “investments ... into and outside of Armenia, specifically in the infrastructure and mining industries,” and added that “we provide our support with Rasia wherever projects are economically appealing.”²⁴

110. In June 2012, Minister Vardanyan was replaced as Minister of Transport by Mr. Gagik Beglaryan, the former mayor of Yerevan. According to Rasia, Mr. Beglaryan requested a second letter of support from Aabar.²⁵ Mr. Tappendorf provided the second letter on 26 June 2012, describing Aabar’s history of “working closely” with Rasia on “investment and co-investment opportunities worldwide,” and noting Aabar’s awareness of Rasia’s discussions with Armenia about the potential Projects. Mr. Tappendorf then stated as follows: “I aim to review the railway and road development projects with a focus on economic feasibility and investment and either directly or through our affiliates consider equity investments and/or lending.” Mr. Tappendorf also stated that “either directly or through our affiliates, I will be focused on considering substantial investments ... in ancillary industries such as agriculture, mining and real estate development.”²⁶

²¹ First Borkowski Statement ¶ 63; Second Borkowski Statement ¶ 160; Cl. Mem. ¶¶ 64-65, 105; Cl. Reply ¶¶ 88, 243; Resp. Rej. ¶¶ 34-36. ↩
²² C-10, Letter from Mr. C. Tappendorf to Minister M. Vardanyan. ↩
²³ First Tappendorf Statement ¶ 11. In December 2012, following Mr. Mowry’s departure from Aabar, Mr. Tappendorf was promoted to the position of Senior Investment Advisor to the Chairman of Aabar, Khadem Abdullah al-Qubaisi. Id. ¶ 13. ↩
²⁴ C-10, Letter from Mr. C. Tappendorf to Minister M. Vardanyan. ↩
²⁵ First Borkowski Statement ¶ 63; Cl. Mem. ¶¶ 65-74. 105; Resp. Rej. ¶ 294; First Tappendorf Statement ¶ 30. ↩
²⁶ C-11, Letter from Mr. C. Tappendorf to Minister G. Beglaryan, 26 June 2012. ↩

[Page 22]

111. Mr. Borkowski testified that in his view, the “essence of [the] bargain” he thereafter struck with Armenia was that “Aabar was to be the anchor equity investor in the Projects once their feasibility had been established.”²⁷ Mr. Tappendorf notes that in July 2012, around the time of the Concession Agreements, Mr. Borkowski appointed him to Rasia’s Investment Advisory Board, in which role he “provided guidance on the projects on behalf of Aabar.”²⁸

112. Armenia observes, however, that neither of Mr. Tappendorf’s 2012 letters actually reflected any commitment on the part of Aabar to invest in the Projects,²⁹ much less “remotely suggest[ed]” or “could possibly be said to put Armenia on notice” that Aabar intended to buy Rasia from Mr. Borkowski.³⁰ This debate becomes relevant to the case for reasons discussed further below.

113. As also will be shown below, from the Armenian side, Mr. Beglaryan (the new Minister of Transport) was to be a significant actor in the lead-up to the present dispute.

C. THE 2012 CONCESSION AGREEMENTS

114. On 28 July 2012, Armenia and Rasia signed two concessions (collectively, the “Concession Agreements” or the “Concessions”) – one for the Road Project (the “Road Concession”) and one for the Railway Project (the “Railway Concession”). The Concessions were signed for Armenia by Minister Beglaryan, and for Rasia (defined as the “Concessionaire”), by Mr. Borkowski, who was identified as Rasia’s CEO and “Sole Shareholder.” The Concession Agreements provided the framework for the development of the Projects.

115. The Concession Agreements are at the heart of this dispute, and the relevance of various provisions is discussed further below. For present purposes, and without prejudice to the Tribunal’s legal analysis, the Tribunal sets out here the provisions that have been discussed in this Arbitration. Some of these are worded identically or very similarly in both Concessions, while others are specific to either the Railway Concession or the Road Concession.

(1) Purpose of Concessions

116. The Preamble of both Concessions stated that the Government “deems it advantageous to have private sector participation in the improvement of its transportation infrastructure so as to benefit

²⁷ Second Borkowski Statement ¶ 31. ↩
²⁸ First Tappendorf Statement ¶ 12. ↩
²⁹ February Tr. Day 4, Hanessian/Borkowski, 660:11-663:13. ↩
³⁰ Resp. Rej. ¶¶ 34-36. ↩

[Page 23]

from private sector know-how, business connections and capital.”³¹ For this purpose, the Government has asked Rasia to implement a project for “financing, designing, building, rehabilitating, possessing, commissioning, operating and maintaining,” respectively, (a) a “new high speed road” between Sisian and Meghri and/or Armenia’s southern border near Meghri (the “High Speed Road”),³² and (b) a “new railway” between the existing operating central railway system and Armenia’s southern border near Meghri (the “Railway”).³³

117. The Preamble of the Concessions also stated that based on preliminary estimates, the budget for constructing the “new high speed road” will be “no less than USD 1.1 billion,”³⁴ and for the new railway will be “no less than USD 1.7 billion.”³⁵ The Concessions acknowledge that “in addition to any equity investment that Rasia FZE is willing to arrange,” the Projects implied at least 75% debt financing through secured lending, “without which implementation of the project may not be feasible” for Rasia. Successfully attracting such debt financing would substantially depend on Rasia’s ability to grant “legally reliable” security interests, “as well as on the availability of a favorable and stable legal framework.”³⁶

(2) Subject of Concessions

118. With respect to the Road Project, Section 3 of the Road Concession (entitled “Grant of Concession”) provided in relevant part, and defined collectively as “the Project,” the following:

The Concessionaire shall have the right and obligation at its own cost and risk:

(a) to finance and carry out the Feasibility Study from its own funds;

(b) to implement from its own funds and attracted Project Financing, the following:

(i) finance, design, build, rehabilitate, possess, commission, operate and maintain the Southern Armenia High Speed Road;

³¹ C-1, Railway Concession, Preamble; C-2, Road Concession, Preamble. ↩
³² C-2, Road Concession, Preamble. Consistent with the Preamble, Article 1 of the Road Concession defined the “Southern Armenia High Speed Road” to mean “a new high speed road between (i) the city of Sisian and (ii) the city of Meghri and/or the [sic] Armenia’s southern border near the city of Meghri ....” Id., Article 1. ↩
³³ C-1, Railway Concession, Preamble. ↩
³⁴ C-2, Road Concession, Preamble. As will be discussed later, Mr. Borkowski testified at the February Hearing that “this was a number pulled out of thin air,” because “[i]t wasn’t possible for us at that time to have an accurate number.” February Tr. Day 2, Borkowski, 354:1-12. ↩
³⁵ C-1, Railway Concession, Preamble. ↩
³⁶ Id.; C-2, Road Concession, Preamble. ↩

[Page 24]

(ii) finance, design, rehabilitate, possess, commission, operate and maintain as part of the Southern Armenia High Speed Road any and all infrastructures and facilities in the Concession Territory³⁷ currently or formerly used in the operation of any road ...; and

(iii) finance, design, build, rehabilitate, possess, commission, operate and maintain all utilities required or advisable for building, operating and maintaining the Southern Armenia High Speed Road, ...;

(c) to do all such other things and carry out all such other businesses as may be necessary or reasonably advisable for any of the above;

(d) to pay to the Government a variable concession fee pursuant to Article 4 [Concession Fee];

(e) to rehabilitate and hand over to the Government the existing toll free road between Sisian and Meghri as reflected in Schedule B within the budget of USD 80 millions (eighty million US dollars); and

(f) to rehabilitate and hand over the Southern Armenia High Speed Road in good working order to the Government at expiration or termination of the Concession ....³⁸

119. As discussed further herein, the Parties dispute whether, and to what extent, Section 3(b) of the Road Concession required Rasia to work to deliver two separate roads with separate routes (a new High Speed Road as well as the existing road, rehabilitated), or, alternatively, only one road (with some stretches of new construction on new routes, and other stretches simply connecting with the existing road, rehabilitated). The Tribunal returns to this debate in due course.

120. As for the corresponding Railway Concession, Section 3 of that agreement provided in relevant part, and defined collectively as “the Project,” the following:

The Concessionaire shall have the right and obligation at its own cost and risk:

(a) to finance and carry out the Feasibility Study from its own funds;

(b) to implement from its own funds and attracted Project Financing, the following:

(i) finance, design, build, rehabilitate, possess, commission, operate and maintain the Southern Armenia Railway;

³⁷ The “Concession Territory” was defined in the Road Concession as “the territory of the Republic of Armenia south of the city of Sisian.” C-2, Road Concession, Section 1. ↩
³⁸ C-2, Road Concession, Section 3. ↩

[Page 25]

(ii) finance, design, rehabilitate, possess, commission, operate and maintain as part of the Southern Armenia Railway any and all infrastructures and facilities in the Concession Territory currently or formerly used in the operation of a railway ...;

(iii) finance, design, build, rehabilitate, possess, commission, operate and maintain all utilities required or advisable for building, operating and maintaining the Southern Armenia Railway, ...; and

(iv) acquire, lease or otherwise arrange the Rolling Stock necessary or advisable for the operation of the Southern Armenia Railway;

(c) to haul freight on the Southern Armenia Railway ...;

(d) to carry passengers on the Southern Armenia Railway ...;

(e) to do all such other things and carry out all such other businesses as may be necessary or reasonably advisable for any of the above;

(f) to pay to the Government a variable concession fee pursuant to Article 4 [Concession Fee]; and

(g) to rehabilitate and hand over the Southern Armenia Railway in good working order to the Government at expiration or termination of the Concession ....³⁹

(3) Concession Fees

121. Pursuant to Section 3(f) of each Concession Agreement, it was anticipated that Rasia would pay concession fees to the Government with respect to each Project. Section 4 of the Concession Agreements described this as a “fixed concession fee” of 100,000 Armenian Drams per year for the first 10 years of operation of each Project, followed by a “variable concession fee” based on a percentage of the “annual gross revenue earned” from the operation of the “Southern Armenia High Speed Road” and the “Southern Armenia Railway” respectively. The percentage of annual gross revenue would start at 0.1% in year 11 and would increase by 0.1% in each ensuing year, until it reached a maximum of 2% per year, at which point, it would “remain unchanged thereafter.”⁴⁰

(4) Duration of Concessions

122. The duration of the Concessions (identical in both cases) was set out in Section 12 of the Concessions. Essentially, the duration was an aggregate of four periods: (a) a “Feasibility Study

³⁹ C-1, Railway Concession, Section 3. ↩
⁴⁰ Id., Section 4; C-2, Road Concession, Section 4. ↩

[Page 26]

Period,” running from the date of the Concession Agreements “until final acceptance of the Feasibility Study by [Rasia] and confirmation of the Corridor by the Government” (both points addressed further below); (b) a “Project Financing Period,” running from the end of the Feasibility Study Period and until Rasia received its first project financing disbursement; (c) a “Construction Period,” running from the end of the Project Financing Period and until commissioning of, and grant of permission to operate, the High Speed Road and the Railway, respectively; and (d) an “Operations Period,” which would run for 30 years, with an option for Rasia to extend for an additional 20 years (i.e., 50 years in total). If Rasia exercised the extension option, the Parties were to “negotiate in good faith with respect to making amendments to this Agreement, which are necessary or desirable in the view of any of the Parties.”⁴¹

(5) Conditions Precedent and Waiver Thereof

123. Both Concessions stated certain conditions precedent – both to construction (in Section 9) and to operation (in Section 10). Certain of the Section 9 conditions precedent are of particular relevance to this dispute.

124. In the Road Concession, the “Conditions Precedent to Construction” included, inter alia, the following:

Construction of the Southern Armenia High Speed Road shall commence when each of the following conditions has been satisfied or waived:

(a) ...;

(b) Agreement between the Government and the Concessionaire regarding the payment of availability payments by the Government to the Concessionaire (such availability payments when combined with tolls charged by the Concessionaire must, among other things, be sufficient to enable the Concessionaire (i) to repay debt and interest incurred to design and build the Southern Armenian High Speed Road, (ii) to pay for the operation, maintenance and rehabilitation of the Southern Armenian High Speed Road, and (iii) to generate a rate of return on equity sufficient to attract equity investors);

(c) ...;

(d) Feasibility studies prepared by one or more first-class specialized firms confirming the technical, commercial, financial, environmental and social feasibility of the Project (collectively, the “Feasibility Study”) and final acceptance thereof by the Concessionaire. The Feasibility Study shall,

⁴¹ C-1, Railway Concession, Section 12; C-2, Road Concession, Section 12. ↩

[Page 27]

inter alia, (i) reflect the territory (the “Corridor”), in respect of which the Concessionaire shall have free preferred right-of-way or free preferred right of use, (ii) include working designs, as well as (iii) reflect the construction and commissioning milestones for the Southern Armenia High Speed Road and (iv) analyze the benefit of using the existing North-South Road for certain categories of traffic.;

(e) Confirmation of the Corridor by the Government;

(f) Grant by the Government to the Concessionaire the rights to the Corridor, as provide at Section 22.2 [Corridor Acquisition and Grant];

(g) ...;

(h) ...;

(i) Execution of the financing agreements for the implementation of the Project sufficient for Concessionaire, among other things, (i) to carry out its obligations under the Construction Agreements, and (ii) to operate and maintain the Southern Armenia High Speed Road until such time as it generates income sufficient to meet its obligations as they become due (“Project Financing”); and

(j) ....⁴²

125. As discussed below, several of these conditions precedent proved central to the dispute, including the approach to funding the Road Project (the relationship between potential self-funding through tolls paid by users and Government funding through “availability payments”); the expectations of the feasibility study, including regarding working designs and the proposed “Corridor” for the Road; and the provisions for project financing in support of Rasia’s obligations for construction and initial operation of the High Speed Road.

126. In a section of the Road Concession entitled “Benefit of Conditions Precedent” (Section 11), these various conditions precedent were classified into one of three categories, and provision was made for the possibility of waiver of one or more of the conditions:

11.1 Each condition precedent shall be classified into one of the following categories:

(a) Conditions for the benefit of both Parties;

(b) Conditions for the exclusive benefit of the Government; or

(c) Conditions for the exclusive benefit of the Concessionaire.

⁴² C-2, Road Concession, Section 9. ↩

[Page 28]

11.2 A Party who benefits from a condition may waive such condition. Conditions for the benefit of both Parties may be waived only mutually.

11.3 Conditions precedent provided at Sections 9(d), 9(h), 9(i), 10(a) and 10(b) are for the benefit of both Parties.

11.4 Conditions precedent provided at Sections 9(a), 9(b), 9(c), 9(e), 9(f) and 9(g) are for the benefit of the Concessionaire.

11.5 In case the Parties mutually agree on other conditions precedent in accordance with Sections 9(j) and 10(c), the Parties will indicate, for the avoidance of doubt, the benefit of such conditions precedent.⁴³

The interpretation of these waiver provisions is also a subject of dispute.

127. The Railway Concession followed a similar approach, so far as the conditions precedent were concerned. Section 9 of the Railway Concession included, inter alia, the following conditions precedent to construction:

Construction of the Southern Armenia Railway shall commence when each of the following conditions has been satisfied or waived:

(a) Agreement between “South-Caucasian Railway” closed joint stock company and the Concessionaire regarding rail linkages between their respective railways ...;

(b) Agreement(s) between the Concessionaire and railway operators from bordering countries, as agreed between the Concessionaire and the Government, regarding rail linkages between their railways ... ;

(c) ...;

(d) ...;

(e) Feasibility studies prepared by one or more first-class specialized firms confirming the technical, commercial, financial, environmental and social feasibility of the Project (collectively, the “Feasibility Study”) and final acceptance thereof by the Concessionaire. The Feasibility Study shall, inter alia, (i) reflect the territory (the “Corridor”), in respect of which the Concessionaire shall have free preferred right-of-way or free preferred right of use, (ii) include working designs, as well as (iii) reflect the construction and commissioning milestones for the Southern Armenia Railway;

(f) Confirmation of the Corridor by the Government;

⁴³ C-2, Road Concession, Section 11. ↩

[Page 29]

(g) Grant by the Government to the Concessionaire the rights to the Corridor, as provided at Section 22.2 [Corridor Acquisition and Grant];

(h) ...;

(i) ...;

(j) Execution of the financing agreements for the implementation of the Project sufficient for Concessionaire, among other things, (i) to carry out its obligations under the Construction Agreements, and (ii) to operate and maintain the Southern Armenia Railway until such time as it generates income sufficient to meet its obligations as they become due (“Project Financing”); and

(k) ....⁴⁴

128. In turn, Section 11 of the Railway Construction provided the following, with respect to the “Benefit of Conditions Precedent”:

11.1 Each condition precedent shall be classified into one of the following categories:

(a) Conditions for the benefit of both Parties;

(b) Conditions for the exclusive benefit of the Government; or

(c) Conditions for the exclusive benefit of the Concessionaire.

11.2 A Party who benefits from a condition may waive such condition. Conditions for the benefit of both Parties may be waived only mutually.

11.3 Conditions precedent provided at Sections 9(e), 9(i), 9(j), 10(a) and 10(b) are for the benefit of both Parties.

11.4 Conditions precedent provided at Sections 9(a), 9(b), 9(c), 9(d), 9(f), 9(g) and 9(h) are for the benefit of the Concessionaire.

11.5 In case the Parties mutually agree on other conditions precedent in accordance with Sections 9(k) and 10(c), the Parties will indicate, for the avoidance of doubt, the benefit of such conditions precedent.⁴⁵

⁴⁴ C-1, Railway Concession, Section 9. ↩
⁴⁵ Id., Section 11. ↩

[Page 30]

(6) Feasibility Studies and Acceptance Thereof

129. As noted above, one of the key conditions precedent to the Projects moving ahead was the preparation of feasibility studies “confirming the technical, commercial, financial, environmental and social feasibility of the Project,” and the “final acceptance thereof” by Rasia.⁴⁶

130. Sections 17-20 of both Concessions provided more detail about the preparation and acceptance of these “Feasibility Studies.” Section 17 addressed the timing within which Rasia was to commence the Feasibility Studies.⁴⁷ Section 18 required that such studies were to be prepared taking into account, inter alia, the project parameters defined in an attached schedule; Armenian legislation; World Bank environmental, health and safety guidelines for “toll roads” and railways respectively; the practices, methods and standards of care and safety that would both reasonably be expected of a “prudent, skilled and experienced foreign investor” and consistent with “good industry practices”; and the “terms of reference” for conducting the feasibility studies.⁴⁸

131. Section 19 of both Concessions in turn described the requirements for the “Terms of Reference” for the Feasibility Studies, including both their required content and the process by which the Terms of Reference would be proposed by the Government and either commented on or deemed accepted by Rasia.⁴⁹

132. With respect to the acceptance of the Feasibility Studies themselves, both Concessions provided as follows in Section 20:

20.1 The Feasibility Study shall be completed within 18 (eighteen) months from its commencement, and in case of being preliminarily acceptable for the Concessionaire, it shall be submitted to the Government in English together with an Armenian translation.

20.2 Within 30 (thirty) days from the date of receiving the Feasibility Study, the Government shall submit its reasoned comments, objections and suggestions, which should be considered by the Concessionaire prior to the final acceptance of the Feasibility Study. Those comments of the Government, which are not attributed to legal, technical or environmental unfeasibility, shall not be obligatory for the Concessionaire.

⁴⁶ C-1, Railway Concession, Section 9(e); C-2, Road Concession, Section 9(d). ↩
⁴⁷ C-1, Railway Concession, Section 17; C-2, Road Concession, Section 17. ↩
⁴⁸ C-1, Railway Concession, Section 18; C-2, Road Concession, Section 18. ↩
⁴⁹ C-1, Railway Concession, Section 19; C-2, Road Concession, Section 19. ↩

[Page 31]

20.3 If the Government does not submit comments within the aforementioned period, the Feasibility Study shall be deemed finally accepted by the Concessionaire.

20.4 If the Feasibility Study proves the Project unfeasible from technical, commercial, financial, environmental and social standpoint (including in view of the Government's obligatory comments), then upon the Concessionaire's written request made within 15 (fifteen) days the Parties shall undertake negotiations in good faith on such reasonable measures, which may make the Project feasible.⁵⁰

133. The timing of the presentation and acceptance of the Feasibility Studies was important for various other provisions of the Concessions. As discussed above in connection with Section 12, “final acceptance” of the Feasibility Studies by Rasia was a trigger for the ensuing “Project Financing Period” and subsequent periods for construction and operation. In addition, Section 36.2 of the Concessions provided strict deadlines within which Rasia was to present construction designs to the Government, running from “the end of the Feasibility Study.” In the case of the Road Concession, Rasia was required to submit construction designs with 6 months; for the Railway Concession, Rasia was required to submit construction designs within one year.⁵¹

(7) Corridor Confirmation, Acquisition and Grant

134. A further condition precedent listed in Section 9 of the Concessions related to the “Corridor,” which was defined in that Section as the territory over which Rasia would have a preferred right-of-way for the Road and Railway, respectively. As noted above, Section 9(d) listed two conditions precedent to construction, with respect to the Corridor: (a) the Feasibility Studies were to “reflect” the proposed Corridor, and (b) the Government was to “confirm[]” that Corridor.⁵²

135. The definitions section of the Road Concession (Section 1) defined “Corridor” to have “the meaning ascribed thereto in Section 9(d) [Conditions Precedent to Construction].” It also cross-referenced a map attached as Schedule B, stating that “[a]s indicatively shown on the map presented in Schedule B, it is envisaged that the Corridor shall start at the city of Sisian.”⁵³ The map in Schedule B was cross-referenced in two other places in the Road Concession: (a) Section 3(e), which set out Rasia’s obligation to “rehabilitate ... the existing toll free road between Sisian and Meghri as reflected in Schedule B,” in addition to its separate obligations in Section 3(b) with

⁵⁰ C-1, Railway Concession, Section 20; C-2, Road Concession, Section 20. ↩
⁵¹ C-1, Railway Concession, Section 36.2; C-2, Road Concession, Section 36.2. ↩
⁵² C-1, Railway Concession, Section 9(e), (f); C-2, Road Concession, Section 9(d), (e). ↩
⁵³ C-2, Road Concession, Section 1. ↩

[Page 32]

respect to a new high speed road, and (b) Section 15, which confirmed, “[f]or the avoidance of doubt,” that the existing road between Sisian and Mehri “as reflected in Schedule B shall continue to be in use and toll free.”⁵⁴

136. The “indicative[]” map in Section B of the Road Concession is reproduced below⁵⁵:

ՀԱՐԱՎԱՅԻՆ ՀԱՅԱՍՏԱՆԻ ԱՐԱԳԱԸՆԹԱՑ ԱՎՏՈՃԱՆԱՊԱՐՀԻ
ՆԱԽՆԱԿԱՆ ՔԱՐՏԵԶ

[Map Image]

Map Labels:

• Sisian
• Goris
• Kapan
• Meghri

⁵⁴ C-2, Road Concession, Sections 3(e), 15. ↩
⁵⁵ R-63, Schedule B, Southern Armenia High Speed Road Concession Agreement Preliminary Map of Southern Armenia High Speed Corridor; see also C-2, Road Concession, Schedule B. ↩

[Page 33]

137. For greater clarity, the Tribunal also reproduces below a more readable, color illustration drawn from the Respondent’s Counter-Memorial, which shows both the existing toll-free roads that were reflected in Schedule B of the Road Concession (in yellow), and the proposed route of the new High Speed Road that was reflected in the same Schedule B (in red)⁵⁶:

Figure 5: The Proposed vs Existing and Required Routes¹³⁸

[Map Image]

Legend:

• existing national roads (Schedule B)
• existing local roads
• proposed route (Schedule B)
• Rasia's feasibility study

Map Labels:

• Goris
• Sisian
• Agitu
• Tatev
• Syunik
• Gehi
• Kajaran
• Kapan
• Meghri
• Agarak

138. The Concessions contained more detail about the process of confirmation, acquisition and grant of the Corridors. Section 21 of both Concessions provided that if, first, the Feasibility Study for each Project confirmed that the High Speed Road or the Railway (respectively) was “technically, commercially, financially, environmentally and socially feasible,” and, second, if the Feasibility Studies were “finally accepted” by Rasia, then Rasia “shall request the Government to confirm the Corridor recommended by the Feasibility Study.” If the recommended Corridor complied with the requirements of Section 18 (described above), then the Government “within 90 (ninety) days of its receipt of the Feasibility Study, as finally accepted by [Rasia], shall confirm the Corridor and shall

⁵⁶ Resp. Counter-Mem. p. 32, Figure 5. The Tribunal discusses separately below the significance of the black line in this Figure 5, which is said by the Respondent to reflect a different route that Rasia proposed for the road in its later feasibility study. ↩

[Page 34]

recognize the exclusive prevailing public interest in respect of the lands and immovables in the Corridor.”⁵⁷

139. Section 22 of the Concessions in turn addressed the Government’s duty to acquire the Corridor lands for purposes of construction. It provided, inter alia, that “[o]nce the Corridor is confirmed by the Government,” it shall “within a reasonably short period” acquire at its costs all lands and immovables in the Corridor, “on a timely basis so as not to delay the commencement of construction.”⁵⁸ Having acquired these properties, the Government would then grant Rasia rights of access, occupation and use to implement the Project, for the entire period of the Concession.⁵⁹

(8) Consortium Approach and Project Financing

140. Sections 5 of both Concessions provided, with similar wording, that “for the purpose of implementing the Project [Rasia] may adopt a consortium approach,” under which it “will likely attract investors, international financial institutions, institutional and other lenders,” as well as “first-class specialized developers” for building and operating the Road and Railway. Nonetheless, while Rasia may be “called upon to closely cooperate” with these various entities, Rasia alone “shall always remain fully liable before the Government for the performance of obligations under this Agreement.”⁶⁰

141. Both Concessions also contained similar provisions on the use of external finance providers. Section 31 provided that once the Feasibility Study has “confirmed that the Project is technically, commercially, financially, environmentally and socially feasible and the Concessionaire has finally accepted the Feasibility Study,” then Rasia shall have up to 12 months to obtain the requisite project financing.⁶¹

142. However, Section 33 of both Concessions provided the following deadlines for the presentation of letters of interest from potential finance providers:

33.1 The Concessionaire undertakes to present to the Government not later than within [Railway Concession: “12 (twelve)”] [Road Concession: “6 (six)”] months from the date of final approval of the Feasibility Study, letters of interest from one or more credible and reputable potential

⁵⁷ C-1, Railway Concession, Section 21; C-2, Road Concession, Section 21. ↩
⁵⁸ C-1, Railway Concession, Section 22.1; C-2, Road Concession, Section 22.1. ↩
⁵⁹ C-1, Railway Concession, Sections 22.2, 22.3; C-2, Road Concession, Sections 22.2, 22.3. ↩
⁶⁰ C-1, Railway Concession, Section 5; C-2, Road Concession, Section 5. ↩
⁶¹ C-1, Railway Concession, Section 31.1; C-2, Road Concession, Section 31.1. ↩

[Page 35]

investors, Financing Parties and other finance providers as described in Section 31.2, according to which such potential investors, Financing Parties and other finance providers are prepared to make investments in the equity or quasi-equity of the Concessionaire and provide debt financing in the aggregate amount not less than the total financing envisaged by the Feasibility Study.

33.2 The Government may within 30 (thirty) days of the receipt of such letters of interest present its written objections to the Concessionaire based on criteria set forth in Section 8 [Control of Concessionaire]. If the Government does not provide its written objections within the mentioned period of time, the candidacies of investors shall be deemed approved, which does not limit, however, the Concessionaire's rights to attract other further parties not objectionable to the Government as per the above procedure.

33.3 In case of any objections from the Government, the Concessionaire may present additional letters of interest within additional [Railway Concession: “6 (six)”] [Road Concession: “3 (three)”] months.

(9) Control of Rasia

143. Sections 8 of each Concession regulated any potential “alienation” of Rasia, the direct or indirect shareholding interest in Rasia, and Rasia’s “rights and assets related to the Project.” Any such alienation was subject to various conditions, including the acceptability of the acquiror to the Government on grounds of national security, and confirmation that the acquiror would be able to provide continuity and proper progress on the Project.⁶² In addition, Section 8.2(e) of both Concessions provided the Government with certain rights of first refusal, as follows:

(e) the Government shall enjoy rights of first refusal in acquiring shareholding interest in the Concessionaire, including in case of increase of the equity capital, except for any acquisition of the shareholding interest through open auction or any other public tender process.⁶³

A material breach of these rights of first refusal, or of any of Rasia’s obligations related to transfer of control of it or its shares, would provide the Government with a right of early termination of the Concession.⁶⁴

⁶² C-1, Railway Concession, Section 8.2(a), (b), (c); C-2, Road Concession, Section 8.2(a), (b), (c). ↩
⁶³ C-1, Railway Concession, Section 8.2; C-2, Road Concession, Section 8.2. ↩
⁶⁴ C-1, Railway Concession, Section 8.3; C-2, Road Concession, Section 8.3. ↩

[Page 36]

(10) Exclusivity of Concession

144. The Road Concession contained a provision – a similar version of which was included also in the Railway Concession – included under the heading “Competing Transportation Systems”:

15 NO GRANT

In order to induce the Concessionaire to enter into this Agreement and to assume substantial financial and commercial risks in connection with the implementation of the Project, the Government shall not at any time grant to any person, including any State Authority, any concession or other right or privilege to finance, design, construct, possess, commission, rehabilitate, operate and/or maintain any road at the southern border of Armenia or connecting with Meghri or territories adjacent to the southern border of Armenia, including any road not in service on the date of signing this Agreement. For the avoidance of doubt, the existing road between Sisian and Meghri which is in service on the date of signing this Agreement as reflected in Schedule B shall continue to be in use and toll free.

(11) Early Termination

145. Finally, both Concessions contained similarly worded clauses on early termination based on negative results from a Feasibility Study:

59.1 If the Concessionaire has not accepted the Feasibility Study by the [Railway Concession: “third (3^rd)“] [Road Concession: “second (2^nd)”] anniversary of the commencement of the Concession, then the Government may terminate this Agreement with a notice issued within 5 (five) working days following the second (2nd) anniversary of the commencement of the Concession or within 5 (five) working days following any consecutive [Railway Concession: “two-month”] [Road Concession: “one-month”] period thereafter (provided that the Government is not notified by then about the Feasibility Study being finally accepted by the Concessionaire).

59.2 If the Agreement is terminated due to the Feasibility Study not being finally accepted by the Concessionaire or, prior to the completion of the construction designs, due to the Concessionaire Event of Default, then the Concessionaire shall promptly transfer to the Government free-of-charge the Feasibility Study and all results of the design works, and the Government shall have the right to freely dispose of those at its own discretion.

59.3 Unless the Concession is effectively terminated by the Government’s notice, the Feasibility Study works may continue and the Feasibility Study may be accepted by the Concessionaire at any time with a notice to the Government.

[Page 37]

D. RASIA'S 2012 DISCUSSIONS WITH AABAR AND FRAMEWORK AGREEMENT WITH CCCC

146. On 31 July 2012, three days after the Concession Agreements were signed, Rasia sent a letter to the Government, stating that it had met Aabar to discuss “the prospects of equity investments” in connection with the Railway Project. Rasia also mentioned calls with several entities “to discuss turnkey solutions for railway and road development,” requests for “competing feasibility study proposals from two prominent multinational companies,” and an aim to “engage world class contractors ... to develop the engineering designs in parallel with the feasibility study,” rather than addressing engineering “separately from and after completing the feasibility study,” which “could substantially alter project costing, corridor location, and other primary project attributes.” Rasia requested the Government to begin developing the “terms of references (sic) for feasibility studies.”⁶⁵

147. Starting in August and September 2012, Rasia sought to identify a Chinese firm to assist with engineering, procurement and construction (“EPC”) works. It ultimately concluded a Framework Agreement on 30 September 2012 with China Communications Construction Company Ltd. (“CCCC” and the “Rasia-CCCC Framework Agreement,” respectively).⁶⁶ The decision to involve a Chinese EPC firm was made on advice from Aabar’s Mr. Tappendorf, who had authored the May and June 2012 letters to the Government about Rasia discussed in Section III.B above, and by his then-superior Mr. Brandt Mowry, who was Aabar’s CFO and CIO until he retired from the firm in December 2012. Rasia appointed these two individuals to its Advisory Board in September 2012.⁶⁷

148. The Rasia-CCCC Framework Agreement stated that Rasia “ha[d] decided in favor of appointing CCCC as its exclusive transportation infrastructure development company and as the lead member of its Consortium to carry out the Feasibility Studies and the subsequent design, procurement, construction, and completion of the Projects.”⁶⁸ The Rasia-CCCC Framework agreement also referenced various deadlines in the Concession Agreements with respect to the Feasibility Studies;⁶⁹ noted the advantage of beginning discussions about potential project financing with

⁶⁵ C-91, Letter from Mr. J. Borkowski to Minister G. Beglaryan, 31 July 2012. ↩
⁶⁶ R-8, Framework Agreement between Rasia and CCCC (“Rasia-CCCC Framework Agreement”); Cl. Mem. ¶¶ 76-80; Cl. Reply ¶¶ 91-92; First Tappendorf Statement ¶¶ 35-39. ↩
⁶⁷ Cl. Reply ¶ 238; Second Thornber Statement ¶¶ 19-21; Second Tappendorf Statement ¶ 38. ↩
⁶⁸ R-8, Rasia-CCCC Framework Agreement, Section 7. ↩
⁶⁹ The Rasia-CCCC Framework Agreement stated that the Feasibility Study for the Railway Project “must be created, delivered and accepted by” Rasia within 24 months from the 2 August 2012 date of Armenia’s approval of the Railway ↩

[Page 38]

“such China financial institutions as China Development Bank and The Export-Import Bank of China” (“China EximBank”); and agreed that Rasia and CCCC would work together to propose to the Government of Armenia “selected favorable changes to the Concession Agreements in order for the Projects to remain bankable or to enhance their bankability.”⁷⁰

149. As discussed further below, the Parties dispute whether Rasia and CCCC ever obtained any commitments from Chinese banks for debt financing for the Projects. Rasia maintains that CCCC proceeded, during the second half of 2013, to secure financing commitments from China Development Bank and China EximBank.⁷¹ Armenia disputes that the evidence demonstrates that any such commitments were obtained from Chinese banks.⁷²

E. THE ROAD PROJECT (LATE 2012): CCCC'S SITE VISIT, THE TERMS OF REFERENCE, AND THE CCCC ROAD COMMERCIAL AGREEMENT

150. Shortly after CCCC concluded its Framework Agreement with Rasia, it began to organize its investigation of the Road Project, focusing on the work required to complete the feasibility study required by the Road Concession. Its preliminary steps included a trip to Dubai from 3-5 November 2012 to meet with Mr. Borkowski of Rasia and Mr. Tappendorf, who was employed at the time by Aabar, but whom CCCC evidently understood to be a “senior director” of Rasia.⁷³ The group then flew to Armenia for a “working conference” on 7 November 2012 with officials and engineers from the “Road Authority” of the Ministry of Transport, followed by a three-day field investigation of the proposed Road Project from 8-10 November 2012.⁷⁴

151. On 10 November 2012, at the conclusion of the Road Project site visit, Rasia and the Republic of Armenia (represented by its Minister of Transport, Mr. Beglaryan) agreed on the “Terms of Reference for Feasibility Study of the Southern Armenia High Speed Road” (the “Road Terms of Reference”).⁷⁵ In the Road Terms of Reference, the Road Project was described “[a]s defined in Section 3 [...] of the [Road Concession],” which, as recounted above, provided for a new “High

Concession, and the Feasibility Study for the High Speed Road Project “must be created, delivered and accepted by” Rasia within 18 months of Armenia’s 2 August 2012 approval of the Road Concession. R-8, Rasia-CCCC Framework Agreement, Section 5.
⁷⁰ R-8, Rasia-CCCC Framework Agreement, Section 6. ↩
⁷¹ Cl. Mem. ¶ 107-108; First Borkowski Statement ¶¶ 65-66; Second Borkowski Statement ¶¶ 127-131. ↩
⁷² Resp. Counter-Mem. ¶¶ 152-153. ↩
⁷³ C-96, CCCC, “Site Visit Report: Southern Armenia High Speed Road Project,” November 2012, p. 1. ↩
⁷⁴ Id., pp. 3-4. ↩
⁷⁵ C-98, Road Terms of Reference. ↩

[Page 39]

Speed Road” and the rehabilitation of an existing toll-free road between Sisian and Meghri.⁷⁶ The objective of the Road Terms of Reference was stated to be to “specify the Feasibility Study requirements; reflect main value of the Feasibility Study and the Project, their technical and economic requirements, quality standards, paperwork composition and guidelines on milestones as well as other special terms and conditions” and to “reflect the Project limitations including the Corridor limitations on environmental, natural resources use, national security and strategic grounds.”⁷⁷

152. The Road Terms of Reference also set out the purpose of the Road Feasibility Study:

As defined in Section 9(e) [Conditions Precedent to Construction] of the Southern Armenia High Speed Road Concession Agreement “... confirming the technical, commercial, financial, environmental and social feasibility of the Project (collectively, the ‘Feasibility Study’) and final acceptance thereof by the Concessionaire. The Feasibility Study shall, inter alia, (i) reflect the territory (the ‘Corridor’), in respect of which the Concessionaire shall have free preferred right-of-way or free preferred right of use, (ii) include working designs, as well as (iii) reflect the construction and commissioning milestones for the Southern Armenia High Speed Road”. Working designs are preliminary designs that are normally required for establishing project feasibility.⁷⁸

153. Among other things, the Road Terms of Reference also specified that the Road Project would involve “New construction,”⁷⁹ and that while the Corridor for the Road Project was as “indicatively shown on the map” in Schedule B of the Road Concession, Rasia could consider variations in the Corridor during the Feasibility Study Period defined in Section 12(a) of the Concession, including certain specified variations.⁸⁰ The Road Terms of Reference also provided that the road “should meet the requirements” for a Class II category road as defined in Armenia’s Construction Norms. They listed certain “selected technical parameters ... in order to provide flexibility to [Rasia] in determining the optimal technical parameters during the Feasibility Study.”⁸¹ The technical parameters that were singled out were the following:

A maximum vertical/longitudinal gradient of 40‰ (per mil)

⁷⁶ C-98, Road Terms of Reference, Section 2. ↩
⁷⁷ Id., Section 3. ↩
⁷⁸ Id., Section 4. ↩
⁷⁹ Id., Section 7. ↩
⁸⁰ Id., Section 9. ↩
⁸¹ Id., Section 10. ↩

[Page 40]

A minimum radius of 600 meters for horizontal curves, 8,000 meters for vertical convex curves, and 4500 meters for vertical incurved curves.

Design speed to be determined under the Feasibility Study.⁸²

154. The Road Terms of Reference also set out certain requirements for the “structure and contents” of the Road Feasibility Study to be delivered by Rasia,⁸³ as well as a provision stipulating that “[t]he estimated cost of construction shall be carried out in accordance with international best practices.”⁸⁴ The Road Feasibility Study was also to estimate “investment efficiency in accordance with international best practices,” including calculations of net present value, internal rate of return, and payback period.⁸⁵

155. As will be explained further below, the Parties disagree as to whether the Road Feasibility Study that Rasia delivered to Armenia met these requirements.

156. Meanwhile, following the conclusion of its site visit on 10 November 2012, CCCC wrote up a report of its site visit, which made no reference to the Road Terms of Reference that Rasia signed on that date. The CCCC site visit report described its understanding that the project was expected to involve the “upgrading” of an existing 110 km highway, but with certain bypasses to improve travel, including a bridge or viaduct over the Tatev valley, a detour around the city of Kapan (involving a new 7 km stretch of highway) and a possible tunnel through a mountain in Kajaran. CCCC indicated that it had proposed a “preliminary alignment” for the project on the basis that “[i]t is mainly an existing road reconstruction and improvement project,” with “new-build part[s]” only in these three sections. CCCC opined that “most of the sections” can reach a “Class II highway” construction standard, restrained by terrain conditions in certain areas.⁸⁶ The CCCC report did not specify which Class II standard it had in mind, although as noted above, the Road Terms of Reference signed on 10 November 2012 specified that the relevant reference should be to Armenian standards.⁸⁷ The difference between Armenian and Chinese Class II highway construction standards becomes relevant later in this case.

⁸² C-98, Road Terms of Reference, Section 10. ↩
⁸³ Id., Section 23. ↩
⁸⁴ Id., Section 24. ↩
⁸⁵ Id., Section 25. ↩
⁸⁶ C-96, CCCC, “Site Visit Report: Southern Armenia High Speed Road Project,” November 2012, pp. 1, 6, 7, 12. ↩
⁸⁷ C-98, Road Terms of Reference, Section 10. ↩

[Page 41]

157. On 10 December 2012, Rasia and CCCC concluded a “Commercial Agreement for Feasibility Study” for the Road Project (the “CCCC Road Commercial Agreement”), which they agreed would become an “integral part” of the Rasia-CCCC Framework Agreement they had completed on 30 September 2012. The CCCC Road Commercial Agreement was signed by Mr. Borkowski for Rasia, and witnessed by Mr. Mowry, formerly Aabar’s CEO but now identified as “Vice Chairman” of Rasia.⁸⁸ According to this Agreement, CCCC was to prepare a feasibility study to “serve the very purpose of obtaining Project financing,” and as a prelude to a “subsequent EPC contract” with CCCC.⁸⁹ CCCC’s work on the feasibility study was to be divided into two stages: (a) a “Stage One” delivery of a “Pre-Feasibility Study” focused on establishing the economic model and base technical requirements for the High Speed Road Project and the selection of the desired road corridor,” and (b) a “Stage Two focused on completing the Feasibility Study to a bankable status based on the outcome of Stage One.”⁹⁰ CCCC would front all the costs associated with both stages, but Rasia undertook to pay CCCC a “Services Fee” of $5 million over time, according to a gradual payment schedule which envisioned only $500,000 being paid (in two tranches) in connection with “Stage One” (the “Pre-Feasibility Study”), with the rest of the fee deferred until work on and delivery of the “Stage Two” Feasibility Study.⁹¹ CCCC would retain ownership of, and all intellectual property rights in, both studies, with these rights gradually transferred to Rasia in percentages reflecting the actual payments made to CCCC. In this fashion, “any CCCC work that has been completed, but not paid for, will remain its property.”⁹²

F. THE RAILWAY PROJECT (LATE 2012-EARLY 2013): THE TERMS OF REFERENCE, CCCC RAIL COMMERCIAL AGREEMENT, AND SCR TRILATERAL MOU

158. On 10 November 2012, the same day Rasia and Armenia signed the Road Terms of Reference, they also executed a “Terms of Reference for Feasibility Study” for the Railway Project (the “Railway Terms of Reference,” and collectively with the Road Terms of Reference, the “Terms of Reference”).⁹³

⁸⁸ R-68, Commercial Agreement for Feasibility Study on the Southern Armenia High Speed Road, 10 December 2012, p. 8. ↩
⁸⁹ Id., ¶ 3.4. ↩
⁹⁰ Id., ¶ 4. ↩
⁹¹ Id., ¶ 4 & Appendix 1. ↩
⁹² Id., ¶ 5.1. ↩
⁹³ C-99, Terms of Reference for the Feasibility Study on the Southern Armenia Railway between the Republic of Armenia and Rasia FZE, 10 November 2012. ↩

[Page 42]

159. The two Terms of Reference documents were structured in similar ways. The Railway Terms of Reference also described the Railway Project with reference to the Railway Concession,⁹⁴ and contained a provision describing the objective of the Terms of Reference identical to that contained in the Road Terms of Reference.⁹⁵ The provisions defining the purpose of the Feasibility Studies – Section 4 in both Terms of Reference – were also identical for both Terms of Reference, save for the project names.

160. On 10 December 2012, Rasia and CCCC concluded a “Commercial Agreement for Feasibility Study” for the Railway Project (the “CCCC Railway Commercial Agreement”),⁹⁶ which was substantively similar to the CCCC Road Commercial Agreement. In particular, CCCC’s work was to be divided into two stages, the first a “Pre-Feasibility Study” focusing on the economic model, base technical requirements, and the “selection of the desired railway corridor,” and the second on “completing the Feasibility Study to a bankable status.”⁹⁷ CCCC would again front all the costs, with Rasia undertaking to pay a “Services Fee” of $10 million, most of it after the second stage of work.⁹⁸ Again, CCCC would retain ownership of (and intellectual property rights in) its work until Rasia paid its fee.⁹⁹

161. On 21 December 2012, Rasia notified Armenia that it had selected CCCC to prepare the feasibility studies for both Projects.¹⁰⁰ Rasia emphasized not only CCCC’s design and construction experience, but also its “favorable financing allocations for overseas railway and road projects” from China Development Bank and China EximBank, with which CCCC had already begun discussions. Rasia explained that “[t]he China government is the only feasible source of major loan financing for the [Railway Project] in particular,” and that “[n]o other government, private or international financing institution either alone or jointly” would be able and willing to finance the Railway Project without most of the financing coming from Chinese government banks.

⁹⁴ C-99, Terms of Reference for the Feasibility Study on the Southern Armenia Railway between the Republic of Armenia and Rasia FZE, 10 November 2012, Section 2. ↩
⁹⁵ Id., Section 3. ↩
⁹⁶ R-67, Commercial Agreement for Feasibility Study on the Southern Armenia Railway, 10 December 2012. ↩
⁹⁷ Id., ¶ 4. ↩
⁹⁸ Id., ¶ 4 & Appendix 1. ↩
⁹⁹ Id., ¶ 5. ↩
¹⁰⁰ C-101, Letter from Mr. J. Borkowski to Minister G. Beglaryan (Unofficial Translation and Armenian Original), 21 December 2012, pp. 1-2. ↩

[Page 43]

Accordingly, Rasia explained, “[w]orking with a China contractor, such as CCCC, is a mandatory prerequisite for seeking the required China government financing.”¹⁰¹

162. The Parties jointly announced the Projects at a media event on 18 January 2013.¹⁰² Both Mr. Borkowski and Mr. Beglaryan spoke at the event; Mr. Tappendorf also attended.

163. During the event, a trilateral Memorandum of Understanding (the “SCR Trilateral MoU”) was signed by Rasia, the Armenian Ministry of Transport and the SCR, which was the operator of the existing railway network in Armenia and, as noted at paragraph 101 above, a subsidiary of Russian Railways OJSC.¹⁰³ The Trilateral MoU set out the broader context of the Railway Concession, essentially as follows:

• In 2009 and 2010, the Ministries of Transport of Armenia, Russia and Iran discussed the importance of coordinating development of a direct railway line to connect Armenia’s existing rail network and Iran’s existing rail network, which would mean covering 316 km in Armenia and 60 km in Iran;¹⁰⁴
• They also discussed the importance of integrating this new railway connection into existing international corridors, which would involve coordinating technical parameters, including the width of railroad gauge;¹⁰⁵
• “In order to ensure the implementation of the Armenian Segment” of the new railway, Armenia had granted Rasia a concession “to implement the feasibility study and to design, finance, construct and operate the Armenian Segment”;¹⁰⁶
• The SCR Trilateral MoU was a “non-binding agreement solely intended to outline the framework of understanding” regarding development of the Project.¹⁰⁷

164. In the SCR Trilateral MoU, the three signatories agreed to “cooperate in the sharing of technical, trade, economic, social, environmental, and other feasibility and design related information so as to enable [Rasia] to deliver complete feasibility studies for the Southern Armenia Railway in

¹⁰¹ C-101, Letter from Mr. J. Borkowski to Minister G. Beglaryan (Unofficial Translation and Armenian Original), 21 December 2012, pp. 2, 4. ↩
¹⁰² C-107, Transcript of Welcoming Speech of Minister of Transport and Communication Gagik Beglaryan (Unofficial Translation and Armenian Original), 18 January 2013; C-108, Government of Armenia, “The Projects ‘Southern Armenia Railway’ and ‘Southern Armenia High-Speed Road’ are Launched” (Unofficial Translation and Armenian Original), 18 January 2013. ↩
¹⁰³ C-103, Memorandum of Understanding Between Ministry of Transport, SCR and Rasia, 18 January 2013. ↩
¹⁰⁴ Id., pp. 3-4. ↩
¹⁰⁵ Id., p. 4. ↩
¹⁰⁶ Id., p. 4. ↩
¹⁰⁷ Id., p. 5. ↩

[Page 44]

accordance with the Concession Agreement.”¹⁰⁸ Construction was intended to start from Armenia’s border with Iran (hopefully in parallel with work on the “Iranian Segment”) to “allow for the earliest possible commencement of commercial operation,” even prior to connecting the new “Armenian Segment” to the existing Armenian railway network operated by SCR.¹⁰⁹ However, in exchange for SCR’s cooperation, it would be provided a first preference right for future operation, management and maintenance of the Southern Armenia Railway, including prior to the connection of that new railway to the existing Armenian rail network.¹¹⁰

G. THE FEASIBILITY STUDIES (2013-EARLY 2014)

(1) Payment for the Feasibility Studies

165. The feasibility studies that Rasia eventually delivered to Armenia for the Road and Railway Projects (respectively, the “Road Feasibility Study” and the “Railway Feasibility Study,” and collectively, the “Feasibility Studies”) form a crucial part of this case. Before delving into their delivery and content, however, it is important to identify one threshold factual dispute, which becomes relevant to some of the Parties’ legal contentions discussed further herein.

166. As discussed above, each of the CCCC Road Commercial Agreement and the CCCC Railway Commercial Agreement provided that CCCC would fund the development of both a “Stage One” “Pre-Feasibility Study” and a subsequent “Stage Two” “Feasibility Study,” but that Rasia would pay CCCC for its work over time. Once all such payments had been made, Rasia would become the owner of the Feasibility Studies, with a right to all the intellectual property reflected therein. Although Mr. Borkowski submitted a witness statement in which he maintained that “Rasia had commissioned and paid for” the Feasibility Studies,¹¹¹ he conceded at the Hearing that Rasia had yet to pay CCCC anything.¹¹² The extent to which Rasia remains indebted to CCCC for its Feasibility Study work is disputed in this Arbitration. The evidence on that issue is discussed further in Sections III.I and V.A.3, including in connection with the Parties’ dispute over whether Claimants have demonstrated a cognizable investment for purposes of the ICSID Convention.

¹⁰⁸ Memorandum of Understanding Between Ministry of Transport, SCR and Rasia, 18 January 2013, p. 5. ↩
¹⁰⁹ Id., p. 6. ↩
¹¹⁰ Id., pp. 7-8. ↩
¹¹¹ Second Borkowski Statement ¶ 87; see also Cl. Reply ¶ 488. ↩
¹¹² February Tr. Day 4 Kalicki/Borkowski, 581:25-582:2; Beechey/Borkowski, 675:12-16. ↩

[Page 45]

(2) Rasia's Summaries of the Feasibility Studies to Armenia and Aabar

167. Mr. Borkowski informed the Ministry of Transport on 17 June 2013 that CCCC had completed the “Stage One feasibility studies” for both Projects on 7 June 2013,¹¹³ but that the documents were available only in Chinese, and were awaiting translation into English. Mr. Borkowski stated that Rasia would provide comments on the English-language versions, once received, and then “officially submit and present the final Stage One feasibility studies for Rail and Road to the Ministry.”¹¹⁴

168. On 27 August 2013, Mr. Borkowski requested to “briefly meet” with Mr. Grigoryan to provide a “brief summary of findings” from the Feasibility Studies.¹¹⁵ The following day, 28 August 2013, Mr. Borkowski met with officials from the Ministry of Transport, including Mr. Grigoryan.¹¹⁶ The Parties describe the discussions differently. According to Mr. Borkowski, he presented a summary of the findings reflected in the draft Road Feasibility Study and made clear that they revealed that it would not be feasible to proceed with a toll road. Mr. Borkowski stated that Mr. Grigoryan was not surprised to hear that a toll road was not a feasible proposition and that, instead, he encouraged Mr. Borkowski to proceed with the Road Project on the basis of so-called “availability payments.”¹¹⁷

169. Mr. Grigoryan’s recollection of the 28 August meeting differs from Mr. Borkowski’s. According to Mr. Grigoryan, Mr. Borkowski “may have stopped by” in August 2013, but there was no “formal presentation” or “extensive discussion” of any preliminary results. Mr. Grigoryan also denies having authorized Mr. Borkowski to finalize the Road Feasibility Study on the basis solely of availability payments.¹¹⁸ However, Armenia has not expressly disputed that Mr. Borkowski informed the Government, at this meeting, that he no longer considered a toll road to be feasible.¹¹⁹

¹¹³ By this time, CCCC had completed at least one other site visit to Armenia, in February and March 2013. See generally C-112, CCCC, “Site Visit Report: Southern Armenia Railway,” March 2013, p. 10. ↩
¹¹⁴ C-327, Email from Mr. J. Borkowski to Mr. G. Grigoryan, 17 June 2013. ↩
¹¹⁵ C-328, Email from Mr. G. Grigoryan to Mr. J. Borkowski, 27 August 2013. ↩
¹¹⁶ C-118, Letter from Mr. J. Borkowski to Prime Minister T. Sargsyan, 19 September 2013, which refers to a meeting “at the end of August” when Rasia provided “the key results of the feasibility studies for the Southern Armenia Railway and High Speed Road projects.” ↩
¹¹⁷ Second Borkowski Statement ¶ 46; February Tr. Day 4, Hanessian/Borkowski, 590:23-591:7. ↩
¹¹⁸ Grigoryan Statement ¶ 22. ↩
¹¹⁹ Armenia assumed during cross-examination of Mr. Borkowski at the February Hearing that Mr. Borkowski did take this position at the meeting (see below para. 196). See also Resp. Counter-Mem. ¶ 75. ↩

[Page 46]

170. When, soon after the meeting, Mr. Borkowski forwarded an English-version executive summary of the Railway Feasibility Study, he wrote in the accompanying email that an executive summary of the Road Feasibility Study would follow two days later, “in print and by email as well.”¹²⁰ It is not clear if this was ever sent. However, on 3 September 2013, Mr. Borkowski invited Minister Beglaryan and Armenia’s Prime Minister to visit CCCC’s headquarters for a “briefing of the railway and road feasibility study results,” together with a “presentation and summary of the alignment along with a positive announcement that the railway is feasible and the road will be a free road.”¹²¹

171. Mr. Borkowski, CCCC representatives and Armenian representatives, including Prime Minister Sargsyan, then met in Dalian, China on 10 September 2013 (the “Dalian Meeting(s)”).¹²² At the meeting(s), the Prime Minister was briefed on the preliminary results of both Feasibility Studies and provided with estimated future financing steps and timeline. With respect to the Road Project, a slide from Mr. Borkowski’s presentation at the meeting indicated as a “key result” that the Road Project was “not feasible as Toll Road; Feasible as Free Road w/Government.”¹²³ Another slide reflected, as “Key Needs Remaining” for the fourth quarter of 2013, the need, first, to translate the final feasibility studies into English and formally to submit them to the Government, and, second, to begin “pre-construction fundraising of $100 million,” including initiating talks with the Eurasian Development Bank (“EDB”) and the government of China, for which an “Armenian Guaranty” would be “[r]equired.” The slide also anticipated, as “Key Needs” for the first quarter of 2014, obtaining “Concession Amendments” regarding a “Corridor extension,” having the Government “review and confirm corridor for railway and road,” and having the Government “assemble and transfer land to Southern Armenia Railway for use.”¹²⁴

172. Roughly a week later, on 19 September 2013, Mr. Borkowski followed up with a letter to Armenia’s Prime Minister Sargsyan and Transport Minister Beglaryan, in which he reiterated that a “toll road structure is not feasible” for the Road Project, so financing and construction would have to be either “on a government-to-government basis with long-term, low cost financing from China and the construction handled by CCCC,” or “[a]lternatively, Rasia can proceed forward with the road

¹²⁰ C-329, Email from Mr. J. Borkowski to Mr. G. Grigoryan, 28 August 2013. ↩
¹²¹ C-331, Email from Mr. J. Borkowski to Mr. G. Grigoryan, 3 September 2013. ↩
¹²² Mr. Borkowski and Mr. Grigoryan seem to disagree as to whether one or several meetings took place in Dalian. Cf. Second Borkowski Statement ¶ 46 with Grigoryan Statement ¶ 23. ↩
¹²³ C-117, “Southern Armenia Railway and High Speed Road – Summary of Key Results From Feasibility Studies” (Rasia), slide 3. ↩
¹²⁴ Id., slide 4. ↩

[Page 47]

project using availability payments from the Armenian government.” With respect to the Railway Project, Rasia stated that, having ascertained that it was feasible, it would soon “move into the financing stage” after it had submitted the “final translated versions of the feasibility studies and the recommended alignment for review” by the Ministry of Transport. Rasia requested Armenia to “instruct the [EDB] to begin reviewing” the project.¹²⁵

173. While Mr. Borkowski was communicating these points to Armenia, Rasia also wrote to Aabar. On 13 September 2013, Mr. Borkowski emailed Aabar’s CEO, Mr. Mohamed al-Husseiny (with Mr. Tappendorf in copy), describing the Railway Project as a “government-to-government project with very high level support from China, Armenia, Russia, and Iran.” He requested “pre-construction funding of $35 million to take me through the next 3 years building a team and working to complete the project financing from the regional governments and China.” Mr. Borkowski stated that “[c]onstruction will ultimately be government-government funded when [it] begins in 2016,” but “Rasia requires pre-capex funding of $35 million to fund a development team and complete the project level financing over the next 3 years,” for which he considered it would be “possible to get Armenia government guaranty.”¹²⁶

174. In a subsequent email six weeks later, on 28 October 2013, Mr. Borkowski wrote to Mr. al-Husseiny about the Railway Project, again with Mr. Tappendorf copied. He claimed that Rasia had already had “many discussions with the [ADB], EBRD, [and the] Eurasian Development Bank”; that “both the Russian and the Chinese govt’s will likely be debt partners and operators”; and that he “would like to now find an equity partner that could help drive this forward with some preliminary funding.”¹²⁷ When questioned at the Hearing, Mr. Borkowski said that the “preliminary funding” he sought through these emails did not refer to the Railway Project as such, but rather to potential ancillary mining and agricultural ventures along the route of the railway.¹²⁸

175. On 29 October 2013, Mr. Borkowski sent a proposal to Aabar’s CEO outlining a transaction that would enable Aabar’s subsidiary, Arabtec Holding PJSC (“Arabtec”), to “own and control [this] strategic railway by issuing shares” to Rasia. The proposal described this as an opportunity for Arabtec to become “Master Developer, Contractor [and] Railway Owner,” controlling “100% of [the] Project,” which Mr. Borkowski described as a “Massive project ($3.2bn EPC)” for which

¹²⁵ C-118, Letter from Mr. J. Borkowski to Prime Minister T. Sargsyan, 19 September 2013. ↩
¹²⁶ JB-4, Email from Mr. J. Borkowski to Mr. M. al-Husseiny and Mr. C. Tappendorf, 13 September 2013. ↩
¹²⁷ CT-5, Email from Mr. J. Borkowski to Mr. M. al-Husseiny and Mr. C. Tappendorf, 28 October 2013. ↩
¹²⁸ February Tr. Day 3, Hanessian/Borkowski/Thomas, 529:24-531:18, 533:8-538:2. ↩

[Page 48]

Rasia had been awarded a “public-private project[] from Armenian Gov’t with monopoly rights and unregulated tariffs for 50 years.” Mr. Borkowski further identified the benefits to Arabtec as enabling it to “own and control a ... major energy transport corridor railway” and to “[a]dd an exclusive $3.2 billion EPC railway project to its pipeline with the ability to partner with China company,” all with “minimal to no cash investment from Arabtec,” because “[s]ignificant financing can come from 3^rd parties (up to 85% [C]hina banks and 15% ADFD and Eurasian Development Bank).”¹²⁹ The proposal to Aabar made no mention of Rasia’s prior agreement with CCCC to appoint it (CCCC) “as the lead member of its Consortium and exclusive EPC for developing” the Railway Project.¹³⁰

176. The Claimants say that at some point in late October 2013, the Aabar CEO confirmed his interest in investing in both Projects, which was communicated to Mr. Borkowski through Mr. Tappendorf.¹³¹

(3) Rasia's Delivery of the Feasibility Studies

177. Mr. Borkowski met again with Armenian Government representatives, including Minister Beglaryan and Mr. Grigoryan, on 7 October 2013, this time in Yerevan. A few hours before this meeting, Mr. Borkowski submitted a letter to Minister Beglaryan, stating that he would deliver at the meeting certain “key feasibility study materials” for both Projects. For the Railway Project, this included an English-language final Railway Feasibility Study, as well as engineering drawings and a “profile for the recommended alignment” of the Railway. Mr. Borkowski requested feedback on these documents and “confirmation of the Corridor.” He also asked Armenia to “urgently enter[] into” a trilateral Memorandum of Understanding with Rasia and the Government of Iran, “that is essential for the success of the Southern Armenia Railway project.”¹³² The Tribunal returns to the Iran issue later below.

178. Mr. Borkowski’s 7 October 2013 letter did not promise to deliver a final Road Feasibility Study at the meeting that day. Instead, the letter referred only to submitting certain drawings showing recommended routes, on which Mr. Borkowski requested feedback and “confirmation of the

¹²⁹ C-121, “Southern Armenian Railway – An Energy Corridor Linking Asia to Europe” (Rasia, 29 October 2013). ↩
¹³⁰ R-8, Rasia-CCCC Framework Agreement, p. 2 and Section 7. ↩
¹³¹ First Borkowski Statement ¶ 69; First Tappendorf Statement ¶ 47. ↩
¹³² C-119, Email from Mr. J. Borkowski to Mr. G. Grigoryan (attaching letter from Mr. J. Borkowski to Minister G. Beglaryan), 7 October 2013. ↩

[Page 49]

Corridor.” In the meantime, Mr. Borkowski requested as follows with respect to financing of the Road Project:

Considering that a toll road structure is not feasible for the Southern Armenia High Speed Road project, feedback on whether the Government will prefer to proceed with guaranteed availability payments for the Financing of the Project or to work on a Government-to-Government basis for the Financing and Construction periods with CCCC – this feedback is required in order to complete and submit the final Southern Armenia High Speed Road feasibility study.¹³³

179. Whereas there seems to be no dispute that the Railway Feasibility Study was submitted to the Government (first the English version on 7 October 2013, and then an Armenian translation on 31 December 2013¹³⁴), the Parties have different versions of the chain of events by which Rasia made the Government aware of the results of the Road Feasibility Study, including what was discussed in Yerevan on 7 October 2013.

180. The use of so-called availability payments as a funding model for the Road Project was discussed at the meeting. Mr. Borkowski recalled that he explained to Minister Beglaryan that “Armenia had agreed to the availability payments provision under the road concession, and knew from our negotiations of the concessions that the road could not be financed based on tolling alone”; he said that Minister Beglaryan was upset over this arrangement, to the extent that he threatened to terminate the Road Concession if the Government had to make any availability payments to fund it. Mr. Borkowski says that Minister Beglaryan and Mr. Grigorian did not suggest that Mr. Borkowski’s proposal contradicted the Road Concession, nor that a toll element was required under the concession.¹³⁵

181. Mr. Grigoryan has presented a different account, saying that he does not “know what Mr. Borkowski is talking about.” According to his recollection, Mr. Borkowski did not – at the 7 October 2013 meeting or thereafter – submit any details about how his proposed availability payment funding scheme would work. Instead, it became clear around this time that Mr. Borkowski’s idea of the future of the Road Project differed from the Government’s.¹³⁶ In particular,

¹³³ C-119, Email from Mr. J. Borkowski to Mr. G. Grigoryan (attaching letter from Mr. J. Borkowski to Minister G. Beglaryan), 7 October 2013. ↩
¹³⁴ C-116, Railway Feasibility Study; C-127, Email from Mr. J. Borkowski to Minister G. Beglaryan, 31 December 2013. ↩
¹³⁵ First Borkowski Statement ¶ 53; Second Borkowski Statement ¶¶ 9, 50-51, 85; February Tr. Day 3, Borkowski, 409:5-14; February Tr. Day 4, Borkowski, 725:22-24. ↩
¹³⁶ Grigoryan Statement ¶¶ 25-27. ↩

[Page 50]

Mr. Grigorian says he told Mr. Borkowski that “Armenia is not interested in spending its limited budget funds to finance the Road Project as presented by Rasia.” He stated that his perception at the time was that Mr. Borkowski understood that Rasia’s proposal for the Road Project was “unworkable and unacceptable on its face.”¹³⁷ Mr. Grigorian testified that he and Minister Beglaryan explained during the October 2013 meeting that progressing without a tolling element was not possible: “We discussed his proposals, and we said that this option was not acceptable for the project which was the subject of the Concession which he had signed.”¹³⁸

182. Following a telephone call on 25 October 2013, Mr. Borkowski sent Mr. Grigoryan certain revised pages of a PowerPoint presentation he had used at the earlier October 2013 meetings. This presentation emphasized again that while Rasia considered the Railway Feasibility Study to be “preliminarily acceptable” to it, a “Toll Road Structure” for the Road Project “is not [e]conomical,” whereas a “[f]ree [r]oad w/ Government Availability Payments is Feasible” from Rasia’s perspective. The presentation stated that the “Objective” for the Road Project therefore was “to adopt feasibility studies and route by end of 2013 and to complete negotiation of agreement on availability payments to implement project.”¹³⁹

183. Mr. Borkowski ultimately submitted the Road Feasibility Study to the Government on 24 January 2014.¹⁴⁰ In the accompanying email, Mr. Borkowski wrote that “[g]iven the low traffic volume forecasts, this version assumes for now that there is no tolling on the Project (i.e. that this is a free road). Instead, following the adoption of the recommended corridor and the feasibility study, Rasia FZE will rely on availability payments from the government as provided in the concession agreement.” He added that Rasia nonetheless would explore “potential tolling and levy strategies for the entire North-South Road Corridor and the Armenian road network to offset the cost of the availability payments” required to fund the Southern Armenia High Speed Road project.¹⁴¹ This reference to the “entire North-South Road Corridor” must be taken to mean the broader NSRC road development project that Armenia had been exploring for years with international development banks. From this document, it appears that Mr. Borkowski’s proposal at this point was that tolling should not be attempted on the southern Road Project for which Rasia had the Road Concession, but, rather that tolling should be explored on other portions of the NSRC, and other Armenian roads

¹³⁷ Grigoryan Statement ¶ 28. ↩
¹³⁸ February Tr. Day 8, McNeill/Grigoryan, 1435:12-24. ↩
¹³⁹ C-334, Email from Mr. J. Borkowski to Mr. G. Grigoryan, 25 October 2013. ↩
¹⁴⁰ C-122, Road Feasibility Study; C-130, Email from Mr. J. Borkowski to Mr. G. Grigoryan, 24 January 2014. ↩
¹⁴¹ C-130, Email from Mr. J. Borkowski to Mr. G. Grigoryan, 24 January 2014. ↩

[Page 51]

for which Rasia had no concession rights, in order to help the Government fund the full costs of construction for the Road Project.

184. As will be developed further below, this issue of how the Road Project would be financed became a critical stumbling block in that Project’s moving forward. The Respondent says that the Road Feasibility Study submitted by Rasia did not comply with the Road Concession because it proposed that all costs be borne by the government through availability payments,¹⁴² as opposed to at least in part by tolls, which the Respondent says was required by the Road Concession.¹⁴³ Rasia disagrees with this reading of the Road Concession; it contends that it permitted, but did not require, the use of tolls.

185. Separate from the issue of financing, the Parties also dispute whether the Road Feasibility Study complied with various other requirements of the Road Concession and the Road Terms of Reference. For example, the Parties dispute whether there was an agreement to merge the “two-road” Project set out in the Road Concession into a “single road” project later described in the Road Feasibility Study. They also dispute whether the Road Feasibility Study met some of the technical standards that had been agreed between the Parties in the Road Terms of Reference.¹⁴⁴ These disputes are discussed further below.

H. THE FAILURE OF THE PROJECTS

186. Neither the Road Project nor the Railway Project ultimately came to fruition. The reasons and timelines for the failure of the two Projects differ. In this section, the two Projects are discussed separately, beginning with the Road Project.

(1) The Road Project

187. A running theme in this Arbitration is the Claimants’ contention that the Respondent engaged in a campaign to undermine the Road Project by seeking to develop a competing southern road in violation of Rasia’s exclusive rights under the Road Concession – a characterization which the Respondent denies. The Parties also dispute what was agreed between them with respect to the type

¹⁴² C-122, Road Feasibility Study, p. 125 (stating that it is “currently anticipated that the Project Costs ... will be borne by the government of the Republic of Armenia through the provision of availability payments”). ↩
¹⁴³ Resp. Counter-Mem. ¶¶ 76-81; see also ¶¶ 510-518 below. ↩
¹⁴⁴ For example, the Respondent contends that the Road Feasibility Study used a Chinese technical standard for roads, rather than the applicable Armenian technical standard stipulated in the Terms of Reference, with the result that the Feasibility Study proposed a much lower design speed than the Terms of Reference had anticipated (60 and 40 km/hour rather than 100 and 90 km/hour for different types of terrain). ↩

[Page 52]

of road(s) to be built, how this relates to the broader NSRC project, and how the Road Project was to be financed. The facts underlying these disputes are briefly outlined below.

a. Exclusivity and the NSRC project

188. On the Claimants’ case, the Respondent’s parallel campaign to develop a competing southern road had begun already in November 2012, when Armenia requested additional financing from the ADB.¹⁴⁵ As discussed above, the ADB had agreed in 2009 to provide a multi-tranche financing facility for various NSRC projects.¹⁴⁶ On 22 November 2012, Armenia submitted a periodic financing request to the ADB,¹⁴⁷ for which the ADB approved certain financing in an “Advance Contracting Notice” issued on 16 January 2013. The financing approved in this notice was for roadwork on Tranche 3 of the NSRC, but also to enable Armenia to “undertake feasibility and detailed design of Tranche 4,” the southernmost portion of the NSRC.¹⁴⁸ On 18 June 2013, Armenia notified the ADB that it would require less funding from the ADB than previously discussed, because it had successfully obtained alternative financing from the European Investment Bank for part of the Tranche 3 work. However, Armenia stated that:

as part of preparing the Tranche 4 of the ADB [Multilateral Financing Facility], we intend to request the ADB to take over the construction of approximately 55-60km of Category 1 road from Artashat to the southern direction ... Meantime, by doing the feasibility study of the whole of the southern part of the North South Road, we increase the chances for the Government to attract additional co-financing, or parallel financing, from such potentially interested lending agencies as the Eurasian Development Bank (EBD), JICA, etc.¹⁴⁹

¹⁴⁵ Cl. Mem. ¶ 154; Cl. Reply ¶¶ 309, 371, 386(i); Cl. First PHB ¶ 4. ↩
¹⁴⁶ R-4, ADB, Proposed Multitranche Financing Facility and Administration of Cofinancing, Republic of Armenia: North-South Road Corridor Investment Program, September 2009. ↩
¹⁴⁷ C-134, Loan Agreement for the North-South Corridor Investment Program – Project 3 between the Republic of Armenia and the ADB, 11 March 2014, Preamble. ↩
¹⁴⁸ C-276, Advance Contracting Notice from the ADB to the Ministry of Transport regarding the NSRC Investment Program, 16 January 2013; see also C-265, Email from Mr. J. Borkowski to Mr. G. Grigoryan (attaching Letter from Mr. J. Borkowski to Mr. G. Beglaryan), p. 6 (attaching an 18 March 2014 letter from Mr. D. Dole of the ADB to Mr. Borkowski). ↩
¹⁴⁹ C-295, Letter from D. Sargsyan, Minister of Finance of the Republic of Armenia, to K. Gerhaeusser, Director General, ADB, 18 June 2013. ↩

[Page 53]

189. Armenia and the ADB ultimately concluded a $100 million loan agreement on 11 March 2014, Schedule 1 of which describes the loan as covering, inter alia, the “preparation of feasibility study for Artashat-Qajaran section (304 km) of the North-South corridor.”¹⁵⁰

190. The Claimants say they were not aware at the time of the Respondent’s dealings with the ADB about the southern road, which they claim was part of the territory for which Rasia held exclusive rights under the Road Concession. Mr. Borkowski and Mr. Tappendorf say that they first learned about Armenia’s funding request when they met with ADB themselves on 12 July 2013.¹⁵¹

191. When Mr. Grigoryan and Minister Beglaryan met with Mr. Borkowski in Yerevan to discuss the preliminary results of the Feasibility Studies in October 2013, Mr. Borkowski also recalls asking whether Armenia was seeking separate ABD funding for the Road Project, which he says Mr. Grigoryan and Minister Beglaryan denied. Mr. Grigoryan does not agree with this version of events, and says that no attempts were made to hide from Rasia the Government’s work with the ADB.¹⁵²

192. However, according to the Respondent, the road stretch for which it sought ADB financing does not overlap in any event with the Concession Territory covered by Rasia’s exclusive rights under the Road Concession. The request for ADB financing was triggered by the completion of preparatory works on Tranche 3, a different part of the NSRC, to which the “overwhelming majority” of the funds related, the Respondent says. The references to Tranche 4 are explained by the fact that Tranche 4 of the NSRC is longer than the Concession Territory,¹⁵³ and a small part of the work for which Armenia also sought financing covered a part of Tranche 4 which did not overlap with Rasia’s rights. In any event, the Respondent observes, it is undisputed that the ADB loan agreement was not signed until 11 March 2014, by which time (on the Respondent’s version of events), Rasia already had defaulted on its Road Project obligations.¹⁵⁴

¹⁵⁰ C-134, Loan Agreement for the North-South Corridor Investment Program – Project 3 between the Republic of Armenia and the ADB, 11 March 2014, Schedule 1, ¶ 3(c). ↩
¹⁵¹ First Borkowski Statement ¶ 48; Cl. Reply ¶ 372; Cl. First PHB ¶¶ 4, 34-45. ↩
¹⁵² First Borkowski Statement ¶ 53; Second Borkowski Statement ¶ 85; Grigoryan Statement, ¶¶ 25-28; Resp. Rej ¶¶ 224, 246; February Tr., Day 3, Borkowski, 409:5-14; February Tr. Day 5, Borkowski, 725:22-24. ↩
¹⁵³ Resp. Counter-Mem. ¶ 71; Resp. Rej. ¶ 285. ↩
¹⁵⁴ Resp. Second PHB ¶¶ 69-72; C-113, ADB, Periodic Financing Request Report, ¶¶ 4, 18-19, 31 and Tables 2 and 4. ↩

[Page 54]

b. Type(s) of road(s) and the financing thereof

193. As explained at paragraph 118 above, Section 3 of the Road Concession defined as the Road “Project” work on two separate roads. Rasia was “to implement from its own funds and attracted Project Financing” the design and build of a new “high speed road” (Section 3(b)) and was also “to rehabilitate and hand over to the Government the existing toll free road between Sisian and Meghri ... within the budget of USD 80 millions” (Section 3(e)).¹⁵⁵

194. It is undisputed that instead of the two roads contemplated by the Road Concession, Rasia proposed a single road project, financed by so-called “availability payments” from the Government instead of any tolls, on the basis that traffic volumes would be too low to sustain a toll road as a commercial undertaking. However, the Parties are in dispute as to the timing and implications of these developments, in particular, with respect to what was to be built instead of the toll road and how it was to be financed.

195. According to the Claimants, the Parties agreed to a one-road solution in November 2012, during the CCCC site visit to Armenia, a contention which the Respondent disputes.¹⁵⁶ The Claimants observe that the map contained in the site visit report reflects only one road.¹⁵⁷ The Claimants also contend that the Road Terms of Reference, signed on 10 November 2012, also consistently refer to a single road.¹⁵⁸ At the same time, the Respondent notes, Article 2 of the Road Terms of Reference describes the Road Project “[a]s defined in Section 3 [...] of the [Road Concession],” which, as recounted above, provided for two roads.¹⁵⁹

196. It appears undisputed that when Mr. Borkowski presented the preliminary findings of the Road Feasibility Study to the Armenian Government in August 2013, he told the government representatives that a new toll road was not feasible.¹⁶⁰ As mentioned above, Mr. Borkowski also wrote a letter to the Prime Minister on 19 September 2013 to the same effect.¹⁶¹ The Road

¹⁵⁵ C-2, Road Concession, Section 3; see also Id., Section 1 (defining “Project” as having “the meaning ascribed thereto in Section 3”). ↩
¹⁵⁶ Cl. First PHB ¶ 84; Resp. First PHB ¶ 29. ↩
¹⁵⁷ C-96, CCCC, “Site Visit Report: Southern Armenia High Speed Road Project”, November 2012, p. 3; Cl. First PHB ¶¶ 96-104. ↩
¹⁵⁸ C-98, Road Terms of Reference, see for example Section 9, Section 10 and Section 21. ↩
¹⁵⁹ Id., Section 2. ↩
¹⁶⁰ February Tr., Day 4, Hanessian/Borkowski, 590:23-591:7. ↩
¹⁶¹ C-118, Letter from Mr. J. Borkowski to the Prime Minister, copied to Minister Beglaryan, 19 September 2013 (thanking him for meeting with representatives of China Poly and Mr. Borkowski at Dalian, China, on 10 September 2013, and informing him of the general results of the Feasibility Studies for both projects) ↩

[Page 55]

Feasibility Study dated 2013 and submitted to the Government on 24 January 2014 states as follows regarding projected financing for the Road Project:

It is currently anticipated that that the Project Costs including the Administrative, Operation and Maintenance Costs; the Principal and Interest costs from the debt financing; and the required Equity Return to equity investors, if applicable, will be borne by the government of the Republic of Armenia through the provision of availability payments. Based on the availability payments, it is anticipated that the Project should be able to secure loans from the Export-Import Bank of China or China Development Bank for approximately 60-85% of the Project investment requirement .... The remaining 15-40% of the funds are anticipated to be loans from an active international financial institution in Armenia with a history of financing or interest in financing the North-South Road Corridor program. It is not anticipated that equity investment will be required for the Project financing other than the equity invested for the feasibility study and other related works leading up to completion of the Project financing.¹⁶²

197. A separate dispute between the Parties involves the Road Feasibility Study’s compliance with the agreement in the Road Terms of Reference that the design “should meet the requirements” for a Class II category road as defined in Armenia’s Construction Norms.¹⁶³ The Road Feasibility Study makes reference to “the Armenian requirements for the technical standards of the Project,” but also refers to “the highway class selection” in a publication that describes the Chinese highway standards.¹⁶⁴ The distinction becomes important, because the Road Feasibility Study proposed design speeds of 60 and 40 km/hour based on terrain (which is consistent with the Chinese Class II standard), whereas the Armenian Class II standard involves higher design speeds of 90-100 km/hour.¹⁶⁵ As will be discussed further, Armenia raised questions in mid-2014 about the design speed reflected in the Road Feasibility Study.

c. Further NSRC developments in the south

198. On 2 October 2013, the Armenian Government issued a tender for “construction supervision of Tranche 3 and feasibility study, preliminary design and about 60km detailed design of Tranche 4” of the NSRC, to be financed by the ADB as discussed above. The tender described the Tranche 4 feasibility and design work as covering the “Artashat-Qajaran road section ... of southern part of

¹⁶² C-122, Road Feasibility Study, p. 125. ↩
¹⁶³ C-98, Road Terms of Reference, Section 10. ↩
¹⁶⁴ C-122, Road Feasibility Study, p. 9. ↩
¹⁶⁵ Id.; April Tr. Day 1, Hanessian/Harrison, 1666:3-22. ↩

[Page 56]

North-South road.”¹⁶⁶ The tender was won by a joint venture between Spea Ingegneria Europea S.p.A. and IRD Engineering SrL,¹⁶⁷ which later, on 30 March 2015, signed a contract with the Government for a feasibility study and design works for the Artashat to Kajaran road section of Tranche 4.¹⁶⁸ The feasibility study work was completed on 2 May 2016.¹⁶⁹

199. Separately, on 5 February 2014, Armenia’s Ministry of Transport signed an agreement with the French company Egis International (“Egis”), which had been providing consultancy services to the Ministry on other aspects of the NSRC project under a Consultancy Services Contract concluded on 24 September 2010. The 5 February 2014 document, entitled “Agreement No. 8,” was said to be based on an “agreement of [ADB] issued on 16.10.2013,” and assigned to Egis “the performance of the following new tasks,” including preparation of a “[c]omprehensive [f]easibility [s]tudy of Qajaran-Agarak 50km southern section” of the NSRC, based on “Category 1 highway standards.”¹⁷⁰ Egis commenced work for the studies on 17 February 2014, carried out a site visit from 21-23 February 2014 and issued the final version of its feasibility study on 15 May 2014.¹⁷¹

200. The Claimants contend that the work performed by the Spea/IRD joint venture and by Egis was done in respect of territory covered by the Road Concession. The Respondent says it was clear to the Government that the Road Project had failed, and that Rasia was in “default,” before this work was commissioned.¹⁷²

¹⁶⁶ C-156, NSRC Investment Program, Consulting services for construction supervision of Tranche 3 and feasibility study, preliminary design and about 60km detailed design of Tranche 4, http://northsouth.am/en/procurement/show/13, 3 April 2015, p. 5. ↩
¹⁶⁷ First Arakelyan Statement ¶ 59. ↩
¹⁶⁸ C-299, Contract for Consultant’s Services: Time-Based with Lump-Sum Component for North-South Road Corridor Investment Program – Tranche 3 between the Ministry of Transport and Communication of Republic of Armenia and its Agent “Organization for Implementation of North-South Road Corridor Investment Program” (SNCO) and Joint Venture of Spea Ingegneria Europea S.p.A. and IRD Engineering S.r.L. ↩
¹⁶⁹ R-41, J/V SPEA Engineering-IRD Engineering, Feasibility Study for Tranche 4 - Section Artashat South to Kajaran, 2 May 2016. ↩
¹⁷⁰ C-298, Agreement No. 8 on Consulting Services Contract No. 02-CS-002 between Egis International and North-South Road Corridor Investment Program Implementation Organization (SNCO) – Agent of Ministry of Transport and Communication, 5 February 2014, Preamble, ¶¶ 1.1, 1.3.1 & attached Variation Order No. 5, ¶¶ 1.1, 3.2. ↩
¹⁷¹ R-23, Egis International, Feasibility Study for the Southern Section of NS Corridor from Qajaran to Agarak, 15 May 2014, pp. 8, 26. ↩
¹⁷² Cl. Reply ¶¶ 386(iii), 387(iii); Resp Second PHB ¶ 76; First Arakelyan Statement ¶ 59 (stating that by the time of the tender in October 2013, “[a]s for the Road Project with Rasia [...] we had not the slightest doubt that it was closed and all that was needed was to sign the relevant paperwork. So we felt free to take any steps we considered appropriate to continue with the North-South Program.”). ↩

[Page 57]

d. The status of the Road Project in 2014

201. It is undisputed that, in contrast with the Railway Feasibility Study, Rasia never formally accepted the Road Feasibility Study.¹⁷³ The Claimants maintain that the Road Feasibility Study was automatically accepted under Section 20 of the Road Concession in March 2014, following the expiry of the commenting period provided by that provision.¹⁷⁴

202. It is also undisputed that Armenia did not establish an inter-agency Working Group to study the Road Feasibility Study,¹⁷⁵ in the way that it did with the Railway Feasibility Study. In the Claimants’ submission, the Government “ignored” the Road Feasibility Study,¹⁷⁶ a contention which the Respondent rejects, primarily with reference to a series of meetings in February 2014.

203. These meetings took place in Yerevan between Mr. Borkowski, government officials and representatives from both CCCC and China EximBank, between 6-24 February 2014 (the “February 2014 Yerevan Meetings”). These Meetings have been the subject of extensive pleadings by the Parties. Among other things, they disagree as to whether the Road Project was discussed at all during the meetings (see Section III.H.2 for relevance to the Railway Project).

204. According to the Respondent, the Parties discussed the Road Feasibility Study during the February 2014 Yerevan Meetings. Both Mr. Arakelyan and Mr. Grigoryan have recalled that government representatives made clear to Mr. Borkowski that the Road Project, as proposed by Rasia in the Road Feasibility Study, was unworkable. Both men had the impression – and the Respondent has argued – that Mr. Borkowski understood at the Meetings that the Road Project would not proceed.¹⁷⁷ In fact, at the February Hearing, Mr. Arakelyan went so far as to say that it was his understanding that the Parties mutually agreed to terminate the Road Concession during these meetings.¹⁷⁸ By contrast, Mr. Borkowski says that his repeated attempts to present the results of the Road Feasibility Study were cut off.¹⁷⁹

¹⁷³ February Tr., Day 3, Hanessian and Borkowski, 412:13-20. ↩
¹⁷⁴ Cl. First PHB ¶¶ 8, 249; See also February Tr., Day 3, Borkowski, 411:21-25-412:1-7; February Tr., Day 5, Thornber, 956:5-10. ↩
¹⁷⁵ February Tr., Day 8, McNeill/Grigoryan, 1448:21-1449:6. ↩
¹⁷⁶ First Borkowski Statement ¶ 74. ↩
¹⁷⁷ First Arakelyan Statement, ¶ 52; Second Arakelyan Statement ¶ 72; Grigoryan Witness Statement, ¶¶ 34-35; Resp. Counter-Mem. ¶ 82; Resp. Rej ¶ 257. ↩
¹⁷⁸ First Arakelyan Statement ¶¶ 42-49; Grigoryan Statement ¶ 30; Resp. First PHB ¶ 152; February Tr., Day 6, Arakelyan, 1033:25-1034-7. ↩
¹⁷⁹ Second Borkowski Statement, ¶¶ 58, 71; Cl. Reply ¶ 354. ↩

[Page 58]

205. During the February 2014 Yerevan Meetings, Mr. Borkowski says he also suggested that the Road Project be financed by CCCC, either by a loan against availability payments or on a government-to-government basis, and that he presented a draft Memorandum of Understanding (MOU) for the purposes of negotiating Chinese financing for the Road Project on either of these two bases.¹⁸⁰ By Mr. Borkowski’s account, Minister Beglaryan was “non-responsive,” but Mr. Arakelyan has said that he told Mr. Borkowski that a loan from a Chinese bank was not an option.¹⁸¹

206. Mr. Borkowski alleges that Minister Beglaryan solicited a bribe during the February 2014 Yerevan Meetings, by suggesting that the payment of a personal contribution to the Minister would secure his support for the Projects. According to Mr. Borkowski, Minister Beglaryan raised the subject at a separate meeting in his private office on 17 February 2014, which was also attended by Mr. Grigoryan acting as English-Armenian translator. During this meeting, Minister Beglaryan allegedly insisted that Mr. Borkowski drop the Road Project, and threatened that Rasia would also lose the Railway Project if Mr. Borkowski persisted with pursuing the Road Project. According to Mr. Borkowski, Mr. Grigoryan then said that “the Minister wants to know what’s under the paper,” and further explained that “he wants to know what’s in it for him.”¹⁸² Both Mr. Arakelyan (who Mr. Borkowski says “with 100% certainty” did not attend the meeting in question¹⁸³) and Mr. Grigoryan have denied Mr. Borkowski’s account. Mr. Arakelyan says that no discussion of the kind Mr. Borkowski describes took place, while Mr. Grigoryan, who denies having been present at the alleged meeting, says there was “absolutely nothing,” either during the February 2014 Yerevan Meetings or afterwards, that would support Mr. Borkowski’s allegations in this respect.¹⁸⁴

207. Two days after the alleged bribery request, Mr. Borkowski reported to Mr. Tappendorf about the February 2014 Yerevan Meetings. In his report, while he was “in middle of war on [the] road,” he expected “a victory on that soon,” and in the meantime had scored a “[b]ig win” with respect to the Railway Project, in the sense that Armenian officials had been impressed with his detailed presentation.¹⁸⁵ Mr. Borkowski admits that he never told Aabar about the bribery request he now alleges took place at this time.¹⁸⁶

¹⁸⁰ Cl. Reply ¶ 358; Second Borkowski Statement ¶ 103. ↩
¹⁸¹ Second Borkowski Statement ¶¶ 97-98; First Arakelyan Statement ¶ 43. ↩
¹⁸² Second Borkowski Statement ¶¶ 18, 66-80. ↩
¹⁸³ Id., ¶ 76. ↩
¹⁸⁴ First Arakelyan Statement ¶ 54; Second Arakelyan Statement ¶ 71; Grigoryan Statement ¶¶ 12, 31-32. ↩
¹⁸⁵ CT-6, Email from Mr. J. Borkowski to Mr. C. Tappendorf, 19 February 2014. ↩
¹⁸⁶ February Tr. Day 3, Hanessian/Borkowski, 430:24-433:5. ↩

[Page 59]

208. Be that as it may, immediately after the February 2014 Yerevan Meetings, Mr. Borkowski wrote to ADB. He did so, because he says that he had been told at those Meetings that Rasia might be able to participate in the broader ADB-financed NSRC road program, involving a Category 1 road (which the Respondent denies).¹⁸⁷ In a 20 February 2014 email to Mr. David Dole of the ADB, Mr. Borkowski submitted what he described as a “request for approval from [ADB] to continue our activities.”¹⁸⁸ The attached letter stated as follows:

Following our presentation of the Southern Armenia Railway, the Prime Minister requested that Rasia and CCCC contact [ADB] to seek [ADB] approval in order to participate in the North South Road Corridor program.

Pursuant to this instruction, we are pleased to submit our formal request for Rasia and CCCC, together and individually, to continue existing works on the Southern Armenia High Speed Road project as well as to consider additional new works regarding feasibility, design, financing and construction proposals between CCCC, the China Banks such as China Export Import Bank and China Development Bank, and the Government of the Republic of Armenia potentially extending from Ararat to Agarak. In all cases, we aim to coordinate closely with [ADB] and request your approval by letter to the Minister of Transport and Communication, Mr. Gagik Beglaryan, to work directly with the Government of the Republic of Armenia.

Kindly advise of any questions or required clarifications to this letter and we hope to secure your approval/consent to continue our road related works soon.¹⁸⁹

209. On 3 March 2014, Mr. Borkowski reported to Mr. Weixin of CCCC that ADB was finalizing a letter to Minister Beglaryan “that would enable CCCC to move forward on the road project MoU,” integrating the CCCC Road Project into the broader NSRC.¹⁹⁰

210. On 18 March 2014, however, ADB responded without making any commitments. The transmittal email to Mr. Borkowski said the ADB was “requesting the govt’s advice on how they would like us to work with Rasia.... [w]e are kicking this back to the govt.”¹⁹¹ The attached ADB letter stated that while ADB “is interested in cooperating with all potential partners on Armenia’s North-South Road Corridor Investment Program, and is glad to hear of Rasia’s interest in the southern sections of the North-South road ... [a]ll work on the North-South road, involving ADB or others ... is

¹⁸⁷ Second Borkowski Statement ¶ 95; February Tr. Day 3, Borkowski, 441:1-5; Resp. Rej. ¶ 256. ↩
¹⁸⁸ R-90, Email from Mr. D. Dole to Mr. J. Borkowski, 4 April 2014, p. 3. ↩
¹⁸⁹ R-15, Letter from Mr. J. Borkowski to Mr. D. Dole, 20 February 2014. ↩
¹⁹⁰ R-85, Email from Mr. J. Borkowski to Mr. B. Weixin, 3 March 2014. ↩
¹⁹¹ R-90, Email from Mr. D. Dole to Mr. J. Borkowski, 4 April 2014, p. 2. ↩

[Page 60]

coordinated by” the Armenian Ministry of Transport. ADB instructed Rasia to “coordinate directly” with Armenian officials “to discuss Rasia’s interest in financing the North-South road ....”¹⁹²

211. On 19 March 2014, Mr. Weixin of CCCC expressed confusion about ADB’s role in the “upcoming sections of North-South Corridor project,” because “[i]t seems that ADB still wants to be the leading party.” Mr. Borkowski explained that “[w]e are submitting a formal letter to the Armenia government today requesting the Minister to enter into the MoU directly with CCCC.” Mr. Borkowski’s explanation was that “if China is providing 70-85% of the funding, the other 15-30% has to come from the government of Armenia, which means ADB or Eurasian Development Bank.”¹⁹³

212. The next day, on 20 March 2014, Mr. Borkowski sent a letter to Minister Beglaryan, in which he professed to have “received a positive response letter” from ADB regarding “mutual cooperation with the Government of the Republic of Armenia for the North-South Road including [the Road Project].” The letter also attached the same draft CCCC MoU Mr. Borkowski allegedly raised with Armenia at the February 2014 Yerevan Meetings, pursuant to which Armenia and CCCC would seek to integrate the proposed road into the NSRC initiative and begin negotiating Chinese financing. Mr. Borkowski proposed in his letter to Minister Beglaryan that “CCCC and Rasia FZE, at our own cost, [...] modify the existing feasibility study and the recommended alignment of the road project to the standards of the North-South Road Corridor.”¹⁹⁴

213. Several days later, on 24 March 2014, Mr. Borkowski reported to ADB that in a meeting with Mr. Grigorian of the Ministry of Transport, he was told that “the Armenian government has agreed to borrow funds from ADB that also covers a feasibility study from Arthashat to Kajaran.” Mr. Borkowski queried why “the government is paying for another FS when we have already paid CCCC” for one. Nonetheless, he said, “[w]e are waiting to modify our FS from the road directorate technical input/standards to the NSRC technical standards.”¹⁹⁵ The next day, ADB confirmed that it “has about $170 million left to lend for the NS road, and will prefer to continue from Artashat to however far south we can” with that sum, but it required instructions from the Government

¹⁹² C-265, Email from Mr. J. Borkowski to Mr. G. Grigoryan (attaching Letter from Mr. J. Borkowski to Minister G. Beglaryan), 21 March 2014, p. 6 (attaching 18 March 2014 letter from Mr. D. Dole to Mr. J. Borkowski). ↩
¹⁹³ R-89, Email from Mr. B. Weixin to Mr. J. Borkowski, 26 March 2014. ↩
¹⁹⁴ R-19, Email from Mr. J. Borkowski to Minister G. Beglaryan, 20 March 2014 (attaching Letter from Mr. D. Dole to Mr. J. Borkowski, 18 March 2014, and Draft Memorandum of Understanding between Armenia and CCCC, 20 March 2014); C-239, Email from Mr. J. Borkowski to Mr. G. Grigoryan, 21 March 2014 (attaching Letter from Mr. J. Borkowski to Minister G. Beglaryan). ↩
¹⁹⁵ R-88, Email from Mr. J. Borkowski to Mr. D. Dole, 26 March 2014, p. 3. ↩

[Page 61]

regarding Rasia’s participation. ADB did report “good news for you,” which was that “[t]he final version of the govt’s development strategy mentions your railway and road projects.” Mr. Borkowski welcomed the news and stated that “[h]opefully I can sort out the road matter and CCCC can continue their work.”¹⁹⁶

214. Mr. Borkowski’s optimism was misplaced, however. One week later, on 1 April 2014, Mr. Beglaryan informed the ADB that the Road Feasibility Study submitted by Rasia “is inefficient and does not comply with the overall strategy, and therefore it cannot be considered” within the broader NRSC project. Specifically, he complained as follows:

[I]n the feasibility study represented by Rasia is proposed a reconstruction of the existing road option by providing Category II road where the design speed is 60 km/h and 40 km/h and the carriageway is 2 lanes as well as is intended horizontal curves with small radius and large longitudinal slopes. Taking into account the main conditions of North-South road corridor now feasibility study is being carried out for about 5 alternatives, where approval is expected to be given to the construction of the Category I road where the speed will be mostly 80km/h and carriageway will be 4 lanes, as well as the new road construction will give an opportunity to shorten the existing about 50km road section. At the same time for intending carriageway with 2 lanes for upstream and downstream it’s necessary to have additional lanes for traffic, otherwise problems may arise in the presence of large trucks. On the Qajaran to Agarak section ... [i]t should also be noted that the radiuses of horizonal curves, longitudinal slopes and other technical parameters are more secure and creates favorable conditions for traffic.

Mr. Beglaryan added, however, that while Rasia’s Road Feasibility Study could not be considered within the NSRC project, “Rasia, if [it wishes], can be involved into the implementation” of any road construction resulting from alternative feasibility studies developed by the ADB in future.¹⁹⁷

215. On 4 April 2014, Mr. Dole of the ADB informed Mr. Borkowski that he believed the Government did not understand that “the govt and any financier can do a separate deal themselves and ADB does not have to be involved in all financing for the North-South road. Mr. Borkowski agreed that “in my discussions with the [Ministry of Transport], the key aspect the[y] have not been understanding is the ‘separate deal’ part.”¹⁹⁸ Mr. Borkowski had tried to explain to the Government that Rasia wished to continue “with our project,” and to work with ADB on co-financing “only

¹⁹⁶ R-88, Email from Mr. J. Borkowski to Mr. D. Dole, 26 March 2014, pp. 2-3. ↩
¹⁹⁷ C-294, Letter from Minister G. Beglaryan to Mr. D. Dole, 1 April 2014. ↩
¹⁹⁸ R-90, Email from Mr. D. Dole to Mr. J. Borkowski, 4 April 2014, p. 2. ↩

[Page 62]

where we meet the necessary standards/requirements, but we also want to be able to explore all financing alternatives (Exim, China Development Bank, etc) that may also not involve ADB in the financing ... I think they are learning as things go but they seem to have good intentions.” ADB replied that “[o]ne part of the govt’s argument makes sense – they want to follow one set of rules for the whole road.”¹⁹⁹

216. Roughly five weeks later, on 12 May 2014, Mr. Borkowski sent a follow-up email to Mr. Grigoryan at the Ministry of Transport. He stated that “CCCC ... asked about the road project and would love to be able to sign the MoU,” so that Rasia could “get the Chinese banks working with the Minister of Finance on very special loan packages.”²⁰⁰ It is undisputed that Armenia never signed a Memorandum of Understanding with CCCC.²⁰¹

217. On 23 May 2014, Armenia requested a US$150 million loan from the EDB.²⁰² The EDB approved the loan on 2 July 2014,²⁰³ and the final loan agreement was executed on or about 14 April 2015.²⁰⁴ The Claimants argue that the road stretch for which the loan was sought overlaps with the exclusive territory in the Road Concession, a contention which the Respondent disputes.²⁰⁵ The Claimants also argue that while the formal request for the EDB loan took place in May 2014, Armenia took several earlier steps, beginning with a preliminary application in December 2012, to seek this financing.²⁰⁶ According to the Respondent, the precise section of the road for which the government sought EDB construction financing had not been defined in December 2012. In any event, the Respondent says, first, that the stretch for which it sought EDB financing did not overlap with the road envisioned by the Road Concession, and, second, the loan agreement with EDB was not

¹⁹⁹ R-90, Email from Mr. D. Dole to Mr. J. Borkowski, 4 April 2014, p. 1. ↩
²⁰⁰ R-97, Email from Mr. J. Borkowski to Staff of the Ministry of Transport, 12 May 2014. ↩
²⁰¹ February Tr., Day 8, McNeill/Grigoryan, 1440:16-19. ↩
²⁰² C-139, “Eurasian Fund for Stabilization and Development Website: “Armenian Ministry of Finance Applies to EDB for New Investment Finance From the ACF,” https://efsd.eabr.org/en/press-center/news/armbanks-am-armenian-ministry-of-finance-applies-to-edb-for-new-investment-finance-from-the-acf/, 29 May 2014; C-140, Eurasian Development Bank – Resources Manager of EurAsEC Anti-Crisis Fund, “Appraisal of Application of Republic of Armenia for Investment Loan to be provided by the EurAsEC Anti- Crisis Fund for the project ‘Construction of the North-South Road Corridor (Phase 4)’ in the amount of US$ 150 million,” June 2014; ↩
²⁰³ C-128, Eurasian Development Bank, “Eurasian Fund for Stabilization and Development – Annual Report 2014,” 2014, p. 16. ↩
²⁰⁴ C-297, Agreement on an Investment Loan Extended Using the Funds of the Anti-crisis Fund of the Eurasian Economic Community to Finance the Project Titled Construction of the North-South Road Corridor (4th Stage) between Armenia and EDB, April 2015. ↩
²⁰⁵ Cl. Mem. ¶ 154; Resp. Rej ¶ 291. ↩
²⁰⁶ Cl. First PHB ¶¶ 57-60; C-140, EDB Appraisal of Application of Armenia for Investment Loan for the project “Construction of the NSRC (Phase 4), June 2014, pp. 6, 23. ↩

[Page 63]

executed until 14 April 2015,²⁰⁷ long after Rasia had defaulted on the Road Project (and over a year after the ADB loan discussed above).²⁰⁸

218. On 16 June 2014, Deputy Minister Arakelyan wrote a letter to Mr. Borkowski which emphasized technical differences between the two projects, along the same lines as Mr. Beglaryan’s 1 April 2014 letter to the ADB. The letter noted, for example, that Rasia had submitted a Road Feasibility Study which provided for “reconstruction of the existing road option by providing Category II road where the design speed is 60 km/h and 40km/h and carriageway is 2 lanes as well as is intended horizontal curves with small radius and large longitudinal slopes.” This proposal was contrasted with the “main conditions” of the NSRC feasibility study now being carried out with ADB assistance, “where approval is expected to be given to the construction of the Category I road where “the speed will be mostly 80km/h and carriageway will be 4 lanes,” with “radiuses of horizontal curves, longitudinal slopes and other technical parameters [that] are more secure and create[] favorable conditions for traffic.” Mr. Arakelyan invited Rasia to be involved in the future “implementation of the Project,” subject to ADB approval.²⁰⁹

219. The Parties dispute whether the Road Concession was ever effectively terminated. While the Respondent has suggested that the Concession was orally terminated at the February 2014 Yerevan Meetings, it has conceded that the formal termination was delayed.²¹⁰ The Ministry of Transport prepared a draft decision authorizing Minister Beglaryan to rescind the Road Concession. It was submitted to the Ministry of Justice for legal review, and on 5 December 2014 also submitted to the Chief of the Staff of the Government for consideration.²¹¹ However, the formal termination decision was not sent to Rasia “solely for bureaucratic reasons,” the Respondent says.²¹² Instead, Mr. Borkowski says, he was informed by Mr. Grigoryan in a phone call “on or around 29 December 2014” of the Government’s decision to terminate the Road Concession.²¹³

²⁰⁷ C-157, North-South Road Corridor Investment Program, Investment Agreement Signed with Eurasian Development Bank, 14 April 2015, http://northsouth.am/en/news/show/79/70. ↩
²⁰⁸ Resp. Second PHB ¶ 73; February Tr. Day 2, Fridman, 258:3-16. ↩
²⁰⁹ R-26, Letter from Mr. A. Arakelyan to Mr. J. Borkowski, 16 June 2014. ↩
²¹⁰ Resp. First PHB ¶ 155. ↩
²¹¹ R-31, Letter from Mr. Beglaryan to Mr. D. Harutyunyan (attaching Draft Decision on Making Amendments to the Decision of the Government of the Republic of Armenia No. 982-AG of 2 August 2012), 5 December 2014., ↩
²¹² First Arakelyan Statement ¶¶ 49-50; Resp. First PHB ¶ 155. ↩
²¹³ Second Borkowski Statement ¶ 89. ↩

[Page 64]

220. On 31 December 2014, Mr. Borkowski wrote to Minister Beglaryan that Rasia was “still waiting for confirmation that the Southern Armenia High Speed Road Concession Agreement has been terminated.”²¹⁴ The letter expressed disappointment about this outcome, but it did not allege any breach of contract or other wrongdoing on the part of Armenia.

221. After this letter, the record contains no further written correspondence between the Parties about the Road Project for the next 18 months, until the Claimants’ Notice of a Dispute under the BIT on 25 June 2016.²¹⁵

e. Alleged Road Project arrangements with CCECC and other entities

222. In the meantime, the Claimants say, Armenia took steps to develop the Road Project with entities other than Rasia. Specifically, the Claimants say that Armenia signed an MoU on Tranche 4 of the NSRC with China Civil Engineering Construction Corporation Ltd. (“CCECC”) on 23 December 2014. This alleged MoU (the “Alleged CCECC MoU”) has not been produced as evidence in this Arbitration, but the Claimants contend that its existence is evident from a briefing prepared for the Armenian President, before his visit to China in March 2015.²¹⁶ The Respondent says this reflects a mistake in making reference to a December 2014 MoU.²¹⁷ An MoU undisputedly was signed on 31 January 2015 between the Armenian Ministry of Transport and the CCECC, but this was for the design and construction of just a 22 kilometer road section south of Kajaran, including a 4.7 km tunnel, and not any broader stretch of Tranche 4 (the “CCECC MoU”).²¹⁸

223. Following the CCECC MoU, a CCECC delegation visited Armenia in January and February 2015 to investigate the road, as well as the Southern Railway Project (railway issues discussed separately below). The resulting site visit report has not been produced as evidence in this Arbitration, but the Claimants again contend that the site visit is evident from the same March 2015 briefing prepared for the Armenian President. In the absence of the site visit report, the precise stretch of the road investigated by CCECC is not clear.²¹⁹

²¹⁴ C-19, Letter from Mr. J. Borkowski to Minister G. Beglaryan, 31 December 2014. ↩
²¹⁵ C-53, Letter from Mr. J. Borkowski to Minister G. Beglaryan, 25 June 2016. ↩
²¹⁶ C-306, Presentation, “Construction of the Southern Railway Passing through Armenia’s Section of the Silk Road,” 2015, p. 7 (stating that “[o]n 23 December 2014 the Minister of Transport and Communication of the RA signed a Memorandum on Tranche 4 of the North-South highway” with CCECC). ↩
²¹⁷ Resp. Rej, ¶ 197. ↩
²¹⁸ AA-5, MoU, Ministry of Transport and CCECC, 30 January 2015. ↩
²¹⁹ Cl. First PHB ¶ 61; C-306, Presentation, “Construction of the Southern Railway Passing through Armenia’s Section of the Silk Road”, 2015, p. 7. ↩

[Page 65]

224. In 2015 and 2016, the Claimants say that the Armenian Government took further actions to develop the Road Project with entities other than Rasia.²²⁰ Those steps included:

1. an announcement, by President Sargsyan on 11 December 2015, that Armenia would soon issue an invitation for bids for the construction of the Kajaran-Agarak section of the NSRC;²²¹
2. Armenia’s signing on 18 July 2016 of a Memorandum of Understanding with Sinohydro, a large Chinese engineering and construction company, for the completion of the entirety of Tranche 4 of the NSRC;²²²
3. a meeting hosted by Minister Beglaryan in Yerevan on 25 July 2016 in order to provide information about the tender for the design and construction of the Kajaran-Agarak section of Tranche 4;²²³
4. an August 2016 tender for the Kajaran-Agarak road section;²²⁴ and
5. a May 2020 announcement that an Italian company would begin work on the Kajaran-Agarak road section of Tranche 4.²²⁵

(2) The Railway Project

225. On 13 December 2013, Armenian Prime Minister Sargsyan issued a decree creating an “interagency working group” to “examine the feasibility study on the proposed draft project of the Armenian South Railroad” (the “Working Group”).²²⁶ Officials from nine different agencies participated in the Working Group with Mr. Beglaryan as one of its two heads.²²⁷

²²⁰ Cl. Reply ¶¶ 386-387; Cl. First PHB ¶ 61. ↩
²²¹ C-173, President of the Republic of Armenia Press Release, 11 December 2015. ↩
²²² C-14, North-South Road Corridor Investment Program Website: Memorandum of Understanding Between the RA Ministry of Transport and Communication and Chinese Sinohydro Corporation Ltd. (http://northsouth.am/en/news/show/126/20), accessed on 11 July 2018, 18 July 2016. ↩
²²³ C-182, “Meeting held regarding the competition for the design and construction of the Qajaran - Agarak section”, 26 July 2016; C-173, President of the Republic of Armenia Press Release, 11 December 2015. ↩
²²⁴ C-185, Presentation titled “North-South Road Corridor Investment Program: Republic of Armenia”, 26–27 October 2016, Slide 9. ↩
²²⁵ C-254, “NSRC project’s works in southern Armenia to be transferred to Italian company”, 7 May 2020. ↩
²²⁶ C-300, Prime Minister of the Republic of Armenia Decree No. 1157-A on Creating Interagency Working Group (Unofficial English Translation and Armenian Original), 13 December 2013. ↩
²²⁷ Id., p. 2. ↩

[Page 66]

226. As noted in Section III.G.3 above, Rasia then submitted the Armenian version of the Railway Feasibility Study on 31 December 2013. It appears undisputed that the Armenian Government did not provide written comments to Rasia on the Railway Feasibility Study. The Respondent argues (as discussed further herein) that, pursuant to Sections 20.2-20.3 of the Railway Concession, this means that the Railway Feasibility Study was deemed to have been “finally accepted” on 30 January 2014, thirty days from the date of the Government’s receipt,²²⁸ with the result that the time periods for Rasia’s obligations under the Railway Concession with respect to further phases of the Project began running from then.

227. Notwithstanding the absence of written comments provided to Rasia, the Railway Feasibility Study was the subject of study and discussion within the Armenian Government. On 17 February 2014, the governmental Working Group sent a summary of its recommendations to the Ministry of Transport. One recurring concern mentioned by several ministries was that the project cost calculated at $3.2 billion did not include the acquisition cost of lands required for construction. Working Group members also wished to learn more about the projected loan terms for the 60% of the project that was to be debt financed, and about the “procurement sources” of the other 40% of the project cost.²²⁹ In this regard, the Railway Feasibility Study had stated only as follows:

The Project allows for loans from the Export-Import Bank of China (interim) of at least 60% with a bank loan APR of 3.5% as well as self-raised funds of 40% with the participation of regional governments benefiting substantially from the development of the Project.²³⁰

228. The Railway Project was then discussed extensively at the February 2014 Yerevan Meetings, when Mr. Borkowski, together with a CCCC team, presented the results of the Railway Feasibility Study in more detail to representatives from the Working Group.²³¹ Rasia’s PowerPoint presentation reported that financing would be “[h]ighly dependent on China bank negotiations and Armenia involvement during 2-year Project Financing period,” but stated that Rasia’s “[p]reliminary discussions with China banks assumed” they would finance 60% of the estimated $3.2 billion

²²⁸ C-1, Railway Concession, Section 20; Resp. First PHB ¶ 74. ↩
²²⁹ C-279, Letter from A. Shahnazaryan, Railway Construction Directorate, to A. Arakelyan, Deputy Minister of Transport, enclosing summary sheet of recommendations of the interagency working group (Unofficial English Translation and Armenian Original), 17 February 2014. ↩
²³⁰ C-116, Railway Feasibility Study, pp. 12, 15; see also Id., p. 168 (“[i]t is currently anticipated that loans will be secured from the Export-Import Bank of China (interim) for approximately 60% of the Project Cost ... implying that the remaining 40% of funds will need to be secured from regional governments and international financial institutions”). ↩
²³¹ First Borkowski Statement ¶¶ 74-77; Second Borkowski Statement ¶¶ 53-57; First Arakelyan Statement ¶¶ 24-25. ↩

[Page 67]

Project cost at a fixed rate of 3.5%, with the “[r]emaining 40% likely to be sourced from traffic volume Origin and Destination countries along Corridor,” from whom regional freight volume guarantees might be sought.²³²

229. The Minutes of the governmental Working Group meeting on 19 February 2014, attended by Rasia, reflect that the Working Group recommended the Government approve a draft decision which in turn would approve the “preliminary alignment of Southern Armenia Railway construction ... and the draft feasibility study (technical and economic rationale) and submit it to the Prime Minister of the Republic of Armenia.”²³³ The reference to the proposed alignment as being only “preliminary” at this stage is explained further below.

a. February-August 2014 correspondence about corridor alignment

230. After the February 2014 Yerevan Meetings, the Parties corresponded about next steps for the Railway Project. On 3 March 2014, apparently in response to the Government’s request,²³⁴ Mr. Borkowski provided Armenia with a two-year “Roadmap to Construction,” which among other things calculated a “Feasibility Study Deadline” of 30 June 2014, based on a “Feasibility Study Start[]” date of 31 December 2012. The Rasia roadmap also referred to “Year 1 (2014-2015)” steps as including a “Government Decree – Feasibility Study/Alignment” and a “Land Acquisition Plan for Project Areas.” The land acquisition plan was to be developed in Year 1 before the detailed engineering work, with the acquisition of lands slated to take place in Year 2.²³⁵

231. On 13 March 2014, the Government promulgated a Decree approving an action plan for 2014-2017 measures implementing national road transportation security. This action plan anticipated, inter alia, that the Railway Feasibility Study would be jointly approved by the Government and Rasia in the second quarter of 2014.²³⁶

232. On 21 March 2014, Mr. Borkowski wrote to the Ministry of Transport, stating that Rasia was looking forward to receiving copies of the Government decrees “reflecting the adoption of the

²³² C-131, “Southern Armenia Railway Project and Southern Armenia High Speed Road Project” (Razia FZE), February 2014, p. 15. ↩
²³³ R-14, Minutes of the session of the inter-departmental working group established for the purpose of examining the proposed alignment of the Southern Railway of Armenia, 19 February 2014. ↩
²³⁴ R-85, Email from Mr. J. Borkowski to Mr. B. Weixin, 3 March 2014. ↩
²³⁵ R-16, Email from Mr. J. Borkowski to Mr. G. Grigoryan, 3 March 2014. ↩
²³⁶ R-17, Decision of the Government of the Republic of Armenia, No. 305-N, On Approving Plan-Schedule of 2014-2017 Measures Guaranteeing Implementation of National Strategy Provisions on Ensuring the Transport Security of the Republic of Armenia, 13 March 2014. ↩

[Page 68]

feasibility study and recommended alignment so that we can begin the financing period” under the Railway Concession.²³⁷

233. As discussed in Sections III.C.6 and III.C.7 above, the Railway Concession had provided that the Feasibility Studies were to “reflect” the proposed land corridor on which construction would take place, and that the Government was to “confirm the Corridor recommended by the Feasibility Study” within 90 days of Rasia’s final acceptance of the Feasibility Study. The Government’s confirmation of the corridor would in turn constitute its recognition of “the exclusive prevailing public interest in respect of the lands and immovables in the Corridor,” and would trigger its duty to acquire the Corridor these lands and immovables “within a reasonably short period,” so as not to delay the start of construction.²³⁸

234. Respondent claims that in early April 2014, Mr. Grigoryan wrote to Rasia noting that the company had not provided sufficiently detailed information regarding the corridor to allow the Government to begin taking the steps required for it to acquire all lands and immovables in the Corridor, as required by the Railway Concession.²³⁹ While this particular communication does not appear to be in the record, it does seem clear from other correspondence that the Government raised the issue of detailed coordinates with Rasia in early April 2014. On 13 April 2014, Mr. Borkowski asked Mr. Weixin of CCCC for “[a]ny news on the ... railway GPS or other coordinates,” advising him that “[w]e need responses as quickly as possible to avoid dragging this project timeline out.”²⁴⁰ Mr. Weixin responded on 14 April 2014 that “absolute coordinates,” as opposed to the “relative coordinates” already in place, would be necessary for further design work for the Railway Project,” a response that Mr. Borkowski interpreted as meaning that the more detailed coordinates could not be provided until the engineering stage.²⁴¹

235. On 21 April 2014, Mr. Borkowski reported to the Ministry of Transport that he had met with CCCC and “spoke extensively about the alignment” question the Ministry had raised. Specifically, “[r]egarding your request for coordinates,” he attached the coordinates he had, but advised that “[a]s is standard in railway engineering design and construction, these coordinates are considered relative (versus absolute) at this stage since they may be varied as the route scheme is optimized ...

²³⁷ C-265, Email from Mr. J. Borkowski to Mr. G. Grigoryan (attaching Letter from Mr. J. Borkowski to Minister G. Beglaryan), 21 March 2014. ↩
²³⁸ C-1, Railway Concession, Section 9(e), (f); Section 21; Section 22.1. ↩
²³⁹ Resp. First PHB ¶ 109. ↩
²⁴⁰ R-94, Email from Mr. B. Weixin to Mr. J. Borkowski, 14 April 2014. ↩
²⁴¹ Id. ↩

[Page 69]

during the design and construction stage.” Mr. Borkowski added that “the variation may be controlled in a few hundred meters in either direction,” and suggested that “[t]his process is iterative and becomes more specific as the project progresses.” Mr. Borkowski requested the Government proceed to provide its decrees approving the Railway Feasibility Study and the “macro alignment adoption” for the railway corridor.²⁴²

236. Mr. Grigoryan responded on 30 April 2014 that the coordinate data Rasia had supplied “cannot be processed by the State Committee of the Real Estate Cadastre,” which required submission of information in the “WGS-84 coordinates system,” for it to identify “all the necessary data on the adjacent area to the alignment.” On 5 May 2014, Mr. Grigoryan wrote again to Mr. Borkowski, expressing concern that “the coordinates already provided might not be correct as the unofficial viewing showed deviations varying from a few meters to several kilometers.” Given these significant discrepancies, he again requested submission of coordinates in “the WGS-84 coordinates system,” and expressed the hope that “they will be completely correct.”²⁴³ Mr. Borkowski replied the same day, repasting his 21 April 2014 response and insisting that only “relative coordinates” could be provided at this point, and that “[t]he government must adopt the FS and macro alignment for us to move forward .... [T]he government should not begin allocating land now.” He also emphasized that “we should make amendments to the concession agreement based on the actual developments we experience together over time which can never match the anticipated steps in the concession agreement.”²⁴⁴

237. On 23 May 2014, Mr. Borkowski wrote again, emphasizing that the coordinates provided were “relative coordinates” (although already in a WGS format), and reiterating CCCC’s view that “we do not recommend that the government use these coordinates to immediately transfer the land at this stage because the route scheme and therefore the coordinates are expected to be optimized during the EPC ... stage.” He advised that “[t]he land cadastre should not take any further actions” until Rasia provided further information at a later stage. Mr. Borkowski proposed that once the Government had “confirm[ed] the feasibility study and macro alignment” based on the information provided, “we can simultaneously agree to various concession agreement modifications including that the land assemblage will take place later following the start of the EPC works.”²⁴⁵

²⁴² R-20, Email from Mr. J. Borkowski to Mr. A. Arakelyan and Mr. G. Grigoryan, 21 April 2014. ↩
²⁴³ R-22, Email from Mr. G. Grigoryan to Mr. J. Borkowski, 5 May 2014. ↩
²⁴⁴ C-340, Email from Mr. J. Borkowski to Mr. G. Grigoryan, 5 May 2014. ↩
²⁴⁵ R-24, Email from Mr. J. Borkowski to Mr. G. Grigoryan, 23 May 2014. ↩

[Page 70]

238. On 31 May 2014, Mr. Borkowski contacted his ADB correspondent, Mr. Dole (with whom Rasia was already in touch about the Road Project), to suggest that ADB might be able to assist Armenia with “the financial support (i.e. soft loans) and expertise to fulfill the GoA obligations related to the ... railway (such as identifying the exact parcels of land most suitable for the project, assisting with the land assemblage, and developing social and environmental analyses not currently required under the concession agreements).”²⁴⁶ Mr. Borkowski expressed concern that “[a]t the moment, the GoA ... wants me to tell them the exact parcels of land required for the project now so that they can assemble and transfer them to the project; something that CCCC and I communicated would not be necessary until post engineering survey and pre-construction rather than now.”²⁴⁷

239. On 16 July 2014 the Chairman of Armenia’s State Committee of the Real Estate Cadastre informed Mr. Beglaryan that the Cadastre could not agree to the proposed draft Government decision approving the “initial right-of-way of construction” of the Railway Project. The Cadastre advised that once it received appropriate “measurement data,” it would be possible for the Cadastre to provide information on “the surfaces, designated purpose and ownership entities of the land parcels located on the adjacent territories of the right of way.”²⁴⁸

240. Rasia maintains that it formally accepted the Railway Feasibility Study in a letter to Minister Beglaryan several days later, on 20 July 2014. That letter stated that “[b]y this Notice, ... we finally accept” the study, and “look forward to receiving the government decrees ... that will officially adopt both the ... feasibility study as well as the recommended railway alignment so that we may begin our Project Financing period.”²⁴⁹ As noted in para. 226 above, the Respondent maintains, by contrast, that Rasia should be deemed to have accepted the Railway Feasibility Study automatically almost six months earlier, on 30 January 2014, through application of Section 20 of the Railway Concession.²⁵⁰

241. Be that as it may, on 7 August 2014, Armenia promulgated Protocol No. 33-26, “on Approving the Preliminary Alignment and the Feasibility Study of the Southern Armenia Railway Construction” (the “7 August 2014 Protocol”). This Protocol accommodated Rasia by replicating its proposed

²⁴⁶ R-99, Email from Mr. J. Borkowski to Mr. D. Dole, 31 May 2014. At the Hearing, Mr. Borkowski admitted that the latter part of this statement was incorrect; the Railway Concession had made Rasia responsible for social and environmental analyses. See February Tr. Day 3, Hanessian/Borkowski, 540:6-16. ↩
²⁴⁷ R-99, Email from Mr. J. Borkowski to Mr. D. Dole, 31 May 2014. ↩
²⁴⁸ R-106, Letter from M. Sarsyan to Minister G. Beglaryan, 16 July 2014. ↩
²⁴⁹ C-141, Letter from Mr. J. Borkowski to Minister G. Beglaryan, 20 July 2014. ↩
²⁵⁰ Resp. First PHB ¶ 74; C-1, Railway Concession, Section 20. ↩

[Page 71]

language approving the “preliminary alignment" of the Railway, but it went on to make clear that the Government intended to act with dispatch in performing its side of the Concession Agreement's terms on land assemblage. In particular, the 7 August 2014 Protocol instructed the Cadastre to provide information on the purpose and value of lands that would be impacted by the Railway, two months after receiving the coordinate measurement date from Rasia, and within a few months thereafter, the Government was to consider any proposed changes to the preliminary alignment and prepare a list of actions needed to move forward to a final alignment and land acquisition mechanisms.²⁵¹

242. The following day, 8 August 2014, Mr. Borkowski requested the Government to issue a formal notice approving the Railway Feasibility Study and the preliminary alignment, based on the understanding that detailed coordinates would be provided later. He stated that he needed this document to move to the next stage on financing arrangements,²⁵² even though he had previously written that the Concession Agreements provide for “automatic adoption" of Feasibility Studies, in the absence of Government comment.²⁵³

243. Following another request from Mr. Borkowski on 15 August 2014,²⁵⁴ Minister Beglaryan formally communicated the Government's decision to approve the Railway Feasibility Study in a letter to Mr. Borkowski on 19 August 2014. It stated as follows: "[t]he preliminary alignment ... has also been approved .... Rasia may now proceed to the Project Financing Period under the [Railway Concession] while also determining the final detailed coordinates for the recommended alignment of the Southern Railway.”²⁵⁵

244. The issue of coordinates was not resolved by these communications. Before addressing disputes that subsequently arose, the Tribunal summarizes below a separate issue connected to the Railway Project, involving uncertainties about railway connections at the Iranian border and the relationship between such connections and the availability of potential project financing.

²⁵¹ C-288, Protocol Decree 33/-26 on Approving the Preliminary Alignment and the Feasibility Study of the Southern Armenia Railway Construction (Unofficial English Translation and Armenian Original), 7 August 2014. ↩

²⁵² R-27, Email from Mr. J. Borkowski to Mr. G. Grigoryan (attaching Letter from Minister G. Beglaryan to Mr. J. Borkowski, 18 August 2012), 15 August 2015. ↩

²⁵³ R-20, Email from Mr. J. Borkowski to Mr. A. Arakelyan and Mr. G. Grigoryan, 21 April 2014. ↩

²⁵⁴ R-27, Email from Mr. J. Borkowski to Mr. G. Grigoryan (attaching Letter from Minister G. Beglaryan to Mr. J. Borkowski, 18 August 2012), 15 August 2015. ↩

²⁵⁵ C-143, Letter from Minister G. Beglaryan, to Mr. J. Borkowski, 19 August 2014. ↩

[Page 72]

b. The Iranian connections

245. As discussed above, the existing railway network in Armenia did not extend south to the Iranian border. Nor, for that matter, did the existing Iranian railway network extend north to the Armenian border. For the two networks to connect, new track would have to be laid on both sides of the border. Armenia and Iran had discussed the need for improved transport connectivity between the two countries for several years prior to the initiation of the Railway Project.²⁵⁶

246. The establishment of a connection to the Iranian railway system was a critical factor for the feasibility of the Railway Project, since the Project was expected eventually to generate revenue from freight traffic, and more than half of the eventual traffic projected by the Railway Feasibility Study consisted of oil shipments to the Black Sea.²⁵⁷ Mr. Borkowski himself was acutely aware of the importance of the Iranian connection. A year before he delivered the Railway Feasibility Study to Armenia,²⁵⁸ Mr. Borkowski advised Minister Beglaryan that CCCC and the China Development Bank had "requested with great emphasis to demonstrate strong regional cooperation with Russia and Iran regarding the railway development by signing a tripartite memoranda of understanding." With respect to Iran, Mr. Borkowski emphasized that in order "to successfully develop the railway, it is mandatory ... that Rasia has an initial commitment from ... Iranian party regarding the 60 km railway development on its territory ....”²⁵⁹

247. On 19 April 2013, Mr. Borkowski wrote to Minister Beglaryan, again highlighting the need for Iranian cooperation:

Our work on the feasibility studies requires the immediate technical cooperation of the Islamic Republic of Iran Railways (IRI Railways). We kindly ask the Ministry of Transport and Communication to send a letter to IRI Railways requesting a technical team meeting with CCCC and Rasia in Beijing, Yerevan or Teheran.

We also need to sign the Memorandum of Understanding (MoU) with Iran to demonstrate the important political support and cooperation with Iran for the project.²⁶⁰

²⁵⁶ Arakelyan Statement ¶ 34; Resp. Counter-Mem., ¶ 112. ↩

²⁵⁷ C-116, Railway Feasibility Study, p. 29. ↩

²⁵⁸ C-127, Email from Mr. J. Borkowski to Minister G. Beglaryan, 31 December 2013 (delivering Armenian language version of Railway Feasibility Study). ↩

²⁵⁹ C-101, Letter from Mr. J. Borkowski to Minister G. Beglaryan (Unofficial Translation and Armenian Original), 21 December 2012, p. 6. ↩

²⁶⁰ JB-3, Letter from Mr. J. Borkowski to Ministry of Transport, 19 April 2013. ↩

[Page 73]

248. The viability of an Iranian extension of the Railway was threatened by the fact that another cross-border railway link was already under construction in Azerbaijan, with Iranian support, constituting a competitive threat to Rasia's Railway Project. Mr. Borkowski identified this threat as an "exceptionally important matter" in a letter to Minister Beglaryan on 27 November 2013, expressing concern that “[t]he Azeri railway would ruin the South Armenia Railway as a private project and only the Armenian government will be able to develop it if the Azeri's [sic] develop their project." Mr. Borkowski added:

We must secure the previously desired exclusivity/monopoly from Iran for the north-south railway through Armenia for 20-30 years. Only Russian leadership (Putin or Yakunin) can persuade Iran not to build the Qazvin-Astara link [through Azerbaijan]. I see that President Putin is coming to Armenia on December 2nd. It is absolutely essential for the Southern Armenia Railway that President Sargsyan request that President Putin and/or Vladimir Yakunin give a clear and public political signal to Iran that the north-south railway must be built through Armenia and not Azerbaijan [...]²⁶¹

249. In a separate letter two days later, Mr. Borkowski re-emphasized the importance of having President Sargsyan try to persuade Russia to signal to Iran that the link be built through Armenia and not Azerbaijan, because “the north-south railway through Azerbaijan would ruin the feasibility of the Southern Railway as a private project. The Southern Armenia Railway requires up to 30 years of exclusivity from Iran for the north-south transport traffic through Armenia and therefore no development of the [Azerbaijan] link.”²⁶² President Sargsyan did meet with Russia's President Putin on 2 December 2013, during which plans to "build a [rail] transport link-up through Iran" were discussed.²⁶³ However, Iran ultimately did not agree to abandon the Azerbaijan link, which remained a threat to the feasibility of the Railway Project.

250. The issue of Azerbaijan continued to worry Mr. Borkowski, who asked Mr. Grigoryan on 23 January 2014 to try persuade Iran – in the context of an Iran-Armenia-Rasia trilateral memorandum of understanding that was then under discussion – "to include the same No Grant provision (monopoly rights) to the Iran section as in the Armenia concession to Rasia.” Mr. Borkowski explained that this was important “considering that Iran's construction of an alternative competing

²⁶¹ R-9, Email from Mr. J. Borkowski to Minister G. Beglaryan, 27 November 2013. ↩

²⁶² R-10, Letter from Mr. J. Borkowski to Minister G. Beglaryan, 29 November 2013, p. 2. ↩

²⁶³ R-78, The President of the Republic of Armenia, Press conference of President Serzh Sargsyan and President Vladimir Putin on the results of the meeting, https://www.president.am/en/interviews-andpress-conferences/item/2013/12/02/President-Serzh-Sargsyan-pressconference-with-the-President-of-Russian-Federation/, 2 December 2013. ↩

[Page 74]

railway to Astera will cause the Iran-Armenia railway to be unable to attract financing and fail.”²⁶⁴ On 27 April 2014, Mr. Borkowski bemoaned an “announcement from the Iran president regarding railway communication with Georgia through Azerbaijan," stating that "[I]ran is not helping our project with these types of pro-Azeri announcements.”²⁶⁵

251. The connection between a viable Iranian railway link and Rasia's ability to obtain outside financing for the Railway Project within Armenia was clear from the beginning. Mr. Borkowski candidly admitted during the Hearing that without the link to an Iranian rail segment to enable cross-border freight traffic, the proposed Armenian track sections would become a proverbial "railway to nowhere.”²⁶⁶ This was consistent with Mr. Borkowski's contemporaneous statements to the Ministry of Transport, such as his statement in February 2014 that there was a “[t]erminal risk to Project from Iran railway section" (either because of “no construction or competing construction to Astara"),²⁶⁷ and his October 2014 that “the Iran cooperation is absolutely critical for any further progress to be made.”²⁶⁸

252. Yet just as Iran proved unwilling to forswear a potential future railway link through Azerbaijan, it also proved unwilling to commit to construction of a railway segment connecting to Armenia, until there first was meaningful progress in constructing the corresponding Armenian sections. Mr. Borkowski had predicted just such a problem in late May 2014, when he expressed concern to the ADB that "I believe Iran will only undertake to construct its 80km railway link ... when it sees construction activities on the Armenia side of the border.”²⁶⁹ His instinct proved correct: this predicate condition was expressly reflected in the final Memorandum of Understanding that Iran, Armenia and Rasia signed on 10 November 2014 (the “Iranian Trilateral MoU”), in which Iran

²⁶⁴ R-12, Email from Mr. J. Borkowski to Mr. G. Grigoryan, 23 January 2014. ↩

²⁶⁵ R-21, Email from Mr. J. Borkowski to Mr. G. Grigoryan, 30 April 2014. ↩

²⁶⁶ February Tr. Day 2, Borkowski, 325:8-9. ↩

²⁶⁷ C-131, “Southern Armenia Railway Project and Southern Armenia High Speed Road Project" (Razia FZE), February 2014, p. 20. ↩

²⁶⁸ R-108, Email from Mr. J. Borkowski to A. Arakelyan, 13 October 2014. ↩

²⁶⁹ R-99, Email from Mr. J. Borkowski to Mr. D. Dole, 31 May 2014, p. 3. In the same letter to the ADB, Mr. Borkowski expressed a hope that Armenia “should borrow from ADB and make a controlled equity investment” into the Railway Project, because "[a] unified project, ADB involvement, and Armenia government direct ownership are the critical aspects to getting this north-south railway project up to the EPC/construction phase." Id. Mr. Borkowski admitted at the Hearing that this was a new idea – that Armenia should participate directly in the financing of the Railway Project, even though it was not required to do so under the Concession Agreements. He also insisted that by this time, he was confident that he already had sufficient financing support for the Railway Project, consisting of 60% China EximBank financing (referenced in the Railway Feasibility Study) and a deal in principle with Aabar to supply the additional 40%. See February Tr. Day 3, Borowski, 542:3-6; 545:23-546:7. ↩

[Page 75]

“expressed its readiness to undertake construction of ... Iran segment of the railways when [the Railway Project] progress by value achieves 30% in the Republic of Armenia territory.”²⁷⁰

253. Mr. Borkowski sought to persuade Iran to consider a private funding model for a future Iranian segment of the railway. Iran alluded in the Iranian Trilateral MoU to the possibility that "[i]n its sole discretion, [it] could choose Rasia as an alternative ... in the form of finance, build, lease and transfer," but made no commitments in that regard.²⁷¹

254. Nonetheless, soon after the Iranian Trilateral MoU, Mr. Borkowski began to focus on efforts to obtain outside financing for possible EPC work on the Iranian side. On 24 November 2014, he approached China Poly Group (“China Poly”), a Chinese firm with which Mr. Borkowski had previous connections, explaining that "[t]he objective is to bring Poly into the project exclusively on the Iranian side," in the first instance to prepare a “bankable feasibility study and designs for the Iran section." He explained that Iran might be willing to provide “various sovereign and resource guarantees and payments" to support the eventual railway construction, whereas “Armenia is too poor to provide a sovereign guaranty or payments" for the work on its side of the border. Nonetheless, Mr. Borkowski referred to the possibility of future amendments to the Railway Concession with Armenia, “such that the project involves a government guaranteed lease payment to service debt and pay a profit" to outside financers.²⁷²

255. Further correspondence followed in December 2014, with China Poly expressing preliminary interest "if the Iran side can provide a proper guarantee" and a solution to current sanctions issues could be found.²⁷³ China Poly continued to ask various questions, to which Mr. Borkowski provided answers in January 2015. Among his statements to China Poly was the boast that “Rasia can ensure Poly gets exclusivity [on the Iranian side] because Rasia is the concessionaire on the Armenia side and controlling the entire Armenia-Iran railway cooperation between the Armenia and Iran governments." He acknowledged the challenge that "[t]he Iran government wants to see the

²⁷⁰ C-12, Unofficial Trilateral Memorandum of Understanding Between the Holding Company for Construction and Development of Transport Infrastructures of the Ministry of Roads and Urban Development of the Islamic Republic of Iran, the Ministry of Transport, and Rasia, 10 November 2014, Article 3. ↩

²⁷¹ Id., Article 4. ↩

²⁷² R-118, Email from Zhaodi to Mr. J. Borkowski, 21 January 2015, pp. 10-11. ↩

²⁷³ Id., p. 9. ↩

[Page 76]

Armenia side constructed at the same time," but stated that "it is our decision to determine the best way by the completion of the FS and preliminary design works.”²⁷⁴

256. In January and February 2015, Mr. Borkowski continued to engage with China Poly and to seek possible support from Iranian government agencies for Rasia and China Poly involvement on the Iranian segment of the railway. One such agency, Iran's Construction and Development of Transportation Infrastructures Company (CDTIC), cautioned that "[a]ll of our projects have the government and Central Bank of Iran guarantees.”²⁷⁵

257. In July 2015, Mr. Borkowski arranged for China Poly representatives to meet with officials in Tehran.²⁷⁶ On 10 August 2015, China Poly told Mr. Borkowski that Iranian officials “are very concerned about the feasibility of railway in Armenia," and had “made it clear that 30% of the railway or investment in Armenia has to be done to activate the project in Iran. ... The question is how the Armenia side would like to finance their project ...." China Poly's inquiry about Armenian financing of the Railway Project is curious, given that Mr. Borkowski had already informed China Poly some eight months previously that “Armenia is too poor to provide a sovereign guaranty ....”²⁷⁷ In any event China Poly further reported that it had asked Iranian officials if Iran might provide a guarantee for the Armenian railway, to which Iranian officials responded that any such request would have to come officially from the Armenian government. China Poly made no commitment of its own in this communication.²⁷⁸ Following another meeting in September 2015 (which Mr. Thornber of Aabar apparently attended), Rasia promised to send China Poly a "draft non-binding framework agreement giving Poly exclusivity and conditional on conversion of the Rasia agreements into G2G cooperation in Iran and Armenia.”²⁷⁹

258. On 14 October 2015, Mr. Borkowski reported as follows to the Armenian Government regarding Rasia's meetings with China Poly:

In July and August 2015, Rasia organized meetings with China Poly Group [and Iranian officials] that resulted in the China Poly Group confirming its willingness to finance, design and construct this part of the

²⁷⁴ R-118, Email from Zhaodi to Mr. J. Borkowski, 21 January 2015, pp. 6-8. ↩

²⁷⁵ R-122, Email from Zhaodi to Mr. J. Borkowski, 2 February 2015, p. 3. ↩

²⁷⁶ R-128, Email from D. Ning to Mr. J. Borkowski, 21 July 2015; R-129, Email from Mr. J. Borkowski to D. Ning, 26 July 2015. ↩

²⁷⁷ R-118, Email from Zhaodi to Mr. J. Borkowski, 21 January 2015, pp. 10-11. ↩

²⁷⁸ R-134, Email from Mr. J. Borkowski to D. Ning, 22 September 2015. ↩

²⁷⁹ R-132, Email from Mr. J. Borkowski to D. Ning, 17 September 2015; R-133, Email from Mr. J. Borkowski to D. Ning, 21 September 2015. ↩

[Page 77]

Railway with the support of an Iranian Government guarantee. Iran also offered a Government guarantee for the Project in Armenia provided the request was made through official Armenian channels.

Based on these efforts, which render the Railway and Armenia's participation in the International North-South Transportation Corridor feasible, Rasia secured further interest from China Poly Group to contribute and arrange financing to cover the full cost of the Southern Armenia at even more attractive rates.²⁸⁰

259. Between 19 and 21 January 2016, Minister Beglaryan led an Armenian delegation to Iran to discuss potential cooperation on road and railway infrastructure, as well as communications technology. According to the after-action mission report he prepared, Mr. Beglaryan stated that Iranian and Russian "investments ... into implementation of the project would be justified and would be in the interest of all," and the Iranian Minister of Roads and Urban Development "offered to select an independent consulting company to conduct ... feasibility studies of the railway project," stating that "with guarantees from the Government ... of Armenia, Iran can assist in securing funds from international organizations." Mr. Beglaryan clarified that a feasibility study already had been conducted "by a Chinese company.”²⁸¹ In a separate meeting with the First Vice President of the Islamic Republic, Mr. Beglaryan congratulated Iran on the lifting of international sanctions and said that with respect to “joint transport projects” between the two countries, “Armenia wanted to use the capacity of the Iranian companies and contractors for project implementation since they had extensive experience in implementing such projects.”²⁸² During the visit, the delegations signed a memorandum of understanding on the "Unification of the Railway Systems of the Two Countries."²⁸³

260. The Respondent has situated these meetings as very general and high-level, in the context of the securing cooperation between the two countries following the lifting of international sanctions on

²⁸⁰ C-35, Letter from Mr. J. Borkowski to Prime Minister H. Abrahamyan (attaching letter from Mr. J. Borkowski to Minister G. Beglaryan), 14 October 2015, p. 4. ↩

²⁸¹ C-308, "Mission report on the results of the delegation visit headed by the Minister of Transport and Communication of the Republic of Armenia" submitted by Minister G. Beglaryan to D. Harutyunyan, Chief of Staff of the Government of the Republic of Armenia (Unofficial English Translation and Armenian Original), 25 January 2016, p. 4. ↩

²⁸² Id., p. 6. ↩

²⁸³ R-38, Memorandum of Understanding between Ministry of Transport and Communication of Armenia and Ministry of Road and Urban Development of Iran on Joining Two Countries' Railway Networks, 20 January 2016; see also C-308, "Mission report on the results of the delegation visit headed by the Minister of Transport and Communication of the Republic of Armenia" submitted by Minister G. Beglaryan to D. Harutyunyan, Chief of Staff of the Government of the Republic of Armenia (Unofficial English Translation and Armenian Original), 25 January 2016; p. 7; C-33, Republic of Armenia, “Public-Private Partnership Opportunities and Financial Resources Necessary for the Construction of the Armenia Railway Project," p. 5. ↩

[Page 78]

Iran; the Respondent says there were no concrete discussions of the Railway Project.²⁸⁴ By contrast, the Claimants assert that the mission report indicates that Minister Beglaryan intended to exclude Rasia from implementation of the Railway Project, by instead involving Iranian companies and contractors.²⁸⁵

261. On 18-19 April 2016, an expert meeting was held in Iran, with representatives of Armenia, Bulgaria, Greece and Iran, regarding international transport and transit issues.²⁸⁶ In an email two weeks earlier, on 5 April 2016, Mr. Grigoryan had informed Mr. Borkowski of the upcoming meeting, writing that "in case the Southern Railway Construction project issues are considered, Rasia FZE will be duly notified in prior, in order to ensure the potential participation.”²⁸⁷ The Iran-Armenia meetings in April 2016 resulted in the signing of a protocol between the four governments on "Establishing the International Transport and Transit Corridor/Persian Gulf-Black Sea.²⁸⁸

262. On 20 July 2016, the Armenian Ministry of Transport and the Iranian Ministry of Roads and Urban Development signed a further MoU, "regarding railway links," and agreed to hold "expert meetings to coordinate viewpoints and technical information.” At a “technical experts" meeting the following week, the Armenian delegation shared certain information about “the preliminary studies" prepared by "the company,” and “the Iranian side presented ... its views regarding corrections and additions on the important issues of the study," which the Armenian delegation stated it would study and then forward to "the company for them to incorporate the necessary changes into the preliminary investigative plans.”²⁸⁹ Although Rasia was not mentioned by name, it appears likely that this discussion referred to the Railway Feasibility Study which Rasia had provided, and therefore to forwarding Iranian comments on the study to Rasia for consideration. The minutes of the technical meeting also stated that “in addition to assessing and investigating the suggestions presented by the Iranian side, the Armenian side will be involved in the selection of the investor and shall present all obtained information to the Iranian side through official channels.”²⁹⁰ Based on the structure of these passages – the first one referring to Iranian feedback to the "company" involved with Armenia, and the second one referring to Armenian input to Iran on "the investor” – it appears

²⁸⁴ Resp. Counter-Mem. ¶¶ 176-177. ↩

²⁸⁵ Cl. Reply ¶¶ 448-449. ↩

²⁸⁶ C-43, Letter from Mr. G. Grigoryan to Mr. J. Borkowski, 17 June 2016. ↩

²⁸⁷ C-176, Email from Mr. G. Grigoryan to Mr. J. Borkowski, 5 April 2016. ↩

²⁸⁸ C-43, Letter from Mr. G. Grigoryan to Mr. J. Borkowski, 17 June 2016. ↩

²⁸⁹ C-305, Meeting minutes of the Iran-Armenian-Iranian Technical Experts Subcommittee (Unofficial English Translation and Armenian Original), 27 July 2016, p. 1. ↩

²⁹⁰ Id., p. 2. ↩

[Page 79]

likely that the reference to an “investor” concerned Iran's possible use of private investment for the railway segment in its country, not the replacement of Rasia in the Railway Project on the Armenian side.

c. Disagreements between mid-2014 and early 2015

263. Returning to the chronology of the Parties' disputes, the Tribunal recalls that on 19 August 2014, in response to Rasia's request for a formal notice, Minister Beglaryan formally communicated to Rasia that the Government had accepted the Railway Feasibility Study and approved “[t]he preliminary alignment,” which authorized Rasia to "now proceed to the Project Financing Period under the [Railway Concession] while also determining the final detailed coordinates for the recommended alignment of the Southern Railway.”²⁹¹

264. As discussed in Section III.H.2 above, Iran had indicated during the Tehran meetings in November 2014 – and in the official Iranian Trilateral MoU signed at those meetings – that it would not commit to a railway segment on its territory unless concrete progress was first made on the segment in Armenia's territory.²⁹² Mr. Borkowski, however, recognized that substantial financing would be required to progress the Armenian segment, and that funders would be looking for some form of government guarantees, which Armenia had not offered in the Railway Concession and which Mr. Borkowski understood it was “too poor to provide.” Nonetheless, by November 2014, Mr. Borkowski was already alluding to the possibility of seeking amendments to the Railway Concession to provide for some form of government guarantees that would appeal to outside financers.²⁹³

265. Mr. Borkowski was not alone in considering possible amendments to the Railway Concession. During the Tehran meeting in November 2014, the Government provided him with a draft "Treatment" document which would amend certain provisions of the Railway Concession (the “Draft Railway Amendments”).²⁹⁴ Among other things, the proposed amendments would shift to Rasia the cost of financing the land acquisition for the railway corridor.²⁹⁵ On 21 November 2014,

²⁹¹ C-143, Letter from Minister G. Beglaryan, to Mr. J. Borkowski, 19 August 2014. ↩

²⁹² C-12, Unofficial Trilateral Memorandum of Understanding Between the Holding Company for Construction and Development of Transport Infrastructures of the Ministry of Roads and Urban Development of the Islamic Republic of Iran, the Ministry of Transport, and Rasia, 10 November 2014, Article 3. ↩

²⁹³ R-118, Email from Zhaodi to Mr. J. Borkowski, 21 January 2015, pp. 10-11. ↩

²⁹⁴ C-18, Ministry of Transport, Proposed Treatment – “On ‘Making Amendments and Supplements to the Southern Armenia Railway Concession Agreement", November 2014. ↩

²⁹⁵ Id., Sections 1.1, 1.2. ↩

[Page 80]

Mr. Shahnazaryan of the Armenian Railway Construction Directorate reminded Mr. Borkowski about this proposal in writing, stating that "[a]s you have mentioned you would like to make some amendments/supplements to the Concession Agreement as well,” and asking him to provide comments as soon as possible.²⁹⁶

266. On 26 November 2014, Mr. Shahnazaryan wrote again to Mr. Borkowski, requesting the previously sought "measurement data with WGS-84 coordinate system" for the proposed alignment of the railway, so the Cadastre could “give details on land significance" and acquisition price of the properties that would have to be acquired to move forward with the Project. The information was requested "within the shortest possible time in order to facilitate the further work."²⁹⁷ It is undisputed that Mr. Borkowski did not respond to this request in writing. He explained at the Hearing that he felt nothing further was needed from Rasia from this time, and that the more important objective from his perspective was arranging project finance.²⁹⁸

267. On 4 December 2014, Mr. Shahnazaryan wrote again to Mr. Borkowski, with a “kind reminder" that the Government had not received Rasia's "comments and amendments" on the draft "Treatment" document proposing amendments to the Railway Concession. On 10 December 2014, Mr. Borkowski replied, rejecting Armenia's proposed amendments as “unacceptable on th[e] basis" that "[a]ll amendments should improve the feasibility and the financing attractiveness” of the Railway Project, and promising to send soon Rasia's own proposed amendments to the Railway Concession for the Government's consideration.²⁹⁹

268. On 11 December 2014, the day after receiving Mr. Borkowski's rejection of the Government's proposed amendments, the Government amended its prior 7 August 2014 Protocol, to extend the time for various governmental bodies to take actions with respect to the Railway Project.³⁰⁰

269. On 31 December 2014, Mr. Borkowski wrote again to reject Armenia's position on both the detailed land coordinates and Armenia's proposed Draft Railway Amendments. With respect to the former, Mr. Borkowski stated that "[i]t would not be reasonable to commence complex railway

²⁹⁶ R-29, Letter from A. Shahnazaryan to Mr. J. Borkowski, 21 November 2014. ↩

²⁹⁷ R-30, Letter from A. Shahnazaryan to Mr. J. Borkowski, 26 November 2014. ↩

²⁹⁸ February Tr. Day 3, Borkowski, 462:8-20. ↩

²⁹⁹ AA4, Email from Mr. J. Borkowski to Ashot Shahnazaryan, 10 December 2014. ↩

³⁰⁰ R-114, Excerpts from the Minutes of the Sitting of Government of Republic of Armenia, On Making Amendments to the Protocol Decision Approved by Paragraph 26 of Protocol No. 33 of the Government of the Republic of Armenia dated August 7, 2014, 17 December 2014. ↩

[Page 81]

design works prior to the signing of respective official agreements, receipt of technical input, and full cooperation...." With respect to the latter, Mr. Borkowski expressed confusion that “the Armenian government seeks to avoid any investment ... and to further try to pass along its obligatory minimal investment responsibility” to Rasia. He complained that "[t]hese actions cast a shadow over the Armenia government's support" of the Project. Mr. Borkowski further stated that “[f]or future reference, any proposed amendments to the [Railway Concession] must enhance the feasibility and bankability of the project ... and will generally be proposed by Rasia FZE.”³⁰¹ As an example of such a proposed counter-offer, Mr. Borkowski stated that "if the government of Armenia would like to ... eliminate the government responsibility for acquiring the corridor land at its own cost," then Rasia "would be glad to discuss" Armenia's exercising its right of first investment under the Railway Concession by investing $100-150 million of its own funds in the Railway Project.³⁰²

270. The Armenian Government seemingly never responded to this counterproposal,³⁰³ and has stated that it considered the issue of amendments to the Railway Concession closed.³⁰⁴ On 26 February 2015, the Armenian Government promulgated another decree (the “February 2015 Decree”), further extending the time to organize the land corridor. The third paragraph of the February 2015 Decree shows that the Government expected that negotiations would be held with Rasia, to "submit a proposal to the government of the Republic of Armenia on the principles and mechanisms for the construction of the Southern Armenia Railway by May 30, 2015.”³⁰⁵

271. As discussed further below (see para. 318), the Claimants maintain that the Government's proposed amendments came at a sensitive time when Rasia was trying to arrange financing, and were one of the main reasons why the Chairman of Aabar in January 2015 put on hold any purchase of Rasia.³⁰⁶ The Respondent contests this assertion, explaining that its proposal was aimed at creating more flexibility to move forward with the project at a time when Rasia was proposing amendments also,

³⁰¹ C-19, Letter from Mr. J. Borkowski to Minister G. Beglaryan, 31 December 2014, pp. 1-2. ↩

³⁰² Id., p. 3. ↩

³⁰³ February Tr. Day 2, Borkowski, 315:14-15. ↩

³⁰⁴ First Arakelyan Statement ¶ 40. ↩

³⁰⁵ R-124, Excerpt from the Minutes of the Meeting of the Government of the Republic of Armenia, On Amendments to the Protocol Decision Approved by Paragraph 26 of Protocol No. 33 of the Government of the Republic of Armenia dated August 7, 2014, 26 February 2015. ↩

³⁰⁶ Second Tappendorf Statement ¶ 14. ↩

[Page 82]

and that after Mr. Borkowski rejected the Government's proposed amendments, it did not return to the issue again.³⁰⁷

272. It is undisputed that neither Rasia, nor the Government of Armenia communicated with the other at all between January and mid-October 2015. Meanwhile, through the summer of 2015, Mr. Borkowski focused his efforts on the Iranian section of the Railway as discussed in Section III.H.2 above, through negotiations with China Poly and arranging a meeting for China Poly with the Iranian government.

273. The Claimants now contend, as discussed in Section III.I below (from para. 292), that the Railway Project was effectively destroyed in 2015 by Armenia's alleged dealings with third parties in China, which caused CCCC to “abandon" the Railway Project in mid-March 2015.

d. Mutual complaints between August and December 2015

274. On the Armenian side, in a letter of 14 August 2015, Mr. Shahnazaryan of the Armenian Railway Directorate wrote to Mr. Arakelyan, advising that Rasia's “failure ... to fulfil its obligations" had negatively impacted implementation of various actions approved by the Government. In particular, he advised that for nearly a year, Rasia had not submitted coordinate measurement data in a form that the Cadastre could use to perform its work. He also stated that Rasia had not submitted a plan for completion of construction works, which by his reading of Section 36.2 of the Railway Concession, Rasia was required to do "within one year after the end of the feasibility study." He advised that pursuant to Article XII of the Railway Concession, “the Government ... is entitled to terminate [the Railway Concession] prematurely” for these reasons, and he suggested that the Ministry of Transport write immediately to Rasia about the legal consequences that could flow from its asserted failures.³⁰⁸ It appears that the Ministry of Transport did not, however, take the steps that Mr. Shahnazaryan advised.

275. Rather, after a long period of silence between the Parties, the next communication came from Rasia. On 14 October 2015 Mr. Borkowski wrote a letter addressed to Minister Beglaryan³⁰⁹ – which was also sent in copy to Prime Minister Abrahamyan³¹⁰ – in which Mr. Borkowski expressed his

³⁰⁷ February Tr. Day 7, McNeill/Arakelyan, 1324:18-1330:11. ↩

³⁰⁸ R-130, Letter from Mr. A. Shahnazaryan to Mr. A. Arakelyan, 14 August 2015. ↩

³⁰⁹ C-34, Letter from Mr. J. Borkowski to Minister G. Beglaryan, 14 October 2015. ↩

³¹⁰ C-35, Letter from Mr. J. Borkowski to Prime Minister H. Abrahamyan (attaching letter from Mr. J. Borkowski to Minister G. Beglaryan), 14 October 2015. ↩

[Page 83]

concerns over “recent reports in the media” suggesting that the Ministry of Transport had invited "third parties" in China to participate in the Railway Project without consulting Rasia. That, "[i]f true, ... would constitute a blatant repudiation" of the Railway Concession “which establishes Rasia as the exclusive Concessionaire.”³¹¹ These issues are addressed further below.

276. In the same letter, Mr. Borkowski contended that for its part, Rasia had “delivered on all of its obligations to date under the Concession Agreement, and ha[d] made contributions far in excess of its contractual duties that have been decisive to the continued success of the Project and of relations between the governments of China, Armenia and Iran.”³¹² He asked the Government to confirm by 19 October 2015 that (i) the Government intended “to fully honour its obligations to Rasia under the terms of the Concession Agreement,” and (ii) to provide “all documents and information regarding publically-disclosed [sic] offers from China; any agreements or understandings signed or reached; and any detailed explanations regarding its interaction with CCECC, China Export-Import Bank and the China Premier during the recent working visit regarding Rasia's Project.”³¹³

277. Minister Grigoryan replied to Mr. Borkowski's letter on 19 October 2015, stating that the Government “has caused no disruption whatsoever to the implementation” of the Railway Project and "has been meeting all the obligations and responsibilities set forth in the Concession Agreement, nor has it in any way restricted or stepped over the rights of Rasia." Mr. Grigoryan asserted that to the contrary, the Project “has recently been put at risk by the improper handling of a number of issues by Rasia, and the Government has undertaken steps to ensure the Project is implemented smoothly and as a whole." He indicated that further details would be provided soon.³¹⁴ On 28 October 2015, Rasia rejected the allegations in Mr. Grigoryan's 19 October 2015 letter, stating that the letter "confirms the Armenian Government's breach and/or repudiation" of the Railway Concession.³¹⁵

278. The Parties corresponded further in November and December 2015. Mr. Arakelyan wrote to Mr. Borkowski on 17 November 2015, explaining that while the Government did not seek to remove Rasia from the Railway Project – and denied having "signed any agreement with any other organization, which might violate the contractual rights of Rasia" – it remained "seriously

³¹¹ C-34, Letter from Mr. J. Borkowski to Minister G. Beglaryan, 14 October 2015, p. 1. ↩

³¹² Id., p. 4. ↩

³¹³ Id., p. 5. ↩

³¹⁴ C-36, Letter from Mr. G. Grigoryan to Mr. J. Borkowski, 19 October 2015. ↩

³¹⁵ C-169, Letter from Mr. J. Borkowski to Prime Minister H. Abrahamyan (attaching letter from Mr. J. Borkowski to Minister G. Beglaryan), 28 October 2015. ↩

[Page 84]

concerned" about what it viewed as Rasia's material breach of the Railway Concession. In particular, the Government pointed out (i) that Rasia owed it concession fees as per Section 4 of the Railway Concession; (ii) that Section 33 of the Railway Concession obligated Rasia to present the Government with letter(s) of interest from credible and reputable potential investors within 12 months of the date of approval of the Railway Feasibility Study, which Rasia had failed to do; (iii) that Rasia had failed to submit alignment coordinates for the Railway corridor in accordance with international standards; and (iv) that Rasia had not submitted design for the construction work, which Section 36 of the Railway Concession required Rasia to do within one year after the completion of the Feasibility Study.³¹⁶

279. Mr. Borkowski's response, on 16 December 2015, reiterated Rasia's concerns that the Government had taken "concrete steps to remove Rasia and its consortium partners from the Project," with reference to the Government's interactions with CCECC and the Chinese government (discussed in Section III.I below). Rasia also rejected the four alleged breaches of the Railway Concession, and concluded the letter with a formal declaration of a dispute pursuant to the Concession Agreement's dispute resolution clause, and a request for a prompt answer from the Government.³¹⁷

e. The March 2016 meeting and the June 2016 Notice of Dispute

280. The Parties met in Armenia on 18 March 2016 (“the March 2016 Meeting") to discuss the Railway Project. The initial initiative for the meeting seems to have come from Armenia on 15 February 2016, to which Mr. Borkowski responded on 16 March 2016, proposing to meet two days later, when he would be in Armenia.³¹⁸ At the March 2016 Meeting, the Armenian Ministry of Transport was represented by Mr. Grigoryan and Mr. Arakelyan, as well as by Mr. Hasmik Aharonyan and a Ministry lawyer.

281. The Parties' versions of the March 2016 Meeting differ. Mr. Borkowski says he explained that Aabar had decided to withdraw from the Projects; according to the Respondent, this was the first time it was informed of this, while Mr. Borkowski claims he had told Mr. Grigoryan a year earlier that Aabar would no longer participate. Mr. Borkowski says he also explained that CCCC no longer could be relied upon for the financing of the Railway Project, because of its concerns that Armenia's meetings with Chinese government officials had elevated the Railway Project to an

³¹⁶ C-37, Letter from Mr. Artur Arakelyan to Mr. J. Borkowski, 17 November 2015. ↩

³¹⁷ C-38, Letter from Mr. J. Borkowski to Minister G. Beglaryan, 16 December 2015. ↩

³¹⁸ C-39, Letter from Minister G. Beglaryan to Mr. J. Borkowski, 15 February 2016; C-40, Letter from Mr. J. Borkowski to Minister G. Beglaryan, 16 March 2016. ↩

[Page 85]

intergovernmental level, which in turn had involved a different Chinese company, CCECC. The Respondent says that its representatives informed Mr. Borkowski that Armenia's meetings with the Chinese government were high-level and diplomatic in nature and did not involve details about financing or otherwise; they were intended to encourage Chinese support for the Railway Project, not to replace Rasia as the concessionaire; and that Armenia had not asked CCECC, or any other entity, to prepare an alternative feasibility study as Rasia had alleged.³¹⁹

282. There is both an audio recording and a transcript of the March 2016 Meeting.³²⁰ According to the transcript, the meeting closed with Mr. Arakelyan's suggestion to “close this [dispute] and go forward," with a further meeting (perhaps the next day) to discuss a "plan of action" that Mr. Grigoryan would prepare for potential next steps on the Railway Project.³²¹ That further meeting did not occur, however. Instead, the March 2016 Meeting was followed by various exchanges of correspondence between the Parties which concerned, among other things, these records of the Meeting.

283. By letter of 29 March 2016, Mr. Borkowski confirmed that he had received the draft minutes of the March 2016 Meeting and promised to comment on them in early April.³²² On 5 April 2016, Mr. Grigoryan asked for feedback on the draft minutes, and also on a “sample time-line on the completion of the next steps and the obligations of the [Railway Concession],” which the Ministry had shared with Mr. Borkowski following the March 2016 Meeting.³²³ That draft time-line had (a) asked Rasia to specify a date by which it would submit Railway "coordinates meeting the international standards in accordance with the feasibility study"; (b) pledged that the Government would approve the Corridor and exercise eminent domain over the applicable lands within six months of receiving appropriate coordinates; and (c) asked Rasia to specify the dates by which it

³¹⁹ Second Borkowski Statement ¶¶ 175-176; February Tr. Day 3, Borkowski, 562:15-21; First Arakelyan Statement ¶¶ 69-77; Resp. Counter-Mem. ¶¶ 180-182. ↩

³²⁰ R-40, Transcript of the Meeting between Messrs. A. Arakelyan, G. Grigoryan, H. Aharonyan, L. Voskanyan, J. Borkowski and A. Karapetyan, 18 March 2016; AA-6, Audio Recording of the Meeting between Messrs. A. Arakelyan, G. Grigoryan, H. Aharonyan, L. Voskanyan, J. Borkowski and A. Karapetyan, 18 March 2016. ↩

³²¹ R-40, Transcript of the Meeting between Messrs. A. Arakelyan, G. Grigoryan, H. Aharonyan, L. Voskanyan, J. Borkowski and A. Karapetyan, 18 March 2016, p. 8. ↩

³²² AA-7, Email from Mr. J. Borkowski to Mr. G. Grigoryan, 29 March 2016. ↩

³²³ C-176, Email from Mr. G. Grigoryan to Mr. J. Borkowski, 5 April 2016. ↩

[Page 86]

would ensure financing of the Project by submission of appropriate letters of interest; and (d) asked Rasia for the date by which it would submit the design of construction civil works.³²⁴

284. In the same email in which Mr. Grigoryan invited Mr. Borkowski's comments, he also informed Mr. Borkowski of upcoming discussions with Iran on a range of transportation issues “during the end of April or the beginning of May, 2016." He said that Rasia would be notified in advance if the agenda was to include any discussion of the Railway Project in particular. (As discussed in Section III.H.2.b above, this meeting took place in Iran on 18-19 April 2016.)

285. Mr. Borkowski responded on 29 April 2016, without commenting on the draft minutes or proposed timeline of next steps, but requesting the audio recording of the March 2016 Meeting. He also expressed concern about media reports that the competing Iran-Azerbaijan railway had commenced, which (as discussed in Section III.H.2.b above) had long been considered a threat to obtaining support for the Railway Project.³²⁵

286. On 17 June 2016, Mr. Grigoryan in turn expressed concern that Mr. Borkowski still had provided no feedback either on the minutes of the March 2016 Meeting, or on the “plan-deadline" for moving forward with the Railway Project. He suggested that Mr. Borkowski's failure to submit these items was "hindering the fulfillment of the agreement obtained during the meeting, which is the confirmation of the plan-deadline in order to set clear dates to ensure the natural process of the project implementation.” He set a deadline of 25 June 2016 for Rasia to provide information on its progress in "integrating potential investors for the funding of the Project," including "justified documents (memorandums, initial agreements, etc.). Finally, Mr. Grigoryan informed Mr. Borkowski of two recent events: (a) the expert meeting between Armenia, Bulgaria, Greece and Iran that had taken place on 18-19 April 2016, and that had resulted in a joint protocol on an international transport and transit corridor, and (b) the Chinese Vice Premier's visit to Armenia on 6 June 2016, at which the Railway Project was discussed along with other infrastructure projects in the fields of industry, energy, agriculture, science, transport, technology and culture.³²⁶

287. In response to the 17 June 2016 letter, on 25 June 2016, Mr. Borkowski sent the Government a notification of a dispute under the US-Armenia BIT (the “Notice of Dispute"). The Notice of

³²⁴ C-174, The Republic of Armenia's “Time-line on the Fulfilment of the Next Steps and the Obligations of the Parties under the Concession Agreement on the Construction of the Southern Armenia Railway", March 2016. ↩

³²⁵ C-177, Email from Mr. J. Borkowski to Mr. G. Grigoryan, 29 April 2016. ↩

³²⁶ C-43, Letter from Mr. G. Grigoryan to Mr. J. Borkowski, 17 June 2016. ↩

[Page 87]

Dispute recorded Rasia's surprise at having learned only after the fact about Armenia's meetings with Iran and China, which in Rasia's view provided “further irrefutable evidence that Armenia has excluded Rasia and its contractor and lead member of Rasia's consortium, [CCCC], in total disregard for the exclusive rights granted to Rasia under the 2012 Concession Agreements." The Notice of Dispute also said that CCCC had recently informed Rasia that it intended to “terminate contractual agreements with Rasia due to Armenia's coordination and conclusion of agreements with third parties and its exclusion of Rasia as concessionaire and consortium leader from the Railway and Road Projects.”³²⁷

I. CCCC'S INVOLVEMENT AND WITHDRAWAL FROM THE PROJECTS

288. Given the importance of CCCC to the facts of this case, it is useful to recap here the main facts about its involvement in, and withdrawal from, the Projects. (In the next section, the Tribunal provides a similar summary regarding Aabar's involvement and withdrawal, which provides the sole basis for the theory of damages the Claimants have presented in this case.)

289. As already mentioned, CCCC was involved at the outset of the Projects, pursuant to the Rasia-CCCC Framework Agreement which envisioned that CCCC would prepare both Feasibility Studies; that it would become the “exclusive EPC” contractor for developing both Projects; and that it would assist Rasia with debt financing by approaching China EximBank and China Development Bank.³²⁸ It is suggested that CCCC's subsequent withdrawal from the Projects, and Rasia's related failure to obtain Chinese bank funding through CCCC, was a significant factor contributing to the collapse of the Projects. Below, the Tribunal briefly summarizes the facts relevant to CCCC's withdrawal.

290. The Railway Feasibility Study provided a preliminary estimate of Project investment of about $3.2 billion, and stated that "[i]t is currently anticipated that loans will be secured from the Export-Import Bank of China (interim) for approximately 60% of the Project cost at an annual interest rate of 3.5% implying that the remaining 40% of funds will need to be secured from regional governments and international financial institutions.”³²⁹ Citing this passage of the Railway Feasibility Study, the Claimants contend that "[d]uring the second half of 2013," CCCC had

³²⁷ C-53, Letter from Mr. J. Borkowski to Minister G. Beglaryan, 25 June 2016, p. 8. ↩

³²⁸ R-8, Rasia-CCCC Framework Agreement. ↩

³²⁹ C-116, Railway Feasibility Study, p. 168. ↩

[Page 88]

actually "secured commitments" from China EximBank to this effect.³³⁰ Mr. Borkowski testified at the Hearing that the inclusion of this sentence in the Railway Feasibility Study prepared by CCCC, together with contemporaneous discussions he had with Armenia, was sufficient to satisfy the Railway Concession's requirement that Rasia provide Armenia, within 12 months of final approval of the Feasibility Study, with "letters of interest from ... potential ... finance providers ... prepared to ... provide debt financing ....”³³¹ Yet this contention of “commitments” already having been secured from China EximBank is somewhat at odds with Mr. Borkowski's slide presentation during the February 2014 Yerevan Meetings, which stated that the Railway Project would be "highly dependent on China bank negotiations," following certain "preliminary discussions with China banks.”³³² That contemporaneous document seems to confirm that no actual funding commitments had yet been secured at that time.

291. The facts are similar for the Road Project. The Road Feasibility Study "[a]nticipated that the Project should be able to secure loans from the Export-Import Bank of China or China Development Bank for approximately 60-85% of the Project investment requirement an annual interest rate to be determined based on the negotiation of the availability payments contract.”³³³ The phrasing “should be able to secure" no doubt suggested optimism by CCCC, but it does not support the Claimants' contention that by this time CCCC had actually “secured commitments” to finance the Project.³³⁴ The record does not reflect any actual documents from China EximBank, or any other Chinese bank, demonstrating such a commitment.³³⁵

292. Claimants contend that by mid-March 2015, Mr. Weixin of CCCC informed Mr. Borkowski that CCCC was withdrawing from the Railway Project, allegedly because the Chinese Ministry of Commerce had “ring-fenced” the Project for CCECC, another Chinese entity.³³⁶ There is no documentary evidence of this conversation between Mr. Weixin and Mr. Borkowski, but as discussed above, there are indications that CCECC did engage in discussions with Armenia. The

³³⁰ Cl. Mem. ¶ 109; First Borkowski Statement, ¶ 66. ↩

³³¹ C-1, Railway Concession, Section 33.1; February Tr. Day 3, Hanessian/Borkowski, 510:6-20. ↩

³³² C-131, “Southern Armenia Railway Project and Southern Armenia High Speed Road Project" (Razia FZE), February 2014, p. 15. ↩

³³³ C-122, Southern Armenia High Speed Road Feasibility Study, p. 125. ↩

³³⁴ Cl. Mem. ¶ 109. ↩

³³⁵ Resp. Counter-Mem. ¶¶ 152-153. ↩

³³⁶ Cl. First PHB ¶¶ 244, 246, 271; February Tr. Day 2, Hanessian/Borkowski, 313:20-314:3, 314:9-18. ↩

[Page 89]

Parties dispute the exact nature of what was discussed, and what implications that may or may not have had for CCCC's willingness to participate in the Projects.

293. On 18 March 2015, Armenian officials, led by Minister Beglaryan, met with CCECC. The Parties' characterizations of this meeting differ, with the Claimants suggesting it centered on CCECC'S involvement in the Railway Project and the Respondent contending that the meeting had been initiated by the “Chinese side,” with a broad agenda.³³⁷ Handwritten notes from the Ministry of Transport's information service suggest that "[d]uring the meeting, the Chinese party expressed interest in the construction project of the South railroad due to its crucial role in the region. Gagik Beglaryan and [CCECC managing director] Hao Jiyong discussed the possibility that this major Chinese company may participate in the implementation of the above project.”³³⁸ A Ministry of Transport press release also stated that the two men "discussed the possibility of the Chinese largest company's participation in the implementation” of the Southern railway.³³⁹

294. Later in March 2015, during his state visit to China, Armenian President Sargsyan called for "active participation of Chinese companies in the construction of the Armenia-Iran railway.”³⁴⁰ Claimants cite this statement as evidence of the "steps [by the Government] to establish an entirely different consortium" than the one Rasia had established with CCCC.³⁴¹ Press coverage of President Sargsyan's speech expressly mentioned CCCC's feasibility study and Rasia's existing 30-year concession, however,³⁴² and Respondent describes the President's remark as simply a high-level, general statement made in the context of a diplomatic visit.

295. In June 2015, further meetings took place between CCECC, represented by its chairman Vu Van Liang, and Armenia, represented by Mr. Beglaryan. Armenian press releases record that at the meeting, CCECC “reaffirmed [its] wish ... to take part in the construction program of the Armenian Southern Railway,” “submitted some possible mechanisms for the program financing," discussed

³³⁷ Cl. Mem. ¶ 165; Cl. Reply ¶¶ 404-405; Resp. Counter-Mem. ¶ 159; First Arakelyan Statement ¶ 63. ↩

³³⁸ C-277, Minutes attached to Speech of President Serzh Sargsyan at Boao International Economic Forum, 18 March 2015, p. 3. ↩

³³⁹ C-20, Ministry of Transport Website: Gagik Beglaryan Receives Representatives of Chinese Company (http://mtcit.am/pages.php?lang=3&id=5831&page_name=news), 18 March 2015, accessed on 11 July 2018. ↩

³⁴⁰ C-155, "Yerevan Expects Chinese Support For Iran-Armenia” (Azatutyun), 27 March 2015. ↩

³⁴¹ Cl. Mem. ¶ 165(ii). ↩

³⁴² C-155, “Yerevan Expects Chinese Support For Iran-Armenia” (Azatutyun), 27 March 2015. ↩

[Page 90]

"[s]ome issues concerning the railway construction," and "thoroughly discussed the implementation specialities” of the Southern Railway program.³⁴³

296. On 24 August 2015, Minister Beglaryan wrote to CCEEC:

The Ministry of Transport and Communication of Armenia presents its compliments to the China Civil Engineering Construction Corporation.

We have been contemplating the possibility of our cooperation for the realization of priority projects in the transport infrastructure for a while now. More specifically this concerns the North-South Highway and the Southern Railway projects as part of the Silk Road.

In order to discuss these projects in more details and to speed up the process of clarifications on your potential participation in their implementation, herewith I would like to invite you to Yerevan some time at your own convenience within the upcoming month, prior to the Armenian Delegation visit to Beijing in September.³⁴⁴

297. The Armenian visit to Beijing which was foreshadowed in Mr. Beglaryan's letter took place in September 2015. The Ministry of Transport's participation was part of a broader delegation, led by Armenia's Prime Minister and including also senior leaders from the Ministries of Economy, Finance and Foreign Affairs, as well as the Central Bank. An internal meeting summary from the Armenian Ministry of Foreign Affairs confirms that "[d]uring the meeting, discussions were held on the Iran-Armenia rail line, investments and construction of the North-South Corridor Expressway," and the Chinese Prime Minister "reaffirmed the interest of the Chinese side ....”³⁴⁵

298. Again, the Parties' versions of the meeting differ and, in particular, the Claimants assert (and the Respondent denies) that Armenia asked for further railway feasibility studies.³⁴⁶ The agenda for the meeting anticipated that the following issues would be open for discussion:

³⁴³ C-21, Ministry of Transport Website: Gagik Beglaryan Receives “CCECC” Chinese Company Representatives (http://mtcit.am/pages.php?lang=3&page_id=1&id=5935&page_name=news), 23 June 2015, accessed on 11 July 2018; see also C-161, “CCECC's Wish to Participate in the Construction Project of Armenia's Southern Railway" (Aysor), 23 June 2015. C-162, “Armenia's Minister of Transport Receives CCECC Delegation" (Tert.am), 23 June 2015; C-302, Ministry of Foreign Affairs of the Republic of Armenia, Annual Report Summary of the Asia, Oceania, and Africa Committee, Year 2015, p. 3 (summarizing CCECC visit to Yerevan on 22 June 2015). ↩

³⁴⁴ C-307, Letter from Minister G. Beglaryan to Yan Li, President of CCECC, 24 August 2015. ↩

³⁴⁵ C-302, Ministry of Foreign Affairs of the Republic of Armenia, Annual Report Summary of the Asia, Oceania, and Africa Committee, Year 2015, providing report of state visit of Prime Minister H. Abrahamyan to the People's Republic of China on 22–24 September of 2015 (Unofficial English Translation and Armenian Original), p. 3. ↩

³⁴⁶ Cl. Reply ¶ 412; Resp. Counter-Mem. ¶ 164. ↩

[Page 91]

1. The issue regarding the involvement of Chinese companies in construction and funding of the South Railway program of the Republic of Armenia.
2. The issue regarding the involvement of Chinese private and public capital in the funding and construction of specific sections of the railway (tranches) and the possibility of construction of toll roads, tunnels, and bridges apart of the public-private partnership “Investment Program of the North-South Transport Corridor”.³⁴⁷

299. While the discussions between Armenia and CCECC – whatever their scope – were taking place, Rasia's separate discussions with China Poly (as discussed above at paras. 254 and 272) proceeded in September 2015. On 6 September 2015, Mr. Dai Ning of China Poly wrote to Mr. Borkowski to let him know that he had been “approached by some companies regarding the railway in Armenia connecting Iran very recently. It seems that Armenia government is inviting some companies to participate and provide financing to the project. I just wonder if you have any update on this project and what shall we do at this moment?”³⁴⁸ Mr. Borkowski replied on 17 September 2015, thanking Mr. Dai Ning for taking time to meet with Aabar representatives in Beijing, and promising to send a "draft non-binding framework agreement giving Poly exclusivity and conditional on conversion of the Rasia agreements into G2G cooperation in Iran and Armenia.”³⁴⁹ Four days later, Mr. Borkowski wrote to inform Mr. Dai Ning of the Armenian Prime Minister's visit to Beijing, which he stated was arranged by CCEEC along with China EximBank “and is in relation to my railway project." Mr. Borkowski complained that the Prime Minister “had accepted the CCECC invite without coordinating with me, but rather than tell the PM how he should be coordinating the Armenia railway project affairs, I will discuss this with the PM and Minister in Armenia following his visit. I will provide an update afterwards including how it will affect cooperation we might have on the Armenia rail link. The Iran side has not changed its approach.”³⁵⁰ The next day, Mr. Borkowski wrote another email to Mr. Dai Ning, attaching the link to a news article seemingly reporting from the state visit in Beijing, and stating that "I will get a summary of the visit and

³⁴⁷ C-303, "List of Issues Proposed for Discussion at the Meeting between Hovik Abraamyan, Prime Minister of the Republic of Armenia, and Li Keqiang, Premier of the State Council of the People's Republic of China" (Unofficial English Translation and Russian Original), undated. ↩

³⁴⁸ C-271, Email from Dai Ning to Mr. J. Borkowski, 6 September 2015. ↩

³⁴⁹ R-132, Email from Mr. J. Borkowski to D. Ning, 17 September 2015; R-133, Email from Mr. J. Borkowski to D. Ning, 21 September 2015. ↩

³⁵⁰ R-133, Email from Mr. J. Borkowski to D. Ning, 21 September 2015. ↩

[Page 92]

remind [the Armenian Prime Minister] that we control the railway project and that Poly is our preferred partner including on a G2G or government guaranty basis.”³⁵¹

300. According to the Respondent, the correspondence between Mr. Borkowski and China Poly at this time demonstrates Rasia's intention to replace CCCC with China Poly as financier for the Railway Project.³⁵² The Claimants say that their discussions with China Poly concerned only the Iranian portion of the Railway, for which Rasia intended to bring in China Poly, through a framework agreement, alongside CCCC working on the Armenian segment.³⁵³

301. While in Beijing, on 23 September 2015 the Armenian Prime Minister also met representatives of China EximBank. According to press reports from the meeting, the Prime Minister “said the possibility of implementing large-scale investment projects, including construction of South Railway of Armenia, were discussed in the past few years with the Chinese side.”³⁵⁴

302. In November 2015, during a workshop on Chinese-Armenian cooperation connected to the Silk Road Economic Belt, the Chinese ambassador to Armenia reportedly told the press that “at the current stage two Chinese companies are conducting the feasibility study of the project on a non-repayable basis to see the expediency of the Iran-Armenia railway project," following which it would be possible to hold real discussion about potential Chinese investments and implementation. The press article reporting this statement referred specifically to a feasibility study developed "[i]n cooperation with Dubai-based investment company, Rasia FZE," but did not identify which Chinese companies were working on feasibility studies.³⁵⁵

303. Later, in its early 2016 discussions with Iran (see above paras. 259-261) Armenia stated that a railway feasibility study “had been conducted by a Chinese company,' "³⁵⁶ which in the Claimants' submission, could refer either to the Railway Feasibility Study CCCC prepared on behalf of Rasia

³⁵¹ R-134, Email from Mr. J. Borkowski to D. Ning, 22 September 2015. ↩

³⁵² Resp. Rej. ¶¶ 209, 409. ↩

³⁵³ Cl. Reply ¶ 411. ↩

³⁵⁴ C-31, "Iran-Armenia Railway to Play Role in Regional Development” (Armenian News), 23 September 2015. ↩

³⁵⁵ C-23, "Ambassador of China: It Will Be Possible to Speak of Expediency of Iran-Armenia Project after Preparation of Feasibility Study” (ArmInfo), 16 November 2015. ↩

³⁵⁶ C-308, “Mission report on the results of the delegation visit headed by the Minister of Transport and Communication of the Republic of Armenia" submitted by G. Beglaryan, Minister of Transport, to D. Harutyunyan, Chief of Staff of the Government of the Republic of Armenia, 25 January 2016 (Unofficial English Translation and Armenian Original), p. 4. ↩

[Page 93]

(evidencing that Armenia relied on this Feasibility Study as valid in early 2016), or to a separate one prepared by CCECC (suggesting that a competing study indeed had been prepared).³⁵⁷

304. As for CCCC, the record does not contain any contemporaneous documentation indicating the reasons for its withdrawal from the Railway Project, which Mr. Borkowski testified was communicated to him in mid-March 2015.³⁵⁸ The last communication prior to that date was an exchange from 8 February 2015, in which CCCC asked for an update on the Project and Mr. Borkowski responded as follows:

Yes good improvement on the railway project but mostly on the Iran side. On the Armenia side, they need the WGS 84 coordinates in order to progress but I cannot get those without the next stage. I am working on the Iran side now.

On the road, the project is failing and is stopped with the Spanish EPC problems.

Mr. Borkowski indicated he would send "a more detailed update soon.' "³⁵⁹ There is no record evidence of that update, but as noted above, Claimants contend that by mid-March 2015, Mr. Weixin informed Mr. Borkowski that CCCC was withdrawing from the Railway Project, because the Chinese Ministry of Commerce had reserved the Project for CCECC.³⁶⁰

305. The only other correspondence in the record from CCCC is a series of letters, dated between 2018 and 2021, which the evidence demonstrates were drafted by Mr. Borkowski for Mr. Weixin's approval, ostensibly to satisfy Rasia's auditors that Rasia remained indebted to CCCC for preparing the feasibility studies.³⁶¹ The 2018 letter Mr. Borkowski prepared (and Mr. Weixin approved) states that CCCC remains "fully entitled” to $15 million for the feasibility studies, for which remuneration was "deferred ... on the basis of Rasia's commitment ... to involve CCCC in the project EPC works" for both the Railway Project and the Road Project.³⁶² The 2020 and 2021 versions of the letter that Mr. Borkowski prepared have slightly different wording, claiming that the debt was "originally intended to be either paid out from an Aabar ... acquisition of the [Projects] or rolled into the project financing stage with Aabar ... equity and China Exim Bank debt for the CCCC

³⁵⁷ Cl. Reply ¶ 414. ↩

³⁵⁸ Cl. First PHB ¶¶ 244, 246, 271; February Tr. Day 2, Hanessian/Borkowski, 313:20-314:3, 314:9-18. ↩

³⁵⁹ R-123, Email from Mr. J. Borkowski to Mr. B. Weixin, 8 February 2015. ↩

³⁶⁰ Cl. First PHB ¶¶ 244, 246, 271; February Tr. Day 2, Hanessian/Borkowski, 313:20-314:3, 314:9-18. ↩

³⁶¹ Fourth Borkowski Statement ¶ 33; C-344, Email from Mr. J. Borkowski to Mr. B. Weixin, 15 January 2021. ↩

³⁶² C-344, Email from Mr. J. Borkowski to Mr. B. Weixin, 15 January 2021, pp. 3-6. ↩

[Page 94]

EPC works," and that “CCCC "has not called on the debt" because of the pending Arbitration and the "sensitivity of bilateral government relations between China and Armenia as well as China and the UAE,” but that “CCCC will, in due course, seek repayment.”³⁶³ The Tribunal returns to the significance of these letters in Section V.A.3 below.

J. AABAR'S INVOLVEMENT AND WITHDRAWAL FROM PURCHASING RASIA

306. Claimants contend that in addition to losing CCCC in mid-2015 as the intended EPC contractor for the Projects, it also lost the support of Aabar as the intended equity investor in Rasia. The withdrawal of Aabar's interest in investing in Rasia is critically important for this case, as the projected value to Rasia of that investment forms the sole basis for Rasia's calculation of damages in this Arbitration.

307. To recall points about Aabar discussed above, Mr. Borkowski testified that in his view, the "essence" of his bargain with Armenia was that "Aabar was to be the anchor investor in the Projects once their feasibility had been established.”³⁶⁴ In June 2012, Mr. Tappendorf (then of Aabar) had written to Armenia, promising “to review the railway and road development projects with a focus on economic feasibility and investment and either directly or through our affiliates consider equity investments and/or lending.”³⁶⁵ On 31 July 2012, three days after the Concession Agreements were signed, Rasia advised the Government that it had met with Aabar to discuss "the prospects of equity investments” in connection with the Railway Project.³⁶⁶ On 29 October 2013, Mr. Borkowski proposed to Aabar's CEO an equity transaction that would allow it to "own and control [this] strategic railway,” which he said would enable Aabar's subsidiary Arabtec to become “Master Developer, Contractor [and] Railway Owner.” Mr. Borkowski also described the Railway Project as benefiting from “[s]ignificant financing” coming from "3rd parties (up to 85% [C]hina banks and 15% ADFD and Eurasian Development Bank).”³⁶⁷ Although the proposal to Aabar referenced “the ability to partner with China company,”³⁶⁸ it made no specific mention of Rasia's prior agreement

³⁶³ C-344, Email from Mr. J. Borkowski to Mr. B. Weixin, 15 January 2021, pp. 7-8, 10-11; see also C-231, Letter from Mr. B. Weixin to Mr. J. Borkowski, 6 March 2020. ↩

³⁶⁴ Second Borkowski Statement ¶ 31. ↩

³⁶⁵ C-11, Letter from Mr. C. Tappendorf, Aabar to Minister G. Beglaryan, 26 June 2012. ↩

³⁶⁶ C-91, Letter from Mr. J. Borkowski to Minister G. Beglaryan, 31 July 2012. ↩

³⁶⁷ C-121, “Southern Armenian Railway – An Energy Corridor Linking Asia to Europe” (Rasia, 29 October 2013). ↩

³⁶⁸ Id. ↩

[Page 95]

to appoint CCCC “as the lead member of its Consortium and exclusive EPC for developing" the Railway Project.³⁶⁹ The Claimants say that at some point in late October 2013, the Aabar CEO confirmed his interest in investing in both Projects, which was communicated to Mr. Borkowski through Mr. Tappendorf.³⁷⁰

308. The Claimants say that but for the Respondent's acts that led effectively to Rasia and CCCC's ouster from the Projects by March 2015, the deal with Aabar – by which it or one of its subsidiaries would have purchased 100% of the shares of Rasia – would have closed in April 2015. The Parties agree that the Aabar deal failed to materialize, but they disagree as to the reason(s) for the failed deal. The facts underlying these disputes are recounted below.

309. In April 2014, Mr. Tappendorf prepared a presentation about the Projects for the Aabar chairman H.E. Khadem Al Quibaisi, (the "Tappendorf Presentation"). Mr. Tappendorf suggested there would be significant value in Aabar's acquisition of the Projects, including “Arabtec as EPC partner alongside CCCC," with Arabtec described as "joint EPC" and the suggestion that Aabar could "add 10% to EPS for [its] management of project.”³⁷¹ The Tappendorf Presentation also stated that Aabar could "significantly reduce cost of capital for project financing through G2G arrangement,” including for the Railway Project a “G2G de-risking" and for the Road Project an "Armenian government guaranty through availability payments" expected to cover "principal, interest, returns.”³⁷² The Presentation also listed the “key future milestones required from Rasia” before the Projects could be at the stage at which Aabar would invest, including Armenia's acceptance of the Feasibility Studies, a “trilateral co-operation agreement between Armenia-Rasia-Iran on railway linkages," an agreement between Aabar and Rasia on acquisition terms, and “definitive documents and standard due diligence."³⁷³ According to Mr. Tappendorf's witness statements in this Arbitration, the Aabar Chairman reacted positively and expressed a wish to complete the deal once the identified milestones had been reached.³⁷⁴

³⁶⁹ R-8, Rasia-CCCC Framework Agreement, p. 2 and Section 7. ↩

³⁷⁰ First Borkowski Statement ¶ 69; First Tappendorf Statement ¶ 47. ↩

³⁷¹ C-135, “Armenia Strategic Infrastructure Projects, Chairman Summary" (Aabar), April 2014, pp. 2, 4. ↩

³⁷² Id., pp. 2, 4. ↩

³⁷³ Id., p. 5; First Tappendorf Statement ¶ 61. ↩

³⁷⁴ First Tappendorf Statement ¶ 62. ↩

[Page 96]

310. There are two related letters dated 21 September 2014 on the record, both written by Mr. Tappendorf.³⁷⁵ The first³⁷⁶ is a memo written to Mr. Al Quibaisi, which contained an update on the progress on both Projects since the Tappendorf Presentation in April 2014. It stated that Armenia had accepted the Railway Feasibility Study, but had not yet accepted the Road Feasibility Study. The memo further said that “Rasia remains willing to pursue a sale of both projects with [A]abar and involving Arabtec and has agreed with the high end of our previously discussed April terms." It also stated that Armenia had requested an “expression of interest from a 3rd party in support of Rasia for financing the remaining 40%” Railway Project, and that Rasia had requested proceeding "with the sale of both projects to [A]abar." Under the heading "Concerns of [A]abar/potential risks," Mr. Tappendorf also wrote the following:

• July media of other parties willing to fund the road project
• No feedback from Armenia to Rasia on the road project feasibility study
• Competing feasibility study and/or design works having been granted to other parties.

The memo concluded with a recommendation that Aabar drop the acquisition of the Road Project, and instead focus solely on the Railway Project. Mr. Tappendorf suggested that the drafting of definitive agreements for the latter should start in early 2015, "after the planned signing of trilateral cooperation between Armenia-Rasia-Iran, ensuring Iran linkages will be in place." Mr. Tappendorf also recommended that Aabar issue a "soft" Expression of Interest letter to Rasia, to be shown to the Armenian Government.³⁷⁷

311. The second letter dated 21 September 2014, which Mr. Tappendorf has said that he drafted later in the day after having written to, and then met with, Mr. Al Quibaisi,³⁷⁸ was addressed to Mr. Borkowski. The letter had the subject "Expression of Interest, Southern Armenia Railway (Armenia-Iran Railway)." The letter noted that the Railway Feasibility Statement had stated “the China contractor's initial indications of interest" from China EximBank for funding "at least of 60% of the project ... without a sovereign guaranty," and stated that Aabar believed it had the

³⁷⁵ C-13, Letter from Mr. C. Tappendorf to Mr. J. Borkowski, 21 September 2014; CT-7, Memorandum from Mr. C. Tappendorf to H.E. K. Al Qubaisi, 21 September 2014. ↩

³⁷⁶ At the February Hearing, Mr. Tappendorf testified that he drafted CT-7 before C-13, February Tr. Day 5, Hanessian/Tappendorf, 855:18-856:15. ↩

³⁷⁷ CT-7, Memorandum from Mr. C. Tappendorf to H.E. K. Al Qubaisi, 21 September 2014. ↩

³⁷⁸ February Tr. Day 5, Hanessian/Tappendorf, 855:18-856:15. ↩

[Page 97]

ability "to arrange the remaining 40% financing in the form of similar low cost debt along with playing the management role” in the EPC contract through Arabtec. Aabar would require that Rasia sell "100%" of the Railway Project "at a standard multiple (i.e. 5-7x) of the $10 million base feasibility study and alignment design expense," and would require that Rasia remain involved during the duration of the EPC works “in exchange for a market comparable consulting fee (i.e. 5% of the EPC contract). This would enable all flows to equity to be for the benefit of Aabar Investments with all of the EPC profits benefitting Arabtec Construction.”³⁷⁹

312. As will be developed further below, the Parties dispute precisely what type of undertaking Aabar made in this letter. The letter was subsequently delivered in person by Mr. Borkowski to Mr. Arakelyan on 10 November 2014.³⁸⁰

313. Mr. Tappendorf testified that by late November 2014, he considered that the milestones he identified in April 2014 had been met.³⁸¹ In a memorandum dated 22 December 2014, Aabar Chief Financial Officer (and a witness in this Arbitration) Mr. Andrew Thornber sent a memo to the Aabar Finance and Investment Committee, recommending the 100% purchase of Rasia shares, for which USD 105 million (plus a USD 5 million contingency) was to be allocated. The memo stated that Rasia had contributed "100% of the equity investment of USD 15 million" towards the Feasibility Studies and working designs, and accordingly that “the 100% ownership is maintained by Joseph Borkowski." Both projects were said to have been “completed with a positive result," with the "major project being the railway [which] was formally accepted by Armenia.”³⁸² As for the Road Project, the memo reported that Aabar's legal team considered it automatically accepted under the Road Concession's terms, even though Armenia had not provided any written acceptance, and Aabar's investment team believed that the Aabar acquisition of Rasia would convince the Government to support the Road Project as well.

314. Attached to Mr. Thornber's 22 December 2014 memo was, among other things, an 18 December 2014 term sheet that Mr. Tappendorf had prepared, reflecting what he considered had been agreed with Rasia for the purchase of 100% of its shares (the “Aabar Term Sheet" or the "Term Sheet”). The Aabar Term Sheet was an internal document, and it was not signed by either Aabar or Rasia.

³⁷⁹ CT-7, Memorandum from Mr. C. Tappendorf to H.E. K. Al Qubaisi, 21 September 2014. As discussed below, Mr. Borkowski testified during the February Hearing that the reference to Arabtec enjoying all of the EPC profits was a "drafting error,” which the Respondent disputes. ↩

³⁸⁰ Second Borkowski Statement ¶ 78; First Arakelyan Statement ¶ 39. ↩

³⁸¹ First Tappendorf Statement ¶ 68. ↩

³⁸² C-146, Memorandum from Mr. A. Thornber to Aabar Finance and Investment Committee, 22 December 2014. ↩

[Page 98]

It reflected a proposed purchase price of USD 105 million, to be paid upon closing of the transaction which was expected “no later than 30 April 2015.” The terms of the sale provided that it would be on an "as is" basis, free “from charges or liabilities except as disclosed,” with a footnote providing that "Rasia to repay USD 15m credit with CCCC." Furthermore, under the heading "Conditions Subsequent to Closing," it was provided that Aabar and Rasia were to “enter into EPC consulting agreement with Joseph Borkowski ... for value equal to 5% of the EPC for the Southern Armenia Railway only and to be paid proportionately as EPC works are completed.” A separate "operations consulting agreement” with Mr. Borkowski was to provide him "3% of the total annual sales" for the Railway, for the first 30 years of the concession.³⁸³

315. Mr. Thornber has testified that Aabar's Finance and Investment Committee approved the proposed transaction "shortly after" his 22 December 2014 memo,³⁸⁴ although there is no decision as such on the record. Mr. Thornber also testified that he proceeded to "ring-fence" the funds necessary for the purchase, so by the end of December, “all internal approvals for the transaction had been obtained."³⁸⁵

316. According to the Respondent, Mr. Borkowski never informed it of the plan to sell Rasia to Aabar, which the Respondent argues was a violation of Sections 8.2(e) of both Concessions, which gave Armenia a right of first refusal to acquire Rasia's shares. The Respondent maintains that it was only at the March 2016 Meeting that Armenia was informed of the potential equity transaction and the failure of the same.³⁸⁶

317. In any event, the Rasia-Aabar transaction never took place. The Parties have different versions of the events that transpired beginning in early 2015 that led to Aabar's withdrawal in March 2015.

318. In early January 2015, Aabar put the transaction on hold. In the Claimants' telling, this decision, as well as Aabar's ultimate withdrawal in March 2015, was prompted by various actions by the Respondent. According to Mr. Tappendorf, Aabar's chairman expressed concern over Armenia's attempts unilaterally to terminate the Road Project, as well as the Government's stance on the financing of the Railway Project. The Claimants say that by this time, it had become clear that both Projects were under threat. That had prompted the Aabar chairman to instruct Mr. Tappendorf to

³⁸³ C-145, Aabar, Term Sheet, 18 December 2014. ↩

³⁸⁴ First Thornber Statement ¶ 36. ↩

³⁸⁵ Id., ¶ 36. ↩

³⁸⁶ Resp. Counter-Mem. ¶¶ 134, 150. ↩

[Page 99]

put the acquisition temporarily on hold in January 2015, in order to “better assess the situation in Armenia."³⁸⁷

319. In late February 2015, two articles appeared in Armenian press (the "Press Reports"), which, the Claimants argue, informed Aabar's decision to withdraw from acquiring Rasia. These news reports recount remarks from Minister Beglaryan about a two-month postponement of the deadline for adopting a Government measure related to amendments of the Railway Concession and action plans for construction of the Railway Project. The Press Reports state that Mr. Beglaryan attributed the delay to a “negative posture on some matters by the concessionaire.”³⁸⁸ One report also quotes an economist, Mr. Ashot Yeghiazaryan, as saying that Rasia "prevents the construction of the Iran-Armenia railway.”³⁸⁹

320. The Claimants say that these Press Reports prompted Aabar's ultimate decision to withdraw. In Mr. Tappendorf's recollection, in March 2015, Mr. Al-Qubaisi instructed him that “Aabar must withdraw from the investment” as a reaction to the recent news of the Government's stance, which had rendered the Projects “too risky and politically sensitive.”³⁹⁰

321. According to the Respondent's version of events, Aabar's failure to follow through on the proposed deal with Rasia was not motivated by any action or inaction on Armenia's part, but instead was part of the fallout of the so-called “1MDB Scandal," a large-scale fraud involving the Malaysian sovereign wealth fund 1MDB and Aabar's parent company International Petroleum Investment Company ("IPIC”), which ultimately led to Aabar's collapse. In April 2015 Mr. Al-Qubaisi, whom Mr. Tappendorf had advised about the potential Rasia acquisition, was removed as Aabar chairman in connection with the 1MDB Scandal. In June 2015, he was arrested and subsequently sentenced to 15 years in jail for his involvement in the Scandal.³⁹¹ The Respondent says that even before these

³⁸⁷ First Tappendorf Statement ¶ 73; Second Tappendorf Statement ¶¶ 76-77; Cl. Reply ¶¶ 253-256; Cl. First PHB ¶ 250. ↩

³⁸⁸ C-151, "The First Obstacle of the Iran-Armenia Railway is the Concessionaire of the Armenian Railway" (Aravot), 28 February 2015; see also C-150, "The Prime Minister too has no Hope of Iran-Armenia Railway” (Aravot), 26 February 2015 ("Beglaryan connected postponement ... [with] having a negative attitude caused by the concessionaires"). ↩

³⁸⁹ C-151, "The First Obstacle of the Iran-Armenia Railway is the Concessionaire of the Armenian Railway” (Aravot), 28 February 2015. ↩

³⁹⁰ First Tappendorf Statement ¶¶ 73-77; see also Cl. Reply ¶¶ 253-256. ↩

³⁹¹ R-42, B. Hope and N. Parasie, Abu Dhabi Sovereign Wealth Fund Gets Entangled in Global 1MDB Scandal, The Wall Street Journal, https://www.wsj.com/articles/malaysian-money-trail-leads-to-themiddle-east-1480614247, 1 December 2016. ↩

[Page 100]

events, there were “questions about 1MDB," as evidenced by press reports in February 2015 and news spreading in Malaysia even in 2014.³⁹²

322. The Claimants dispute the Respondent's linkage of the 1MDB Scandal with Aabar's withdrawal from acquiring Rasia. They argue that the key events of that scandal – including Mr. al-Qubaisi's resignation – transpired after the Rasia-Aabar deal already had fallen through for unrelated reasons in January-March 2015, and as such, it could not have had any impact on the intended transaction.³⁹³

K. POST-NOTICE OF DISPUTE DEVELOPMENTS

323. The Parties disagree as to exactly when the formal dispute between them arose (see below at Section V.D). However, it seems to be common ground that by the time of the 25 June 2016 Notice of Dispute, the existence of a dispute was known to both sides. The Respondent replied to the Notice of Dispute on 9 September 2016, in a letter signed by Minister Beglaryan, stating that in Armenia's view, the Claimants had breached both Concessions.³⁹⁴ Mr. Borkowski responded to Minister Beglaryan's 9 September 2016 letter on 20 October 2016. In his letter, this time addressed to Mr. Vahan Martirosyan, who by then had replaced Mr. Beglaryan as Minister for Transport, Mr. Borkowski disagreed with Armenia's characterization of Rasia's performance under the Concessions, and he confirmed his intention to proceed to ICSID arbitration.³⁹⁵

324. In the intervening period between this exchange and the Claimants' Request for Arbitration on 19 June 2018, there were further developments which are relevant to the factual background of the dispute.

325. In late 2016 and early 2017, the Armenian Government solicited foreign investors with the aim of attracting investment in the country's infrastructure, including its rail and road networks. On 10-11 October 2016, Mr. Arakelyan presented the Southern Armenia Railway Project at the Armenian

³⁹² Resp. Counter-Mem. ¶¶ 147-151, 243, 297; Resp. Rej ¶¶ 184-193; R-42, B. Hope and N. Parasie, Abu Dhabi Sovereign Wealth Fund Gets Entangled in Global 1MDB Scandal, The Wall Street Journal, https://www.wsj.com/articles/malaysian-money-trail-leads-to-themiddle-east-1480614247, 1 December 2016; C-240. R. Ramesh, 1MDB: The inside story of the world's biggest financial scandal, The Guardian, https://www.theguardian.com/world/2016/jul/28/1mdb-inside-story-worlds-biggest-financial-scandal-malaysia, 28 July 2016. ↩

³⁹³ Cl. Reply ¶¶ 247-257; Second Tappendorf Statement ¶¶ 76-85. ↩

³⁹⁴ C-183, Letter from Minister G. Beglaryan to Mr. J. Borkowski, 9 September 2016. ↩

³⁹⁵ C-184, Letter from Mr. J. Borkowski to Minister V. Martirosyan, 20 October 2016. ↩

[Page 101]

Investment Forum in New York.³⁹⁶ According to the Claimants, the presentation incorporated findings from the Railway Feasibility Study, and offered prospective investors rights that conflicted with Rasia's exclusive rights under the Railway Concession.³⁹⁷ In a separate presentation later that same month to the Group of Experts on the Euro-Asian Transport Links, the Government confirmed that it was considering further financing for Tranche 4 of the NSRC from various institutions, including EDB and ADB.³⁹⁸ On 11 January 2017, the Armenian Ministry of Foreign Affairs distributed an information package entitled "Public-Private Partnership Opportunities and Financial Resources Necessary for the Construction of the Armenia railway project." Among other things, the material invited prospective investors to “become party to a tripartite agreement with [Rasia] and the Republic of Armenia," about which Rasia claims not to have been aware. The Claimants allege that this marketing material also incorporated findings from the Railway Feasibility Study.³⁹⁹

326. On 6 February 2017, Mr. Borkowski contacted ADB with a request for further details about correspondence between Armenia and ADB related to both Projects. The ADB response clarified that most of the requested documents were in the possession of the Armenian Government, to which Mr. Borkowski was referred.⁴⁰⁰ On 5 March 2017, Mr. Borkowski lodged a Request for Information Pursuant to Armenian Law on Freedom of Information with the Ministry of Transport, asking for access to specific documents relating to both Projects and the Respondent's alleged breaches.⁴⁰¹ On 14 March 2017, Mr. Grigoryan responded to the request on behalf of the Government, informing Mr. Borkowski that “the entire requested information has been posted to the official websites of the President of the Republic of Armenia, the Government of the Republic of Armenia and the [Ministry of Transport] of Armenia.”⁴⁰²

327. During the course of 2017, the Parties engaged in settlement discussions. The Claimants first offered to settle all disputes between the Parties in a 7 February 2017 letter which contained two

³⁹⁶ C-44, Republic of Armenia, “Investment Projects", Armenia Investment Forum, New York, 10-11 October 2016. ↩

³⁹⁷ Cl. Reply ¶¶ 437-438. ↩

³⁹⁸ C-185, "North-South Road Corridor Investment Program" (Republic of Armenia). 26-27 October 2016. ↩

³⁹⁹ C-33, Republic of Armenia, “Public-Private Partnership Opportunities and Financial Resources Necessary for the Construction of the Armenia Railway Project", 11 January 2017; Cl. Reply ¶¶ 144-151; 212; 216; 389(i); 439-443. ↩

⁴⁰⁰ C-29, Letter from Mr. J. Borkowski to Mr. V. Karapetyan, Organization for Implementation of North-South Road Corridor Investment Program of the Republic of Armenia, 5 March 2017. ↩

⁴⁰¹ C-24, Letter from Mr. J. Borkowski to Minister V. Martirosyan, 5 March 2017; C-26, Letter from Mr. J. Borkowski to Mr. R. Harutyunyan, Armenian-Chinese Joint Commission on Trade and Economic Cooperation, 5 March 2017. ↩

⁴⁰² C-30, Letter from Mr. G. Grigoryan to Mr. J. Borkowski, 14 March 2017. ↩

[Page 102]

alternative proposals for settlement. The first proposal involved Armenia's payment of $40 million to Rasia for mutual termination of both Concessions; the second proposal involved Armenia's contribution of $150 million to a new joint venture company established to undertake the Railway Concession only, which would be owned 51% by Rasia and 49% by Armenia.⁴⁰³

328. On 9 June 2017, Minister Martiroysan replied that Armenia did not see any ground for a dispute regarding the Road Project, while not mentioning the Railway Project. The Minister nevertheless invited Mr. Borkowski to the Ministry for a meeting.⁴⁰⁴ Mr. Borkowski confirmed, on 14 June 2017, his willingness to meet on 3 July 2017. In the same letter, Mr. Borkowski also noted that Mr. David Harutyunyan had recently been appointed Minister of Justice of Armenia, and suggested this raised potential conflicts of interest given Mr. Harutyunyan's prior involvement in advising Rasia at earlier stages of the Projects.⁴⁰⁵ In a further letter on 27 June 2017, Mr. Borkowski requested the audio recording from the earlier March 2016 Meeting, as well as a written response to the 6 February 2017 settlement offer. He also asked that the meeting be audio recorded.⁴⁰⁶

329. The settlement discussions took place in Yerevan on 3 July 2017. The following individuals were present at the meeting, according to the transcript of the audio recording: Mr. Borkowski, Mr. Martirosyan (Minister of Transport), Mr. Harutyunyan (Minister of Justice), Mr. Grigoryan, and Mr. Ashot Boghossian (advisor to the Ministry of Transport).⁴⁰⁷ No concrete progress was made in terms of a potential settlement at the meeting. Among other things, the Government stated that the two Concessions remained in force. It complained that Mr. Borkowski had not submitted any action plan to restart the Railway Project, as the Government had requested at the March 2016 Meeting discussed in Section III.H.2. Mr. Borkowski emphasized that this was an “unreasonable” request to which he had not agreed, since his “consortium" (which he described as involving financing "pulled together ... between China Exim Bank and the Abu Dhabi government") "was dismantled already," as he had explained at the March 2016 Meeting. The meeting closed with Minister Harutyunyan saying that Armenia would review its position with respect to the Projects and revert back to Mr. Borkowski.⁴⁰⁸

⁴⁰³ C-48, Letter from Mr. J. Borkowski to Minister V. Martirosyan, 7 February 2017. ↩

⁴⁰⁴ C-200, Letter from Minister V. Martirosyan to Mr. J. Borkowski, 9 June 2017. ↩

⁴⁰⁵ C-201, Letter from Mr. J. Borkowski to Minister V. Martirosyan, 14 June 2017. ↩

⁴⁰⁶ C-202, Letter from Mr. J. Borkowski to Minister V. Martirosyan, 27 June 2017. ↩

⁴⁰⁷ C-318, Transcript of 3 July 2017 Meeting, 3 July 2017. ↩

⁴⁰⁸ Id., pp. 5:20-26; 13:12-15; 14:9-36; Cl. Reply ¶ 246; Cl. First PHB ¶¶ 105; 111-114. ↩

[Page 103]

330. On 27 July 2017, Minister Martirosyan sent two letters to Mr. Borkowski, following up on the 3 July 2017 settlement meeting. In one letter, the Minister wrote that "[t]he record clearly shows that Rasia, by its own admission, has failed to perform its responsibilities under the Agreements and is therefore in breach." It went on to outline the Government's view of Rasia's failure to perform under both Concessions, and it concluded that "Rasia is free to file a claim against the Government with ICSID."⁴⁰⁹

331. The other letter from Minister Martirosyan contained a settlement offer, "open for [Mr. Borkowski's] acceptance until August the 25th, 2017.” The offer limited Rasia's future role to potentially receiving fees from “invest[ing] any prior work performed and paid for by Rasia or you" into the Projects, should the Government find any new parties “who are willing and able to develop the Projects, which Rasia was commissioned to develop, but failed to do."⁴¹⁰

332. Mr. Borkowski responded to the two letters on 1 August 2017, in a letter denying the allegations contained therein and rejecting the Government's settlement offer.⁴¹¹

333. After the Parties failed to reach a settlement, Armenia proceeded to pursue the involvement of other entities in the Projects. Separately, on 7 November 2017, the Transport Ministry published a message on its web site which explained that the Government intended to proceed with the Railway Project without the Claimants:

The Government has been patient with RASIA FZE, but the company has not met the deadlines and other contractual obligations.

Taking into consideration the abovementioned and the strategic significance of this Program for the Republic of Armenia, the Government of RA is undertaking efforts to complete the railway separately from RASIA FZE.⁴¹²

334. Also in November 2017, Armenia sought further investments in the Sisian-Kajaran road (which overlaps with the Road Concession), in marketing documents which also noted that the

⁴⁰⁹ C-49, Letter from Minister V. Martirosyan to Mr. J. Borkowski, 27 July 2017. ↩

⁴¹⁰ C-50, Letter from Minister V. Martirosyan to Mr. J. Borkowski, 27 July 2017. ↩

⁴¹¹ C-51, Letter from Mr. J. Borkowski to Minister V. Martirosyan, 1 August 2017. ↩

⁴¹² C-57, Ministry of Transport Website: On the Implementation Process of the Concession Agreement of Southern Railway of Armenia (http://www.mtcit.am/pages.php?lang=3&id=6834&page_name=news#), 9 November 2017, accessed on 11 July 2018. ↩

[Page 104]

Government would contribute about USD 200 million for the construction of this portion of the road.⁴¹³

335. In March 2018, the Transport Ministry reached a framework agreement with the Italian company Anas International, allowing the company to conduct feasibility studies for the construction and operation of the Sisian-Kajaran road. In June 2018, the Government also invited tender bids for the construction of this part of the road.⁴¹⁴

336. The Armenian Government sought Chinese involvement in the NSRC, and to this end met with Chinese officials in November 2018 and with the China Railway Group in May 2019. Also in May 2019, the State's Deputy Minister of Transport presented the construction of Tranche 4 to a delegation from the United Kingdom.⁴¹⁵

IV. THE PARTIES' CLAIMS AND REQUESTS FOR RELIEF

337. The Claimants in the Arbitration request the Tribunal to render an award:

1. DECLARING that Armenia has violated its obligations under the Treaty and international law and, in particular, has expropriated the Claimants' investments in violation of customary international law and, in respect of the second named Claimant, in violation of Article III(1) of the Treaty, has failed to accord the second named Claimant's investments, and the

⁴¹³ C-46, Republic of Armenia, “Public-Private Partnership Opportunities and Financial Resources Necessary for the Construction of Sisian- Kajaran Section, Tranche 4, of North-South Road Corridor Investment Program", 11 January 2017. Claimants' Memorial states that this undated document was issued in November 2017 (Cl. Mem. ¶ 156). ↩

⁴¹⁴ C-210, "Italy's Anas International to explore construction of Sisian- Kajaran section of North-South Road Corridor" (ArmenPress), 14 March 2018; C-211, Ministry of Transport Website: “The Italian company will carry out a study of the Sisian-Qajaran road section under the signed agreement"(http://www.mtcit.am/pages.php?lang=3&page_id=1&id=6949&page_name=news#), 14 March 2018, accessed on 5 June 2019; C-212, Ministry of Transport Website: “Chinese company interested in Armenia's road construction projects" (http://mtcit.am/pages.php?lang=3&page_id=1&id=7020&page_name=news#), 13 June 2018, accessed on 5 June 2019. ↩

⁴¹⁵ C-216, Ministry of Transport Website: “Acting Minister Received Ambassador Extraordinary and Plenipotentiary of China" (http://mtcit.am/pages.php?lang=1&id=7193&page_name=news#), 12 November 2018, accessed on 5 June 2019 (Unofficial English Translation and Armenian Original); C-217, Transport Project Implementation Organization Website: "The constructions issues of the North-South Road discussed with the representatives of the ‘PowerChina” (https://tpio.am/en/news/inner/News_24.11.2018), 24 November 2018, accessed on 5 June 2019: C-218, “Armenia's North-South Road Corridor viewed as part of road linking Persian Gulf to Black Sea" (Armenia News), 14 May 2019; C-219, Ministry of Transport Website: “Minister Hakib Arshakyan met with Vice President of the Chinese rail way organization Ren Hongheng” (http://www.mtcit.am/pages.php?lang=1&id=7347&page_name=news), 14 May 2019, accessed on 5 June 2019 (Unofficial English Translation and Armenian Original); C-220, Ministry of Transport Website: "Possibilities of cooperation in the fields of high technologies and road construction were discussed with Mark Pritchard" (http://mtcit.am/pages.php?lang=1&page_id=1&id=7357&page_name=news#), 24 May 2019, accessed on 5 June 2019 (Unofficial English Translation and Armenian Original). ↩

[Page 105]

management, enjoyment, operation and disposal thereof, treatment that is fair and equitable, non-arbitrary and non-discriminatory in violation of Articles II(2)(a) and II(2)(b) of the Treaty, and has failed to observe its obligations with regard to the second named Claimant's investments in violation of Article II(2)(c) of the Treaty;

1. DECLARING that Armenia is in material breach of its obligations under the Railway and Road Concession Agreements, and its obligations arising under the Foreign Investment Law of Armenia;
2. ORDERING Armenia, by way of satisfaction, to issue a public apology to the Claimants for violation of its obligations under the Treaty, international law, the Concession Agreements and Armenian law with respect to the Claimants' investment in a form to be determined by the Tribunal following further submissions;
3. ORDERING Armenia to pay the Claimants compensation in the amount of US$225 million, or in such other amount sufficient to wipe out the consequences of Armenia's wrongful acts and omissions, to be paid in a freely convertible currency;
4. ORDERING Armenia to pay interest on any compensation awarded, at a commercial rate and compounding interval to be determined by the Tribunal following further submissions, accruing from 18 March 2015 until payment in full;
5. ORDERING Armenia to pay all costs in connection with these proceedings, including the costs of the Tribunal and of ICSID, as well as legal and other expenses incurred by the Claimants including the fees of their legal counsel, experts and consultants, in accordance with Article 61(2) of the ICSID Convention; and
6. ORDERING such other or additional relief as the Tribunal considers appropriate under the applicable law or as may otherwise be just and proper.⁴¹⁶

338. The Respondent, on the other hand, requests the Tribunal to issue an Award:

1. Dismissing Claimants' claims on the grounds that the Tribunal lacks jurisdiction;
2. In the alternative, dismissing Rasia's claims for breach of the Concession Agreements and Mr. Borkowski's claims for breach of the umbrella clause of the Treaty as time-barred;
3. In the alternative, dismissing Claimants' claims on the merits in their entirety;

⁴¹⁶ Cl. Second PHB ¶ 177. ↩

[Page 106]

1. In the alternative, declaring that Claimants are not entitled to any damages;
2. Ordering the Claimants to separately and together pay all costs incurred in connection with these arbitration proceedings, including their own costs, the costs of the arbitrators and ICSID, and the legal and other expenses incurred by the Respondent including the fees of its legal counsel, experts, and consultants, as well as the Respondent's own officials and employees on a full indemnity basis, plus interest thereon at a reasonable rate; and
3. Granting such further relief against the Claimants as the Tribunal deems fit and proper.⁴¹⁷

V. JURISDICTION AND ADMISSIBILITY

339. The Respondent submits that the Tribunal does not have jurisdiction to hear this dispute.⁴¹⁸ Specifically, the Respondent argues that the Claimants did not make a qualifying investment under Article 25 of the ICSID Convention (Section A),⁴¹⁹ and that Mr. Borkowski cannot assert umbrella clause claims on behalf of Rasia under the BIT's umbrella clause (Section B).⁴²⁰

340. The Respondent further argues that, even if the Tribunal were to assume jurisdiction, it would not suffice for the Claimants' case to proceed since the claims are not admissible.⁴²¹ In this respect, the Respondent contends that the Claimants are seeking to profit from an illicit scheme (Section C)⁴²² and that the Claimants' claims under the Concessions are time-barred (Section D).⁴²³

341. In the sections that follow, the Tribunal summarizes the Parties' respective positions regarding these various jurisdictional and admissibility issues, then provides its analysis and conclusions.

⁴¹⁷ Resp. Second PHB ¶ 180. ↩

⁴¹⁸ Resp. Counter-Mem. ¶ 191. ↩

⁴¹⁹ Id.; Resp. Rej. ¶ 328. ↩

⁴²⁰ Resp. Counter-Mem. ¶ 207. ↩

⁴²¹ Id. ¶ 210. ↩

⁴²² Id. ¶¶ 213, 219. ↩

⁴²³ Id. ¶ 223; Resp. Rej. ¶ 340. ↩

[Page 107]

A. WAS THERE A QUALIFYING INVESTMENT UNDER THE ICSID CONVENTION?

(1) The Respondent's Position

342. Armenia submits that the jurisdiction of an ICSID tribunal is dependent on the existence of a qualifying investment within the meaning of both the applicable BIT and the ICSID Convention.⁴²⁴ Therefore, it is not sufficient to satisfy the definition of an investment under the BIT alone.⁴²⁵ Armenia contends that Article 25 of the ICSID Convention contains an objective standard, which requires a substantial contribution or allocation of resources, duration, and risk in the relevant host State.⁴²⁶ The Respondent argues that the Claimants have made no qualifying investment since they do not meet this objective standard; in particular, they have made no economic contribution in Armenia.⁴²⁷

343. First, the Respondent submits that the Tribunal should apply the Salini test, which requires a significant economic contribution to the host State.⁴²⁸ In the Respondent's view, this requirement applies to both the BIT and the ICSID Convention.⁴²⁹ The Respondent contends that the objective standard under the ICSID Convention must be met regardless of the definition of investment in the BIT.⁴³⁰ It is a double-barreled test, and the Claimants must satisfy the definition of investment in both the BIT and the ICSID Convention.⁴³¹

344. According to the Respondent, a State and a private party cannot create ICSID jurisdiction simply by stating in an agreement (such as the Concessions) that a given transaction constitutes an investment.⁴³² The Respondent argues that, while a contractual provision could create a presumption that a transaction is an investment, such a contractual definition cannot supersede the

⁴²⁴ Resp. Rej. ¶¶ 303, 305. ↩

⁴²⁵ Id. ¶ 300. ↩

⁴²⁶ Resp. Counter-Mem. ¶ 194; Resp. Rej. ¶¶ 301, 304; Resp. First PHB ¶ 158. ↩

⁴²⁷ Resp. Counter-Mem. ¶¶ 194–95; Resp. Rej. ¶¶ 311, 315. ↩

⁴²⁸ Resp. Counter-Mem. ¶ 193 (citing RL-38, Salini Costruttori S.p.A. and Italstrade S.p.A. v. Kingdom of Morocco, ICSID Case No. ARB/00/4, Decision on Jurisdiction, 31 July 2001 (“Salini”), ¶ 52). ↩

⁴²⁹ Resp. Rej. ¶ 305. ↩

⁴³⁰ Id. ¶ 304 (citing RL-35, Quiborax S.A., Non Metallic Minerals S.A. and Allan Fosk Kaplún v. Plurinational State of Bolivia, ICSID Case No. ARB/06/2, Decision on Jurisdiction, 27 September 2012 (“Quiborax"), ¶ 211). ↩

⁴³¹ CL-50, Koch Minerals SARL and Koch Nitrogen International SARL v. The Bolivarian Republic of Venezuela, ICSID Case No. ARB/11/19, Award, 30 October 2017 (“Koch"), ¶ 6.50 (quotation omitted). ↩

⁴³² Resp. Rej. ¶ 310 (relying on RL-37, RSM Production Corporation v. Grenada, ICSID Case No. ARB/05/14, Award, 13 March 2009 (“RSM"), ¶ 235). ↩

[Page 108]

objective meaning of investment under the ICSID Convention.⁴³³ Armenia relies on Joy Mining v. Egypt, Michell v. Congo, and OI European Group BV v. Venezuela for the contention that the Concession provisions alone, without any actual significant contribution, do not satisfy the requirements on jurisdiction.⁴³⁴

345. Second, the Respondent submits that the proper test to assess the Claimants' alleged investment is whether there is a contribution or allocation of resources, risk, and duration.⁴³⁵ Furthermore, a portion of the contribution must be made in the country concerned and should bring with it economic value.⁴³⁶ Armenia submits that the tribunal in Quiborax addressed this point and found that a shareholder with no evidence that it had paid for its shares in the investment vehicle or that it had made a subsequent contribution did not have a qualifying investment.⁴³⁷

346. The Respondent contests the Claimants' interpretation of RSM and argues that the tribunal in that case found jurisdiction because the claimant spent US$400,000 during the pre-exploration phase of an oil and gas concession, conducted several preliminary studies, and applied for an exploration license.⁴³⁸ Furthermore, the Respondent argues that the tribunal in RSM found the concession to be an investment because of the risks of failure and capital required during the exploration stage.⁴³⁹ By contrast, the Claimants in the present case neither expended funds nor took any risk.⁴⁴⁰ According to the Respondent, the Claimants admitted they paid nothing for the Feasibility Studies

⁴³³ Resp. Counter-Mem. ¶ 197 (citing RL-12, Ceskoslovenska Obchodni Banka, A.S. v. The Slovak Republic, ICSID Case No. ARB/97/4, Decision of the Tribunal on Objections to Jurisdiction, 24 May 1999 (“CSOB”), ¶¶ 66, 68); see also Resp. Rej. ¶ 306. ↩

⁴³⁴ Resp. Counter-Mem. ¶ 199; Resp. Rej. ¶ 307 (citing RL-73, Joy Mining Machinery Limited v. The Arab Republic of Egypt, ICSID Case No. ARB/03/11, Award on Jurisdiction, 6 August 2004 (“Joy Mining”), ¶ 50; RL-78, Mr. Patrick Mitchell v. The Democratic Republic of Congo, ICSID Case No. ARB/99/7, Decision on the Application for Annulment of the Award, 1 November 2016, ¶ 31; and RL-75, ΟΙ European Group B.V. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/11/25, Award, 10 March 2015, ¶ 229). ↩

⁴³⁵ Resp. Rej. ¶ 313 (citing RL-74, KT Asia Investment Group B.V. v. Republic of Kazakhstan, ICSID Case No. ARB/09/8, Award, 17 October 2013 (“KT Asia”), ¶ 173; RL-76, Orascom TMT Investments S.à.r.l. v. People's Democratic Republic of Algeria, ICSID Case No. ARB/12/35, Award, 31 May 2017 ("Orascom"), ¶ 372; RL-35, Quiborax, ¶ 219). ↩

⁴³⁶ Id. ¶ 313 (relying on RL-15, Consortium Groupement L.E.S.I – DIPENTA v. People's Democratic Republic of Algeria, ICSID Case No. ARB/03/08, Award. 10 January 2005 (“LESI”), ¶ 73(i)). ↩

⁴³⁷ Id. ¶ 314 (citing RL-35, Quiborax, ¶¶ 232–33, 237). ↩

⁴³⁸ Id. ¶ 315 (citing RL-37, RSM, ¶¶ 51, 168–72, 231, 246, 249). ↩

⁴³⁹ Id. ¶ 316 (citing RL-37, RSM, ¶¶ 243-45). ↩

⁴⁴⁰ Resp. Counter-Mem. ¶ 196; Resp. Rej. ¶¶ 315-16, 318. ↩

[Page 109]

prepared by CCCC and the Claimants make no claim in this case (as Mr. Borkowski expressly confirmed) for any costs or out-of-pocket expenditures allegedly incurred.⁴⁴¹

347. The Respondent also challenges the Claimants' assertion that Rasia financed the Feasibility Studies at its own risk by incurring debt to CCCC, and that the debt/liability itself qualifies as a contribution.⁴⁴² In the Respondent's view, CCCC performed the Feasibility Studies at its own risk, and the Claimants have provided no evidence of Rasia's alleged debt to CCCC; rather, Mr. Borkowski conceded that CCCC never requested payment.⁴⁴³ According to the Respondent, Mr. Borkowski's attempts to evidence the debt's existence through emails with Mr. Weixin are of no avail, since not only were these based on misrepresentations but also were made during this arbitration.⁴⁴⁴ In any event, CCCC has no legal recourse against Rasia on any supposed debt, since the statute of limitations regarding CCCC's debt claims has expired.⁴⁴⁵ Thus, according to the Respondent, even if such debt obligation to CCCC for the Feasibility Studies ever existed, it has been extinguished and cannot be considered a contribution.⁴⁴⁶ The Respondent also submits that CCCC did not appear in this arbitration to be questioned on the matter despite Armenia's request and the Tribunal's invitation.⁴⁴⁷

348. The Respondent rejects the Claimants' argument that the Feasibility Studies are in themselves the Claimants' contributions. The Respondent acknowledges that know-how, if it has economic value, may constitute a contribution.⁴⁴⁸ However, the Respondent argues that the Feasibility Studies were not accepted by Rasia and therefore have no value.⁴⁴⁹ It argues that CCCC's commercial agreements with Rasia expressly provide that CCCC owns all intellectual property, which ownership will be transferred upon payment; thus, since Rasia never paid for them, CCCC still owns the intellectual property in the Feasibility Studies.⁴⁵⁰

⁴⁴¹ Resp. Rej. ¶ 318; Resp. First PHB ¶ 159; Resp. Second PHB ¶ 24. ↩

⁴⁴² Resp. Rej. ¶ 319; Resp. First PHB ¶¶ 161–63. ↩

⁴⁴³ Resp. Rej. ¶ 319; Resp. First PHB ¶ 164; Resp. Second PHB ¶ 24. ↩

⁴⁴⁴ Resp. First PHB ¶¶ 164-68. ↩

⁴⁴⁵ Resp. Rej. ¶ 320. ↩

⁴⁴⁶ Id. ¶¶ 321-22. ↩

⁴⁴⁷ Resp. First PHB ¶ 163; Resp. Second PHB ¶ 24. ↩

⁴⁴⁸ Resp. Counter-Mem. ¶ 200. ↩

⁴⁴⁹ Id. ¶ 203. ↩

⁴⁵⁰ Resp. Rej. ¶ 323; Resp. First PHB, ¶ 162. ↩

[Page 110]

349. The Respondent also disputes Claimants' alternative argument that they do not need to establish ownership stricto sensu over each element of the contributions of their investment operation in Armenia.⁴⁵¹ While the Respondent acknowledges that services of Rasia's subcontractors could be deemed as Rasia's contributions, it argues that the Claimants provide no support for their assertion that Rasia has in fact retained subcontractors.⁴⁵² Since CCCC performed the Feasibility Studies at its own risk and owns the intellectual property in them, the Claimants have no legal basis to claim them as their contribution.⁴⁵³

350. Furthermore, the Respondent argues that any contribution the Claimants made was akin to a commercial transaction, which does not qualify as an investment.⁴⁵⁴ In the Respondent's view, Mr. Borkowski acted as a commercial broker or intermediary of a transient nature, since he admitted that he intended to sell the Concessions from the outset. According to the Respondent, it is well established that pure commercial transactions do not qualify as investments.⁴⁵⁵

351. Finally, the Respondent argues that the Feasibility Studies included information provided by Armenia, including referencing previous studies that contained completely unrealistic projected traffic flows of Iranian oil; the incorporation of this information cannot be viewed as an investment by Claimants.⁴⁵⁶

(2) The Claimants' Position

352. The Claimants argue that the Concessions, and their rights and obligations under the Concessions, constitute protected investments under Article I of the BIT and Article 25 of the ICSID Convention.⁴⁵⁷ Alternatively, the Claimants submit that they have made substantial contributions, as they say Article 15 of the Concessions indeed confirms.⁴⁵⁸

353. First, the Claimants stress that the BIT and the Concessions are the starting point to assess whether the Claimants have made a qualifying investment under Article 25 of the ICSID Convention.⁴⁵⁹

⁴⁵¹ Resp. Rej. ¶ 324. ↩

⁴⁵² Id. ↩

⁴⁵³ Id. ↩

⁴⁵⁴ Id. ¶ 327. ↩

⁴⁵⁵ Id. (relying on RL-73, Joy Mining, ¶ 52; and CL-50, Koch, ¶ 6.57). ↩

⁴⁵⁶ Resp. Counter-Mem. ¶ 205. ↩

⁴⁵⁷ Cl. Mem. ¶ 352; Cl. Reply ¶ 478; Cl. Second PHB ¶ 15. ↩

⁴⁵⁸ Cl. Mem. ¶ 352; Cl. Reply ¶ 478; Cl. First PH ¶ 297; Cl. Second PHB ¶ 22. ↩

⁴⁵⁹ Cl. Reply ¶ 464; Cl. First PHB ¶ 295. ↩

[Page 111]

The Claimants argue that their assets qualify as investments under Articles I(1)(a)(iii) and (v) of the BIT, as they constitute claims to money or performance having economic value and rights conferred by contract.⁴⁶⁰ Moreover, Armenia and Rasia recognized that the transactions to which the Concessions relate are investments and they agreed to ICSID arbitration as reflected in Articles XVII, Section 66.3, of both Concessions.⁴⁶¹

354. The Claimants reject the Respondent's argument that an asset that constitutes an investment under the BIT and/or the Concessions does not necessarily constitute an investment under the ICSID Convention.⁴⁶² The Claimants submit that Article 25 of the ICSID Convention does not contain an investment definition precisely because the drafters wanted Contracting States to have discretion in referring disputes to ICSID.⁴⁶³ In the Claimants' view, the ICSID Convention gives considerable freedom and deference to States regarding the definition of an investment.⁴⁶⁴ As such, Armenia exercised this discretion by qualifying the Claimants' rights under the Concessions as investments under both the Concessions and the BIT, and by expressly referring to ICSID arbitration disputes arising out of or relating to the Concessions.⁴⁶⁵ According to the Claimants, a tribunal should not disregard the definitions of investment agreed in a treaty and incorporated into a contract between an investor and a State, unless there are compelling reasons to do so (e.g., a risk that a particular definition would capture economic activity clearly falls outside the ICSID Convention).⁴⁶⁶

355. The Claimants challenge the Respondent's reliance on the “Salini test," which they argue is inapposite and does not represent the correct construction of the ICSID Convention.⁴⁶⁷ The Claimants rely on Biwater v. Tanzania, in which the tribunal gave more weight to the parties' agreement than to the “strict, autonomous definition” represented by the Salini test.⁴⁶⁸ According

⁴⁶⁰ Articles I(1)(a)(i) and I(1)(a)(iv) of the BIT (quotations omitted); Cl. Second PHB ¶ 15. ↩
⁴⁶¹ Cl. Reply ¶ 465; Cl. First PHB ¶ 295; Cl. Second PHB ¶ 15. ↩
⁴⁶² Cl. Reply ¶ 466. ↩
⁴⁶³ Id. ¶ 467. ↩
⁴⁶⁴ Id. ¶ 469 (relying on CL-76, SGS Société Générale de Surveillance S.A. v. Islamic Republic of Pakistan, ICSID Case No. ARB/01/13, Decision on Jurisdiction, 6 August 2003, ¶ 133 (quotations omitted); CL-75, Inmaris Perestroika Sailing Maritime Services GmbH and Others v. Ukraine, ICSID Case No. ARB/08/8, Decision on Jurisdiction, 8 March 2010 (“Inmaris”), ¶ 130, and CL-77, Malaysian Historical Salvors, SDN, BHD v The Government of Malaysia, ICSID Case No. ARB/05/10, Decision on Annulment, 16 April 2019, ¶¶ 73–74). ↩
⁴⁶⁵ Id. ¶ 467; Cl. First PHB ¶ 295; Cl. Second PHB ¶ 15 (citing CL-78, RSM Production Corporation v. Grenada, ICSID Case No. ARB/05/14, Award, 13 March 2009, CL-78 (“RSM”), ¶¶ 235–36). ↩
⁴⁶⁶ Cl. Second PHB ¶¶ 18-20 (relying on, e.g., CL-75, Inmaris, ¶¶ 130–31; RL-73, Joy Mining, ¶¶ 44, 52, 60). ↩
⁴⁶⁷ Cl. Reply ¶ 471. ↩
⁴⁶⁸ Id. (relying on CL-34, Biwater Gauff (Tanzania) Ltd. v. United Republic of Tanzania, ICSID Case No. ARB/05/22, Award, 24 July 2008, ¶ 317). ↩

[Page 112]

to the Claimants, the correct approach is to elucidate the meaning of investment by reference to the parties' agreement.⁴⁶⁹

356. The Claimants also contend that Armenia's reliance on RSM v. Grenada is misleading.⁴⁷⁰ In RSM, the tribunal held that the parties' agreement, which provided that the underlying transaction constituted an investment, gave rise to a presumption that an investment had been made.⁴⁷¹

357. The Claimants acknowledge that not all categories of disputes can be referred to ICSID.⁴⁷² However, they argue that the key question is not whether the definition of investment in the BIT and the Concessions meets the Salini test, but rather whether such definition exceeds the scope of the ICSID Convention.⁴⁷³ In this respect, the Claimants rely on Garanti Koza v. Turkmenistan, where the tribunal analyzed an identical definition of investment in the Turkmenistan-United Kingdom BIT. The tribunal found the BIT definition of an investment, which included claims to money or to performance having economic value, as well as the concession rights under certain concession agreements, to be within the scope of “investment” under Article 25 of the ICSID Convention.⁴⁷⁴

358. In any event, the Claimants submit that they have made substantial contributions as agreed under Article 15 of the Concessions, thus complying with Armenia's asserted threshold.⁴⁷⁵ The Claimants submit that RSM is analogous to the present case.⁴⁷⁶ In RSM, the tribunal rejected Grenada's argument that the investor made no contributions, as the existence of actual expenses was not deemed to be dispositive for the purposes of the investor's contribution.⁴⁷⁷ Rather, the relevant criterion was found to be the commitment to bring in resources toward the performance of the license.⁴⁷⁸ Accordingly, the Claimants contend that the relevant question is whether the Claimants

⁴⁶⁹ Cl. Reply ¶ 471. ↩
⁴⁷⁰ Id. ¶ 473. ↩
⁴⁷¹ Id. (citing CL-78, RSM, ¶¶ 235-36). ↩
⁴⁷² Id. ¶ 475. ↩
⁴⁷³ Id. (relying on CL-79, Bureau Veritas, Inspection, Valuation, Assessment and Control, BIVAC B.V. v. The Republic of Paraguay, ICSID Case No. ARB/07/9, Decision of the Tribunal on Objections to Jurisdiction, 29 May 2009, ¶ 94; and CL-74, SGS Société Générale de Surveillance S.A. v. The Republic of Paraguay, ICSID Case No. ARB/07/29, Decision on Jurisdiction, 12 February 2010, ¶ 94). ↩
⁴⁷⁴ Id. ¶ 477 (relying on CL-81, Garanti Koza LLP v. Turkmenistan, ICSID Case No. ARB/11/20, Award, 12 December 2016, ¶¶ 189, 245). ↩
⁴⁷⁵ Id. ¶ 478; Cl. First PHB ¶ 297. ↩
⁴⁷⁶ Id. ¶ 480. ↩
⁴⁷⁷ Id. (citing CL-78, RSM, ¶ 223). ↩
⁴⁷⁸ Id. ↩

[Page 113]

made commitments to bring in resources toward the performance of their duties under the Concessions.⁴⁷⁹ In the Claimants' view, their commitments under the Concessions to bring in resources were substantial, and Rasia even reached milestones that made the Projects investment worthy for Aabar.⁴⁸⁰ By way of illustration of their commitments, the Claimants identify, inter alia, their undertaking towards: (i) the financing of the Feasibility Studies; (ii) the financing of the Railway Project and the Road Project; (iii) the carrying of passengers on the Railway; and (iv) the payment of concession fees to Armenia.⁴⁸¹ The Claimants contend that these obligations were invoked and acknowledged by the Respondent on multiple occasions.⁴⁸²

359. The Claimants further submit that they incurred debt to CCCC, in the amount of US$ 15 million plus compound interest, to comply with their commitments towards Armenia by financing the Feasibility Studies.⁴⁸³ The Claimants therefore reject the Respondent's suggestion that the Feasibility Studies are of no value.⁴⁸⁴ According to the Claimants, the Feasibility Studies were essential to the bargain and economic equilibrium of the Concessions and constituted their know-how.⁴⁸⁵ While CCCC performed the Feasibility Studies, the Claimants argue that they were provided to the Respondent and paid for by Rasia, which also incurred debt to CCCC for that purpose.⁴⁸⁶ The Claimants further argue that the fact that CCCC has not yet formally demanded repayment—or that the debt was in the form of a secured loan—is nothing to the point, since that reflects a temporal fallacy vis-à-vis the question of investment.⁴⁸⁷ According to the Claimants, there is no doubt that the debt exists: Mr. Borkowski and CCCC recognized its existence on several occasions; it is not for Armenia to cast doubt on it; and the Tribunal should not base its jurisdiction on CCCC's commercial, fiscal and political assessment as to whether or not to seek to collect on the debt.⁴⁸⁸

⁴⁷⁹ Cl. Reply ¶ 481. ↩
⁴⁸⁰ Id.; Cl. Second PHB ¶¶ 20–24. ↩
⁴⁸¹ Cl. Reply ¶ 481. ↩
⁴⁸² Id. ¶ 483. ↩
⁴⁸³ Id. ¶ 485; Cl. First PHB ¶ 298; Cl. Second PHB ¶ 28. ↩
⁴⁸⁴ Cl. Reply ¶ 486. ↩
⁴⁸⁵ Id. ¶ 487. ↩
⁴⁸⁶ Id. ¶ 488. ↩
⁴⁸⁷ Cl. First PHB ¶¶ 298–99; Cl. Second PHB ¶¶ 29, 31, 35. ↩
⁴⁸⁸ Cl. First PHB ¶¶ 298–99, 301–05; Cl. Second PHB ¶¶ 30–32, 36–37. ↩

[Page 114]

360. Moreover, in the Claimants' view, it is not necessary to establish ownership stricto sensu over each element of their overall investment to find a contribution.⁴⁸⁹ The Claimants submit that having arranged for the performance of their obligations through the services of Rasia's subcontractors (i.e., CCCC), such services are to be deemed Rasia's contributions, since there would be no contribution by the sub-contractor independent of the Claimants' efforts.⁴⁹⁰ In the Claimants' view, it was their prerogative to arrange how to perform their obligations, and their decision to involve subcontractors cannot affect the conclusion that they made contributions.⁴⁹¹

(3) The Tribunal's Analysis

361. The Tribunal is constituted under the ICSID Convention, and thus its jurisdiction must be established in accordance with that Convention. In construing the terms of the ICSID Convention – as with the terms of the BIT – the Tribunal is guided by the interpretative principles reflected in the Vienna Convention on the Law of Treaties (“VCLT”). In particular, under VCLT Article 31, the provisions of the Convention and the BIT are to be interpreted and applied in accordance with the "ordinary meaning" of their terms, in the "context" in which they occur and in light of the treaties' "object and purpose.”⁴⁹² The relevant “context” for construing the provisions of a treaty can include the words and sentences found in close proximity to that passage, including definitional terms, as well as other provisions of the same treaty which help to illuminate its object and purpose.⁴⁹³ In accordance with Article 32 of the VCLT, “[r]ecourse may be had to supplementary means of interpretation, including the preparatory work of a treaty and the circumstances of its conclusion," but only "to confirm the meaning" resulting from the textual approach required by Article 31, or in the event the textual approach leaves a meaning “ambiguous or obscure” or would lead to a result that is “manifestly absurd or unreasonable.”⁴⁹⁴ The ICJ has explained (in a case preceding the VCLT but cited by the International Law Commission in preparing the VCLT) that "a decisive reason" (such as unmistakable evidence of the State Parties' intentions from

⁴⁸⁹ Cl. Reply ¶ 490. ↩
⁴⁹⁰ Id. ↩
⁴⁹¹ Id. ↩
⁴⁹² VCLT, Article 31(1). ↩
⁴⁹³ See generally Kiliç İnşaat İthalat İhracat Sanayi ve Ticaret Anonim Şirketi v Turkmenistan, ICSID Case No ARB/10/1, Award ¶ 5.2.6 (2 July 2013) ("Treaty terms are obviously not drafted in isolation, and their meaning can only be determined by considering the entire treaty text. The context will include the remaining terms of the sentence and of the paragraph; the entire article at issue; and the remainder of the treaty [...]."). ↩
⁴⁹⁴ VCLT, Article 32. ↩

[Page 115]

supplementary materials) would be required “[t]o warrant an interpretation other than that which ensues from the natural meanings of the words" of a provision.⁴⁹⁵

362. For purposes of the jurisdictional analysis, the Tribunal follows the framework established by Article 25(1) of the ICSID Convention. This establishes jurisdiction over “any legal dispute arising directly out of an investment, between a Contracting State ... and a national of another Contracting State, which the parties to the dispute consent in writing to submit to the Centre." In this case, there is no dispute about the qualifying nationality of the Parties: Armenia has been a Contracting State since 1992; Rasia is a juridical national of the United Arab Emirates, which has been a Contracting State since 1982; and Mr. Borkowski is a national of the United States, which has been a Contracting State since 1966.⁴⁹⁶ Accordingly, for purposes of this case, there are two central conditions for jurisdiction under Article 25(1): (a) that the Parties have “consent[ed] in writing" to ICSID jurisdiction, and (b) that the dispute "aris[es] directly out of an investment" by the Claimants. These two requirements are discussed separately below.

a. “Consent in writing"

363. The first requirement of Article 25(1) of the ICSID Convention, namely that the Parties have "consent[ed] in writing" to submit the relevant class of disputes to ICSID jurisdiction, requires the examination of different instruments of consent for the two different Claimants.

364. For Rasia, which presents only contractual claims under the Road Concession and the Railway Concession (not any treaty claims), the issue is whether these Concessions reflect mutual consent to ICSID arbitration. There is little question that they do. Article XVII, Section 66.3 of both Concessions states that "the Government and the Concessionaire ... hereby consent to submit to [ICSID] any dispute arising out of or relating to this Agreement, including any question regarding its existence, validity or termination, for settlement by arbitration pursuant to" the ICSID Convention.⁴⁹⁷ ICSID arbitration is the only dispute resolution forum provided in the Concessions, and Section 66.3 clearly demonstrates in writing the consent by both Rasia and Armenia to submit contractual disputes to ICSID arbitration.

⁴⁹⁵ Admission of a State to Membership in the United Nations (Charter, Art.4), Advisory Opinion: 1948 I.C.J Reports 57, p. 63. ↩
⁴⁹⁶ Cl. Mem. ¶ 352(iii), (iv). Respondent has not disputed the Claimants' qualifying nationality. ↩
⁴⁹⁷ C-1, Railway Concession, Article XVII, Section 66.3; C-2, Road Concession, Article XVII, Section 66.3. ↩

[Page 116]

365. Mr. Borkowski is not a party to the Concession Agreements, and he therefore relies for consent on the BIT. Art. VII.1 of the BIT begins by defining an “investment dispute" as including, inter alia, a dispute between "a Party and a national ... of the other Party arising out of or relating to ... an alleged breach of any right conferred or created by this Treaty with respect to an investment." Article VII.3(a) of the BIT then authorizes "the national ... concerned" to choose among several dispute resolution fora, including ICSID arbitration, and Article VII.4 provides that each Party to the BIT "hereby consents to the submission of any investment dispute for settlement by binding arbitration in accordance with" the national's choice of forum under Article VII.3. To avoid any doubt, Article VII.4 further confirms that these provisions "shall satisfy the requirement for ... written consent of the parties to the dispute for purposes of Chapter II of the ICSID Convention (Jurisdiction of the Centre) ...."

366. In other words, the BIT clearly provides Armenia's written consent for U.S. nationals like Mr. Borkowski to submit to ICSID jurisdiction any claims alleging BIT violations, provided that such alleged violations are “with respect to an investment.” Deferring until the next section a discussion of the objective meaning of the term “investment,” the Parties to the BIT subjectively defined the term broadly, to "mean[] every kind of investment in the territory of one Party owned or controlled directly or indirectly by nationals or companies of the other Party, such as equity, debt, and service and investment contracts ....”⁴⁹⁸ The BIT also includes, in an illustrative list of covered investments, "any right conferred by ... contract.”⁴⁹⁹ These statements reflect the BIT parties' shared understanding and intention that disputes alleging BIT violations with respect to "investment contracts," entered into between Armenia and companies owned or controlled by U.S. nationals, would qualify for ICSID jurisdiction.

367. Accordingly, the Tribunal finds that both the Concession Agreements and the BIT identify ICSID arbitration as an available forum for resolving disputes of the nature now presented. Based on these provisions, the Tribunal concludes that the first requirement of ICSID Convention Article 25(1), namely that the Parties to a dispute have “consent[ed] in writing" to submit the relevant class of disputes to ICSID jurisdiction, is satisfied.

⁴⁹⁸ Article I(1)(a) of the BIT (emphasis added). ↩
⁴⁹⁹ Article I(1)(a)(v) of the BIT (emphasis added). ↩

[Page 117]

b. "Investment" by the Claimants

368. However, this is not the end of the interpretative exercise. Armenia contends that irrespective of any written consent to ICSID arbitration reflected in the Concessions and/or the BIT, the Claimants cannot establish the second predicate for arbitration under Article 25(1) of the ICSID Convention, which is that they must establish that the dispute has “arise[n] directly out of an investment.” Armenia contends, essentially, that the objective meaning of the term “investment” cannot extend to a circumstance where a foreign national concluded an investment agreement with a State, but (as Armenia contends in this case) thereafter made no real contribution of resources in implementation of that agreement. The Claimants disagree with this contention, both as a matter of law and with respect to Armenia's factual predicate, namely that they purportedly made no cognizable contribution of resources following execution of the two Concessions. The Tribunal addresses below, first, the applicable legal standard, and then the application of that standard to the circumstances of this case.

(i) The objective meaning of “investment”

369. As a starting point, the Tribunal agrees with Armenia that – by contrast with the consent requirement of Article 25(1), which examines the existence of the Parties' subjective intent to submit disputes to ICSID jurisdiction – Article 25(1)'s additional requirement that such disputes "arise[] directly out of an investment” involves an objective (rather than subjective) assessment. The two inquiries cannot be collapsed into one.⁵⁰⁰ Stated otherwise, parties to a contract or treaty do not have unlimited discretion under the ICSID Convention to define as an "investment" a transaction that objectively has no such nature.⁵⁰¹ This is consistent with the 1965 Report of the Executive Directors on the Convention, which stated that “[w]hile consent of the parties is an essential prerequisite for the jurisdiction of the Centre, consent alone will not suffice to bring a dispute within its jurisdiction. In keeping with the purpose of the Convention, the jurisdiction of the Centre is further limited by reference to the nature of the dispute and the parties thereto.”⁵⁰²

370. Accordingly, ICSID tribunals may not simply defer to subjective characterizations by the parties; they must undertake their own independent review of the asset that is purported to qualify as an

⁵⁰⁰ The separateness of the inquiry, requiring satisfaction of the ICSID Convention's requirements as well as the requirements of the underlying treaty or other instrument of consent, has often been described as a "double keyhole" or "two-fold" approach. See, e.g., RL-74, KT Asia, n.58 (citing cases). ↩
⁵⁰¹ See, e.g., RL-12, CSOB, ¶ 68; RL-37, RSM, ¶ 235; RL-73, Joy Mining, ¶ 50. ↩
⁵⁰² CL-130, Report of the Executive Directors on the Convention on the Settlement of Investment Disputes between States and nationals of Other States, 18 March 1965, ¶ 25. ↩

[Page 118]

investment, to confirm that it meets the objective definition of that term. At the same time, tribunals should not lightly conclude that a dispute which the parties subjectively intended to be placed before ICSID for resolution lacks the essential characteristics of investment to permit it to be entertained. The Tribunal accepts that a joint stipulation that a given asset should qualify as an investment ordinarily will give rise to a presumption that it objectively does so, but that presumption remains subject to rebuttal in appropriate circumstances.⁵⁰³

371. Thus, while the ICSID Convention does not contain any express definition of “investment," this does not mean, as Claimants contend, that the term should be deemed co-extensive with the meaning that parties to a given contract or treaty choose to ascribe to it.⁵⁰⁴ Rather, the lack of an express definition simply leaves the term “investment” in the ICSID Convention to be interpreted like any other undefined term in a treaty, namely in accordance with VCLT interpretative principles (including ordinary meaning, context and object and purpose).⁵⁰⁵

372. Importantly, the same proposition – that the term “investment” has an objective, inherent meaning for purposes of the ICSID Convention – also applies to the term as used in the BIT at issue in this case. That conclusion flows from the structure of the BIT's definition of investment, which begins in Article I(1)(a) with a circular statement (that “investment' means every kind of investment”), before providing an illustrative but non-exhaustive list of assets (“such as ...; and includes ...").⁵⁰⁶ The clear implication of the latter step is that the Contracting Parties to the BIT expected that assets falling within the list would have characteristics that satisfied their understanding of the word “investment” that preceded the list. Since one of the examples given is “investment contracts," this aspect of the text gives rise to a presumption (as stated above) that such contracts entered into with a State, by entities “owned or controlled directly or indirectly by nationals or companies of the other Party," will be entitled to the BIT's protections. In the great majority of cases, this will be the

⁵⁰³ See RL-19, Georg Gavrilovic and Gavrilovic D.O.O. v. Republic of Croatia, ICSID Case No. ARB/12/39, Award, 26 July 2018 (“Gavrilovic”), ¶ 192 (concluding that the judgment of BIT parties as to which economic activities constitute investments "should be given considerable weight and deference," and that a tribunal "would need compelling reasons to disregard such a mutually agreed definition of investment”); CL-75, Inmaris, ¶ 130 (same); CL-78, RSM, ¶¶ 236, 238 (“the agreement to the jurisdiction of ICSID in a transaction between a state and a foreign private party thus can be viewed as a presumption that the transaction is indeed an investment .... [O]nly where the economics of the disputed transaction are clearly lacking one or more of the recognized characteristics of an investment should an ICSID tribunal decline to enforce the parties' will and find that it has no jurisdiction...."). ↩
⁵⁰⁴ Cl. Reply ¶ 467 (arguing that the absence of an express definition of investment “was precisely in order to defer to Contracting State parties' discretion in referring disputes to ICSID"). ↩
⁵⁰⁵ See RL-74, KT Asia, ¶ 165; RL-35, Quiborax, ¶ 212. ↩
⁵⁰⁶ Article I(1)(a) of the BIT. ↩

[Page 119]

end of the matter, because there will be no dispute about whether a particular investment agreement was based on or led to the making of any actual contribution by the investor.

373. However, jurisprudence often involves the examination of atypical and disputed circumstances. In such circumstances, it must be recognized that the existence of an illustrative list of assets in a BIT, and a presumption of a cognizable investment when a particular asset is included in that list, is not conclusive. Presumptions can be rebutted if the evidence warrants, and specifically, a BIT's illustrative list of assets expected to qualify as investments cannot trump the objective, ordinary meaning of the word “investment." This is both because words in a treaty do have an ordinary meaning, which VCLT Article 31 requires to be taken into account, and because of the very fact that the list of assets in Article I(1)(a) is framed as non-exclusive. The latter point was well explained in a case that was discussed in several of the Parties' cited authorities, Romak v. Uzbekistan.⁵⁰⁷ As the Romak tribunal and others have observed, unless the term “investment" is given some inherent meaning, the non-exclusive nature of the asset list in most BITs provides no benchmark by which a tribunal could evaluate the qualifications of other forms of assets outside the illustrative list.⁵⁰⁸ Without any such benchmark, the circularity of the rest of Article I(1)(a)'s definition of “investment” (that the term “investment' means every kind of investment") provides no guidance whatsoever as to the evaluation of non-listed assets. The same is true for the common formulation in other BITs, which defines “investment” sweepingly as “every kind of asset.” Unless some intrinsic meaning is assigned to the term, such general formulations risk permitting even transactions that bear none of the traditional hallmarks of investment to qualify as such.⁵⁰⁹

374. Accordingly, the Tribunal concludes that the word "investment" must be given an inherent, objective meaning, for purposes not only of the ICSID Convention (which contains no definition of the term), but also of the BIT (which contains only an illustrative list of assets, with no stated

⁵⁰⁷ Romak S.A. v. Republic of Uzbekistan, UNCITRAL, PCA Case No. AA280, Award, 26 November 2009 (“Romak”) (discussed in RL-74, KT Asia, ¶¶ 165-66; see also RL-35, Quiborax, ¶¶ 198, 216; RL-76, Orascom, ¶ 496). ↩
⁵⁰⁸ See Romak, ¶ 178-180 (rejecting claimant's argument that it "should simply confirm that [its] assets fall within one or more of the categories listed," because this approach would "deprive[] the term 'investments' of any inherent meaning," an outcome which is inconsistent with the non-exhaustive nature of the categories enumerated; the tribunal explained that “there may well exist categories different from those mentioned in the list," and "[a]ccordingly, there must be a benchmark against which to assess those non-listed assets ... in order to determine whether they constitute an 'investment' within the meaning of the BIT). ↩
⁵⁰⁹ See Romak, ¶¶ 184-185 (explaining that a “mechanical application of the categories listed" in the BIT "would eliminate any practical limitation to the scope of the concept of 'investment,” and “render meaningless the distinction between investments, on the one hand, and purely commercial transactions on the other"); RL-19, Gavrilovic, ¶ 193 (suggesting that "the Salini test may be useful in certain circumstances; for instance, where a tribunal is concerned that a BIT or contract definition of investment is so broad and overreaching as to capture transactions that manifestly are not investments under any acceptable conception"). ↩

[Page 120]

guidance as to what shared characteristics bring the listed assets, and potentially other non-listed assets, within the qualifying term).

375. Beginning with the VCLT command to look to the "ordinary meaning" of the term, the Tribunal observes that according to common dictionary definitions, the noun “investment” means variously:

• the outlay of money usually for income or profit: capital outlay”⁵¹⁰;
• "the act of putting money, effort, time, etc. into something to make a profit or get an advantage, or the money, effort, time, etc. used to do this"⁵¹¹; or
• "the act of investing money in something," or "the money that you invest, or the thing that you invest in."⁵¹²

376. In other words, inherent in the ordinary meaning of “investment” is some contribution of resources which is made in an attempt to earn a return over a period of time, a process that necessarily involves the possibility or risk of not earning a return. Many other tribunals, employing similar "ordinary meaning" analyses, have found these three basic elements to be inherent in any objective definition of "investment.” Although some tribunals have reached this conclusion solely through an analysis of the ICSID Convention, others have stated – as does this Tribunal - that the same interpretation of the word “investment" applies independently to investment treaties, whether or not a case is proceeding at ICSID.⁵¹³

377. Looking beyond the ordinary meaning of Article 1(1)(a), do any other provisions of the BIT (forming the relevant “context” for VCLT purposes) cast further light on the intended scope and

⁵¹⁰ Merriam-Webster, https://www.merriam-webster.com/dictionary/invest. ↩
⁵¹¹ Cambridge Dictionary, https://dictionary.cambridge.org/us/dictionary/english/invested. ↩
⁵¹² Oxford Learner's Dictionaries, https://www.oxfordlearnersdictionaries.com/us/definition/american_english/invest. ↩
⁵¹³ See, e.g., RL-74, KT Asia, ¶¶ 164-166 (observing that the claimant was right not to even argue that “the mere fact of holding an asset which falls within the scope of [the BIT's illustrative list] is sufficient to conclude that a person has made an investment under the BIT," because the word “investment" has an inherent ordinary meaning, “irrespective of the application of the ICSID Convention”; that meaning “presuppose[s] ... a commitment of resources," without which “the asset belonging to the claimant cannot constitute an investment within the meaning of ... the BIT"); RL-35, Quiborax, ¶ 215 (noting cases concluding that "the objective meaning was inherent to the term investment, irrespective of the application of the ICSID Convention"); Romak, ¶ 207 (“The term ‘investment' has a meaning in itself that cannot be ignored when considering the list contained in ... the BIT," because the term in the BIT "has an inherent meaning (irrespective of whether the investor resorts to ICSID or UNCITRAL arbitral proceedings) entailing a contribution that extends over a certain period of time and that involves some risk ..."); RL-76, Orascom, ¶ 372 (“the use of the term 'investment' in both the ICSID Convention and the BIT imports the same basic economic attributes of an investment derived from the ordinary meaning of that term, which comprises a contribution or allocation of resources, duration, and risk"). ↩

[Page 121]

interpretation of the term “investments”? The preamble of the BIT sets forth its object and purpose, which is "to promote greater economic cooperation between” the United States and Armenia "with respect to investment by nationals and companies of one Party in the territory of the other Party, in recognition that “agreement upon the treatment to be accorded such investment will stimulate the flow of private capital and the economic development of the Parties.” The reference to “investment by" nationals and companies “in the territory" of the host State, together with the reference to capital flows leading to economic development, tends to affirm that the purpose of the BIT was to encourage and protect investments in the ordinary sense, namely those that involved some actual making of contributions. The same is true for the preamble of the ICSID Convention, which refers in its first sentence to “the need for international cooperation for economic development, and the role of private international investment therein.” Nothing in either preamble suggests an intent on the part of the drafters to protect transactions that do not involve the making of any contribution of value by the putative investor, or any assumption by it of a concomitant risk that its contribution will not be returned.

378. Based on this analysis, the Tribunal finds that the objective definition of “investment” requires some contribution of resources of cognizable value. For avoidance of doubt, however, this notion of value is focused on whether the resources contributed are of a nature that could be expected to be of value, not on whether such contributions ultimately achieved any benefits for the host State's development. While certain States have suggested that a contribution to host State development is an additional requirement of the objective definition of investment, the Tribunal does not agree. Rather, it agrees with the KT Asia tribunal that, while "such a contribution may well be the consequence of a successful investment ... if the investment fails, and thus makes no contribution at all to the host State's economy, that cannot mean that there has been no investment” in the first place.⁵¹⁴

(ii) Whether Claimants made a “contribution of resources"

379. With this understanding of the applicable legal standard, the Tribunal turns to the facts of this case. There is no dispute that Armenia entered into two “investment contracts" with Rasia, as those terms are used in Article I(1)(a) of the BIT: namely, the Road Concession and the Railway Concession. Nor is there any dispute that the two Concessions envisioned the eventual design, build, operation and maintenance in Armenia of (respectively) a functioning high speed road and a railway in Southern Armenia. Both of these infrastructure developments, if eventually delivered, would have

⁵¹⁴ RL-74, KT Asia, ¶ 171; see also RL-35, Quiborax, ¶¶ 220-225 (citing other cases). ↩

[Page 122]

been considerable contributions. There is likewise no dispute that Mr. Borkowski (a U.S. national) owned and controlled Rasia, such that any cognizable contribution Rasia made in Armenia towards fulfillment of the Concessions would qualify under the BIT as an investment “owned or controlled directly or indirectly by nationals ... of the other Party ...."⁵¹⁵

380. In other words, the dispute does not turn on whether the course of works envisioned by the two Concessions would involve contributions that would satisfy the objective definition of investment in both the ICSID Convention and the BIT. That much appears to be agreed. Rather, the question is whether, beyond the "words on the paper" (i.e., the Concession Agreements themselves), the Claimants actually made any contributions following execution of the Concessions.

381. In Armenia's view, the Claimants cannot qualify as having made any “investment” within the objective definition of that term, because they did not pay anything to obtain the Concession Agreements, did not establish a legal entity within Armenia to implement the Concessions, and did not provide evidence of any actual expenditure related to either Project.⁵¹⁶ By contrast, the Claimants assert that the Concession Agreements themselves satisfy the meaning of “investment,” and even if a further contribution of resources is required, this was satisfied (a) by the Claimants' "financing and procurement of the Feasibility Studies," with the related risk that such studies would conclude that one or both Projects were not feasible,⁵¹⁷ and (b) more generally, by the Claimants' various efforts to implement the Concession Agreements, including their arranging for work to be done by others (e.g., CCCC) whom Claimants analogize to “subcontractors.”⁵¹⁸ The Claimants contend that these efforts were of meaningful value and cannot be ignored, particularly in circumstances where the success of the Projects was ultimately stymied (in Claimants' view) by Armenia's conduct rather than by their own.

382. The Tribunal notes that this debate about what is required to satisfy the objective requirement of an "investment” is, to some extent, prefigured in the ambiguous language the Parties used in the Concession Agreements to cross-reference the ICSID Convention. Section 66.3 of both Concessions stipulates that “the transaction to which this Agreement relates is an investment" for

⁵¹⁵ Article I(1)(a) of the BIT (emphasis added). ↩
⁵¹⁶ Resp. Counter-Mem. ¶ 195; Resp. Rej. ¶ 318. ↩
⁵¹⁷ Cl. First PHB ¶¶ 296-297. ↩
⁵¹⁸ Cl. Reply ¶ 490 (contending that “services of Rasia's subcontractor are to be deemed contributions of the main contractor. ... That is because, 'but for' the Claimants, there would have been no contribution.... It was the Claimants' prerogative to arrange how best to perform their various contributions: directly or with the involvement of subcontractors."). ↩

[Page 123]

purposes of the ICSID Convention.⁵¹⁹ Claimants equate this statement to an agreement by Armenia, in advance, that the Convention's “investment” requirement would be satisfied by the Concessions themselves, which (as “investment contracts") constitute assets that fall within the BIT's express list of those entitled to protection.⁵²⁰ Armenia emphasizes instead Section 66.3's reference to a “transaction” to which each Concession “relates,” and argues that this envisions some post-Concession commitment of resources to implement the Concessions, before any “investment” could be said to have been made for purposes of the ICSID Convention.⁵²¹

383. The fact that this is even a debate reinforces the unusual nature of this case. The Tribunal expects that in most cases involving major concession contracts with a State, the concessionaire will have no difficulty evidencing some outlay of funds, either to obtain its qualifying investment (e.g., the purchase of shares in a local company or title to local assets), or to enhance the value or functioning of the investment it holds (e.g., the injection of funds into a local company or operation). What makes this case unusual, among other things, is that the Claimants have presented no evidence of any kind regarding out of pocket expenditures.

384. The closest the Claimants have come to claiming an actual financial contribution in connection with the Concessions is the assertion that Rasia undertook contractually to reimburse CCCC, in the amount of US$15 million, for the two Feasibility Studies that CCCC prepared initially at its own expense. This arrangement was documented in the CCCC Road Commercial Agreement and the CCCC Railway Commercial Agreement, both of which were agreed to form an integral part of the broader Rasia-CCCC Framework Agreement, which envisioned CCCC's eventual retention as lead EPC contractor for the Projects.⁵²² The Claimants describe this arrangement as Rasia having "financed the Feasibility Studies through a secured loan,”⁵²³ and contend that Rasia's assumption of this contractual liability for the costs of the Feasibility Studies qualifies as a contribution of resources. Armenia focuses, by contrast, on the fact that after the Projects' collapse, CCCC never called upon Rasia's debt, so accordingly Rasia has paid nothing yet – and in the absence of payment, CCCC rather than Rasia continues to own any intellectual property delivered to Armenia through the Feasibility Studies. Armenia further disputes that CCCC ever will call on Rasia's debt,

⁵¹⁹ C-1, Railway Concession, Article XVII, Section 66.3; C-2, Road Concession, Article XVII, Section 66.3. ↩
⁵²⁰ Cl. First PHB ¶ 295. ↩
⁵²¹ Resp. Second PHB ¶¶ 18-19. ↩
⁵²² R-68, Commercial Agreement for Feasibility Study on the Southern Armenia High Speed Road, 10 December 2012, ¶ 4 & Appendix 1; R-67, Commercial Agreement for Feasibility Study on the Southern Armenia Railway, 10 December 2012. ↩
⁵²³ Cl. First PHB ¶ 298. ↩

[Page 124]

casting doubt on the bona fides of the 2018-2021 Borkowski-Weixin correspondence which purports to confirm the continued existence of the debt, notwithstanding CCCC's decision to defer calling on it.⁵²⁴

385. As a threshold matter, the Tribunal agrees with Armenia that the 2018-2021 correspondence, initiated by Mr. Borkowski and apparently drafted by him for Mr. Weixin's signature,⁵²⁵ is of little or no evidentiary weight. The correspondence was not issued in the ordinary course of dealings between the Parties; rather, CCCC was told the letters were required only for purposes of an audit that Rasia was facing.⁵²⁶ The Claimants have not presented any documentary evidence of such an audit, and Mr. Borkowski's testimony regarding these events was far from persuasive. In any event, the correspondence on its face does not reflect any effort by CCCC to collect on the debt from Rasia. At best, the wording that Mr. Weixin accepted (based on Mr. Borkowski's draft) indicates that CCCC had chosen to defer any decision to call the debt, initially because it was waiting for the EPC contracts to materialize,⁵²⁷ and later because of this pending Arbitration and the “sensitivity of bilateral government relations between China and Armenia as well as China and the UAE.”⁵²⁸ The latter reference, referring to important political sensitivities, casts doubt on the general statement in one of the ghostwritten letters that “CCCC will, in due course, seek repayment."⁵²⁹ The Tribunal does not accept that this correspondence demonstrates any real intent by CCCC ever to call on the debt. The record is also devoid of any demonstration that Rasia would have had the wherewithal to pay.

386. At the same time, the Tribunal acknowledges the logic of Claimants' argument that the existence of ICSID jurisdiction should not turn on “a third party's decision (based on its own commercial, fiscal, political or other reasons) as to when it should seek to enforce a loan debt.”⁵³⁰ The Tribunal also notes that that Armenia apparently knew, or at least eventually became aware, that CCCC

⁵²⁴ C-344, Email from Mr. J. Borkowski to Mr. B. Weixin, 15 January 2021; see also C-231, Letter from Mr. B. Weixin to Mr. J. Borkowski, 6 March 2020. ↩
⁵²⁵ Resp. First PHB ¶ 164 (citing Tr. 480:11-21; C-350, Email from J Borkowski to Mr. B. Weixin, 29 April 2018; C-355, Email from Mr. B. Weixin to Mr. J. Borkowski, 17 May 2018 (attaching Rasia Confirmation Letter of 1May 2018). ↩
⁵²⁶ C-350, Email from J Borkowski to Mr. B. Weixin, 29 April 2018; C-355, Email from Mr. B. Weixin to Mr. J. Borkowski, 17 May 2018 (attaching Rasia Confirmation Letter May 1, 2018); C-359, Email from Mr. J. Borkowski to Mr. B. Weixin, 28 August 2020; C-344, Email from Mr. J. Borkowski to Mr. B. Weixin, 15 January 2021. ↩
⁵²⁷ C-344, Email from Mr. J. Borkowski to Mr. B. Weixin, 15 January 2021, pp. 3-6. ↩
⁵²⁸ Id., pp. 7-8, 10-11; see also C-231, Letter from Mr. B. Weixin to Mr. J. Borkowski, 6 March 2020. ↩
⁵²⁹ C-344, Email from Mr. J. Borkowski to Mr. B. Weixin, 15 January 2021, pp. 7-8, 10-11; see also C-231, Letter from Mr. B. Weixin to Mr. J. Borkowski, 6 March 2020. ↩
⁵³⁰ Cl. Second PHB ¶ 32. ↩

[Page 125]

(rather than Rasia) was bearing the cost of the Feasibility Studies.⁵³¹ There is no evidence that Armenia made any objection to this arrangement. To the contrary, so long as the arrangement did not involve any expectation that it would be asked to pay anything for the Feasibility Studies, Armenia's interests would appear unaffected by any internal payment arrangements as between Rasia and the third party (CCCC) that Rasia retained, with Armenia's knowledge, to prepare these technical reports.

387. Certainly, had the Feasibility Studies proved substantively satisfactory to Armenia,⁵³² allowing the Projects to move forward to the next stage, Armenia would have benefited from the technical work reflected therein, (a) regardless of whether Rasia had paid for the work upfront or incurred a contractual obligation to pay for it later, and (b) regardless of whether CCCC later called on that debt. Rasia's contribution in that scenario might have been qualitative (delivering technical studies that it had arranged for CCCC to prepare) rather than quantitative (paying for the underlying work), but it nonetheless would have been a provision of value to the Projects. The fact that, as it transpired, the Feasibility Studies were not satisfactory to Armenia, and that the Projects did not move forward for that and a number of other reasons, is a matter for the merits. It cannot be permitted, with 20-20 hindsight, to erase the fact that Rasia arranged, through its efforts, for the preparation and delivery of two lengthy Feasibility Studies at no cost whatsoever to Armenia.

388. This analysis in turn introduces a broader question: as a matter of law, does a contribution by a putative investor have to be monetary in nature, in order to satisfy the objective definition of investment in the ICSID Convention and the BIT? Armenia appears to suggest that it does, in arguing that the absence of any outlay of funds by Rasia is conclusive of the absence of any contribution.⁵³³ The Tribunal is not convinced, however, that this necessarily is the case. First, the phrase used in most cases discussing the requirement of a contribution to establish an investment is that there must have been a “commitment of resources”⁵³⁴; textually, this is not necessarily

⁵³¹ C-23, "Ambassador of China: It Will Be Possible to Speak of Expediency of Iran-Armenia Project after Preparation of Feasibility Study" (ArmInfo), 16 November 2015 (public remarks by the Chinese Ambassador to Armenia, during a joint event attended by Armenian officials to discuss the Railway Project, that “Chinese companies are conducting the feasibility study of the project on a non-repayable basis"; the press article reporting this statement referred specifically to a feasibility study developed “[i]n cooperation with Dubai-based investment company, Rasia FZE”). ↩
⁵³² Claimants argue that notwithstanding Armenia's criticisms of the Feasibility Study, Armenia until recently has "continued to use” them to attract new investors. Cl. Second PHB ¶ 27. Respondent contests this proposition. The Tribunal does not consider this debate necessary to the resolution of the jurisdictional issue. ↩
⁵³³ See, e.g., Resp. Second PHB ¶ 20 (“since there is no claim that Claimants spent any funds on either Project, Claimants have made no investment under the objective criteria of Article 25 of the ICSID Convention") (emphasis in original). ↩
⁵³⁴ See, e.g., RL-74, KT Asia, ¶ 166, 170; RL-35, Quiborax, ¶ 219. ↩

[Page 126]

limited to an expenditure of money. To the contrary, various tribunals have suggested, albeit sometimes in dicta, that an investment can be created through the contribution of non-monetary resources.⁵³⁵ The Tribunal considers this approach reasonable, so long as the contribution of such resources is of a nature expected to meaningfully advance the project in question. Among other things, this approach is consistent with at least some of the dictionary definitions of “investment" which help to illustrate the ordinary meaning of the term.⁵³⁶

389. In the Tribunal's view, the sufficiency of a particular form of contribution made by a given investor must be assessed, at least in part, against the expectations that the State contemporaneously had of that investor - at least in the context where the State entered into a concession contract or similar investment agreement precisely to regulate their respective obligations. In this case, it is notable that the preamble to both Concession Agreements recited that the Government of Armenia “deems it advantageous to have private sector participation in the improvement of its transportation infrastructure so as to benefit from private sector know-how, business connections and capital.”⁵³⁷ According to this sentence, Armenia evidently considered that each of these contributions – including the deployment of “private sector know-how” and “business connections," in addition to the expenditure of "capital” – would provide a “benefit,” in the sense of helping to advance the development of two highly complex, long-term, multi-step transportation infrastructure projects.

⁵³⁵ See, e.g., RL-13, Christian Doutremepuich and Antoine Doutremepuich v. Republic of Mauritius, PCA Case No. 2018-37, Award on Jurisdiction, 23 August 2019, ¶ 125 ("Contributions to the host State can take several forms, not only financial"); RL-8, Bayindir Insaat Turizm Ticaret Ve Sanayi A.S. v. Islamic Republic of Pakistan, ICSID Case No. ARB/03/29, Decision on Jurisdiction, 14 November 2005, ¶¶ 116, 119-120, 131 (finding that the investor had contributed in the form of "know-how, equipment and personnel," in addition to making financial contributions in the form of certain bank guarantees); RL-15, LESI, ¶ 14(i) (finding that contributions could “consist of loans, materials, works, services, as long as they have an economic value. In other words, the contractor must have committed some expenditure, in whatever form, in order to pursue an economic objective"); RL-37, RSM, ¶ 249 (noting, in the context of a dispute over the denial of an oil and gas exploration license to the claimant notwithstanding the existence of an exploration agreement, that the existence of an investment in the pre-exploration phase "is not dependent on the amounts actually spent by the alleged investor, and that an investment 'may be financial or through work,' including know-how or industry") (citations omitted). See also Deutsche Bank AG v. Democratic Socialist Republic of Sri Lanka, ICSID Case No. ARB/09/2, Award, 31 October 2012, ¶ 297 (referring to the possibility of investment through contribution of “know-how, equipment, personnel and resources,” as referenced in several of the Parties' cited authorities, e.g., RL-13, Doutremepuich, ¶ 125); Romak, ¶ 214 (interpreting the term “contribution" to include "[a]ny dedication of resources that has economic value, whether in the form of financial obligations, services, technology, patents, or technical assistance ... In other words, a 'contribution' can be made in cash, kind or labor."). ↩
⁵³⁶ See, e.g., Cambridge Dictionary, https://dictionary.cambridge.org/us/dictionary/english/invested (referring to non-monetary contributions as one of the forms an investment can take: "the act of putting money, effort, time, etc. into something to make a profit or get an advantage, or the money, effort, time, etc. used to do this") (emphasis added). ↩
⁵³⁷ C-1, Railway Concession, Preamble; C-2, Road Concession, Section 12(d), Preamble. ↩

[Page 127]

390. As to which of these benefits Rasia itself would provide, as opposed to arranging for others to provide, the record also reflects that from the outset (predating the Concession Agreements), Rasia's role in the Projects was described as that of “Sponsor.”⁵³⁸ Logically, that role involved the responsibility to coordinate the deployment of a range of technical and financial services in support of the Projects. There is no evidence, however, that Armenia believed Rasia itself (much less Mr. Borkowski personally) had either the technical or the financial resources to perform or finance the design, build, operation and maintenance work envisioned by the Concession Agreements. To the contrary, the Concession Agreements seemed to envision that Rasia would arrange the provision of "private sector know-how ... and capital" by third parties, presumably utilizing the "business connections" which the preamble of both Agreements described as a distinct “benefit” that also would be “advantageous” for the Government to receive.⁵³⁹

391. With respect to technical know-how, this understanding is express in both Concessions, which obligated Rasia to supply "[f]easibility studies prepared by one or more first-class specialized firms.”⁵⁴⁰ There is no suggestion in this passage that Armenia understood Rasia itself to be a "specialized firm" in the construction of either roads or railways, so this passage necessarily envisioned that Rasia's role was to procure and supply suitable feasibility studies from third parties. That procurement in turn constituted an important part of Rasia's expected contribution under the Concessions. With respect to capital, Armenia was aware even before the Concessions of Rasia's plan to seek backing from Aabar, the U.A.E.'s sovereign wealth fund.⁵⁴¹ The Concessions themselves acknowledged that “in addition to any equity investment that Rasia FZE is willing to arrange," the Projects implied at least 75% debt financing through secured lending, “without which implementation of the project may not be feasible” for Rasia.⁵⁴² In other words, there was no expectation that Rasia itself would be a primary source of funds, although the Concessions did refer generally to Rasia's implementing the Projects "from its own funds and attracted project finance."⁵⁴³

392. It was precisely because Rasia was to draw on the services of third parties that the Concessions expressly authorized it to adopt a "consortium approach" for both financing and development,

⁵³⁸ C-52, Framework Agreement, p. 1. ↩
⁵³⁹ C-1, Railway Concession, Preamble; C-2, Road Concession, Section 12(d), Preamble. ↩
⁵⁴⁰ C-2, Road Concession, Section 9(d); C-1, Railway Concession, Section 9(e). ↩
⁵⁴¹ See, e.g., C-11, Letter from Mr. C. Tappendorf, Aabar to Minister G. Beglaryan, 26 June 2012. ↩
⁵⁴² C-1, Railway Concession, Preamble; C-2, Road Concession, Section 12(d), Preamble. ↩
⁵⁴³ C-2, Road Concession, Section 3(b); C-1, Railway Concession, Section 3(b). ↩

[Page 128]

under which it “will likely attract investors, international financial institutions, institutional and other lenders," as well as “first-class specialized developers" for building and operating the Road and Railway.⁵⁴⁴ At the same time, the Concessions were quite clear that Rasia “shall always remain fully liable before the Government for the performance of obligations under this Agreement,”⁵⁴⁵ regardless of how many third parties it might pull together to achieve the considerable deliverables Rasia promised to Armenia.

393. In other words, even if Rasia's main contribution as "Sponsor" was expected to be its use of “business connections" to pull together the required specialized know-how and capital of others, the Parties accepted that this role involved its directly undertaking substantial risk. The Concession Agreements each explicitly recognized that Rasia would “assume substantial financial and commercial risks in connection with the implementation of the Project.”⁵⁴⁶ Such risks were particularly pronounced for long-term infrastructure projects as ambitious as these two Projects, which involved obligations that would take years to implement and were susceptible of failure at numerous junctures.

394. Against this backdrop, the debate between the Parties about whether Rasia had made any monetary contributions to the implementation of the Projects, by the time the Projects fell apart, does not capture the full picture of its expected role. The nature of that role encompassed expected substantial contributions of a non-monetary nature as well. Having contracted for such non-monetary contributions, including specifically Rasia's use of its “business connections” to offer Armenia the "advantage[s]" of specialized know-how and capital from third parties, it would not be appropriate to find that Rasia made no cognizable investment, simply because it has not demonstrated any out-of-pocket outlay during the period before the two Projects fell apart.

395. The Tribunal acknowledges that there are serious questions about whether Rasia ever managed to successfully deliver on any of the other contributions it promised, separate from the issue of monetary contributions. There is debate, for example, over the compliance of the two Feasibility Studies with the Concessions' requirements. There is debate also about whether Rasia ever obtained, or ever had the realistic prospect of obtaining, actual financial commitments in support of the two Projects. But that debate cannot be answered without venturing deeply into the merits of

⁵⁴⁴ C-1, Railway Concession, Section 5; C-2, Road Concession, Section 5. ↩
⁵⁴⁵ C-1, Railway Concession, Section 5; C-2, Road Concession, Section 5. ↩
⁵⁴⁶ C-1, Railway Concession, Section 15; C-2, Road Concession, Section 15. ↩

[Page 129]

the dispute, to determine whether either party to the Concessions ultimately performed as promised and if not, why not.

396. For purposes of the jurisdictional analysis, there is no question, at the most basic level, that both Rasia and its principal Mr. Borkowski did expend significant effort attempting to implement the Projects⁵⁴⁷ – or at least some form of road and railway projects, if not precisely the form reflected in the Concessions. The record reflects substantial effort by Rasia and Mr. Borkowski, expended over a period of several years. This includes not only its negotiations with CCCC and Aabar, but also efforts to broker agreements with railway operators from bordering countries (such as Iran), which was a further obligation that Rasia undertook under the Concessions.⁵⁴⁸ Given that these efforts were deployed in attempted implementation of Rasia's main role under the Concessions – that of "Sponsor," procuring and coordinating deliverables from various other actors – it would be odd to conclude that the steps taken were not of a nature that the Parties (at the time) understood as having cognizable value to the Projects as a whole.

397. Such a conclusion would be particularly odd in the context of these Concessions, under which Armenia and Rasia expressly agreed to submit any disputes over performance to ICSID arbitration for resolution. It must be recalled that the ICSID Convention was negotiated at a time when investment contracts (and not investment treaties) were expected to be the principal form in which consent to ICSID jurisdiction was expressed. The Tribunal has been shown nothing in either the wording or history of the Convention to suggest that its drafters intended ICSID tribunals to reject jurisdiction over disputes about investment contract performance, in circumstances where both the State and its contract partner expressly agreed that they should exercise jurisdiction, simply because the disputes arose early in the implementation of contractual performance, at a juncture when the "contributions" of the partner were still relatively inchoate and comparatively minor to what was ultimately envisaged to result from the contract's implementation. Provided that some efforts were undertaken to implement contractual performance,⁵⁴⁹ consistent with the basic obligations the contractual party was expected to perform, a tribunal in these circumstances should not lightly set aside the parties' specific agreement to submit disputes to ICSID arbitration.

⁵⁴⁷ The Claimants describe this as investing “time, energy, resources and reputation." Cl. Mem. ¶ 254. ↩
⁵⁴⁸ C-1, Railway Concession, Section 9(b). ↩
⁵⁴⁹ The Tribunal distinguishes this situation from that in Romak, where the parties executed a “Protocol of Intention” under which claimant pledged to perform certain services for Uzbekistan, but in fact "made no contribution in furtherance of the Protocol of Intention, which ... seems never to have evolved from the status of a mere statement of aspiration and was never acted upon by the Parties." Romak, ¶ 214. ↩

[Page 130]

398. For these reasons, and in the very particular context of these Concession Agreements, the Tribunal concludes that Rasia's efforts to implement the transactions contemplated by those Agreements were a minimally sufficient “contribution of resources” (albeit in non-monetary form) to constitute an investment for purposes of the ICSID Convention. Armenia's objection ratione materiae is therefore denied.

B. CAN THE CLAIMANTS ASSERT UMBRELLA CLAUSE CLAIMS?

(1) The Respondent's Position

399. The Respondent submits that neither Mr. Borkowski nor Rasia can assert umbrella clause claims.

400. With respect to Mr. Borkowski, the Respondent argues that he cannot assert any umbrella clause claim since he is not a party to the Concessions and does not have standing.⁵⁵⁰ According to Armenia, citing the award in WNC Factoring, only a party to an agreement may bring an umbrella clause claim for a breach of that agreement.⁵⁵¹ In the Respondent's view, the umbrella clause under the BIT is not broad enough to allow Mr. Borkowski—a non-party to the Concessions—to assert claims under the Concessions on behalf of Rasia.⁵⁵²

401. The Respondent relies on several cases to argue that the umbrella clause in the BIT is not broad enough to permit Mr. Borkowski to rely on it. In CMS, which dealt with a similar umbrella clause under the US-Argentina BIT, the ad hoc Committee annulled the portion of the award where the tribunal found jurisdiction over CMS's umbrella clause claims, since CMS was not a party to the relevant agreement.⁵⁵³

402. The Respondent further contests the Claimants' reliance on EDF v. Argentina, arguing that the tribunal in that case relied on umbrella clauses broader than the umbrella clause in the US-Argentina and US-Armenia BIT.⁵⁵⁴ The Respondent also challenges the Claimants' interpretation

⁵⁵⁰ Resp. Counter-Mem. ¶ 207; Resp. Second PHB ¶ 14. ↩
⁵⁵¹ Resp. Counter-Mem. ¶ 208 (citing RL-48, WNC Factoring Ltd. v. The Czech Republic, PCA Case No. 2014-34, Award, 22 February 2017 (“WNC Factoring”), ¶ 325. ↩
⁵⁵² Resp. Rej. ¶¶ 330, 338. ↩
⁵⁵³ Id. ¶¶ 331-32 (citing RL-14, CMS Gas Transmission Company v. Argentine Republic, ICSID Case No. ARB/01/8, Decision of the Ad Hoc Committee on the Application for Annulment of the Argentine Republic, 25 September 2007 "CMS Annulment Decision"), ¶¶ 96–97). ↩
⁵⁵⁴ Id. ¶ 335 (citing EDF International S.A., SAUR International S.A. and León Participaciones Argentinas S.A. v. Argentina, ICSID Case No. ARB/03/23, Award, 11 June 2012 (“EDF”), ¶¶ 937-38). ↩

[Page 131]

of Continental Casualty and notes that the question of whether the claimants could bring an umbrella clause claim on behalf of their subsidiary was never decided in that case.⁵⁵⁵

403. With respect to Rasia, the Respondent submits that a U.A.E. entity cannot bring a claim under the US-Armenia BIT.⁵⁵⁶ The Respondent contends that, while Rasia could possibly assert an umbrella clause claim under a suitable BIT based on the Concessions, the BIT invoked in this case does not afford Rasia any protection as a U.A.E. entity.⁵⁵⁷

(2) The Claimants' Position

404. The Claimants reject the Respondent's umbrella clause objection regarding Mr. Borkowski, because it is an issue for the merits rather than jurisdiction, and because (in any event) the Concessions constitute Mr. Borkowski's investments. The Claimants do not dispute the Respondent's umbrella clause objection regarding Rasia.

405. First, the Claimants argue that while Mr. Borkowski's entitlement to invoke the umbrella clause of the BIT is a substantive rather than a jurisdictional issue,⁵⁵⁸ he may do so, regardless of the fact that he is not personally a party to the Concessions. That is because, under Article II(2)(c) of the BIT, Armenia undertook to “observe any obligation it may have entered with regard to investments.”⁵⁵⁹ Accordingly, the issue before the Tribunal is whether Article II(2)(c) of the BIT confers rights on Mr. Borkowski, for the determination of which, the Tribunal must interpret the clause in accordance with Article 31(1) of the VCLT.⁵⁶⁰

406. According to the Claimants, the Respondent fails to engage in a textual interpretation of the umbrella clause of the BIT.⁵⁶¹ Article II(2)(c) of the BIT is a broad umbrella clause. It offers protection against the breach of any obligation entered into “with regard to investments,” including contracts entered into by the State, the Claimants say.⁵⁶² Furthermore, there is no privity requirement under the provision; the threshold is whether Armenia entered into any obligation

⁵⁵⁵ Resp. Rej. ¶ 337 (citing CL-85, Continental Casualty Company v. The Argentine Republic, ICSID Case No. ARB/03/09, Award, 5 September 2008 (“Continental Casualty"), ¶¶ 302-03). ↩
⁵⁵⁶ Resp. Counter-Mem. ¶ 208. ↩
⁵⁵⁷ Resp. Counter-Mem. ¶ 208. ↩
⁵⁵⁸ Cl. Reply ¶ 492 (citing CL-82, Nissan Motor Co., Ltd. v. Republic of India, PCA Case No. 2017-37, 29 April 2019, ¶¶ 282-84). ↩
⁵⁵⁹ Cl. Mem. ¶ 278 (quoting US-Armenia BIT, CL-1, Article II(2)(c)). ↩
⁵⁶⁰ Cl. Reply ¶ 496. ↩
⁵⁶¹ Id. ¶ 493. ↩
⁵⁶² Cl. Mem. ¶¶ 279-81. ↩

[Page 132]

"with regard to investments" and not whether the investor himself entered into the obligations in question. The Claimants argue that in Enron, the tribunal held that the phrase "any obligation" refers to obligations regardless of their nature, including contractual obligations. Those obligations are limited by their object: “with regard to investments.”⁵⁶³ In the Claimants' view, the type of undertaking covered by such a broad umbrella clause includes contracts entered into by the State.⁵⁶⁴

407. Second, the Claimants submit that Armenia's obligations under the Concessions were entered into “with regard to investments” of Mr. Borkowski.⁵⁶⁵ They invoke the EDF tribunal's decision that EDF was entitled to assert an umbrella clause claim in respect of obligations owed to EDF's local subsidiary.⁵⁶⁶ The Claimants note that the umbrella clause in the EDF case was worded similarly to that in issue in this case – "in connection with investments" – and the tribunal's finding relied on that broad wording. This interpretation, according to the Claimants, was further confirmed by the tribunal in Continental Casualty,⁵⁶⁷ which held that umbrella clauses may apply to obligations in force between a State and the claimant's subsidiary.

408. The Claimants also reject the Respondent's reliance on WNC Factoring. They argue that in that case, the applicable umbrella clause expressly provided that an agreement must exist between the investor and the host State. In the Claimants' view, the analysis of that clause is irrelevant in the present context, where the relevant umbrella clause has different wording.⁵⁶⁸

(3) The Tribunal's Analysis

409. As a threshold matter, there is no dispute between the Parties regarding Rasia, in connection with Article II(2)(c) of the BIT. Rasia is a U.A.E. company, and as such has no standing to invoke any of the substantive protections of the BIT, which protects only nationals of the United States and Armenia. Claimants do not contend otherwise. Accordingly, there is only one Claimant, Mr. Borkowski, who seeks to assert claims under the BIT, and whose authority to do so is disputed.

410. Moreover, the resolution of this debate will have far less impact on the scope of the case than in most other cases where the reach of umbrella clauses has been disputed. That is because Mr.

⁵⁶³ CL-29, Enron Creditors Recovery Corporation (formerly Enron Corporation) and Ponderosa Assets, L.P. v. Argentine Republic, ICSID Case No. ARB/01/3, Award, 22 May 2007, ¶ 274. ↩
⁵⁶⁴ Cl. Mem. ¶ 281. ↩
⁵⁶⁵ Cl. Reply ¶ 494. ↩
⁵⁶⁶ Id. ¶ 495 (citing CL-84, EDF, ¶¶ 938–39). ↩
⁵⁶⁷ CL-85, Continental Casualty, ¶ 297. ↩
⁵⁶⁸ Cl. Reply ¶ 497. ↩

[Page 133]

Borkowski's invocation of an Article II(2)(c) violation is articulated solely in connection with Armenia's alleged breach of its two Concessions with Rasia, and the Tribunal has already found that Rasia has jurisdiction to assert a breach of contract claim directly against Armenia, pursuant to the dispute resolution clauses of those Concessions. The Claimants have not suggested that Mr. Borkowski's umbrella clause claim under the BIT is any broader than Rasia's breach of contract claim under the Concessions. This is not a case, for example, where a foreign investor alleges that a State entered into separate obligations with respect to its investment, arising from commitments made outside the framework of a particular investment agreement.

411. In these circumstances, one might query the necessity even of deciding the disputed issue. The Tribunal accepts, however, that a party may have practical reasons for seeking to bring a treaty claim under its own name, even where that claim appears factually almost identical to a contract claim that its 100% subsidiary is already asserting. Claims brought under the two different legal instruments may (if successful) be subject to different enforcement regimes, and any relief obtained may (if collected by one claimant or the other⁵⁶⁹) be subject to different tax consequences. In any event, the fact remains that Mr. Borkowski has asserted an umbrella clause claim under the BIT, to which Armenia has objected as a matter of jurisdiction. Under the ICSID Convention, the Parties are entitled to a ruling with respect to that jurisdictional objection.

412. The resolution of the issue dispute turns entirely on treaty interpretation. The relevant BIT clause, Article II(2)(c), is short. It provides in entirety as follows:

Each Party shall observe any obligation it may have entered into with regard to investments.

413. Some investment treaty tribunals have interpreted similar or identical clauses as giving standing to foreign investors to bring umbrella clause claims, even where the State “obligations” in question were "entered into" through contracts with the claimant's subsidiary rather than with the claimant itself. These tribunals have generally emphasized the breadth of the phrase “with regard to investments" (emphasis added). For example, the Continental Casualty tribunal held that “provided that these obligations have been entered ‘with regard' to investments, they may have been entered with persons or entities other than foreign investors themselves, so that an undertaking by the host State with a subsidiary ... is not in principle excluded.”⁵⁷⁰ The EDF tribunal likewise reasoned,

⁵⁶⁹ It goes without saying that there could be no valid basis for double recovery, both by a subsidiary on its contract claims and by its shareholder on umbrella clause claims. ↩
⁵⁷⁰ CL-85, Continental Casualty, ¶ 297 (emphasis added). ↩

[Page 134]

albeit under umbrella clauses that were worded somewhat differently,⁵⁷¹ that “[a] clear and ordinary reading of these dispositions covers ... [c]oncession agreements granted to foreign investors for specific investments,” even if the agreement in question was signed with a local subsidiary.⁵⁷² The EDF decision survived an annulment challenge based on this finding, even though (as discussed below) an earlier decision in CMS, which likewise allowed a foreign investor to assert umbrella clause claims based on a State contract with its subsidiary, was annulled for failure to state reasons on this point.⁵⁷³

414. Another argument commonly presented in support of allowing investors to assert umbrella clause claims asserting a breach of State contracts with their subsidiaries is that many BITs – like this one, in its Article 1(1)(a) – define “investments” as including those “owned or controlled directly or indirectly by nationals ... of the other Party" (emphasis added). This was a point emphasized by Professor Orrego Vicuña in his dissent in Burlington,⁵⁷⁴ which was cross-referenced in the majority decision discussed by the Parties.⁵⁷⁵ If this textual element is combined with the “with regard to investments" element emphasized in Continental Casualty and EDF, an argument could be made

⁵⁷¹ See CL-84, EDF, ¶ 938 (interpreting one clause that covered commitments “undertaken with respect to investors of the other Party" and another covering any “commitment undertaken in connection with the investments made by nationals or companies from the other Contracting Party”). On annulment, an ICSID ad hoc committee acknowledged that these clauses were different from those in the CMS, Azurix and Burlington cases discussed further below, which all involved clauses obligating each State to "observe any obligation it may have entered into with regard to investments" - the exact wording in the BIT before this Tribunal. However, the EDF annulment committee found the differences in wording to be inconsequential, and “therefore proceeded on the basis that the umbrella clauses in the present case are substantially the same as those in the CMS, Azurix and Burlington cases." See RL-71, EDF International S.A. et al. v. Argentine Republic, ICSID Case No. ARB/03/23, Annulment Proceeding, Decision, 5 February 2016 (“EDF Annulment Decision"), ¶¶ 270-273. ↩
⁵⁷² CL-84, EDF, ¶ 938. The EDF tribunal emphasized, in addition to the "broadly worded" form of the umbrella clause, that the contract with EDF's subsidiary made explicit mention of shareholders. Id., ¶ 942. ↩
⁵⁷³ RL-71, EDF Annulment Decision ¶¶ 264, 276-277 (distinguishing the CMS Annulment Decision on the basis that the EDF tribunal had sufficiently stated its reasoning, which emphasized both the respondent's dealings directly with the claimants "as prospective foreign investors" and "the broad language of the umbrella clauses ... which spoke of commitments undertaken (or entered into) with regard to investments, rather than with investors") (emphasis in original). ↩
⁵⁷⁴ Dissenting Opinion of Arbitrator Orrego Vicuña, Burlington Resources Inc. v. Republic of Ecuador, ICSID Case No. ARB/08/5, Decision on Liability, 14 December 2012 (“Burlington Dissent”), ¶¶ 7-9 ("Article 1 of the Treaty expressly protects both direct and indirect investments. The obligations to which the umbrella clause refers are also those relating to investments. ... I regret not to be able to agree with the Decision's conclusion that while some Treaty provisions protect both direct and indirect investments, such as expropriation, on other matters, such as the umbrella clause, the scope of the protection is different and does not apply to indirect investments lacking the privity requirement. The Treaty does not make that distinction and if this had been the intention it would have had to be spelled out.... It is the submission of this arbitrator that the right conclusion should have ben that the entity whose interest in the investment is protected under the treaty is also entitled to benefit from the protection of an umbrella clause devised to ensure the observance of obligations concerning that investment. This is often the case when the contract is signed by an investment vehicle ... channeling the investment."). ↩
⁵⁷⁵ See RL-69, Burlington, ¶ 220. ↩

[Page 135]

that the umbrella clause requires the host State to “observe any obligation it may have entered into," not only directly with the foreign investor, but also “with regard to” the investor's indirect investments, i.e., involving investments in the host State by companies that the investor owns or controls. In this case, there is no question that Mr. Borkowski qualifies as a "national ... of the other Party," nor that he owns and controls Rasia. Rasia in turn, entered into Concession Agreements, which anticipated that it would make investments in Armenia, and by which Armenia granted Rasia certain rights. The Claimants accordingly say that the Concession Agreements qualify as obligations that Armenia “entered into with regard to" Mr. Borkowski's indirect investment in Armenia, even though Armenia did not enter into the Concession Agreements directly "with" Mr. Borkowski.⁵⁷⁶

415. However, a number of other awards have reached a contrary conclusion, based on a different reading of similar or identical umbrella clauses. First, in a ruling that was explained in a single paragraph, the Azurix tribunal concluded that since Argentina's contract was with Azurix's subsidiary rather than with Azurix itself, Azurix could not invoke the relevant umbrella clause, because "there is no undertaking to be honored by Argentina to Azurix other than the obligations under the BIT.”⁵⁷⁷ The same conclusion was reached the next year in the Siemens case, based on a similarly brief analysis.⁵⁷⁸ However, more textual analysis was provided in subsequent cases, first in the CMS Annulment Decision,⁵⁷⁹ and subsequently in the Burlington majority decision⁵⁸⁰ and the decision in WNC Factoring,⁵⁸¹ both of which discussed the prior case law in some depth.

416. A common feature in these three decisions is a textual focus on the word “obligation" in the relevant umbrella clauses. As the CMS ad hoc committee explained, obligations arising from contracts exist in a particular legal framework that is provided by their governing law. They “are not entered into

⁵⁷⁶ Cl. Reply ¶ 493. ↩
⁵⁷⁷ CL-93, Azurix Corp. v. The Argentine Republic, ICSID Case No. ARB/01/12, Award, 14 July 2006 (“Azurix”), ¶ 384. ↩
⁵⁷⁸ CL-94, Siemens A.G. v. The Argentine Republic, ICSID Case No. ARB/02/8, Award, 6 February 2007 (“Siemens”), ¶ 204 (observing that "[t]he Claimant is not a party to the Contract and [its subsidiary] SITS is not a party to these proceedings," and finding that for purposes of the umbrella clause, “to the extent that the obligations assumed by the State party are of a contractual nature, such obligations must originate in a contract between the State party to the Treaty and the foreign investor"). ↩
⁵⁷⁹ RL-14, CMS Annulment Decision, ¶¶ 89-98. ↩
⁵⁸⁰ RL-69, Burlington Resources Inc. v. Republic of Ecuador, Decision on Liability, 14 December 2012 ("Burlington"), ¶¶ 210-234. ↩
⁵⁸¹ RL-48, WNC Factoring, ¶¶ 312-341. ↩

[Page 136]

erga omnes but with regard to particular persons," such that performance is owed by a particular obligor to a particular obligee:

The effect of the umbrella clause is not to transform the obligation which is relied on into something else; the content of the obligation is unaffected, as is its proper law. If this is so, it would appear that the parties to the obligation (i.e., the persons bound by it and entitled to rely on it) are likewise not changed by reason of the umbrella clause.⁵⁸²

417. The Burlington majority echoed this approach, stating that "[t]he word 'obligation' is thus the operative term of the umbrella clause," and that "[a]n obligation entails a party bound by it and another one benefitting from it, in other words, entails an obligor and an obligee. Second, an obligation does not exist in a vacuum," but requires "municipal law to give it content.” Yet under most systems of law, companies have independent legal personality, and “the non-signatory parent of a contract party may [not] directly enforce its subsidiary's rights.”⁵⁸³ As for the phrase “entered into with regard to investments" (emphasis added), while this denotes a “link between the obligation and the investment,” the link “does not replace but qualifies” the notion of obligation: - and "[i]f there is no obligation in the first place, there is nothing to qualify." The Burlington majority acknowledged that the definition of investment in the relevant treaty covered both direct and indirect investment, but it stated that this did not make the parent company a co-obligee of the State's obligations under the relevant contracts: "Broad as the definition of investment in the Treaty may be, it cannot compensate for the absence of an ‘obligation.’”⁵⁸⁴

418. In WNC Factoring, the umbrella clause was quite different from the one in this case: it began by referring to "specific agreements” that “[i]nvestors of the Contracting Party may conclude with the other Contracting Party," before stating that each Party "shall, with regard the investments of investors of the other Contracting Party, observe the provisions of these specific agreements.” The tribunal found that this language limited a “specific agreement" to those a State concluded with an “investor," defined as the qualifying foreign national, and that this prima facie excluded umbrella clause protection for agreements entered into with its subsidiaries.⁵⁸⁵ Nonetheless, the WNC Factoring tribunal went on to state that it would have found privity to be required even had it been faced with a more typical umbrella clause,⁵⁸⁶ because “an undertaking" is something owed to "the

⁵⁸² RL-14, CMS Annulment Decision, ¶ 95. ↩
⁵⁸³ RL-69, Burlington, ¶¶ 214-215. ↩
⁵⁸⁴ RL-69, Burlington, ¶¶ 216-217. ↩
⁵⁸⁵ RL-48, WNC Factoring, ¶¶ 317-318, 320. ↩
⁵⁸⁶ Id., ¶ 335 (“If it were necessary to do so, the Tribunal would uphold the requirement of privity even for generally worded umbrella clauses"). ↩

[Page 137]

identified beneficiary of the undertaking," and "[u]nder international law, merely because a State may owe an obligation to observe an undertaking given to a company does not mean that the State also owes that same obligation ... to that company's shareholders.”⁵⁸⁷ After canvassing other decisions to similar effect (including Azurix, Siemens, the CMS Annulment Decision and Burlington),⁵⁸⁸ the WNC Factoring tribunal stated that it was not persuaded by the contrary reasoning of either Continental Casualty or EDF.⁵⁸⁹ In the tribunal's view, umbrella clauses “are intended to give effect to legal commitments entered into by the host state with regard to investments, not to change their scope or content.”⁵⁹⁰ It added that since the contract at issue "imposes no obligation on the Claimant, the Claimant and the Respondent cannot be said to have a relationship of obligor and obligee.”⁵⁹¹

419. Some critics of the “contractual privity" decisions have suggested that by denying a foreign investor the ability to assert an umbrella clause claim arising from a State's alleged breach of a contract with its subsidiary, the "privity" approach undermines the object and purpose of BITs. This is said particularly to be the case in circumstances where the host State required the foreign investor to invest through a local company, which accordingly could not on its own invoke umbrella clause protections.⁵⁹² That particular concern has no relevance here, where Rasia is not an Armenian company, and there is no evidence that Armenia expressed any preferences at all regarding the nationality of its Concession counterparty. Presumably, it was Mr. Borkowski who chose to pursue

⁵⁸⁷ RL-48, WNC Factoring, ¶¶ 322-323. ↩
⁵⁸⁸ Id., ¶¶ 325-329, 336-337. The tribunal considered these cases to reflect “the dominant view ... that in respect of contractual obligations, only parties entitled to enforce the obligation under the proper law of the contract may sue," resulting in a "requirement of privity under umbrella clauses.” Id., ¶ 325. ↩
⁵⁸⁹ Id., ¶¶ 331-333 (discussing Continental Casualty), ¶¶ 338-339 (discussing EDF). ↩
⁵⁹⁰ Id., ¶ 335. ↩
⁵⁹¹ Id., ¶ 339. This point about reciprocity of obligations echoed another concern of the CMS ad hoc Committee with the broad interpretation the CMS tribunal had rendered of the umbrella clause. Specifically, the Committee observed that "[t]he obligation of the State covered by [the umbrella clause] will often be a bilateral obligation, or will be intrinsically linked to obligations of the investment company. Yet a shareholder, although apparently entitled to enforce the company's rights in its own interest, will not be bound by the company's obligations, e.g. as to dispute settlement." RL-14, CMS Annulment Decision, ¶ 95(d). ↩
⁵⁹² See, e.g., Burlington Dissent, ¶¶ 9-10 (reasoning that "[w]hen the use of such vehicles or local companies is required by the host State by means of legislation or regulation," it becomes “imperative" to conclude that the foreign investor is also entitled to benefit from the protection of an umbrella clause. "An interpretation to the effect that only the corporate entity having signed the contract can rely on the protection of the umbrella clause will inevitably lead to a negation of the protection in question depriving the treaty of all meaning in this context."); cf. RL-48, WNC Factoring, ¶ 340 (noting Claimant's argument that a restrictive interpretation of the umbrella clause would enable a State "to circumvent the BIT by prescribing domestic incorporation” as a condition of a transaction, but rejecting that argument: "as the seller in an open tender process, the Respondent was free to impose such a condition, and any potential bidder was free not to bid on those terms. It cannot be said that, if a foreign investor voluntarily enters into an agreement which is clearly excluded from the plain terms of an umbrella clause, there is a manifestly absurd result."). ↩

[Page 138]

the Concessions through a U.A.E.-incorporated company, rather than incorporating (for example) a U.S. company for that purpose. In any event, as certain cases have noted,⁵⁹³ the object and purpose of BITs must be read holistically, and they would hardly be defeated by the “privity” approach to umbrella clauses, when other treaty protections indisputably may be invoked by foreign shareholders without concern for contractual privity.

420. In the end, the Tribunal is faced with a BIT provision which (under other BITs with identical language) has been interpreted in two very different ways. The Tribunal agrees with the EDF Annulment Decision that both approaches are "arguable," and that in these circumstances a conclusion in either direction cannot be considered a manifest excess of powers.⁵⁹⁴ On balance, however, the Tribunal considers the approach reflected by the Burlington majority to represent the more natural and convincing interpretation of Article II(2)(c). In particular, the Tribunal is persuaded that every contract must be considered within the legal regime from which it derives its existence and with specific regard to the identity of the parties to the contract. Mr. Borkowski was not a co-obligor or a co-obligee of Rasia under the Concessions, and he derived no rights either to enforce them or to have them enforced against him. On this basis, the Concessions cannot be said to be obligations that Armenia "entered into" with Mr. Borkowski. As for the reference in Article II(2)(c) to "obligation[s] ... entered into with regard to investments,” the Tribunal observes that Mr. Borkowski's investment was in the shares of Rasia, a U.A.E. company. There is no suggestion that Armenia entered into (much less breached) any obligations with regard to such shares. Rather, Armenia entered into obligations with regard to Rasia's potential investments in Armenia, not Mr. Borkowski's investment in Rasia.

421. The Tribunal of course accepts that a shareholder's status as an indirect investor in a host State will often entitle it to bring other types of investment treaty claims in its own right. Mr. Borkowski accordingly has standing to assert, in his own name, the other Treaty claims he pleads: fair and equitable treatment, arbitrary measures, and indirect expropriation. But umbrella clauses are generally different, in that they posit a key precondition, in the form of an "obligation" that the host State "entered into" through an instrument (generally a contract) other than the investment treaty

⁵⁹³ See, e.g., RL-69, Burlington, ¶ 218 (“The umbrella clause is only one of the various substantive protections that the Treaty bestows upon investors, with the scope of protection depending on the terms of each specific provision. Other Treaty provisions unquestionably protect both direct and indirect investments, such as for instance the expropriation clause. The object and purpose of the Treaty do not impose that all standards of protection have the same scope."); RL-48, WNC Factoring, ¶ 340 (noting that the privity approach to umbrella clauses “would not preclude the investor from recourse to other protections open to it qua investor under the BIT”). ↩
⁵⁹⁴ RL-71, EDF Annulment Decision, ¶ 279. ↩

[Page 139]

itself. Absent unusual treaty language, a shareholder who has no rights under such a contract, under that contract's own governing law, may not step into the shoes of the contracting entity for purposes of an umbrella clause, collapsing all corporate formalities established under the governing law and claiming contractual benefits directly for its own account.

422. For these reasons, the Tribunal accepts the Respondent's objection that Mr. Borkowski has no standing under the Treaty to assert a claim under Article II(2)(c) with regard to the contractual obligations that Armenia entered into with Rasia. Hypothetically, if there were an applicable U.A.E.-Armenia BIT that contained a comparable umbrella clause, then Rasia might well have standing to bring an umbrella clause claim in its own name for breach of obligations that Armenia “entered into with regard to" its investments, namely the Concessions. But Mr. Borkowski has no derivative right to invoke the U.S.-Armenia BIT's umbrella clause with respect to contracts to which he was never a party, and under which he has neither rights, nor obligations as a matter of Armenian law. The umbrella clause claims accordingly are dismissed.

C. ARE THE CLAIMS ADMISSIBLE?

423. The Respondent contends that, even if the Tribunal were to uphold jurisdiction, the claims are inadmissible.⁵⁹⁵

(1) The Respondent's Position

424. The Respondent submits that the Claimants' claims for damages are based on the alleged "Borkowski-Aabar" transaction under which Aabar would purchase Rasia from Mr. Borkowski and make further payments.⁵⁹⁶ The Respondent alleges that the Claimants have engaged in an illicit scheme from which they seek to profit through their claim for damages in this case.⁵⁹⁷ The Respondent alleges that Mr. Borkowski, Mr. Tappendorf and Aabar's chairman (Mr. Al-Qubaisi), who allegedly approved the Borkowski-Aabar transaction, were involved in a scheme to defraud Aabar.⁵⁹⁸ The Respondent contends that this is evidenced by Mr. Al-Qubaisi's arrest in connection with the 1MBD Scandal, in which Aabar was defrauded, as well as Aabar's and Rasia's supposed

⁵⁹⁵ Resp. Counter-Mem. ¶ 210. ↩
⁵⁹⁶ Id. ↩
⁵⁹⁷ Id. ¶ 219. ↩
⁵⁹⁸ Id. ¶ 213. ↩

[Page 140]

earlier work together on the Gobi Coal mine in Mongolia, an investment vehicle involved in the 1MDB Scandal.⁵⁹⁹

425. The Respondent submits that the parties to the Borkowski-Aabar transaction knew at the time of the alleged transaction that the Projects under the Concessions could not succeed.⁶⁰⁰ As such, the Respondent contends that Mr. Borkowski was the beneficiary of an illegal scheme to defraud Aabar and used Rasia as its instrumentality.⁶⁰¹ According to the Respondent, international tribunals will not grant assistance to a party that engages in an illegal act.⁶⁰²

(2) The Claimants' Position

426. The Claimants reject the Respondent's allegations that Mr. Borkowski engaged in a scheme to defraud Aabar and they argue that the Respondent has failed to provide any evidence of the alleged fraud and illicit scheme. According to the Claimants, fraud allegations are held to a high standard of proof, and the evidence must be clear and convincing.⁶⁰³

427. The Claimants further contend that neither Mr. Borkowski, nor Mr. Tappendorf had any contemporaneous knowledge about the unrelated activities of Aabar's former CEO, which led to his imprisonment. They argue that Armenia's guilt-by-association arguments rest on Mr. Borkowski and Mr. Tappendorf's supposed knowledge about those activities, yet the Respondent does not meet the standard of proof in respect of allegations of fraud. They also note that the events giving rise to the 1MDB Scandal predate Mr. Borkowski's involvement in the Gobi Coal project in Mongolia.⁶⁰⁴

428. Moreover, the Claimants submit that, for an illegality-based objection to succeed, “illegality in the creation of the investment has to be demonstrated." In the Claimants' view, Armenia needs to demonstrate that the conclusion of the Concessions was unlawful or contrary to public policy. Any

⁵⁹⁹ Resp. Counter-Mem. ¶¶ 213, 219. ↩
⁶⁰⁰ Id. ¶ 212. ↩
⁶⁰¹ Id. ¶ 213. ↩
⁶⁰² Id. ¶ 215 (citing RL-49, World Duty Free v. Kenya, ICSID Case No. ARB/00/07, Award, 4 October 2006, ¶¶ 157, 179; RL-21, Inceysa Vallisoletana S.L. v. Republic of El Salvador, ICSID Case No. ARB/03/26, Award, 2 August 2006 ¶¶ 247-48; and RL-33, Plama Consortium Limited v. Republic of Bulgaria, ICSID Case No. ARB/03/24, Award, 27 August 2008 (“Plama”), ¶¶ 144, 146). ↩
⁶⁰³ Cl. Reply ¶¶ 499-500 (quoting CL-88, Waguih Elie George Siag & Clorinda Vecchi v. Arab Republic of Egypt, ICSID Case No. ARB/05/15, Award, 1 June 2009,, ¶ 326 (quotation omitted); CL-89, Fraport AG Frankfurt Airport Services Worldwide v. Republic of the Philippines II, ICSID Case No. ARB/11/12, Award, 10 December 2014, ¶ 479 (quotation omitted)). ↩
⁶⁰⁴ Id. ¶ 502. ↩

[Page 141]

alleged subsequent conduct cannot bear upon the admissibility of the Claimants' claim. Accordingly, the Claimants allege that Armenia's allegation is not only baseless but also irrelevant.⁶⁰⁵

(3) The Tribunal's Analysis

429. The Tribunal notes that during the Respondent's opening argument, it appeared to resile from any contention that it had established the existence of a scheme by Mr. Borkowski, Mr. Tappendorf and Mr. Al-Qubaisi to defraud Aabar, in connection with the proposal that Aabar purchase Rasia. The highest this was put in the opening argument was that it was a “potential" scenario that might have existed, and that the possibility was "not outlandish" to postulate. Specifically, Respondent's counsel stated as follows:

Now, we don't know what happened here, obviously. I have no idea what happened here. And we have suggested this potentially could have been some sort of a fraud on Aabar, but of course we don't know anything like that, but it is not outlandish, under the circumstances, given that they were actually imprisoned for this Virgin fraud and there was this 4.5 billion 1MDB fraud which got a lot of attention.⁶⁰⁶

430. The Tribunal considers that Respondent was correct not to persist in its original assertion that the proposed acquisition of Rasia was part and parcel of a scheme to defraud Aabar. While there are any number of reasons to doubt the success of the Road Project and Railway Project, there is a qualitative difference between Claimants' advocating that Aabar undertake this risky investment and their seeking to defraud it. The Respondent has not presented sufficient evidence to demonstrate an intent to defraud.

431. In any event, even assuming arguendo that there was some misrepresentation to Aabar regarding the benefits and risks of acquiring Rasia, it is not clear how this would render illegal the Claimants' investment in Armenia, which they have defined as the Concession Agreements and the rights to the Road and Railway Projects granted therein. At most, the Respondent's theory of a fraud on Aabar might undermine Claimants' attempt to quantify damages from an alleged Respondent breach of the Concessions and the BIT, by pegging them to the value of the failed Aabar acquisition that they say otherwise would have proceeded. But even a party which propounds an untenable theory of damages may still have standing to pursue declaratory relief, such as that which, inter alia, Claimants have sought here. The Respondent has not demonstrated why any alleged plan to

⁶⁰⁵ Cl. Reply ¶ 503. ↩
⁶⁰⁶ February Tr. Day 2, Hanessian, 227:13-21. ↩

[Page 142]

defraud Aabar should render inadmissible Claimants' underlying claims that Armenia breached its obligations to Rasia and Mr. Borkowski under the Concessions and the BIT respectively.

432. The inadmissibility defense accordingly is denied in its entirety.

D. ARE THE CLAIMS UNDER THE CONCESSIONS AND UMBRELLA CLAUSE TIME-BARRED?

(1) The Respondent's Position

433. The Respondent contends that the Claimants' claims under the Concessions are time-barred under Armenian Law (the governing law of the Concession Agreements).⁶⁰⁷ The Respondent argues that the statute of limitations for contract claims is three years, running from the date that a person learns, or should have learned, of the violation of its rights.⁶⁰⁸ In this case, the Respondent says, the limitations period began to run on 18 March 2015, which is the date by which Claimants contend Armenia had repudiated the Concession Agreements, and the date Claimants select as the "valuation date" for their damages claim. Accordingly, the Respondent contends, the limitations period expired on 18 March 2018.⁶⁰⁹ However, since the Claimants commenced this arbitration only on 19 July 2018, more than three years after the alleged "repudiation” date of 18 March 2015, any claim under the Concession Agreements is time-barred.⁶¹⁰ In the Respondent's submission, the Tribunal must take the applicable statute of limitations under Armenian law into account.⁶¹¹

434. The Respondent disputes the Claimants' assertion that the statute of limitations was interrupted by Rasia's letter to Armenia on 16 December 2015 by which it notified the dispute.⁶¹² According to the Respondent, this argument misrepresents the wording of Article 340 of Armenia's Civil Code and is not supported by Armenian case law.⁶¹³ Conversely, the Respondent submits that the correct interpretation is that a claim must be filed judicially in order to interrupt the running of the statute of limitations.⁶¹⁴ The Respondent submits that this interpretation is supported by Armenia's highest court.⁶¹⁵

⁶⁰⁷ Resp. Counter-Mem. ¶ 223; Resp. First PHB ¶¶ 171, 221; Resp. Second PHB ¶¶ 27-28. ↩
⁶⁰⁸ Resp. Counter-Mem. ¶ 223. ↩
⁶⁰⁹ Id. ↩
⁶¹⁰ Id.; Resp. Rej. ¶ 340; Resp. Second PHB ¶ 29. ↩
⁶¹¹ Resp. Rej. ¶ 344. ↩
⁶¹² Id. ¶ 340; Resp. Second PHB ¶¶ 30–31. ↩
⁶¹³ Resp. Rej. ¶¶ 340–41. ↩
⁶¹⁴ Id. ¶ 342. ↩
⁶¹⁵ Id. ¶ 341; Resp. Second PHB ¶ 31. ↩

[Page 143]

435. The Respondent also challenges the Claimants' arguments that (i) Armenia's wrongful acts did not stop before 19 July 2015, that (ii) the statute of limitations does not apply to umbrella clause claims,⁶¹⁶ and that (iii) Armenia acknowledged a debt to Rasia.⁶¹⁷

436. Regarding the first aspect of the Claimants' argument, the Respondent acknowledges that if later breaches by Armenia of the Concessions were demonstrated, then the statute of limitations objection should fail.⁶¹⁸ The Respondent contends, however, that the Claimants did not articulate how Armenia had allegedly continued to breach its obligations after 19 July 2015,⁶¹⁹ nor did they submit any evidence to sustain their argument regarding such later breaches.⁶²⁰ Moreover, the Respondent argues that the Claimants did not articulate what, if any, damages might flow from these alleged later breaches.⁶²¹

437. Regarding the second aspect of the Claimants' argument—that the Armenian statute of limitations does not apply to umbrella clause claims—the Respondent submits that the Claimants did not cite any law for that proposition.⁶²² The Respondent argues that, while the statute of limitations under Armenian law would not apply to other treaty claims, umbrella clause claims are different.⁶²³ That is because the content of the underlying obligation to which an umbrella clause claim relates, including the scope and parties to the undertaking, must be interpreted in accordance with the governing law of the contract (Armenian law).⁶²⁴ Since any claim for breach of the underlying obligation is time-barred under Armenian law, a claim for violation of the umbrella clause by virtue of such breach also must be time-barred, the Respondent argues.⁶²⁵

⁶¹⁶ Resp. Rej. ¶¶ 343-44. ↩
⁶¹⁷ Resp. Second PHB ¶ 32. ↩
⁶¹⁸ Resp. Rej. ¶ 343. ↩
⁶¹⁹ Resp. Counter-Mem. ¶ 224. ↩
⁶²⁰ Resp. Rej. ¶ 343. ↩
⁶²¹ Resp. Counter-Mem. ¶ 224. ↩
⁶²² Resp. Rej. ¶ 344. ↩
⁶²³ Id. ¶ 345. ↩
⁶²⁴ Id. ↩
⁶²⁵ Id. (relying on RL-14, CMS v. Argentina, ICSID Case No. ARB/01/8, Decision of the Ad Hoc Committee on the Application for Annulment of the Argentine Republic, 25 September 2007, ¶ 95(c)). ↩

[Page 144]

438. Regarding the third aspect of the Claimants' argument, the Respondent rejects the Claimants' suggestion that Armenia ever acknowledged a debt to Rasia.⁶²⁶ Rather, the Respondent submits that Armenia's position has always been that Rasia, not Armenia, breached the Concessions.⁶²⁷

(2) The Claimants' Position

439. The Claimants reject the Respondent's interpretation and understanding of the statute of limitations under Armenian law, as well as its argument regarding the date of expiration of the time period to bring relevant claims.

440. First, the Claimants contend that Article 340 of Armenia's Civil Code provides that the statute of limitations "shall be interrupted by the filing of a claim in the prescribed manner.”⁶²⁸According to the Claimants, the prescribed manner does not necessarily entail a court or a judicial filing as the Respondent suggests.⁶²⁹ In this respect, the Claimants note that the "prescribed manner" in this case is set out in the Concessions' dispute settlement provisions;⁶³⁰ Article XVIII of both Concessions provides that the dispute shall be referred first to the Minister of Transport and Communications and to the CEO of Rasia.⁶³¹ According to the Claimants, the dispute settlement mechanism was therefore triggered at the latest by Rasia's letter to Armenia on 16 December 2015,⁶³² such that the statute of limitations period for the Concessions' claims was interrupted by Rasia's invocation of the Concessions' dispute resolution mechanism. Pursuant to Article 340(2) of Armenia's Civil Code, the "[r]unning of the term ... shall restart after the interruption. The time which has elapsed before the interruption shall not be calculated within the new term.”⁶³³

441. The Claimants further argue that Armenia's acknowledgment of its obligations under the Concessions can also interrupt the running of the statute of limitations.⁶³⁴ According to the Claimants, the Respondent's selective quotation of Article 340(1) of Armenia's Civil Code omitted to draw attention to that point.⁶³⁵ The Claimants submit that, even if recourse to Armenian law were

⁶²⁶ Resp. Second PHB ¶ 32. ↩
⁶²⁷ Id. ↩
⁶²⁸ Cl. Reply ¶ 602 (quoting Armenian Civil Code, Article 340). ↩
⁶²⁹ Id. ¶ 605; Cl. First PHB ¶ 294. ↩
⁶³⁰ Cl. Reply ¶ 603. ↩
⁶³¹ Id. ↩
⁶³² Id. ↩
⁶³³ Id. ¶ 604 (quoting Armenian Civil Code, Article 340(2)). ↩
⁶³⁴ Cl. First PHB ¶¶ 307-09. ↩
⁶³⁵ Id. ¶ 307. ↩

[Page 145]

appropriate, Armenia acknowledged its obligations under the Concessions after 18 March 2015⁶³⁶ on at least three occasions (15 February 2016, 18 March 2016, and 3 July 2017), thereby interrupting the statute of limitations.⁶³⁷

442. Alternatively, the Claimants contend that Mr. Borkowski's umbrella clause claims under the BIT and the consequences of Armenia's breaches are governed by customary international law and not by Armenian law.⁶³⁸ By breaching its obligations under the Concessions, Armenia violated its international obligations under the BIT. The Claimants submit that international law on State responsibility, which governs Armenia's wrongful acts, does not contain a statute of limitations period.⁶³⁹

443. Finally, the Claimants argue that the Respondent's contention that the statute of limitations started to run on 18 March 2015 is wrong in any event, since Armenia's illegal acts did not stop before 19 July 2015—three years before the Claimants submitted their Request for Arbitration.⁶⁴⁰ According to the Claimants, Armenia continued to disregard the Claimants' rights under the Concessions as late as 2017.⁶⁴¹ Consequently, the Claimants state that, with respect to Armenia's breaches after 19 July 2015, the Respondent's time-bar objection must be rejected.⁶⁴²

(3) The Tribunal's Analysis

444. The Respondent's statute of limitations defense seeks to defeat Rasia's claims for breach of the Concession Agreements, and Mr. Borkowski's umbrella clause claim under the BIT. The Respondent does not assert any limitations defense with respect to Mr. Borkowski's other BIT claims (fair and equitable treatment, arbitrary treatment, and expropriation), so these claims would proceed regardless of the Tribunal's ruling on the timeliness of the contract and umbrella clause claims.

⁶³⁶ Cl. First PHB ¶¶ 307, 309. ↩
⁶³⁷ Id. ¶ 308. ↩
⁶³⁸ Cl. Reply ¶ 606. ↩
⁶³⁹ Id. ¶ 606 (citing CL-108, AES Corporation and Tau Power B.V. v. Republic of Kazakhstan, ICSID Case No. ARB/10/16, Award, 1 November 2013 (“AES v. Kazakhstan"), ¶ 431). ↩
⁶⁴⁰ Id. ¶ 607. ↩
⁶⁴¹ Id. ↩
⁶⁴² Id. ↩

[Page 146]

a. Rasia's breach of contract claims

445. The Tribunal begins with Rasia's breach of contract claims, which the Parties agree are governed by Armenian law. The Parties also agree that the applicable provisions of the Armenian Civil Code are the following:

Article 332. General terms of statute of limitations

General terms statute of limitations shall be three years.

Article 337. Calculation of the terms for statute of limitations

1. The statute of limitations shall start running on the day when the person learns or should have learned of the violation of his or her right. ....

Article 340. Interruption of the running of the term for the statute of limitations

1. Running of the statute of limitations shall be interrupted by the filing of a claim in the prescribed manner, as well as by performing actions evidencing the acknowledgement of the debt by the person obliged.

2. Running of the term for the statute of limitations shall restart after the interruption. The time which has elapsed before the interruption shall not be calculated within the new term.⁶⁴³

446. None of the Parties has presented an expert on Armenian law to interpret these Civil Code provisions, nor has any Party presented any commentary by Armenian legal scholars to shed light on their application. Nor do the Parties rely, with one exception, on judicial practice.⁶⁴⁴ Thus, the Tribunal is left largely on its own to interpret the relevant Civil Code provisions, based on the apparent ordinary meaning of the terms used.

(i) Accrual of the limitations period

447. The first question is when the three-year statute of limitations began running. Article 337(1) provides that time begins to run "when [Rasia] learn[ed] or should have learned of the violation of [its] right." The Claimants accuse the Respondent of breaching the Concession Agreement by "a series of measures that undermined the Claimants' rights and ultimately destroyed their investments.”⁶⁴⁵ In general, the Claimants' case is that “[f]irst in respect of the Road Project and later in respect of the Railway Project, Armenia sought to exclude Rasia and its EPC contractor and

⁶⁴³ RL-1, Armenian Civil Code (excerpts), 5 May 1998, Articles 332, 337 and 340. ↩
⁶⁴⁴ The exception is a single Court of Cassation case which the Respondent presents to support its interpretation of one aspect of Civil Code Article 340. See RL-86, The Court of Cassation of the Republic of Armenia, Case No. EAND/0052/02/11, 25 December 2012. The Claimants do not comment on the applicability of this case. ↩
⁶⁴⁵ Cl. Mem. ¶ 143. ↩

[Page 147]

establish its own consortium using Rasia's feasibility study and work product.”⁶⁴⁶ The Claimants allege, however, that Armenia's initial dealings with third parties were “covert[]" and “unilateral,”⁶⁴⁷ allegations which have some bearing on the question as to when Rasia learned (or should have learned) of the alleged breach. With respect to the Road Project, the Claimants say that they "have since learned more details about the secret road project that [Armenia] was seeking to establish, in blatant breach of Rasia's exclusive concession," including various actions undertaken on dates ranging from November 2012 through May 2019.⁶⁴⁸ With respect to the Railway Project, the Claimants say that Armenia took steps “to establish an entirely different consortium to continue the works," in violation of Rasia's exclusivity rights, beginning with project meetings with others between March and August 2015.⁶⁴⁹ The Claimants say that they “were excluded entirely from these meetings and only learned of them after they had already occurred.”⁶⁵⁰ The Claimants complain of subsequent dealings in September and November 2015 allegedly in violation of their exclusivity rights with respect to the Railway Project,⁶⁵¹ but they say that Armenia withheld much of this information from them.⁶⁵²

448. In short, it is the Claimants' case that their investments “were destroyed by Armenia through a series of acts beginning in November 2012," and that "[t]here is no single event which constituted the total loss of the Claimants' investments.” However, acknowledging that "it is nevertheless necessary to select a valuation date" for purposes of calculating damages, the Claimants “submit that the most appropriate date is 18 March 2015,” which they describe as "the date by which Armenia had made clear its intention to eliminate the Railway Project as well as the Road Project,"⁶⁵³ by publicly announcing a meeting in Yerevan between Minister Beglaryan and CCECC.⁶⁵⁴ It is Claimants' case that 18 March 2015 was also "the date on which the Claimants were substantially and irreversibly deprived of their investments,”⁶⁵⁵ because the news of Armenia's "negative conduct towards the Projects" led Aabar in March 2015 to withdraw from its

⁶⁴⁶ Cl. Mem. ¶ 143. ↩
⁶⁴⁷ Id. ¶ 144. ↩
⁶⁴⁸ Id. ¶¶ 153-156. ↩
⁶⁴⁹ Id. ¶¶ 164-165. ↩
⁶⁵⁰ Id. ¶ 166. ↩
⁶⁵¹ Id. ¶¶ 167-168. ↩
⁶⁵² Id. ¶ 169. ↩
⁶⁵³ Id. ¶ 320 (emphasis added). ↩
⁶⁵⁴ Id. ¶ 165(i). ↩
⁶⁵⁵ Id. ¶ 320 (emphasis added). ↩

[Page 148]

alleged deal to purchase Rasia in order to obtain equity in the Railway and Road Projects,⁶⁵⁶ after having previously placed the acquisition on hold in January 2015 to “better assess the situation in Armenia."⁶⁵⁷ It is the Claimants' case that this deal otherwise would have closed "no later than 30 April 2015,⁶⁵⁸ notwithstanding Aabar's general freeze on new investment activities in April 2015 following the resignation of its Chairman, because Aabar had already approved this particular deal and effectively ring-fenced the necessary funds in December 2014.⁶⁵⁹

449. In other words, the Claimants have staked their claim of irreversible harm on the loss of the Aabar acquisition, and they have tied that loss to Aabar's concern about events in Armenia that it allegedly knew to have occurred by mid-March of 2015. In these circumstances, the Claimants' pleading that Armenia took additional steps in breach of the Concessions after Claimants already had been "irreversibly deprived of their investments” in March 2015⁶⁶⁰ does not alter the accrual date for purposes of the statute of limitations analysis. The Respondent, meanwhile, has not presented arguments in support of any earlier accrual date than 18 March 2015. Tribunal accordingly finds that, for purposes of Article 337(1) of the Armenian Civil Code, the three-year statute of limitations on breach of contract claims began running no later than 18 March 2015, which was the day that Claimants say they learned of the most significant violation of Rasia's Concession rights, which caused "irreversibl[e]" loss to their investment.

(ii) Interruption of the limitations period

450. The next question is whether the running of the three-year period was “interrupted" for purposes of Article 340 of the Armenian Civil Code, with the effect that the clock thereafter “restart[s]" and any “time which has elapsed before the interruption shall not be calculated within the new term.”⁶⁶¹ Article 340(1) sets out two different bases for interrupting the running of the statutory period. The first is by "the filing of a claim in the prescribed manner"; the second is when “the person obliged" "perform[s] actions evidencing the acknowledgment of the debt." The Tribunal examines these in turn.

⁶⁵⁶ Cl. Mem. ¶ 186. ↩
⁶⁵⁷ First Tappendorf Statement ¶ 73. ↩
⁶⁵⁸ Cl. Mem. ¶ 186. ↩
⁶⁵⁹ First Thornber Statement ¶ 36. ↩
⁶⁶⁰ Cl. Mem. ¶ 320 (emphasis added). ↩
⁶⁶¹ RL-1, Armenian Civil Code (excerpts), 5 May 1998, Article 340(2). ↩

[Page 149]

1. Interruption by “filing of a claim in the prescribed manner"

451. Beginning with interruption by "the filing of a claim in the prescribed manner," the question is whether Rasia's letter of 16 December 2015 qualifies under Armenian law. As a threshold point, that letter referred to the Railway Concession only, and thus could not (under any scenario) constitute an interruption of the limitations period for claims under a separate contract, the Road Concession. The Claimants have not pointed to any equivalent letter that Rasia might have sent regarding the Road Concession and which they contend satisfies the terms of Article 340(1) of the Armenian Civil Code.

452. As for the Railway Concession, Rasia's letter of 16 December 2015, which was addressed to Mr. Beglaryan as Minister of Transport and Communication, (a) declares Armenia to have committed "material breaches" of the agreement, (b) "formally declares there to be a dispute between the parties," and (c) "request[s] ... a response from the Government that addresses our concerns ... in order that we might attempt amicably to settle our dispute, in accordance with the terms of Article XVII of the Concession Agreement.”⁶⁶² There is no question that this letter qualifies as the initiation of the dispute resolution process agreed in Article XVII of the Railway Concession, which begins (in Section 66.1) with a requirement that "[t]he Parties shall first attempt amicably to settle all disputes arising out of or relating to this Agreement.”⁶⁶³ Conceivably, by virtue of the letter being signed by Mr. Borkowski as CEO of Rasia, and addressed to the Minister of Transport and Communication of Armenia, it could be said also to jump to the second step in the agreed dispute resolution process, which provides (in Section 66.2) that "[s]hould the Parties not be able to [amicably settle disputes] within 30 ... days of the declaration of a dispute, then they shall refer the matter for resolution” jointly to the Minister and to Rasia's CEO.⁶⁶⁴ The third and final step in the agreed process is that should the Minister and Rasia's CEO not be able to resolve a dispute within 30 days, both Parties “consent to submit” the dispute to ICSID arbitration for resolution.⁶⁶⁵

453. For purposes of the statute of limitations issue, the question is whether Rasia's initiation of the agreed dispute resolution process qualifies as “the filing of a claim in the prescribed manner,” in keeping with Article 340(1) of the Armenian Civil Code, or whether only the eventual submission of a claim to ICSID would satisfy that provision. The Respondent contends the latter, emphasizing

⁶⁶² C-38, Letter from Mr. J. Borkowski to Minister G. Beglaryan, 16 December 2015. ↩
⁶⁶³ C-1, Railway Concession, Section 66.1. ↩
⁶⁶⁴ Id. Section 66.2. ↩
⁶⁶⁵ Id. Section 66.3. ↩

[Page 150]

the ordinary meaning of the words "filing of a claim." The Claimants say the former, emphasizing the Civil Code's reference to "the prescribed manner," which they argue in this instance means initiating the multi-step dispute resolution process in the Railway Concession. The Tribunal has been provided with only one Armenian legal authority in connection with that question, namely excerpts from a 2012 Court of Cassation decision that relates to the initiation of a judicial proceeding, not an arbitration.⁶⁶⁶ There is no indication in the excerpts that the case involved a contractual dispute resolution provision, much less one requiring preliminary steps before a claim could be submitted to the agreed forum. In these circumstances, the decision is not authoritative on the matter in question. Nonetheless, it does suggest that in the judicial context, what matters for purposes of interrupting a limitations period is the "initiati[on] of a lawsuit," the date of which "can be found out by examining the registration stamp on the document received in court, as well as the date of receipt.”⁶⁶⁷

454. On balance, and absent any other guidance as to how to interpret Article 340(1) of the Armenian Civil Code in the context of a multi-step arbitration clause, the Tribunal considers that the relevant act is the filing of a Request for Arbitration before ICSID. This is the equivalent formality to the filing of a lawsuit in Armenian court. Moreover, it is consistent with Article 340(1)'s focus on “the filing of a claim,” which connotes the commencement of a legal proceeding by lodging the initial paperwork before a decision-making body. The following phrase which Claimants invoke – “in the prescribed manner” – is a dependent phrase, which qualifies the primary reference to a “filing," rather than supplants it. In other words, it conveys that a “filing" which does not comply with the applicable rules would not stop the clock for purposes of the statute of limitations. It does not convey, in the Tribunal's view, that simply following prescribed pre-requisites for a filing (such a written request for amicable dispute resolution) can somehow obviate the need for a filing itself, in order to stop the running of the clock.

455. For these reasons, the Tribunal concludes that Rasia's letter of 16 December 2015 did not interrupt the running of the three-year statute of limitations for contract breach claims, which commenced on 18 March 2015.

⁶⁶⁶ RL-86, The Court of Cassation of the Republic of Armenia, Case No. EAND/0052/02/11, 25 December 2012. ↩
⁶⁶⁷ Id. ↩

[Page 151]

2. Interruption by actions “evidencing the acknowledgment of the debt"

456. The second question posed by Article 340(1) of the Armenian Civil Code is whether the limitations period was interrupted by Armenia's taking any actions “evidencing the acknowledgment of the debt." The Parties have not submitted any authorities to assist in interpreting this Civil Code provision. In these circumstances, the Tribunal considers the likely purpose of the provision along with its literal text. Presumably, an “acknowledgment of [a] debt" by an obligor to an obligee may reasonably lead the obligee to consider a dispute resolved at least at the level of principle, without the need to initiate a legal proceeding. In these circumstances, the running of the limitations period is interrupted, and would begin anew only when the obligee “learns or should have learned" of a new violation of his or her rights, within the meaning of Article 337 of the Armenian Civil Code. The logical reason for such a provision is to prevent an obligor from encouraging the obligee's forbearance on filing a claim, in good faith reliance on the obligor's “acknowledgment of the debt," and then turning around and invoking the limitations period as having been running all the time notwithstanding the acknowledgment.

457. Taken in its most literal meaning, of course, this case does not involve a “debt,” in the sense of a financial obligation owed by one party to the other. Nonetheless, the Tribunal interprets the phrase in Article 340(1) more broadly, to include an acknowledgment of an outstanding contractual obligation to another, which is either intended to, or would have the natural effect of, encouraging a counterparty to refrain from initiating legal action.

458. The Claimants contend that this requirement was satisfied by the Respondent's statements on three occasions (15 February 2016, 18 March 2016, and 3 July 2017), each of which accordingly interrupted the statute of limitations.⁶⁶⁸ The Tribunal has examined these statements closely. Several points emerge.

459. First, none of the Respondent's statements on these occasions can be said to include any acknowledgment of wrongdoing on Armenia's part; to the contrary, they consistently defend Armenia's conduct, deny any breach on its part, and contend that Rasia was the party responsible for the failure of either Project to proceed.⁶⁶⁹

⁶⁶⁸ Cl. First PHB ¶ 308. ↩

⁶⁶⁹ See generally C-39, Letter from Minister G. Beglaryan to Mr. J. Borkowski, 15 February 2016; R-40, Transcript of the Meeting between A. Arakelyan, G. Grigoryan, H. Aharonyan, L. Voskanyan, J. Borkowski and A. Karapetyan, 18 March 2016; and C-318, Transcript of 3 July 2017 Meeting, 3 July 2017. ↩

[Page 152]

460. Second, and notwithstanding the Respondent's complaints about Rasia's performance, the Respondent consistently maintained on these occasions that the Concessions had not been terminated, but they remained in effect.⁶⁷⁰

461. Third, if taken in isolation, several of the Respondent's statements in early 2016 could be viewed as encouraging the Claimants to engage in practical discussions to revive at least the Railway Project, rather than declaring an end to the Parties' dealings. For example, the Respondent's 15 February 2016 letter – by which it responded to Rasia's 16 December 2015 invocation of the Railway Concession's dispute resolution procedure – stated that the Government “is willing and ready to solve the existing disagreements, while denying the existence of an actual dispute"; reaffirmed that “[e]ach provision of the [Railway] Agreement is important to the Government of RA, hence ... it would like to clarify the process of the Company's and its own Agreement obligations"; and invited Rasia to a meeting “in order to restore the natural workflow as intended by the Agreement, during which [both Parties] will also deliver on the Project developments, derived from [their respective] Agreement obligations ...”.⁶⁷¹ Similarly, during the meeting in March 2016, the Respondent “highlight[ed] that we are ready to continue the fulfillment of our obligations undertaken by our agreement concluded between us.... I suggest to cooperate and revive our relationships.”⁶⁷² Shortly thereafter, on 5 April 2016, the Respondent asked Rasia to provide a "sample time-line on the completion of the next steps and the obligations of the [Railway Concession],"⁶⁷³ and pledged that after receiving appropriate Corridor coordinates from Rasia, the Government would perform its reciprocal obligations, namely approving the Corridor and exercising eminent domain over the applicable lands.⁶⁷⁴

462. The record is thinner regarding any encouraging statements by the Respondent about reviving the Road Project. It must be recalled that Mr. Borkowski first became concerned in December 2014

⁶⁷⁰ See C-39, Letter from Minister G. Beglaryan to Mr. J. Borkowski, 15 February 2016, ¶ 1 (stating that Armenia's actions "do not release the Company from the Agreement obligations"), ¶¶ 2-4 (calling upon Rasia to take certain next steps under the Railway Concession); R-40, Transcript of the Meeting between A. Arakelyan, G. Grigoryan, H. Aharonyan, L. Voskanyan, J. Borkowski and A. Karapetyan, 18 March 2016, p. 1 (affirming that "certain rights within the project belong to" Rasia), p. 8 ("we signed an agreement with you, at the end it is in force”); C-318, Transcript of 3 July 2017 Meeting, 3 July 2017, p. 5 (“Yes, we have still a legally binding agreement"), p. 7 (stating that both Concessions were still in force "at the moment"). ↩

⁶⁷¹ See C-39, Letter from Minister G. Beglaryan to Mr. J. Borkowski, 15 February 2016, pp. 3-4. ↩

⁶⁷² R-40, Transcript of the Meeting between A. Arakelyan, G. Grigoryan, H. Aharonyan, L. Voskanyan, J. Borkowski and A. Karapetyan, 18 March 2016, p. 1. ↩

⁶⁷³ C-176, Email from Mr. G. Grigoryan to Mr. J. Borkowski, 5 April 2016. ↩

⁶⁷⁴ C-174, The Republic of Armenia's "Time-line on the Fulfilment of the Next Steps and the Obligations of the Parties under the Concession Agreement on the Construction of the Southern Armenia Railway", March 2016. ↩

[Page 153]

that the Government was treating the Road Concession as effectively terminated,⁶⁷⁵ and Claimants now claim that by March 2015, Armenia had "made clear its intention" to eliminate the Road Project.⁶⁷⁶ For a substantial time after that date, there was no correspondence at all between the Parties regarding the Road Project, and thus nothing that even arguably could be invoked as an event of interruption. The Respondent's letter of 15 February 2016, which the Claimants' invoke as the first communication satisfying the interruption standard, is entirely focused on the Railway Project, and does not mention the Road Project at all.⁶⁷⁷ As for the March 2016 meeting, there is only one passage referring to roads, in which the Respondent explained that CCECC had expressed interest in investing in both railway and road projects in Armenia, to which the Government had responded that it already had an agreement in force with Rasia. The minutes indicate that the Government's representative then stated to Mr. Borkowski: “we are very interested in cooperation with you, because without you ... we cannot move forward, because you have only the rights to go and implement the project."⁶⁷⁸

463. If the evidence had suggested that the Claimants took any of these early 2016 statements seriously and delayed moving forward with legal claims as a result, then the Tribunal might accept the situation to fall within the spirit, if not the letter, of Article 340(1) of the Armenian Civil Code. While not an “acknowledgment of a debt" in the narrowest reading of Article 340(1) of the Armenian Civil Code, statements acknowledging both Parties' ongoing contractual obligations to one another and professing a willingness to move forward could be seen as fulfilling the implicit broader purposes of the “interruption" provision, namely, to stop a limitations period from running while one party continues to encourage and promise mutual performance rather than a resort to litigation.

464. The insurmountable problem for the Claimants is that it is abundantly clear they did not rely on the Respondent's statements in any way. First, Claimants do not contend that they viewed the Respondent's words as providing any practical path forward to reviving the Projects. To the contrary, Mr. Borkowski testified that at the March 2016 meeting, he emphasized that the Projects had already lost the support of both of Rasia's would-be partners (Aabar and CCCC), without which

⁶⁷⁵ Second Borkowski Statement ¶ 89; see also C-19, Letter from Mr. J. Borkowski to Minister G. Beglaryan, 31 December 2014. ↩

⁶⁷⁶ Cl. Mem. ¶ 320. ↩

⁶⁷⁷ C-39, Letter from Minister G. Beglaryan to Mr. J. Borkowski, 15 February 2016. ↩

⁶⁷⁸ R-40, Transcript of the Meeting between A. Arakelyan, G. Grigoryan, H. Aharonyan, L. Voskanyan, J. Borkowski and A. Karapetyan, 18 March 2016, pp. 7-8. ↩

[Page 154]

Rasia practically could not proceed.⁶⁷⁹ For that reason, Mr. Borkowski claims to have told the Government during the March 2016 meeting that its request for an action plan to restart the Railway Project was "unreasonable.”⁶⁸⁰

465. Second, the record is equally clear that the Claimants did not view any of the Respondent's statements in early 2016 as a basis for forbearance in pursuing legal claims. Rather, the Claimants' response was consistent with a plan to push forward with litigation. For example, on 29 April 2016, Mr. Borkowski provided no comment on the Respondent's request for a proposed timeline of next steps, but instead expressed further complaints and demanded the audio record of the March 2016 meeting.⁶⁸¹ Less than two months later, on 25 June 2016, Mr. Borkowski sent the Government his Notice of Dispute under the US-Armenia BIT.⁶⁸²

466. As for the period following the Notice of Dispute, the only event the Claimants invoke as allegedly meeting the grounds for interruption of the limitations period is the 3 July 2017 Meeting, during which Armenia's Minister of Justice stated, in response to repeated questions by Claimants' representatives, that he considered both Concessions to still be in force “at the moment.”⁶⁸³ In the Tribunal's view, however, this statement falls far short of satisfying the requirements for interrupting the limitations period, when it was not accompanied either by any acknowledgment of the Respondent's wrongdoing or by any call for the Parties to revive the Projects. In the context of both Parties accusing the other of contract breach, and neither side proposing to resume contractual performance, a mere statement that contracts have not yet been formally terminated by either side cannot be seen as an inducement to defer filing legal claims. That is particularly the case when there were no meaningful discussions thereafter about possibly reviving either the Road Project or the Railway Project.

467. In conclusion, the Tribunal sees no basis in the evidence for finding, pursuant to Article 340(1) of the Armenian Civil Code, an "interruption" in the running of the statute of limitations for Rasia's breach of contract claims under either Concession. Those claims were not filed until 19 July 2018, far more than three years after 18 March 2015, which is the date the Claimants themselves identify

⁶⁷⁹ Second Borkowski Statement ¶¶ 175-176; February Tr. Day 3, Borkowski, 562:15-21. ↩

⁶⁸⁰ C-318, Transcript of 3 July 2017 Meeting, 3 July 2017, p. 5 (claiming that he had explained this at the March 2016 meeting). ↩

⁶⁸¹ C-177, Email from Mr. J. Borkowski to Mr. G. Grigoryan, 29 April 2016. ↩

⁶⁸² C-53, Letter from Mr. J. Borkowski to Minister G. Beglaryan, 25 June 2016. ↩

⁶⁸³ C-318, Transcript of 3 July 2017 Meeting, 3 July 2017, p. 7; see also Id., p. 5 (“Yes, we have still a legally binding agreement"). ↩

[Page 155]

as when they were “substantially and irreversibly deprived of their investments.”⁶⁸⁴ Accordingly, the Tribunal finds that Rasia's breach of contract claims under both Concessions are time-barred.

b. Mr. Borkowski's umbrella clause claims

468. The Tribunal likewise finds that Mr. Borkowski's corresponding umbrella clause claims under the BIT are time-barred as well.

469. As a threshold point, neither Claimants nor Respondent have cited any prior case that determines the source of the statute of limitations applicable to umbrella clause claims. The only authority advanced in this context is AES v. Kazakhstan, but in that case, the specific issue was not resolved: the tribunal rejected an umbrella clause claim as unfounded, and therefore found that "the question of limitation period under Kazakh law is irrelevant” in the context.⁶⁸⁵ It went on to say, in the next paragraph which the Claimants cite, that "[a]s to claims based on alleged breaches of substantial protection standards under the ECT and BIT, it is undisputed that time limitations applicable under national law do not apply to such treaty claims.”⁶⁸⁶ Read together, the AES v. Kazakhstan holding is best understood as not saying anything about the law applicable to the time-bar for umbrella clause claims (because it did not have to resolve that issue), but that time-bars for "pure" treaty claims would be governed by international rather than domestic law.

470. The Respondent does not cite any cases specifically on point either. Instead, it advances the more general notion, supported by the Burlington majority decision and the CMS Annulment Decision, that umbrella clauses do not transform the content or proper law of the underlying obligations, even if they permit claims for liability to be brought in a treaty forum.⁶⁸⁷ Neither of these cases addressed the issue of statutes of limitation.

471. On consideration, the Tribunal observes that Mr. Borkowski's claims under Article II(2)(c) of the BIT are predicated on Armenia's alleged failure to observe contractual obligations into which it entered with Rasia. Once Rasia no longer has contractual rights it could assert (because, for example, it has allowed the limitations period to lapse), it would be an oddity to allow Rasia's sole shareholder, Mr. Borkowski, in essence to revive those expired rights. Umbrella clauses may provide a path to an international dispute resolution forum, constituted under treaty, but they do not

⁶⁸⁴ Cl. Mem. ¶ 320 (emphasis added). ↩

⁶⁸⁵ CL-108, AES v. Kazakhstan, ¶ 430. ↩

⁶⁸⁶ Id., ¶ 431. ↩

⁶⁸⁷ Resp. Rej. ¶ 345 (citing RL-69, Burlington, ¶¶ 214-215, and RL-14, CMS Annulment Decision, ¶ 95(c)). ↩

[Page 156]

transform the nature of the underlying contractual rights and obligations; those underlying rights and obligations are still capable of extinguishment in accordance with the laws under which they initially were established. In this case, nothing in Article II(2)(c) of the BIT suggests an intention by the Contracting State Parties to allow foreign investors to assert treaty claims, derived from contract breaches, in circumstances where the right to pursue those same contract breaches has already lapsed as a matter of their own governing law. The Tribunal has already found that the claims based directly on alleged breaches of the contractual rights and obligations are time-barred under the applicable Armenian law, and accordingly the umbrella clause claims based on those same rights and obligations are also time-barred.

c. Further observations

472. Given the Tribunal's finding that both Rasia's contract claims and Mr. Borkowski's umbrella clause claims regarding the Concessions are barred under the applicable statute of limitations, one might query why the Tribunal proceeds to discuss the underlying contractual issues in the Liability section that follows. This is not just because the Parties have devoted substantial time to briefing these issues and may wish to know whether the contract claims would have succeeded, had they not been time-barred. More fundamentally, it is because the time bar for these particular claims does not dispose of the case: Mr. Borkowski asserts a number of other treaty claims under the BIT, which are not subject to an equivalent time bar derived from Armenia's limitations period for breach of contract claims.⁶⁸⁸ Yet the Parties have presented those treaty claims as very much interwoven with the question of whether, and to what extent, Rasia and/or Armenia performed their respective contractual obligations. Given the way the treaty claims have been presented, the Tribunal considers it appropriate to provide its general views on the underlying contractual claims, as a prelude to considering the BIT claims that remain for resolution.

VI. LIABILITY

473. The Claimants claim that the Respondent is in material breach of its obligations to Rasia under the Railway and Road Concessions, and that these breaches trigger an entitlement to compensation of Rasia under the Concessions or alternatively under the Foreign Investment Law of Armenia. The Claimants also contend that Armenia breached its obligations to Mr. Borkowski under the BIT and international law, triggering a separate entitlement to compensation. Specifically, they contend that

⁶⁸⁸ CL-108, AES v. Kazakhstan, ¶ 431. ↩

[Page 157]

the Respondent expropriated Mr. Borkowski's investments and failed to accord his investments treatment that is fair and equitable, non-arbitrary and non-discriminatory. The Respondent, on the other hand, contests the Claimants' claims in their entirety, and argues that the substantive claims lack merit and should be dismissed.

474. For clarity of exposition, and because many of the treaty claims in this case are predicated on contentions about compliance or non-compliance with underlying rights and obligations arising from the Concession Agreements, the Tribunal begins below with a summary of the Parties' positions regarding alleged breach of contractual obligations, followed by the Tribunal's analysis of these issues (Section A). This is followed by a summary of the Parties' positions regarding alleged violation of obligations under the BIT and international law, followed again by the Tribunal's analysis (Section B). Issues of causation arising from any findings of breach are deferred until the following Section VII.

A. RASIA'S CLAIMS UNDER THE CONCESSION AGREEMENTS

475. The Claimants argue that the Respondent breached its obligations to Rasia under the Concession Agreements. They state that the Respondent's core obligations of the Concessions included the following:

• a. Exclusivity: Armenia promised not to grant to any other person any “concession or other right or privilege to finance, design [or] construct" a competing roadway near its southern border (Section 15);
• b. Cooperation and non-interference: Armenia had an obligation to "cooperate with the Concessionaire [and] its contractors [...] in carrying out the Project" (Section 38) and to "do or cause the doing of all things reasonably required to give full effect to this Agreement" (Section 74); it also committed to letting the Concessionaire “carry out its activities without any interference from the Government" (Section 39(a) of the Concessions);
• c. Transparency: Armenia committed to providing “on a timely basis, all data (in whatever form) in the possession of the Government [...] relevant to the Project (Section 38);
• d. Stability of policies and legal framework: Armenia promised to provide and maintain a "favourable and stable legal framework" (Section 32(j));

[Page 158]

• e. Confidentiality: Armenia committed to not disclosing to any third party any of Rasia's "proprietary or confidential information (including specifications, plans and drawings) provided to or arising or acquired by [Armenia]” (Section 70); and
• f. Transferability: Rasia could sell or assign the Concessions at any time (Section 73(1)).⁶⁸⁹

476. The Claimants contend that the evidence confirms multiple breaches by the Respondent beginning from the third month after the Agreements entered into force. Some of the arguments concerning a breach of contractual obligations are similar to the allegations that the Respondent acted arbitrarily in violation of the BIT, which are set forth further below.⁶⁹⁰ The Claimants also contend that Armenia's defenses are meritless and unsupported by the record or by applicable law.⁶⁹¹

477. The Respondent contests the Claimants' allegations that it breached either of the Concession Agreements in any respect.

478. In the discussion that follows, the Tribunal organizes content by Project, meaning that it first summarizes (and then analyzes) the Parties' positions on liability with respect to the Road Project, and then does the same for the Railway Project.

(1) The Road Project

a. The Claimants' Position

479. The Claimants contend that the Respondent first breached the Road Concession by securing a loan from ADB in November 2012 and signing a variation order in a separate government contract for the procurement of a feasibility study for road works falling within the Claimants' exclusive concession territory, in violation of Rasia's exclusive right under the Road Concession to design, build and operate the Road Project within the concession area for a period of up to 50 years.⁶⁹² The Claimants also argue that the Respondent's engagement directly with third parties, including CCECC with respect to both the Road and Railway Projects, breached Rasia's exclusivity rights under the Concession Agreement, which were essential to Rasia's debt financing arrangements.⁶⁹³

⁶⁸⁹ C-1, Railway Concession, and C-2, Road Concession; Cl. Second PHB ¶ 40. ↩

⁶⁹⁰ Cl. First PHB ¶¶ 21, 32. ↩

⁶⁹¹ Id. ¶ 293. ↩

⁶⁹² Id. ¶¶ 21-23, 26-27, 31, 34-37, 48-58; Claimants' Second PHB ¶¶ 46-56; Cl. Mem., ¶¶ 3, 13, 49. (relying on C-2, Road Concession, Preamble, Art.1.1). ↩

⁶⁹³ Cl. Second PHB ¶¶ 40, 61, 260–61, 263, 265–68. ↩

[Page 159]

480. According to the Claimants, the Respondent's subsequent MOU with CCECC had the effect of "ring-fencing" the Projects in favor of CCECC to the exclusion of CCCC.⁶⁹⁴ The Claimants further contend that in consequence of the Respondent's cumulative actions which initially targeted the Road Project, but eventually affected both the Road and Railway Projects, Aabar terminated its proposed acquisition of both the Rail and Road Projects, while CCCC withdrew from the consortium, thereby contributing to the loss of the entire investment.⁶⁹⁵

481. The Claimants contest the Respondent's submission that the ADB loan was in respect of a road project outside the Concession Territory, arguing that it is speculative. The Claimants further argue that (i) the location of the design work covered by the ADB loan was unassigned as of December 2012 and was to be determined based on results of an anticipated feasibility study, (ii) the feasibility study referred to in the ADB loan documents could only possibly refer to a section of the road project overlapping Rasia's concession territory,⁶⁹⁶ and (iii) the route was subsequently identified in the Egis Feasibility Study, commissioned in October 2013, as running from Kajaran to Agarak, which falls within the Concession territory.⁶⁹⁷

482. With respect to the Respondent's argument that the ADB loan was executed only in March 2014, the Claimants argue that the evidence confirms that the Respondent issued its tender for a feasibility study on 2 October 2013, and ADB's letter to Rasia dated 25 January 2014 confirms that the loan for a road feasibility study within Rasia's Concession territory had already been obtained.⁶⁹⁸

483. The Claimants also argue that upon securing the loan and feasibility study from third parties, the Respondent began stonewalling the Road Project by (i) rejecting the availability payments contained in the Road Concession,⁶⁹⁹ and (ii) refusing to review and provide comments on the Road Feasibility Study prepared by CCCC.⁷⁰⁰ The Claimants also argue that the Respondent set out to destroy Rasia's consortium and block Aabar's acquisition by taking steps to replace Rasia/CCCC/Aabar with a new government-to-government consortium.⁷⁰¹

⁶⁹⁴ Cl. First PHB ¶¶ 271–72. ↩

⁶⁹⁵ Id. ¶¶ 17-20, 62, 246–47, 250, 269; Cl. Second PHB ¶¶ 25, 128-31. ↩

⁶⁹⁶ Cl. First PHB ¶¶ 38–41, 59; Cl. Second PHB ¶ 55. ↩

⁶⁹⁷ Cl. First PHB ¶¶ 48, 60. ↩

⁶⁹⁸ Cl. Second PHB ¶¶ 52-54. ↩

⁶⁹⁹ Cl. First PHB ¶¶ 24, 65, 67, 73. ↩

⁷⁰⁰ Id. ¶¶ 24, 74–75; Cl. Second PHB ¶ 75. ↩

⁷⁰¹ Cl. Second PHB ¶ 92. ↩

[Page 160]

484. The Claimants argue that the Respondent rebuffed or ignored their efforts to engage it in discussions regarding availability payments to implement the Road Project.⁷⁰² The Claimants also contend that the Respondent refused to sign the MOU which would have enabled CCCC and Chinese banks to collaborate with the Respondent's Ministry of Transport and Ministry of Finance over the quantum and terms of availability payments. According to the Claimants, the Respondent's refusal to sign the MOU was due to Minister Beglaryan's decision not to make any availability payments, because the Respondent had written off the Road Project after it became clear there would be no tolling. The Respondent's refusal to make availability payments, in the Claimants' view, also constitutes a breach of Armenia's obligation to cooperate with the Claimants and to give full effect to the Concessions under Section 74 of the Road Concession.⁷⁰³

485. With respect to the Respondent's refusal to review the Road Feasibility Study, the Claimants argue that the Respondent refused to constitute an inter-ministerial working group to examine it and prevented Rasia and CCCC from presenting the Feasibility Study results during the February 2014 Yerevan meetings.⁷⁰⁴ According to the Claimants, the Respondent's only written feedback on the Road Feasibility Study was its rejection of the study, because it preferred a Category I Road over the Category II Road that had been agreed in the Road Concession.⁷⁰⁵ Citing the Report of the November 2012 Site Visit in Yerevan, and the Road Terms of Reference dated 10 November 2012, the Claimants argue that the Respondent, Rasia and CCCC had all proceeded on the assumption that the Road Feasibility Report would feature a single Category II toll-free road.⁷⁰⁶

486. The Claimants also argue that after Rasia refused to sign amendments unilaterally demanded by the Respondent, which would have altered core financial terms and imposed additional costs on the Claimants of between US$ 100-150 million, the Respondent initiated a smear campaign and took other pernicious actions against Rasia. According to the Claimants, these actions by the Respondent included its purported termination of the Road Concession on 29 December 2014 and (as discussed further below) its cooperation with CCECC on the implementation of the Railway Project with a view to replacing Rasia, in breach of Rasia's right to exclusivity under the Railway Concession.⁷⁰⁷

⁷⁰² Cl. First PHB ¶ 69. ↩

⁷⁰³ Id. ¶¶ 71-73 (relying on C-2, Road Concession, Article X, Section 38 & 39, Article XVIII, Section 74). ↩

⁷⁰⁴ Id. ¶¶ 74-76. ↩

⁷⁰⁵ Id. ¶ 79. ↩

⁷⁰⁶ Id. ¶¶ 97–100, 263, 265–68; Respondent's Second PHB ¶ 54. ↩

⁷⁰⁷ Cl. First PHB ¶¶ 256–60. ↩

[Page 161]

487. The Claimants contend that the Road Concession was never rescinded or terminated by operation of law, whether unilaterally, by agreement of the Parties or implicitly by conduct of both or either of the Parties. First, in response to the Respondent's submission that the Road Concession was terminated by oral agreement of the Parties in February 2014, prior to the Respondent's engagement with third parties, the Claimants argue that Armenian law does not provide for oral termination of a written contract.⁷⁰⁸ Further, the Respondent's Minister of Justice admitted during a settlement meeting held on 3 July 2017 that the Road Concession remained in force as of that date.⁷⁰⁹

488. Second, the Claimants contend that the purported termination of the Road Concession on 29 December 2014 is invalid because as of that date, the Respondent was only in the process of seeking State approval for an agreement to rescind the Road Concession. Thus, the Respondent understood that any termination would require a formal State approval as well as an agreement on termination.⁷¹⁰ According to the Claimants, the Respondent's draft proposal for State approval to terminate the Road Concession was never approved.⁷¹¹

489. Third, the Claimants contest the Respondent's contention that it was entitled to terminate, and justified in terminating, the Road Concession once CCCC confirmed in its Road Feasibility Study that tolling was uneconomic owing to low traffic volume.⁷¹² According to the Claimants, Section 9(b) of the Road Concession expressly provided for availability payments, but not for tolling, as a condition precedent to construction. Consequently, availability payments were meant to meet the agreed threshold if tolling was deemed uneconomic. The Claimants further argue that tolling was not essential to the feasibility of the entire Concession, because the provision for tolling in the Road Concession was made only as a measurement for determining whether returns are “sufficient.”⁷¹³

490. Furthermore, the Claimants contend that (i) the Respondent failed to provide the formal termination notice required by Armenian law, and (ii) the Respondent's letter rejecting the Road Feasibility Study made no reference to any purported agreement to terminate. Further, the concerns raised in the letter rejecting the Road Feasibility Study, namely the Respondent's preference for a toll road

⁷⁰⁸ Cl. First PHB ¶¶ 64; 110, 116; Cl. Second PHB ¶ 79. ↩

⁷⁰⁹ Cl. First PHB ¶¶ 111–14. ↩

⁷¹⁰ Id. ¶ 119 (relying on R-31, Letter from Minister G. Beglaryan to D. Harutyunyan (attaching Draft Decision on Making Amendments to Decision of the Government of the Republic of Armenia No. 982-AG of 2 August 2012), 5 December 2014). ↩

⁷¹¹ Id. ¶ 114. ↩

⁷¹² Id. ¶¶ 86, 105-08. ↩

⁷¹³ Id. ¶ 107. ↩

[Page 162]

and issues with certain slopes and turns proposed in that Study, had never been raised with Rasia prior to June 2014.⁷¹⁴ In sum, the Claimants argue that there is no evidence that the Road Concession was terminated in accordance with the procedures set by Armenian law.⁷¹⁵ Therefore, the Road Concession remained in force and the Respondent was not free to engage with third parties concerning any other road project within Rasia's exclusive concession territory.

b. The Respondent's Position

491. In connection with the Road Project, the Respondent argues that contrary to Rasia's claim to have an exclusive right to build or rehabilitate any road in Southern Armenia, the terms of the Road Concession are unequivocal as to their requirement of the construction of two specific roads – a $1.1 billion “Category II” toll road and a $80 million rehabilitation of existing roads.⁷¹⁶ These terms, according to the Respondent, were neither waived, nor amended at any time by the Respondent.⁷¹⁷ The Respondent therefore submits that the Claimants' proposal in CCCC's Road Feasibility Study of a single $690.5 million road, which would be neither a high speed road, nor a toll road, was contrary to the requirements of the Road Concession.⁷¹⁸

492. The Respondent also contends that while private investment and generation of revenue through tolls was a critical component of the high speed road project, the Feasibility Study made no provision for revenue generation and instead proposed that all costs would be borne by the Respondent.⁷¹⁹ The Respondent also argues that Mr. Borkowski's testimony that the Parties agreed to proceed with a single road is not corroborated by the evidence on record.⁷²⁰ Moreover, the Respondent says, the Claimants themselves conceded that the two roads required in the Road Concession were not feasible.⁷²¹

493. The Respondent submits that Armenia repeatedly rejected the single toll-free road proposal.⁷²² Because Rasia's single-road proposal fell short of the technical requirements of the Concession Agreement, the Respondent communicated its rejection of the proposal to the Claimants first in

⁷¹⁴ Cl. First PHB ¶ 121. ↩

⁷¹⁵ Id. ¶ 116. ↩

⁷¹⁶ Resp. First PHB ¶¶ 25–26, 132–39, 144, 148, 150; Resp. Second PHB ¶ 45; Resp. Counter-Mem. ¶¶ 78–81. ↩

⁷¹⁷ Resp. First PHB ¶¶ 27-29, 145; Resp. Second PHB ¶ 59. ↩

⁷¹⁸ Resp. First PHB ¶¶ 146–48; Resp. Second PHB ¶¶ 34–35, 38, 41; Resp. Rej., ¶ 4. ↩

⁷¹⁹ Resp. First PHB ¶¶ 140-42; Resp. Counter-Mem. ¶¶ 72–73, 75–80. ↩

⁷²⁰ Resp. First PHB ¶¶ 30, 53. ↩

⁷²¹ Id. ¶¶ 24-26. ↩

⁷²² Resp. Second PHB ¶ 54. ↩

[Page 163]

October 2013, and again in February 2014.⁷²³ The Respondent also contends that while it delayed formally terminating the Road Concession for purely bureaucratic reasons, this Agreement was effectively terminated in 2014.⁷²⁴ In the Respondent's view, it was entitled thereafter to explore alternative options for road projects in Southern Armenia, including procurement of a feasibility study for a North-South Road Corridor (NSRC) project which geographically overlapped with Rasia's concession, and procurement of a loan for that purpose.⁷²⁵

494. The Respondent also contests the Claimants' assertion that Armenia breached the Claimants' right to an exclusive concession even before Rasia concluded its Feasibility Study. Specifically, the Respondent argues that it did not execute any loan agreement or feasibility study for a road project which overlapped geographically with Rasia's concession until February 2014, after the Claimants had failed to perform the Road Concession.⁷²⁶ The Respondent contends that the loan applications it made prior to February 2014 were merely requests to be pre-qualified for future loans, and that it made no actual commitments to borrow any funds with respect to road projects overlapping with Rasia's concession until March 2014.⁷²⁷ Further, the Respondent argues that the Claimants knew of the NSRC project and loan agreements, but they raised no issues or objections in 2013 or 2014.⁷²⁸

495. The Respondent contends that the Road Concession was terminated in at least one of several ways. First, the Respondent argues that having informed the Claimants of the Respondent's rejection of Rasia's single toll-free road proposal, the Road Concession could be deemed terminated under its Section 59.⁷²⁹ Second, the Respondent says that the Road Concession was rescinded by operation of Armenian law in consequence of Rasia's failure to perform, i.e., when Rasia concluded that the high speed toll road envisioned by the Concession was not feasible.⁷³⁰ Alternatively, the Respondent contends that Mr. Borkowski's participation in a different road project within the same geographic area for a broker fee, his letter dated 31 December 2014 seeking confirmation that the Road Concession had terminated, and his silence afterwards on the matter until 25 June 2016, can

⁷²³ Resp. First PHB ¶¶ 31, 150–52; Resp. Second PHB ¶¶ 66–68. ↩

⁷²⁴ Resp. First PHB ¶¶ 155-56; Resp. Counter-Mem. ¶¶ 82, 86. ↩

⁷²⁵ Resp. First PHB ¶¶ 33, 222-23, 237. ↩

⁷²⁶ Id. ¶¶ 226, 238; Resp. Second PHB ¶¶ 9, 75-76; Resp. Counter-Mem. ¶¶ 87–89. ↩

⁷²⁷ Resp. First PHB ¶¶ 227, 229–30. ↩

⁷²⁸ Id. ¶ 242. ↩

⁷²⁹ Id. ¶ 236; Resp. Counter-Mem. ¶¶ 7, 82. ↩

⁷³⁰ Resp. First PHB ¶¶ 237-38; Resp. Second PHB ¶¶ 60–66; Resp. Counter-Mem. ¶¶ 7, 82. ↩

[Page 164]

be construed as a termination of the agreement by verbal agreement of the Parties.⁷³¹ Under any of these termination scenarios, the Respondent asserts, its participation in the NRSC program did not constitute a breach.⁷³²

496. The Respondent denies the Claimants' allegation that Minister Beglaryan demanded a bribe from them. It argues that the alleged bribery demand, which Mr. Borkowski confirmed at the February Hearing that he had not mentioned to anyone at the time,⁷³³ is not supported by any contemporaneous evidence. The Respondent also contends that the allegation was not corroborated by the testimony of Mr. Tappendorf, and that both Mr. Grigoryan and Mr. Arakelyan denied in their witness statements that there had been any such demand for a bribe.⁷³⁴

497. With respect to Mr. Borkowski's testimony, the Respondent rejects as baseless his additional assertions that: (i) CCCC agreed to pay him 5% of the US$3.2 billion it stood to be paid for construction services; (ii) the reason CCCC never requested payment for the Feasibility Studies was because Chinese firms like CCCC do not send invoices; and (iii) the reference in Aabar's 21 September 2014 letter to all EPC profits going to Arabtec was a drafting error. The Respondent also contends that neither Mr. Borkowski's witness statements, nor the evidence on record supports his testimony that CCCC withdrew from the Project on account of the Respondent's alleged breach, its issuance of an RFP, or its subsequent MoU with CCECC.⁷³⁵

c. The Tribunal's Analysis

(i) Delivery of, and comment upon, the Road Feasibility Study

498. The Tribunal begins by recalling that in the sequence of events contemplated under the Road Concession, the first duty was on the part of Rasia to complete and deliver to the Government a feasibility study meeting the object and requirements set forth in the Concession. Under Section 20 of the Road Concession, the delivery of the feasibility study "in English together with an Armenian

⁷³¹ Resp. First PHB ¶ 238 (relying on R-19, Email from Mr. J. Borkowski to Minister G. Beglaryan); C-318, Transcript of 3 July 2017 Meeting; February Tr. 10:24–11:5; C-19, Letter from Mr. J. Borkowski to Minister G. Beglaryan, pp. 2-3, C-53, Letter from Mr. J. Borkowski to Minister G. Beglaryan; and February Tr. 336:4-337:5); Resp. Counter-Mem., ¶¶ 89, 229–31. ↩

⁷³² Resp. First PHB ¶ 239. ↩

⁷³³ February Tr. Day 3, Hanessian/Borkowski, 430:24-433:5. ↩

⁷³⁴ Resp. First PHB ¶ 54(xiii); Resp. Rej. ¶ 254; Resp. Counter-Mem. ¶ 110 (relying on February Tr. 430:24–433:5; Second Arakelyan Witness Statement ¶ 71; and Grigoryan Witness Statement, ¶¶ 12, 32). ↩

⁷³⁵ Resp. First PHB ¶¶ 10, 53, 217. ↩

[Page 165]

translation"⁷³⁶ triggered certain deadlines for comments and acceptance of the study. Acceptance of the study in turn triggered deadlines for various next steps, including a project financing period and a construction period.

499. In accordance with this defined process, the Tribunal considers that Rasia delivered the Road Feasibility Study to the Government on 24 January 2014. Although Claimants provided certain briefings on preliminary results prior to this date, including at the Dalian Meeting(s) in September 2013, it acknowledged in the course of those briefings that the final feasibility studies had not yet been translated into English or formally submitted to the Government.⁷³⁷ While the Railway Feasibility Study was submitted to the Government first in English on 7 October 2013, and then in Armenian translation on 31 December 2013,⁷³⁸ it appears that the Road Feasibility Study was finally submitted to the Government on 24 January 2014.⁷³⁹

500. Under the contractually defined process, delivery of the final Road Feasibility Study triggered a 30-day period for Government “comments, objections and suggestions," which Rasia was then obligated to consider prior to providing its own “final acceptance" of the Study.⁷⁴⁰ If those comments led to a conclusion that the Road Project was “unfeasible," then upon Rasia's request, the Parties were to undertake negotiations about measures that “may make the Project feasible.”⁷⁴¹ By contrast, if the Government submitted no comments with the 30-day period, then the Feasibility Study would be “deemed” to have been finally accepted by Rasia in the form originally provided.⁷⁴²

501. Claimants contend that in accordance with the latter provision, the Road Feasibility Study should be deemed to have been accepted by Rasia by March 2014, following expiration of the Government's comment period.⁷⁴³ The Tribunal however disagrees with the Claimants' premise, which is predicated upon the absence of any Government reaction in the interim. In fact, the evidence suggests that the Government did provide feedback, albeit not in formal written comments. First, the Government communicated “objections" during meetings even prior to

⁷³⁶ C-2, Road Concession, Section 20.1. ↩

⁷³⁷ C-117, “Southern Armenia Railway and High Speed Road – Summary of Key Results From Feasibility Studies" (Rasia), slide 4. ↩

⁷³⁸ C-127, Email from Mr. J. Borkowski to Minister G. Beglaryan, 31 December 2013. ↩

⁷³⁹ C-130, Email from Mr. J. Borkowski to Mr. G. Beglaryan, 24 January 2014. ↩

⁷⁴⁰ C-2, Road Concession, Section 20.2. ↩

⁷⁴¹ Id. Section 20.4. ↩

⁷⁴² Id. ↩

⁷⁴³ Cl. First PHB ¶ 8. ↩

[Page 166]

Rasia's delivery of the final study, based on Rasia's October 2013 reports that the study had confirmed that “a toll road structure is not feasible for the Southern Armenia High Speed Road project,"⁷⁴⁴ leaving only the option of a "[f]ree [r]oad" funded by Government availability payments.⁷⁴⁵ While recollections of the precise Government response differ, a common thread was that the Government was upset by this conclusion, to the point of questioning the continued viability of the Project.⁷⁴⁶ It appears that similar objections were voiced during meetings in February 2014, following Rasia's delivery of the final Road Feasibility Study, although again recollections differ as to the precise contours of the response.⁷⁴⁷ Whatever the wording used during the meetings, Mr. Borkowski clearly understood that the Road Feasibility Study had not been well received, as he reported to Mr. Tappendorf that he was “in the middle of war on [the] road.”⁷⁴⁸ Indeed, by late February and early March 2014, Mr. Borkowski appeared to shift the focus of his energies to exploring the possibility of a somewhat revised road project, which might involve some form of integration of the Rasia-CCCC project into the broader ADB-financed NSRC road program.⁷⁴⁹ In mid-March 2014, Mr. Borkowski acknowledged that this would require modifications to the existing Road Feasibility Study, including to the “recommended alignment of the road project to the standards of the” NSRC.⁷⁵⁰

502. In the Tribunal's view, these exchanges do not point contractually to the absence of Government comment of the original Road Feasibility Study, leading to that study being “deemed” accepted by Rasia pursuant to Section 20.4 of the Road Concession.⁷⁵¹ Rather, the evidence is more consistent with Rasia considering the Government's objections and undertaking negotiations about “such reasonable measures, which may make the Project feasible,”⁷⁵² pursuant to Section 20.4 of the Road Concession. In these circumstances, the Road Concession simply imposed an obligation to

⁷⁴⁴ C-119, Email from Mr. J. Borkowski to Mr. G. Grigoryan (attaching letter from Mr. J. Borkowski to Minister G. Beglaryan), 7 October 2013. ↩

⁷⁴⁵ C-334, Email from Mr. J. Borkowski to Mr. G. Grigoryan, 25 October 2013. ↩

⁷⁴⁶ See supra ¶¶ 180-181. ↩

⁷⁴⁷ See supra ¶¶ 204-205. ↩

⁷⁴⁸ CT-6, Email from Mr. J. Borkowski to Mr. C. Tappendorf, 19 February 2014. ↩

⁷⁴⁹ See supra ¶¶ 208-209. ↩

⁷⁵⁰ R-19, Email from Mr. J. Borkowski to Minister G. Beglaryan, 20 March 2014 (attaching Letter from Mr. D. Dole to Mr. J. Borkowski, 18 March 2014, and Draft Memorandum of Understanding between Armenia and CCCC); C-239, Email from Mr. J. Borkowski to Mr. G. Grigoryan, 21 March 2014 (attaching Letter from Mr. J. Borkowski to Minister G. Beglaryan). ↩

⁷⁵¹ C-2, Road Concession, Section 20.4. ↩

⁷⁵² Id. ↩

[Page 167]

negotiate in good faith,⁷⁵³ not an obligation to implement the Road Feasibility Study in the form proposed.

(ii) The Road Feasibility Study differed materially from that agreed

503. This conclusion is particularly warranted, given the content of the Road Feasibility Study, which differed materially from that agreed in the Road Concession. In several respects, Rasia failed to propose a Road Project which complied with the core object of the Road Concession. As discussed further below, that object was to develop two roads in Southern Armenia, one of which – the new "High Speed Road" mentioned in the title of the agreement – would be capable of revenue generation through tolls, to differentiate it from more traditional government-funded road projects. Yet the Road Feasibility Study departed significantly from this concept.

504. First, the Road Concession clearly envisioned a two-road scheme. Section 3, entitled “Grant of Concession," used two separate subparagraphs to describe these two roads. First, Section 3(b) obliged Rasia as Concessionaire to “design” and “build” (inter alia) the “Southern Armenia High Speed Road," while Section 3(e) obliged Rasia to "rehabilitate ... the existing toll free road" within a budget that was separately defined (USD 80 million).⁷⁵⁴ While the Road Concession contemplated that some “infrastructure and facilities ... currently or formerly used" in existing roads might be “incorporated in the Southern Armenia High Speed Road,”⁷⁵⁵ nothing suggested that this provision in Section 3(b) could obviate entirely the plan to deliver to the Government of Armenia, at the end of the Project period, two separate roads. To the contrary, the Road Concession referred in several places to a map included as Schedule B, which was said to “indicatively show[]" the placement of the "Corridor” for the new “High Speed Road," while it also "reflected" the route of the existing road.⁷⁵⁶

505. The Tribunal does not accept the Claimants' contention that the Parties agreed to vary this central feature of the Road Concession during the CCCC site visit in November 2012.⁷⁵⁷ While CCCC's site visit report did describe its own understanding that the project was to involve the “upgrading" of an existing road with “new build” only in certain limited bypass sections,⁷⁵⁸ this report notably

⁷⁵³ C-2, Road Concession, Section 20.4. ↩

⁷⁵⁴ Id., Sections 3(b)(i), (e). ↩

⁷⁵⁵ Id., Section 3(b)(ii). ↩

⁷⁵⁶ See supra ¶¶ 135 et seq. ↩

⁷⁵⁷ Cl. First PHB ¶ 84. ↩

⁷⁵⁸ C-96, CCCC, “Site Visit Report: Southern Armenia High Speed Road Project,” November 2012, pp. 1, 6, 7, 12. ↩

[Page 168]

failed to reference the Road Terms of Reference that Rasia signed at the conclusion of the site visit, which described the Road Project as “defined in Section 3” of the Road Concession.⁷⁵⁹ Nothing in either document reflected an express agreement by the Government to abandon the original two-road scheme in favor of a plan that would result only in one southern road, albeit one with certain bypasses and improvements. They certainly did not reflect agreement on the significant route revision that would result from the one-road construct reflected in the Road Feasibility Study.

506. As shown in the Respondent's illustration reproduced at paragraph 137 above, Schedule B of the Road Concession had set forth a proposed route that (a) started out almost directly south from Sisian and Agitu, significantly to the west of the meandering existing road, and that (b) would cross the existing road (and head east of it) somewhere between Gehi and Kapan, and then (c) continue south to the southern border roughly in parallel with the existing road. This proposed route, as appended to the Road Concession, was entirely distinct from the existing road south of Sisian.⁷⁶⁰ The Tribunal accepts that the Road Concession described Schedule B as “indicatively show[ing]" the proposed Corridor for the Road,⁷⁶¹ a phrase which disclaims absolute precision and naturally allows for some variation. Nonetheless, the word “indicative" cannot be divorced of all meaning: it naturally requires that Schedule B provide a reasonable sign or suggestion of what will follow.

507. Yet the evidence shows that Mr. Borkowski did not consider himself bound even indicatively by the route shown in Schedule B of the Road Concession. To the contrary, he ultimately admitted during the February Hearing that this route was "pulled out of thin air" for purposes of Schedule B, without his having given any prior consideration to the associated practicalities.⁷⁶² That astonishing admission does not, however, change the terms of the Parties' agreement, which had never envisioned a single-road project with a route that largely tracked the existing road. Indeed, the subsequent Road Terms of Reference again referenced the Corridor for the Road Project as the one “indicatively shown on the map” in Schedule B of the Road Concession.⁷⁶³ Yet the Road Feasibility Study that Rasia ultimately delivered to the Government abandoned the two-road concept in its entirety, proposing only a rehabilitation of the existing road with bypasses in certain discrete areas.

⁷⁵⁹ C-98, Road Terms of Reference, Section 2. ↩

⁷⁶⁰ Resp. Counter-Mem. p. 32, Figure 5. ↩

⁷⁶¹ C-2, Road Concession, Section 1. ↩

⁷⁶² February Tr. Day 2, Hanessian/Borkowski 354:1-12. ↩

⁷⁶³ C-98, Road Terms of Reference, Section 9. ↩

[Page 169]

508. In addition to these significant departures from the Road Concession, the Road Feasibility Study also incorporated technical criteria which dramatically departed from the concept on which the Parties originally had agreed. From the outset (as reflected in the Framework Agreement), the object for Armenia was to grant a concession which would result in a "new high speed road."⁷⁶⁴ The Road Concession contained the phrase “High Speed Road” in its title.⁷⁶⁵ While the Road Concession did not define the technical parameters to qualify as “High Speed," Rasia and the Government subsequently agreed on certain principles in the Road Terms of Reference, the purpose of which was stated expressly to be to "specify the Feasibility Study Requirements," including "technical ... requirements.”⁷⁶⁶ Among the agreed parameters were that (a) the new road “should meet the requirements: for a Class II category road as defined in Armenia's Construction Norms, and (b) was to have certain maximum gradients and minimum curve radiuses.⁷⁶⁷ Yet the Road Feasibility Study as delivered used the specifications matching a Chinese Class II road, rather than the applicable Armenian Class II specifications, and in several respects significantly departed from the maximum gradients and minimum curve radiuses on which the Parties had agreed.⁷⁶⁸ The result was a proposed design speed of 40-60 km/hour depending on terrain, rather than the 90-100 km/hour design speed that the Parties had jointly referenced in the Road Terms of Reference.⁷⁶⁹

509. The Claimants maintain that these technical objections to the Road Feasibility Study were manufactured post-hoc for purposes of the arbitration.⁷⁷⁰ That argument is belied by the record, which demonstrates that the Government had concluded by 1 April 2014 that the Road Feasibility Study "is inefficient," proposing a “design speed [of] 60 km/hr and 40 km/h ... as well as ... horizontal curves with small radius and large longitudinal slopes.”⁷⁷¹ This view was shared with the ADB, with which both Mr. Borkowski and Mr. Beglaryan were separately in touch in late March and early April 2014, in connection with Mr. Borkowski's own proposal that the Parties

⁷⁶⁴ C-52, Framework Agreement, p. 1. ↩

⁷⁶⁵ C-2, Road Concession, p. 1. ↩

⁷⁶⁶ C-98, Road Terms of Reference, Section 2. ↩

⁷⁶⁷ Id. ↩

⁷⁶⁸ For example, the Road Terms of Reference had referenced a maximum vertical/longitudinal gradient of 4%, but the Road Feasibility Study proposed a 6.9% gradient. Similarly, the Road Terms of Reference had indicated a minimum curve radius of 600 meters, but the Road Feasibility Study included curves with a tight 45 degree radius, resulting in what colloquially could be described as “hairpin turns” and “switchbacks." Cf. C-98, Road Terms of Reference, Section 10 with C-122, Road Feasibility Study, p. 9; Harrison Report, 23 July 2020, ¶¶ 5.7.2, 5.7.23. ↩

⁷⁶⁹ C-122, Road Feasibility Study, p. 9; April Tr. Day 1, Hanessian/Harrison, 1666:3-22; see also Resp. First PHB ¶¶ 148-149 (chart displaying the relevant technical differences). ↩

⁷⁷⁰ Cl. First PHB ¶¶ 115, 121. ↩

⁷⁷¹ C-294, Letter from Minister G. Beglaryan to Mr. D. Dole, ADB, 1 April 2014. ↩

[Page 170]

consider a modified deal under which Rasia and CCCC might help implement an ADB-supported southern tranche of the NSRC, with appropriate modifications to the Road Feasibility Study. On 16 June 2014, the Government wrote directly to Mr. Borkowski, emphasizing technical concerns along the same lines as Mr. Beglaryan's 1 April 2014 letter to the ADB.⁷⁷²

510. Finally, and perhaps most importantly, the project described in the Road Feasibility Study departed dramatically from the Road Concession in terms of the funding model. The Claimants suggest that the Parties had always left open the possibility that the Road Project might have to be 100% Government-funded, first by providing in the Framework Agreement that "the terms applicable to the high speed road ... may include (1) road availability payments from the Ministry of Transport and Communications, and/or (ii) tolls,”⁷⁷³ and second by providing in the Road Concession that construction would commence only after Rasia and the Government reached agreement “regarding the payment of availability payments by the Government to the Concessionaire,” with the proviso that "such availability payments when combined with tolls charged by the Concessionaire” would be sufficient to cover the costs of the road, including financing costs and return on equity.⁷⁷⁴ In the Tribunal's view, this interpretation is incorrect. As a threshold point, the Framework Agreement was expressly terminated upon execution of the Concessions,⁷⁷⁵ so the "and/or" formulation adopted in it did not continue to be the operative contractual language. As for Section 9(b) of the Road Concession, this must be read in the context of other provisions of the Road Concession, and in the broader context of the transaction. In that context, the Section cannot reasonably be read as authorizing Rasia to propose a project to be entirely funded by Government payments.

511. It must be recalled, as a start, that before Armenia ever entered into discussions with Rasia, it had initially contemplated financing the North-South road development on the basis of loan facilities from international development banks, including the ADB. In May 2010, a consultant for the ADB (PADECO) suggested that Armenia consider a private-partnership model to finance Tranche 4, to limit Armenia's financial exposure and its need to borrow so much from development banks.⁷⁷⁶ This provides useful background to understand why Rasia's eventual proposal to Armenia must have appeared both refreshing and appealing. That proposal rested on the central plank, described in Section 3 of the Road Concession, that Rasia would “at its own cost and risk ... implement from

⁷⁷² R-26, Letter from A. Arakelyan to Mr. J. Borkowski, 16 June 2014. ↩

⁷⁷³ C-52, Framework Agreement, ¶ 3(m) (emphasis added). ↩

⁷⁷⁴ C-2, Road Concession, Section 9(b). ↩

⁷⁷⁵ C-52, Framework Agreement, ¶ 11. ↩

⁷⁷⁶ See supra ¶ 102. ↩

[Page 171]

its own funds and attracted Project Financing,” the two-road Road Project described therein.⁷⁷⁷ The preliminary estimate of Rasia's "budget for constructing the new high speed road" was stated to be “no less than USD 1.1 billion.”⁷⁷⁸ Although Mr. Borkowski later admitted that “this was a number pulled out of thin air,"⁷⁷⁹ there is no evidence that he disclosed that fact to Armenia. The use of a number of that magnitude, together with language referring to Rasia's "own cost" and implementation from “its own funds” (together with project financing), clearly could be expected to connote something other than ultimate Government financing of the entire Road Project.

512. Obviously, both Rasia and whichever project financiers Rasia arranged to advance these significant funds would expect to be paid back eventually, with an appropriate return. But the Road Concession is replete with indications that at least some of this pay-back was expected to come from revenue that the new high speed road itself would generate. It makes no sense to use the term “revenue," in terms of the road, unless some form of tolling was implicit in the agreement.

513. The notion of the new High Speed Road generating revenue, particularly from the use of tolling, is reflected in numerous provisions of the Road Concession. This includes Section 3(f), which anticipated that Rasia would pay concession fees to the Government, and Section 4, which described such fees as fixed for the first 10 years but thereafter variable, based on a percentage of the “annual gross revenue earned” from the Road operation.⁷⁸⁰ Obviously, if the Road was not expected to generate revenue, this provision makes no sense whatsoever; as Mr. Borkowski conceded on cross-examination, there is no reason the Parties would contract for Rasia to pay concession fees back to the Government out of funds the Government had advanced in their entirety in the first place.⁷⁸¹

514. Next, as discussed above, Section 9(b) of the Concession Agreement contemplated a later agreement on the amount of Government availability payments that would be necessary, “when combined with tolls charged by the Concessionaire,” to allow repayment of debt with interest and a sufficient return on equity.⁷⁸² Nothing in this phrasing suggests that it was optional whether to use tolls at all. That would render without purpose Section 18's requirement that the Road

⁷⁷⁷ C-2, Road Concession, Section 3(b) (emphasis added). ↩

⁷⁷⁸ Id., Preamble. ↩

⁷⁷⁹ February Tr. Day 2, Hanessian/Borkowski 354:1-12. ↩

⁷⁸⁰ C-2, Road Concession, Sections 3(f), 4 (emphasis added). ↩

⁷⁸¹ February Tr. Day 2, Kalicki/Borkowski, 364:2-11. ↩

⁷⁸² C-2, Road Concession, Section 9(b) (emphasis added). ↩

[Page 172]

Feasibility Study take into account the World Bank's environmental, health and safety guidelines for "toll roads."⁷⁸³ It would also be inconsistent with Section 9(i) of the Concession Agreement, which predicated moving forward on a precondition that financing agreements would be "sufficient" for Rasia to operate and maintain the road “until such time as it generates income sufficient to meet its obligations as they become due (‘Project Financing').”⁷⁸⁴ In other words, the notion that the road would “generate[] income” at least to some extent was baked into the Road Concession's definition of Project Financing.

515. The Tribunal also observes that Section 39(c) of the Road Concession granted Rasia the discretion to "fix all tolls," provided that passenger vehicle tolls would be fixed at half of that of commercial vehicles.⁷⁸⁵ The fact that Rasia had the freedom to set the level of tolls underscores that the Road Project ultimately was to be at its own cost and risk; it could decide whether revenue would be best generated by higher toll levels that might result in lower traffic volume, or by lower toll levels that might encourage higher traffic volume. But entrusting Rasia with these supply-and-demand considerations with respect to toll levels does not imply that Rasia could decide unilaterally to dispense with tolls in their entirety, and thereby with the notion of revenue generation, leaving the Government to bear the full burden of road construction and maintenance.

516. Claimants note that Section 9(b), which refers to an eventual agreement between the Parties on the use of availability payments in combination with tolls, was classified in Section 11.4 as a "[c]ondition precedent ... for the benefit of the Concessionaire.”⁷⁸⁶ From this language, the Claimants conclude that Rasia was free unilaterally to decide to waive any use of tolls.⁷⁸⁷ Of course, this argument is inconsistent with the fact that Section 9(i), which refers to the road eventually becoming income-generating, is designated in Section 11.3 as a condition precedent “for the benefit of both Parties.”⁷⁸⁸ More fundamentally, the Tribunal considers that the overall purpose of Section 11 is to allow a party to waive a benefit it is to receive, but not a burden or cost it is expected to bear. Claimants however seek to use the Section in the opposite way, to waive only a selected portion of Section 9(b) (the words “when combined with tolls”), while continuing to insist on the benefit conveyed by another portion of the same section that is directly linked (“availability

⁷⁸³ C-2, Road Concession, Section 18. ↩

⁷⁸⁴ Id., Section 9(i) (emphasis added). ↩

⁷⁸⁵ Id., Section 39(c). ↩

⁷⁸⁶ Id., Section 11.4. ↩

⁷⁸⁷ February Tr. Day 1, McNeil, 29:12-18. ↩

⁷⁸⁸ C-2, Road Concession, Section 11.3. ↩

[Page 173]

payments ... when combined"). Nothing in Section 11 permits a party unilaterally and selectively to edit a particular provision of the Road Concession, in order to alter the balance achieved by the agreed text in a way that is more favorable to its position.

517. As for Claimants' further suggestion that the Parties subsequently agreed during the CCCC site visit to abandon any tolling element,⁷⁸⁹ this is belied by the Road Terms of Reference, which Rasia and Armenia signed after CCCC completed its site visit. That agreement provided that the forthcoming Road Feasibility Study would estimate “investment efficiency" for the Road Project, including, inter alia, calculations of “Net Present Value (NPV), Internal Rate of Return (IRR), and Payback Period”⁷⁹⁰ – terms which, by definition, assume some revenue generation. Mr. Borkowski conceded under cross-examination that all of these provisions dealing with a return on investment would be rendered otiose by an “all availability payments” scheme,⁷⁹¹ which he also conceded was “just another word for the government pays for the road.”⁷⁹² Yet the Road Feasibility Study did not in the end provide any estimates of “net present value, internal rate of return [or] payback period," precisely because it assumed no revenue generation from the road at all, contrary to the parameters agreed in both the Road Concession and the Road Terms of Reference.

518. For all of these reasons, the Tribunal concludes that the Parties' agreements were predicated on the use of tolls to generate revenue that would be used to defray, at least to some extent, the costs of the Road Project. This is not to say, however, that tolls were ever expected to cover the full costs of the Road Project. It seems clear, not least from Section 9(b) of the Road Concession, that the Government was expected to have to cover some portion of the costs as well, through availability payments that would augment the revenues generated by tolling, and which in combination would enable the payback of the financing arranged for the Project. But nothing in the Road Concession or the Road Terms of Reference contemplated that the Road Project would be financed on an "all availability payments” basis, which effectively would shift the full financial burden of the Project from the Concessionaire to the Government. Indeed, without at least some notable revenue generation from tolls, it is unclear what benefits a private financing model would offer Armenia, beyond the development bank financing model it was already exploring through the broader ADB-financed NSRC project.

⁷⁸⁹ Cl. Reply ¶¶ 321, 336; February Tr. Day 2, Borkowski, 339:17-23. ↩

⁷⁹⁰ C-98, Road Terms of Reference., Section 25. ↩

⁷⁹¹ February Tr. Day 3, Hanessian/Borkowski, 383:13-384:1. ↩

⁷⁹² February Tr. Day 2, Hanessian/Borkowski, 358:10-14. ↩

[Page 174]

519. In short, notwithstanding the Road Concession's reference to a two road project, involving delivery of a $1.1 billion Armenian Category II toll road and a $80 million rehabilitation of existing roads, undertaken initially at Rasia's "own cost" with the expectation that at least some of those costs would be reimbursed by tolls, Rasia's Road Feasibility Study proposed a much smaller ($690 million) single-road project, entailing a rehabilitation of the existing road (35% of the cost) with certain new bypasses (65% of the cost),⁷⁹³ to be financed in its entirety by the Armenian Government. This was a material departure from the terms of the Road Concession.

(iii) Armenia had no duty to accept the Road Project as re-envisioned

520. Given that the project described in the Road Feasibility Agreement differed materially from that which had been described in the Concession Agreement and Road Terms of Reference, the Respondent had no obligation to accept the Road Project as now re-envisioned.

521. As discussed above, the Road Concession provided, in Section 9(b), that construction could commence after "the following condition[] has been satisfied or waived”: an “Agreement between the Government and the Concessionaire” regarding the applicable combination of availability payments and anticipated toll revenue that would cover project costs.⁷⁹⁴ Implicit in this wording is the possibility that the parties might not arrive at such an agreement. There has been no evidence adduced as to whether Armenian law recognizes the concept of an "agreement to agree," but even if the clause could be read to amount to such, it cannot be read to oblige the Government to agree to a financial structure that involved no combination at all of the two elements, but solely of availability payments without any revenue generation from tolls. To accept such an argument would be to turn the financing structure of the Road Concession Agreement on its head, negating among other things the Agreement's provision on a “variable concession fee" to be based on the annual gross revenue earned by operation of the road. Other clauses of the Agreement, discussed above, would likewise have to be ignored.

522. The Claimants concede that the Concession Agreement would have had to be amended to reflect the significant changes in the Project that Rasia proposed.⁷⁹⁵ They also concede that the

⁷⁹³ April Tr. Day 1, Harrison, 1608:4-10 (providing the 65% and 35% allocation). ↩

⁷⁹⁴ C-2, Road Concession, Section 9(b). ↩

⁷⁹⁵ Cl. First PHB ¶ 84 (contending that the “one-road solution," which Claimants say was jointly agreed during the November 2012 site visit, "would likely have been the subject of an Amendment to the Concession Agreement ..."). ↩

[Page 175]

Government was not legally obliged to accept proposed amendments to the Agreement.⁷⁹⁶ In fact, Mr. Borkowski's conduct vis-à-vis the Government's own proposed changes to the Railway Concession Agreement (discussed further below) showed that any amendment to either agreement required the consent of both Parties.⁷⁹⁷

523. In sum, it was open to the Government to agree to the major changes wrought by the Road Feasibility Study (two roads rather than one, Chinese Class II speeds rather than Armenian Class II speeds, and the abandonment of tolling). But the Government was not obliged to do so. The Government was thus within its rights to decline the proposal to proceed on the new basis Rasia proposed. Its decision not to accept the Road Feasibility Study on the terms proposed by the Claimants did not constitute a breach of contract.

524. The Claimants nonetheless complain that the Government refused to “constitute an interagency working group to review the Road Feasibility Study," as it had done for the Railway Feasibility Study, and declined to “provide a single technical comment" during February 2014.⁷⁹⁸ In the Claimants' view, this constituted a breach of the Government's obligation under Sections 38 and 74 of the Road Concession to “cooperate with the Concessionaire ... in carrying out the Project," and to "do or cause the doing of all things reasonably required to give full effect to this Agreement.”⁷⁹⁹ The Tribunal disagrees.

525. First, as a legal matter, the Road Concession made no reference to (much less, imposed an obligation regarding) the establishment of an interagency working group. Moreover, it had always envisioned a possibility that the Government would not provide timely feedback on the Road Feasibility Study. It provided specific consequences for such a contingency, namely that absent Government comment for Rasia to address in a further iteration, the Study would be deemed accepted by Rasia in its present form.⁸⁰⁰ Nothing in the Road Concession suggests that this

⁷⁹⁶ February Tr. Day 3, Hanessian/Borkowski, 405:7-13 (Mr. Borkowski agreeing that the Government was under no obligation to amend the Road Concession to provide for one free road in lieu of the two-road scheme initially described). ↩

⁷⁹⁷ C-19, Letter from Mr. J. Borkowski to Minister G. Beglaryan, 31 December 2014 (criticizing the Government's proposals and stating that these “proposed amendments cannot be accepted by Rasia FZE,” while indicating that Rasia might propose amendments of its own in future). ↩

⁷⁹⁸ Cl. First PHB ¶¶ 24, 65, 74-76. ↩

⁷⁹⁹ Id. ¶ 66; C-2, Road Concession, Sections 38 and 74. ↩

⁸⁰⁰ C-2, Road Concession, Sections 20.2 and 20.3. ↩

[Page 176]

contractually anticipated scenario would itself constitute a breach of other provisions in the contract.

526. Second, as a factual matter, the Tribunal has found that the Government did react to Rasia's abandonment of the key concept of a toll road – the most basic principle of the Road Feasibility Study – as soon as Rasia informed it of that proposal in October 2013. The Government voiced "objections" immediately to that revision, and indicated that it threatened the continued viability of the Project.⁸⁰¹ The Government voiced similar objections during meetings in February 2014, following Rasia's delivery of the final Road Feasibility Study,⁸⁰² and Mr. Borkowski clearly understood the critical nature of the Government's concerns, as he reported to Mr. Tappendorf that he was “in the middle of war on [the] road.”⁸⁰³ In these circumstances, with the concept central to the Road Project cast in doubt, the Government was not obligated to take further steps to evaluate the Road Feasibility Study until such time as Rasia reverted with a Study that matched the core object of the Road Concession. The Claimant's re-interpretation of the Road Project was so distant from what had been agreed in the Road Concession that the Government was entitled to say so in October 2013 and February 2014, and to decline to proceed further.

(iv) Counterproposals and disinterest in negotiations are not a breach

527. The Claimants also contend that the Respondent breached the Road Concession when Minister Beglaryan purportedly declared, in October 2013, that the Government was unwilling to make any availability payments at all.⁸⁰⁴ Any such declaration must be seen, however, in the context of Mr. Borkowski first having informed Minister Beglaryan that Rasia was abandoning the notion of any tolling to generate revenue, meaning it expected the Government to bear the full costs of the Road Project. It is understandable that when confronted with Rasia's starkly revised approach, the Minister reacted correspondingly, denying any interest in the Government's financing the revised Road Project. It is also understandable that when Mr. Borkowski attempted to push his re-interpreted version of the Road Project at the February 2014 meeting in Yerevan, without any element of tolling and now involving a single-road rather than a two-road project, his efforts were rebuffed.⁸⁰⁵

⁸⁰¹ See supra ¶¶ 180-181. ↩

⁸⁰² See supra ¶¶ 204-205. ↩

⁸⁰³ CT-6, Email from Mr. J. Borkowski to Mr. C. Tappendorf, 19 February 2014. ↩

⁸⁰⁴ Cl. First PHB ¶¶ 24, 65, 67. ↩

⁸⁰⁵ February Tr., Day 6, McNeill/Arakelyan, 1031:25-1032:23. ↩

[Page 177]

528. The same point applies to the Claimants' complaint that the Respondent refused to sign a draft MOU by which Armenia and CCCC would seek to integrate CCCC's proposed single road into the broader NSRC initiative. As Mr. Borkowski himself described this proposal, it would require modification of the existing Road Feasibility Study and its proposed road alignment.⁸⁰⁶ This simply underscores that the project as proposed by Rasia in that Study had been materially adjusted in a manner that was inconsistent with the terms of the Concession Agreement, and that the Concession Agreement would have had to be modified further to fit into the NSRC. The Government was not in breach of the Road Concession by declining to pursue the matter further.

(v) Armenia did not effectively terminate the Road Concession

529. From the above analysis, the Tribunal concludes that the Respondent would have been entitled to terminate the Road Concession. The difficulty is that it did not complete the required steps to do so, leaving the Road Concession formally in place, albeit not actively pursued (after a time) by any Party.

530. As previously discussed, a draft decision authorizing contract termination was prepared within the Ministry of Transport in December 2014 and submitted to the Ministry of Justice and the Chief of the Staff of the Government for consideration.⁸⁰⁷ But for reasons that remain unexplained, the formal termination decision was never signed or sent to Rasia.⁸⁰⁸ Instead, there were certain informal communications about the matter. Mr. Borkowski says he was informed by telephone “on or around 29 December 2014” of the Government's decision to terminate the Road Concession,⁸⁰⁹ and on 31 December 2014, he wrote that he was “still waiting for confirmation that the Southern Armenia High Speed Road Concession Agreement has been terminated."⁸¹⁰ Although the Government apparently did not follow up with that confirmation, all participants effectively let the matter go. There were no further communications about the Road Project for 18 months, until Mr. Borkowski sent his Notice of Dispute under the BIT in June 2016.

531. In other words, the Government did not employ the means available to it to protect its interests under the Agreements and Armenian law. This meant that although the evidence shows that the

⁸⁰⁶ R-19, Email from Mr. J. Borkowski to Minister G. Beglaryan, 20 March 2014 (attaching Letter from Mr. D. Dole to Mr. J. Borkowski, 18 March 2014, and Draft Memorandum of Understanding between Armenia and CCCC). ↩

⁸⁰⁷ R-31, Letter from Mr. G. Beglaryan to Mr. D. Harutyunyan, 5 December 2014 (attaching Draft Decision on Making Amendments to the Decision of the Government of the Republic of Armenia No. 982-AG of 2 August 2012). ↩

⁸⁰⁸ First Arakelyan Statement ¶¶ 49-50; Resp. First PHB ¶ 155. ↩

⁸⁰⁹ Second Borkowski Statement ¶ 89. ↩

⁸¹⁰ C-19, Letter from Mr. J. Borkowski to Minister G. Beglaryan, 31 December 2014. ↩

[Page 178]

Road Project was understood practically to be at an end, it was open as a matter of law for the Claimants to contend that the Road Concession was never terminated. The Claimants' contention in this respect was aided by the Minister of Justice's affirmation, during settlement meetings, that both Concessions remained in force as of July 2017.⁸¹¹

532. The Tribunal is not persuaded by the Respondent's contention that, notwithstanding the Minister of Justice's statement in July 2017, the Road Concession should be treated as having been terminated by agreement of the Parties in February 2014.⁸¹² Under Article 466 of Armenia's Civil Code, a contract may indeed be terminated “upon the agreement of parties, unless otherwise provided for by law or the contract."⁸¹³ The contract in this case however expressly set out the Parties' agreement regarding rights of termination. It provided that the Government could terminate the Road Concession either: (a) for Rasia's breach of the Government's rights of first refusal or other obligations related to changes in "Control of Concessionaire" (Section 8.3); (b) "[u]pon occurrence of a Concessionaire Termination Event" (Section 48), or “based on negative result of feasibility study" (Section 59.1).⁸¹⁴ It is not contended that either of the "Control of Concessionaire” or “Concessionaire Termination Events” occurred.⁸¹⁵ As for Section 59.1, this provided the Government with a right to terminate the Road Concession if Rasia "ha[d] not accepted the Feasibility Study” within two years after commencement of the Concession, but only upon issuance of a notice.⁸¹⁶ The same is true of a “Concessionaire Event of Default,” addressed in Section 59.2; this is defined as occurring only when Rasia is in “material breach of its obligations" and such material breach continues for 30 ... days after written notice thereof from the Government.”⁸¹⁷ In other words, the Parties agreed that the Government was required to provide notice of termination in order to activate its termination rights.

533. The Tribunal does not accept that the Government provided any such notice of termination in February 2014. While it certainly communicated its objections to the Road Feasibility Study, this is not the same as declaring the Road Concession itself to be at an end. Indeed, the Government

⁸¹¹ C-318, Transcript of 3 July 2017 Meeting, 3 July 2017, pp. 5, 7. ↩

⁸¹² Resp. First PHB ¶ 236. ↩

⁸¹³ RL-1, Armenian Civil Code (excerpts), 5 May 1998, Article 466. ↩

⁸¹⁴ C-2, Road Concession, Section 47(e). ↩

⁸¹⁵ The Road Concession defined a “Concessionaire Termination Event" as meaning Rasia's inability to pay debts, the appointment of a receiver, its entry into bankruptcy or insolvency, or its taking of a decision to wind-up its affairs. See id. p. 5. ↩

⁸¹⁶ Id. Section 59.1. The same is true of a "Concessionaire Event of Default," addressed in Section 59.2. ↩

⁸¹⁷ Id., p. 5. ↩

[Page 179]

appeared contemporaneously to understand as much, since in December 2014, it commenced the internal processes required to approve issuance of a formal notice of termination. That the Government did so in December 2014 (while ultimately not completing that process) is obviously inconsistent with the Respondent's contention now that the Parties had already terminated the Road Concession by agreement ten months earlier, in February 2014.

534. As for the oral discussions in December 2014, Mr. Borkowski's letter of 31 December 2014 stated that "Rasia FZE is still waiting for confirmation that the [Road Concession] has been terminated" (using the past tense). This certainly reflects his understanding that the Government was not supporting the revised Project, but it also constitutes a request for written affirmation by the Government of whatever message had been conveyed orally. It is possible that Mr. Borkowski was told that documentation of termination was being prepared at this time within the Government. In any event, no confirmation of the sort requested was ever provided. As noted above, the Minister of Justice later stated in settlement discussions that the Road Concession remained in force.

535. In short, there is no evidence of any effective termination of the Road Concession in 2014, or for that matter, thereafter. The most that can be said is that it is to be inferred from the Parties' conduct that they tacitly understood the Project not to be moving forward,⁸¹⁸ without either Party taking the initiative required formally to terminate it.

(vi) Armenia breached the “No Grant” term of the Road Concession

536. Given that the Road Concession was not formally terminated, the Government remained obligated to respect the exclusivity rights granted to Rasia under Section 15, entitled "No Grant" (and falling within Article V, entitled “Competing Transportation Systems"). The operative prohibition in this Section was as follows:

[T]he Government shall not at any time grant to any person, including any State Authority, any concession or other right or privilege to finance, design, construct, possess, commission, rehabilitate, operate and/or maintain any road at the southern border of Armenia or connecting with Meghri or territories adjacent to the southern border of Armenia, including any road not in service on the date of signing this Agreement....

⁸¹⁸ Clearly, the Road Project did not proceed beyond the "feasibility study period" described in the Road Concession. Section 12(a) of the Concession states that such period would end upon the occurrence of two events: "final acceptance of the Feasibility Study by the Concessionaire," and "confirmation of the Corridor by the Government." See C-2, Road Concession, Section 12(a). It is common ground that in contrast to the Railway Feasibility Study, Rasia did not formally accept the Road Feasibility Study; Mr. Borkowski conceded this. February Tr., Day 3, Hanessian/Borkowski, 411:21-412:7. Nor, for its part, did the Government ever confirm the proposed Road Corridor. ↩

[Page 180]

537. Although this provision is broadly worded, it is not so broad as to proscribe exploratory discussions with third parties. The provision proscribes only an actual "grant" of a "concession or other right or privilege." Such rights include, however, rights of finance and rights of design for a road at or adjacent to the southern border of Armenia – two rights that are directly at issue in this case.

538. The Claimants have adduced persuasive evidence that the Government did not respect the exclusivity of the territorial grant. First, on 24 October 2013 – soon after Rasia informed the Government that its re-interpretation of the Road Project was proposed to be undertaken at Armenia's own cost, and the Government voiced its objections – Armenia approved Variation Order No. 5, extending a contract with Egis to perform a feasibility study for the Kajaran to Agarak road section.⁸¹⁹ Egis's services for this feasibility study commenced in February 2014, soon after Rasia's 24 January 2014 delivery of the Road Feasibility Study, which confirmed its no-toll road proposal.⁸²⁰ The Egis site visit to Armenia was from 21-23 February 2014, towards the end of the February 2014 Yerevan Meetings between Rasia, the Government and CCCC to discuss the Road Feasibility Study.⁸²¹ Egis issued its feasibility study for the Kajaran to Agarak section in April 2014.⁸²² Agarak is situated on the southern border of Armenia, meaning this study fell within the territorial scope of Section 15 of the Road Concession (“any road at the southern border of Armenia or connecting with Meghri or territories adjacent to the southern border of Armenia").

539. It might be debated whether contracting for a feasibility study constitutes a "grant" of a "concession or other right or privilege" within the meaning of Section 15 of the Road Concession, in circumstances in which the Government did not commit to Egis that it would actually implement any of the Egis design suggestions. Arguably, this could be seen as merely another exploratory study, without any grant of legal rights (other than the right to a fee in exchange for the study services). However, given that the Road Concession itself started with a critical feasibility study stage, the Tribunal considers that a contract for a competing feasibility study, intended to generate designs, falls within the spirit of the "no grant" provision.

⁸¹⁹ C-298, Agreement No. 8 on Consulting Services Contract No. 02-CS-002 between Egis International and North-South Road Corridor Investment Program Implementation Organization (SNCO) – Agent of Ministry of Transport and Communication, 5 February 2014 (attaching Variation Order No. 5). ↩

⁸²⁰ R-23, Egis International, Feasibility Study for the Southern Section of NS Corridor from Qajaran to Agarak, 15 May 2014, p. 8. ↩

⁸²¹ February Tr. Day 6, McNeill/Arakelyan, 1085:5-10. ↩

⁸²² R-23, Egis International, Feasibility Study for the Southern Section of NS Corridor from Qajaran to Agarak, 15 May 2014, p. 2. ↩

[Page 181]

540. In any event, even if there were some ambiguity as to this point, there is no similar ambiguity regarding Armenia's efforts to arrange funding for construction of this section of the NSRC road. On 23 May 2014, Armenia formalized its request for US$150 million in funding from the EDB (co-financing with the ADB) for construction of the Kajaran to Agarak section, and the EDB approved this construction loan on 2 July 2014.⁸²³ This constituted a “grant” of a “right or privilege to finance" road work within the territory defined in the Road Concession, in violation of the "No Grant" provision in Section 15.⁸²⁴

541. The Respondent's witness, Mr. Arakelyan, contended that such acts did not contravene the intended purpose of the “No Grant" clause, because (in his view) that provision was intended to grant exclusivity only regarding the use of private investment for road development, not international bank loans entailing public debt.⁸²⁵ But the Road Concession makes no such distinction. Certainly, the definition of Concession Territory in Section 1 does not carve out any exception for NSRC development.

542. In the Tribunal's view, if the Government had formally terminated the Road Concession – as it indeed considered doing in December 2014 – then it could have returned to the international development banks and arranged for the financing and design of an NSRC road in southern Armenia, including in the area over which Rasia had previously been granted exclusive rights. But the Government did not take the formal steps necessary to protect itself against claims arising under the dormant (but not yet terminated) Road Concession. Having moved forward nonetheless with grants of rights to ADB and Egis that were inconsistent with the Road Concession's exclusivity provision, the Government was in breach of that provision.

543. By contrast, it is less clear that Armenia's subsequent January 2015 MOU with CCECC for construction of a 22-kilometer section of the road south of Kajaran,⁸²⁶ and its March 2015 contract

⁸²³ C-128, Eurasian Development Bank, “Eurasian Fund for Stabilization and Development – Annual Report 2014," 2014, p. 16. ↩

⁸²⁴ The Tribunal does not accept the Claimants' contention that a breach occurred earlier, because Armenia had “set in motion" the potential financing of this road section in December 2012. See Cl. First PHB ¶ 58. While the ADB had extended financing in January 2013 that could be used by Armenia to “undertake feasibility and detailed design of Tranche 4," and Armenia notified the ADB in June 2013 that it "intend[ed] to request the ADB to take over the construction" of part of a southern road,” this was not yet a grant by Armenia of any definitive rights with regard to the financing or design of the southern road. Indeed, the Claimants themselves concede that "[t]he precise road section for which construction funding was sought had not been defined as of December 2012, but would be defined ... thereafter based on the results of the feasibility study to be performed by Egis," and that the route was not in fact defined until October 2013. Id., ¶¶ 59-60. ↩

⁸²⁵ February Tr. Day 6, Kalicki/Arakelyan, 1014:14-18. ↩

⁸²⁶ AA-5, MoU, Ministry of Transport and CCECC, 30 January 2015. ↩

[Page 182]

with Spea Ingegneria Europea for design works of the Artashat to Kajaran road section of Tranche 4,⁸²⁷ violated Section 15 of the Road Concession. As noted above, the territorial reach of the exclusivity in Section 15 was for roads at or adjacent to the southern border of Armenia. The limited road works addressed in the CCECC MOU and the Spea contract did not approach the southern border.

(vii) Breach does not itself equate to causation of loss

544. For the reasons outlined above, had Rasia brought contract breach claims within three years of their accrual, pursuant to the applicable statute of limitations in Armenian law, the Tribunal would have been prepared to find the Government in breach of Section 15 of the Road Concession. In the absence of a timely claim, however, the only relevance of the Tribunal's findings regarding the Road Concession – as explained in paragraph 472 above – is the extent to which they may inform the analysis of Mr. Borkowski's BIT claims, which are not time-barred. The Tribunal turns to those BIT claims in Section VI.B, after first assessing the Parties' respective contractual performance of the Railway Concession.

545. However, for avoidance of doubt, the Tribunal emphasizes here that a breach of contract (even if timely asserted) does not itself equate to causation of harm. For the reasons elaborated more fully in Sections VI.B.4 and VII, the Tribunal does not consider Claimants to have proven the core causative link they allege, namely that the Respondent's conduct deprived them of the value of their Concession rights by leading Aabar in March 2015 to abandon plans to acquire Rasia, and their “consortium" thereafter to collapse. Accordingly, even if the breach of contract claims were not time-barred, the Tribunal still would not have awarded damages on account of the particular breach (of Section 15 of the Road Concession) that the Tribunal has found.

(2) The Railway Project

a. The Claimants' Position

546. With respect to the Railway Project, the Claimants allege that the Respondent breached the Railway Concession through the following specific alleged acts:

⁸²⁷ C-299, Contract for Consultant's Services: Time-Based with Lump-Sum Component for North-South Road Corridor Investment Program – Tranche 3 between the Ministry of Transport and Communication of Republic of Armenia and its Agent "Organization for Implementation of North-South Road Corridor Investment Program" (SNCO) and Joint Venture of Spea Ingegneria Europea S.p.A. and IRD Engineering S.r.L. ↩

[Page 183]

• a. Armenia's "demand” in November 2014 that the Railway Concession be amended to transfer the costs of the Railway Directorate and land acquisition to the Concessionaire;⁸²⁸
• b. A "smear campaign" by Government officials, through comments published in the Armenian press in February 2015, which criticized Rasia for having a “negative posture" towards the Government, characterized it as the "first obstacle" to a successful Railway Project and blamed Rasia for supposed delays in construction;⁸²⁹
• c. Minister Beglaryan's meeting with CCECC representatives in Yerevan in March 2015, and meetings in China attended by senior government officials;⁸³⁰ and
• d. Armenia's subsequent requests for proposals and MOUs regarding the Railway, from Chinese companies other than CCCC.⁸³¹

547. The Claimants argue that for its part, Rasia implemented the Railway Concession in accordance with its terms, by (i) constituting a consortium for the purpose of implementing the Railway Project, (ii) establishing the Railway Project's feasibility, which was approved by the Respondent, and (iii) securing a low-cost financing arrangement for the Railway Project that would have driven its implementation to a timely and final completion.⁸³² The Claimants argue that Armenia never objected to the adequacy of its financial partners' expression of interest to finance the Project, or to Rasia's assurances to Aabar about a future contractual arrangement with Arabtec,⁸³³ which the Claimants say was not inconsistent with its commitment to CCCC that it would be the main EPC contractor. CCCC was never expected to be the sole member of the consortium, the Claimants say, and would have had to hire subcontractors, a process in which Aabar was to be involved. Therefore, the Claimants contend, Aabar proceeded on the assumption that its subsidiary, Arabtec, would be a partner alongside CCCC, sharing in the EPC arrangement.⁸³⁴

548. The Claimants reject the Respondent's contention that they were delayed in submitting detailed coordinates for the Railway Project, arguing that such coordinates were not required as part of the

⁸²⁸ Cl. First PHB ¶¶ 9-11, 251-253. ↩

⁸²⁹ Id. ¶¶ 11, 253, 259. ↩

⁸³⁰ Id. ¶¶ 260, 266-268. ↩

⁸³¹ Id. ¶ 265. ↩

⁸³² Id. ¶¶ 122-25, 129–30, 135, 167. ↩

⁸³³ Cl. Second PHB ¶¶ 119, 124. ↩

⁸³⁴ Cl. Reply ¶ 239; Cl. Second PHB ¶¶ 124, 127. ↩

[Page 184]

Railway Feasibility Study. The Claimants argue that the routes were bound to change as the design advanced, thereby making it sensible to supply detailed coordinates during the detailed design and engineering phase.⁸³⁵ The Claimants argue in the alternative that if the Respondent believed Rasia had breached the Railway Concession by failing to provide detailed coordinates, the Respondent failed to exhaust the contractual processes for notification and rectification of an alleged breach, and strictly to follow the provisions relating to termination, as contained in the Railway Concession.⁸³⁶

b. The Respondent's Position

549. With respect to the alleged breaches of the Railway Concession, the Respondent first argues that its proposal to amend the Railway Concession to the effect that Rasia would bear the cost of land acquisition did not amount to a breach. The proposed amendment was necessitated by Rasia's delay in providing detailed coordinates for the railway corridor, which impaired the Respondent's ability to plan and secure budget approval for the land acquisition.⁸³⁷ According to the Respondent, the Claimants' assertion that its proposal to amend the Railway Concession caused Aabar to withdraw is not supported by any evidence on record.⁸³⁸

550. Second, the Respondent contends that Ministry of Transport officials were justified in making statements about Rasia's responsibility for delays, given that its delay in providing detailed route coordinates in turn delayed the Respondent's performance of its land acquisition obligation. According to the Respondent, these remarks were in no way suggestive of an intention to terminate the Concessions, as shown by the Government's decision to grant Rasia an extension of time to comply with its obligations. Further, the Respondent argues that its meetings with Chinese officials and its MoU with CCECC concerned broad subjects that were distinct from Rasia's Railway Concession.⁸³⁹

551. The Respondent contends that the Claimants brought this case only having failed to secure funding for the Railway Project in the hope of extracting some money from the Respondent. According to the Respondent, the Claimants' attempts to promote the Railway Project were marred by financial

⁸³⁵ Cl. Second PHB ¶ 113. ↩

⁸³⁶ Id. ¶ 116 (relying on C-1, Railway Concession, Art.1). ↩

⁸³⁷ Resp. First PHB ¶¶ 180–81. ↩

⁸³⁸ Id. ¶¶ 191-93; Resp. Counter-Mem. ¶¶ 242-43. ↩

⁸³⁹ Resp. First PHB ¶¶ 205, 214; Resp. Counter-Mem. ¶¶ 159–60, 164–67, 242–43. ↩

[Page 185]

difficulties, as well as by their lack of experience, lack of adequate due diligence regarding freight traffic and lack of technical assistance, all of which posed tremendous risks to investors.⁸⁴⁰

552. The Respondent submits that by October 2015, funding from Aabar seemed unlikely. Further, funding from China EximBank was conditioned on construction of the Iranian railway link, and the construction of Iran's portion of the Iranian link was, in turn, conditioned on completion of 30% of the Armenian Railroad.⁸⁴¹ The Respondent argues that Mr. Borkowski's own letter of 14 October 2015 acknowledged that the Claimants' inability to secure funding from China EximBank was due to the unviability of the Iranian link, and not to any act of the Respondent.⁸⁴²

553. The Respondent argues that Rasia breached the Railway Concession by its failure to provide, within one year of Rasia's acceptance of the Railway Feasibility Study, (i) coordinates for the railway corridor for the purpose of the Respondent's land acquisition in the corridor, as required under Sections 9(e), 21.1, 21.2 & 22.1 of the Agreement, (ii) letters of interest from financing parties, as required under Section 33 of the Agreement; and (iii) the “design for the construction works," as required under Section 36.2 of the Agreement.⁸⁴³

554. The Respondent contends that the Claimants have failed to provide any written evidence of their alleged partners' expression of interest in funding the project, as required by the terms of the Railway Concession. The Respondent argues that Aabar's purported letter of interest fell short of what was required by the Railway Concession and was bereft of details about the financing that would be provided.⁸⁴⁴ The Respondent also argues that, even if the Aabar letter were considered to have been sufficient, it ceased to be effective as of March 2015 when Aabar, according to the Claimants' own assertion, allegedly withdrew its interest in the Projects.⁸⁴⁵ Further, the Respondent argues that Rasia failed to provide a letter of interest from China EximBank.⁸⁴⁶

555. The Respondent submits that the terms of Rasia's financing arrangement with Aabar were in apparent conflict with those of China EximBank and CCCC. According to the Respondent, Aabar

⁸⁴⁰ Resp. First PHB ¶¶ 14–16, 41–47, 123–29; Resp. Counter-Mem. ¶¶ 4, 8, 11, 42. ↩

⁸⁴¹ Resp. First PHB ¶¶ 17, 104, 126–31; Resp. Counter-Mem. ¶ 119. ↩

⁸⁴² Resp. First PHB ¶¶ 103, 131 (relying on C-35, Letter from Mr. J. Borkowski to H. Abrahamyan, p. 3). ↩

⁸⁴³ Resp. First PHB ¶¶ 19-21, 67–72; Resp. Second PHB ¶ 87 (relying on C-1, Railway Concession, Art. VII, Sections 9(e), 21, 22, 33 and 36.2; C-99, Terms of Reference for Feasibility Study of the Southern Armenia Railway, November 2012, p. 6). ↩

⁸⁴⁴ Resp. First PHB ¶¶ 80-84; Resp. Second PHB ¶¶ 96–107; Resp. Counter-Mem. ¶¶ 130-35. ↩

⁸⁴⁵ Resp. First PHB ¶¶ 79-80, 93. ↩

⁸⁴⁶ Id. ¶ 95; Respondent's Second PHB ¶ 90; Resp. Counter-Mem. ¶¶ 130–35. ↩

[Page 186]

was expecting all the EPC profits of the Railway Project to be retained by Arabtec, whereas 60% of the financing for the Railway Project was supposedly coming from China EximBank based on Rasia's contract with CCCC, which expressly guaranteed CCCC the exclusive rights to the same EPC contract.⁸⁴⁷ The Respondent further contends that there is no evidence on record that Arabtec's involvement was discussed with CCCC, even though Mr. Borkowski represented to Aabar that Arabtec would have a substantial interest in the EPC Contract.⁸⁴⁸

556. The Respondent also contends that, by Mr. Borkowski's own admission, there is no evidence on the record to support his testimony that he proposed an MOU which was essential to the provision of letters of interest by Chinese banks, which the Respondent refused to sign.⁸⁴⁹ In the same vein, the Respondent says, the Claimants' assertion that Rasia secured further interest in financing the Railway Project from China Poly with the involvement of CCCC is unsupported by any evidence on the record from either China Poly or CCCC. In addition, the Respondent argues that all new investments from Aabar were frozen when its Chairman, Khadem Abdulahi al-Qubaisi, was removed in early 2015 when he became implicated in an alleged fraud in an unrelated transaction, effectively ending any possibility of Aabar's investment.⁸⁵⁰

557. With respect to the Claimants' failure to provide Railway corridor coordinates, the Respondent argues that Mr. Borkowski's insistence that the provision of detailed coordinates could be deferred until the design and construction phase is contrary to the requirements of Section 21.1 of the Railway Concession, which required the Railway Feasibility Study to be sufficiently detailed as to enable the Respondent to fulfil its contractual obligation to acquire land for the corridor. According to the Respondent, the preliminary coordinates based on the preliminary results of the feasibility study were imprecise, and were approved by the Respondent only based on Mr. Borkowski's agreement to provide the required detailed coordinates shortly after.⁸⁵¹ The Respondent submits that on account of the Claimants' failure to provide detailed coordinates, it could not acquire the land in the corridor within the expected timeframe, despite its good faith extension of time for relevant ministries to act.⁸⁵²

⁸⁴⁷ Resp. First PHB ¶¶ 85–86; Resp. Counter-Mem. ¶¶ 139-40. ↩

⁸⁴⁸ Resp. First PHB ¶¶ 88–92; Resp. Counter-Mem. ¶ 9. ↩

⁸⁴⁹ Resp. First PHB ¶¶ 53(vi), 105; Resp. Counter-Mem. ¶¶ 155–57. ↩

⁸⁵⁰ Resp. First PHB ¶¶ 20–21, 93; Resp. Counter-Mem. ¶¶ 6, 149–51. ↩

⁸⁵¹ Resp. First PHB ¶¶ 106, 111–13; Resp. Second PHB, ¶¶ 109–19; Resp. Counter-Mem. ¶¶ 100-03, 120 (relying on C-1, Railway Concession, Section 21.1). ↩

⁸⁵² Resp. First PHB ¶¶ 110, 117–18, 121; Resp. Second PHB ¶¶ 136-38. ↩

[Page 187]

558. In regard to the Claimants' failure to provide the construction designs, the Respondent submits that the feasibility study period ended on 31 December 2013 pursuant to the Concession Agreement, and that Rasia had failed to submit the required design for construction within that period.⁸⁵³ In the Respondent's view, Mr. Borkowski's testimony that the requisite designs were submitted along with the Railway Feasibility Study confuses "working designs,” which are required to be provided along with the Railway Feasibility Study under Section 9 of the Railway Concession, with “designs for construction works,” which were required within a year after the end of the feasibility study under Section 36.2 of the Agreement.⁸⁵⁴

c. The Tribunal's Analysis

559. Before turning to the four specific breaches of the Railway Concession on the part of the Respondent that the Claimants allege, it is necessary to address certain predicate disputes, beginning with the acceptance of the Railway Feasibility Study and the ensuing deadline, under the Railway Concession, for Rasia to provide (and the Government thereafter to confirm) land coordinates for the Railway Corridor. These issues are addressed in the first two sub-sections below, followed by a discussion of the specific acts that are alleged to constitute breaches of the Railway Concession.

(i) Delivery and acceptance of the Railway Feasibility Study

560. As discussed above in connection with the Road Project, the sequence of events under both Concessions began with Rasia's delivery to the Government of a feasibility study "in English together with an Armenian translation.”⁸⁵⁵ Rasia delivered the English-language Railway Feasibility Study to the Government on 7 October 2013, followed by an Armenian translation on 31 December 2013.⁸⁵⁶

561. Under the contractually defined process, delivery of the Railway Feasibility Study triggered a 30-day period for Government “comments, objections and suggestions," which Rasia was then obligated to consider prior to its providing its own “final acceptance" of the Study.⁸⁵⁷ If the Government submitted no comments with the 30-day period, then the Feasibility Study would be

⁸⁵³ Resp. First PHB ¶¶ 123–24. ↩

⁸⁵⁴ Id. ¶ 125. ↩

⁸⁵⁵ C-1, Railway Concession, Section 20.1. ↩

⁸⁵⁶ C-119, Email from Mr. J. Borkowski to Mr. G. Grigoryan, 7 October 2013 (attaching letter from Mr. J. Borkowski to Minister G. Beglaryan); C-127, Email from Mr. J. Borkowski to Minister G. Beglaryan, 31 December 2013. ↩

⁸⁵⁷ C-1, Railway Concession, Section 20.2. ↩

[Page 188]

“deemed” to have been finally accepted by Rasia in the form originally provided.⁸⁵⁸ The acceptance date was important under the Railway Concession as it triggered certain subsequent obligations regarding the provision of Corridor coordinates, financing and construction.

562. When Mr. Borkowski first delivered the English-language version of the Railway Feasibility Study on 7 October 2013, he also showed a PowerPoint presentation (sent again by email on 25 October 2013), which described the Railway Feasibility Study as “preliminarily acceptable" to Rasia.⁸⁵⁹ This language reflected the terminology in Section 20.1 of the Railway Concession, which described Rasia's submission of the Study to the Government once it was "preliminarily acceptable for the Concessionaire.”⁸⁶⁰ As noted above, however, Rasia did not submit the Armenian translation until 31 December 2013, which the Railway Concession deems the relevant date for delivery.

563. It is undisputed that the Armenian Government did not provide written comments to Rasia on the Railway Feasibility Study, so according to the strict language of Section 20.4 of the Railway Concession, Rasia could be “deemed” to have finally accepted that Study on 30 January 2014, thirty days from the Government's receipt of the Armenian translation. This is the position advocated by the Respondent,⁸⁶¹ and it accords with Rasia's own contemporary understanding of how the Concession Agreements worked.⁸⁶² However, Rasia contends that with respect to the Railway Feasibility Study, the deadline for its final acceptance was tacitly deferred by both Parties, based on the Government's indication that it would be forming a governmental Working Group to provide feedback to Rasia prior to a joint approval of the Railway Feasibility Study.⁸⁶³

564. On this issue, Rasia's position is supported by contemporaneous evidence. It includes the minutes of a governmental Working Group meeting on 19 February 2014, which Rasia attended, which reflect a recommendation that the Government approve the Railway Feasibility Study and submit it to the Prime Minister.⁸⁶⁴ It is implicit in that recommendation that the Government did not believe its own deadline for considering the Study had yet run, much less that the Study already had been

⁸⁵⁸ C-1, Railway Concession, Section 20.4. ↩

⁸⁵⁹ C-334, Email from Mr. J. Borkowski to Mr. G. Grigoryan, 25 October 2013. ↩

⁸⁶⁰ C-1, Railway Concession, Section 20.1. ↩

⁸⁶¹ Resp. First PHB ¶ 74. ↩

⁸⁶² R-20, Email from Mr. J. Borkowski to A. Arakelyan and G. Grigoryan, 21 April 2014 (noting that the Concession Agreements "call for automatic adoption" of the feasibility studies). ↩

⁸⁶³ February Tr. Day 4, Borkowski, 614:6-11. ↩

⁸⁶⁴ R-14, Minutes of the session of the inter-departmental working group established for the purpose of examining the proposed alignment of the Southern Railway of Armenia, 19 February 2014. ↩

[Page 189]

"deemed" finally accepted by Rasia in the absence of Government feedback. The point is even clearer from subsequent evidence. On 3 March 2014 Mr. Borkowski provided Armenia with a "Roadmap" document that referred to a “Feasibility Study Deadline" of 30 June 2014, as well as a forthcoming "Government Decree – Feasibility Study/Alignment.”⁸⁶⁵ Ten days later, on 13 March 2014, the Government promulgated a Decree approving an action plan which anticipated that the Railway Feasibility Study would be jointly approved by the Government and Rasia in the second quarter of 2014.⁸⁶⁶ On 21 March 2014, Mr. Borkowski wrote that Rasia was looking forward to receiving the Government decrees “reflecting the adoption of the feasibility study.”⁸⁶⁷ These communications suggest that neither Rasia nor the Government believed, at the time, that the Study had already been “deemed” accepted at the end of January 2014, as the Respondent now insists for purposes of this arbitration. To the contrary, they support Rasia's contention of a tacit agreement to extend the Government's timetable to comment, and accordingly Rasia's obligation to consider those comments prior to providing its own “final acceptance" of the Study, until the end of June 2014.⁸⁶⁸

565. During the second quarter of 2014, the Government conveyed specific concerns to Rasia about the inadequacy of the land coordinates reflected in the Railway Feasibility Study. That feedback qualifies as Government “comments, objections and suggestions," within the meaning of Section 20.2 of the Railway Concession, and therefore Rasia was obligated to consider it prior to its providing its own "final acceptance" of the Study.⁸⁶⁹ Rasia did take the Government's questions back to CCCC, and conveyed CCCC's responses back to the Government, as discussed in Section III.H.2 above. Nonetheless, Mr. Borkowski insisted that “[t]he government must adopt the FS" in its present form.⁸⁷⁰

566. The Government did not issue the promised decree by the end of the second quarter of 2014. On 20 July 2014, without waiting for it further, Rasia wrote formally and “finally [to] accept" the Railway Feasibility Study. Rasia's letter stated that it “look[s] forward to receiving the government

⁸⁶⁵ R-16, email from Mr. J. Borkowski to Mr. G. Grigoryan, 3 March 2014. ↩

⁸⁶⁶ R-17, Decision of the Government of the Republic of Armenia, No. 305-N, On Approving Plan-Schedule of 2014-2017 Measures Guaranteeing Implementation of National Strategy Provisions on Ensuring the Transport Security of the Republic of Armenia, 13 March 2014. ↩

⁸⁶⁷ C-265, Email from Mr. J. Borkowski to Mr. G. Grigoryan, 21 March 2014 (attaching Letter from Mr. J. Borkowski to Minister G. Beglaryan). ↩

⁸⁶⁸ C-1, Railway Concession, Section 20.2. ↩

⁸⁶⁹ Id. ↩

⁸⁷⁰ C-340, Email from Mr. J. Borkowski to Mr. G. Grigoryan, 5 May 2014; R-24, Email from Mr. J. Borkowski to Mr. G. Grigoryan, 23 May 2014. ↩

[Page 190]

decrees ... that will officially adopt" the Railway Feasibility Study.⁸⁷¹ Again, nothing in the Government's response suggested that it believed Rasia already had been "deemed” to have accepted the Feasibility Study back in late January 2014 (the Respondent's position in this arbitration). To the contrary, on 7 August 2014, Armenia promulgated its Protocol 33-26, which approved the Railway Feasibility Study from its perspective.⁸⁷² Minister Beglaryan formally communicated this approval to Mr. Borkowski on 19 August 2014.⁸⁷³

567. Based on this sequence of events, the Tribunal accepts that the relevant date of Rasia's final acceptance of the Railway Feasibility Study was 20 July 2014, after a tacit agreement extended the deadline to 30 June 2014 for the Government to submit comments and Rasia to consider them. The next section examines the implications of Rasia's acceptance date for next steps under the Railway Concession, including, in particular, with respect to Corridor coordinates.⁸⁷⁴

(ii) Rasia's failure to provide sufficient Corridor coordinates

568. Under the Railway Concession, several important deadlines run from the Concessionaire's final acceptance of the Railway Feasibility Study.

569. Notably, the Railway Feasibility Study was to have "reflect[ed] the territory" in respect of which Rasia was to have right of use for purposes of the Railway.⁸⁷⁵ On that predicate, under Section 21 of the Railway Concession, the Government had 90 days from Rasia's final acceptance of the Railway to "confirm the Corridor and ... recognize the exclusive prevailing public interest in respect of the lands and immovables in the Corridor.”⁸⁷⁶ This in turn triggered a duty for the Government to acquire all lands and immovables within the Corridor, “within a reasonably short period." While the period for land acquisition was not specifically defined, it was described as required “on a timely basis so as not to delay the commencement of construction.”⁸⁷⁷ Section 9(g) in turn required Armenia to grant Rasia "the rights to the Corridor" as a precondition to

⁸⁷¹ C-141, Letter from Mr. J. Borkowski to Minister G. Beglaryan, 20 July 2014. ↩

⁸⁷² C-288, Protocol Decree 33/-26 on Approving the Preliminary Alignment and the Feasibility Study of the Southern Armenia Railway Construction (Unofficial English Translation and Armenian Original), 7 August 2014. ↩

⁸⁷³ C-143, Letter from Minister G. Beglaryan, to Mr. J. Borkowski, 19 August 2014. ↩

⁸⁷⁴ The implications for a second set of deadlines, related to confirmation of the availability of outside finance, are discussed separately in Section VI.A.2. ↩