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ICSID

INTERNATIONAL CENTRE FOR SETTLEMENT OF INVESTMENT DISPUTES
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CERTIFICATE

WILLIAM ARCHIBALD RAND
(Applicant on Annulment)

and

REPUBLIC OF SERBIA
(Respondent on Annulment)

(ICSID CASE NO. ARB/18/8) – ANNULMENT PROCEEDING

I hereby certify that the attached document is a true copy of the of the ad hoc Committee’s Decision on the Application for Partial Annulment of the Award dated 20 May 2026.

Signature

Gabriela Álvarez Ávila
Acting Secretary-General

INTERNATIONAL CENTRE FOR
ICSID
SETTLEMENT OF INVESTMENT DISPUTES

Washington, D.C., 20 May 2026

INTERNATIONAL CENTRE FOR SETTLEMENT OF INVESTMENT DISPUTES

WILLIAM ARCHIBALD RAND
(Applicant on Annulment)

and

REPUBLIC OF SERBIA
(Respondent on Annulment)

ICSID Case No. ARB/18/8
Annulment Proceeding

DECISION
ON THE APPLICATION FOR PARTIAL ANNULMENT OF THE AWARD

Members of the ad hoc Committee
Professor Lawrence Boo, President of the ad hoc Committee
Dr. Claudia Annacker, Member of the ad hoc Committee
Mr. Colm Ó hOisín SC, Member of the ad hoc Committee

Assistant of the President of the ad hoc Committee
Ms. Sarra Nihed Azaiez

Secretary of the ad hoc Committee
Ms. Marisa Planells-Valero

Date of dispatch to the Parties: 20 May 2026

[Page ii]

REPRESENTATION OF THE PARTIES

[Page iii]

[Page vi]

[Page vii]

[Page 1]

I. INTRODUCTION

1. This is the Committee’s Decision on the application for partial annulment of the award rendered on 29 June 2023 in the arbitral proceedings Rand Investments Ltd., William Archibald Rand, Kathleen Elizabeth Rand, Allison Ruth Rand, Robert Harry Leander Rand and Sembi Investment Limited v. Republic of Serbia, ICSID Case No. ARB/18/8, as supplemented by the Decision on the Claimants’ Request for a Supplementary Decision dated 27 October 2023 (the “Award"), by a tribunal composed of Prof. Gabrielle Kaufmann-Kohler, Mr. Baiju S. Vasani and Prof. Marcelo G. Kohen (the “Tribunal”).

2. The claimants in the original proceeding were Rand Investments Ltd, William Archibald Rand, Kathleen Elizabeth Rand, Allison Ruth Rand, Robert Harry Leander Rand and Sembi Investment Limited. They are collectively referred to as the “Claimants.”

3. By an application dated 14 June 2024 (the “Partial Withdrawal Application”), five of the six Claimants withdrew their participation in the annulment proceedings. Only Mr. Rand, a natural person of Canadian nationality, continued as the applicant in these proceedings.¹ In this Decision, Mr. William Archibald Rand is referred to as the “Applicant,” “Claimant” or “Mr. Rand." The Republic of Serbia is referred to as the “Respondent” or “Serbia,” and together with the Applicant as the “Parties.” The Parties’ representatives and their addresses are listed above on page ii.

4. The Award decided a dispute submitted to the International Centre for Settlement of Investment Disputes (“ICSID” or the “Centre") based on the Agreement between Canada and the Republic of Serbia for the Promotion and Protection of Investments, which was signed on 1 September 2014 and entered into force on 27 April 2015 (the “Canada-Serbia BIT"), the Agreement between Serbia and Montenegro and the Republic of Cyprus on Reciprocal Promotion and Protection of Investments, which was signed on 21 July 2005 and entered into force on 23 December 2005 (the “Serbia-Cyprus BIT") (together, “the Treaties"), and 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").

5. The dispute arose out of investments in a Serbian dairy farm, BD Agro AD (“BD Agro”). In 2005, the Privatization Agency of the Republic of Serbia and Montenegro (the “Privatization Agency") put up for auction 70% of the shares in BD Agro (“the Privatized Shares"). Mr. Rand participated in the auction through Mr. Djura Obradović (a Serbian national) who had agreed that, if they succeeded in the auction, he would purchase and hold the Privatized Shares on behalf of Marine Drive Holdings Inc. ("the MDH Agreement”), a company incorporated in the British Virgin Islands and majority

¹ Partial Withdrawal Application, para. 6. ↩

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owned by Mr. Rand.² Mr. Obradović succeeded in the auction and on 4 October 2005, entered into an agreement with the Privatization Agency to purchase 70% of the socially owned capital of BD Agro for EUR 5,548,996.46 to be paid in six annual instalments (the “Privatization Agreement”)³. On that same date, Mr. Obradović also entered into a share pledge agreement with the Privatization Agency, pledging the Privatized Shares to the Agency for a five-year period within which he agreed to pay the full purchase price. The Privatization Agreement was amended on 9 January 2006 to provide for an additional investment of EUR 1,998,554 and an extension of the deadlines for making payment⁴, and on 15 March 2006, requiring the submission of four bank guarantees to the Privatization Agency.⁵ The final instalment of the purchase price under the Privatization Agreement was paid in April 2011.⁶

6. In October 2006, Mr. Obradović's shareholding in BD Agro increased to 75.87% as a result of a capital increase (.⁷ The combined effect of the MDH Agreement and the Privatization Agreement was that Mr Rand became the beneficial owner of 75.87% of BD Agro (the “Beneficially Owned Shares").

7. In addition, Mr. Rand independently acquired indirect ownership, through his wholly owned company Marine Drive Holding d.o.o. (“MDH Serbia"), of a 3.9% shareholding in BD Agro (the “Indirect Shareholding").⁸

8. Beginning in February 2011, the Privatization Agency repeatedly notified Mr. Obradović of breaches of the Privatization Agreement in respect of pledges of BD Agro's assets. The Privatization Agency refused to release the Privatized Shares, and, in September 2015, the Privatization Agency eventually terminated the Privatization Agreement for failure to comply with the Agreement's provisions limiting the pledging of BD Agro's assets. On 21 October 2015, the Privatization Agency issued a decision ordering the transfer of BD Agro's capital to itself. BD Agro was declared bankrupt on 30 August 2016.

II. THE ARBITRATION AND THE AWARD

9. On 9 February 2018, the Claimants submitted the Request for Arbitration, which was registered on 22 March 2018. The Claimants claimed inter alia that Serbia unlawfully terminated the Privatization Agreement and seized the Beneficially Owned Shares, in breach of the fair and equitable treatment and expropriation standards of the Treaties.

² Award, para. 9. ↩

³ Award, para. 10. ↩

⁴ Award, para. 12. ↩

⁵ Award, para.13. ↩

⁶ Award, para. 34. ↩

⁷ Award, para. 14. ↩

⁸ Award, para. 17. ↩

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10. Serbia contested the Tribunal’s jurisdiction and competence, arguing inter alia that there was no evidence that the Claimants themselves made a contribution for their alleged interests in the Beneficially Owned Shares and that Mr. Rand paid for his Indirect Shareholding in BD Agro. Serbia also contested that payments made by Mr. Rand for the benefit of BD Agro qualified as investments protected under the Canada-Serbia BIT and took the position that even if they did, they would be excluded from treaty protection by virtue of the exclusions in the BIT’s investment definition.

11. The Tribunal assumed jurisdiction of Mr. Rand’s interest in the Beneficially Owned Shares but declined jurisdiction over the claims of all remaining Claimants. The Tribunal first held that the term “investment" in Article 25(1) of the ICSID Convention required (i) a contribution or allocation of resources, (ii) made for a certain duration, and (iii) involving risk, which includes the expectation of a profit.

12. Mr. Rand’s interest in the Beneficially Owned Shares was found to qualify as an investment for purposes of Article 25(1) of the ICSID Convention. Mr. Rand made a contribution to the Beneficially Owned Shares, as evidenced inter alia by his involvement in BD Agro’s activities, his nomination of BD Agro’s board, his exercise of control over the company’s operations, and the fact that the purchase price for the Beneficially Owned Shares was paid from a loan that he arranged and was liable to repay.⁹ His interest in the Beneficially Owned Shares was also found to satisfy the duration and risk requirements.¹⁰

13. The Tribunal further concluded that Mr. Rand controlled a contractual interest in the Beneficially Owned Shares, which fell within Article 1(h) of the Canada-Serbia BIT, “an interest arising from the commitment of capital or other resources in the territory of a Party to economic activity in that territory.”¹¹

14. However, the Tribunal declined jurisdiction over Mr. Rand’s claims based on his Indirect Shareholding and payments he made on behalf of BD Agro to replace BD Agro’s herd and transport the heifers from Canada to Serbia (EUR 2.2 million) and to remunerate herd management experts (EUR 160,000). (the “Payments"). With respect to Mr. Rand’s Indirect Shareholding, the Tribunal found that there was no evidence that he paid for the acquisition of the shareholding. The Indirect Shareholding therefore did not meet the contribution requirement under Article 25(1) of the Convention.¹² With respect to the Payments, the Tribunal concluded that they did not meet the duration requirement under Article 25(1)

⁹ Award, paras. 236-237, 250. ↩

¹⁰ Award, paras. 266-269. ↩

¹¹ Award, para. 313. ↩

¹² Award, para. 273. ↩

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of the ICSID Convention and fell within the exclusions of the investment definition in the Canada-Serbia BIT.¹³

15. The Tribunal also declined jurisdiction over the claims of all Claimants other than Mr. Rand. It found that the other Claimants had made no contributions of their own and that Mr. Rand’s contributions could not be attributed to them.¹⁴

16. On the merits, the Tribunal concluded that the Privatization Agency’s conduct was attributable to Serbia under Article 5 of the International Law Commission’s Articles on the Responsibility of States for Internationally Wrongful Acts¹⁵ since the Agency was empowered to exercise sovereign powers and did exercise such powers when it seized the Beneficially Owned Shares without the intervention of a court or tribunal and without returning the purchase price.¹⁶

17. The Tribunal held that the Privatization Agency’s termination of the Privatization Agreement, and therefore the seizure of the Beneficially Owned Shares, which was a direct consequence of the termination, violated Article 6 of the Canada-Serbia BIT. Specifically, the Tribunal concluded that the Privatization Agency had no right to terminate the Privatization Agreement for breach of Article 5.3.4 of the Privatization Agreement because the restrictions on the pledging of BD Agro’s assets that the Article imposed no longer applied after the full purchase price had been paid under the agreement.¹⁷

18. Having concluded that the Privatization Agency’s conduct ultimately caused BD Agro’s bankruptcy, the Tribunal proceeded to valuing Mr. Rand’s losses. The Tribunal rejected the discounted cash flow method, given that BD Agro had been operating at loss, and instead opted for an asset-based valuation methodology. Valuing all of BD Agro’s assets and deducting its liabilities, it determined BD Agro’s net asset value to be EUR 19.7 million as of the valuation date, i.e., the date of the seizure of the Beneficially Owned Shares. It accordingly awarded Mr. Rand EUR 14,572,30 for his interest in the Beneficially Owned Shares, plus interest (6-month average of EURIBOR + 2%, compounded semi-annually).¹⁸

19. Prof. Marcelo G. Kohen issued a dissenting opinion disagreeing with the majority’s conclusions on jurisdiction, the admissibility of Mr. Rand’s claims, the breach of Article 6(1) of the Canada-Serbia BIT and, consequently, the award of damages.

¹³ Award, paras. 274-275, 344-345. ↩

¹⁴ Award, paras. 264-265. ↩

¹⁵ Award, paras. 485, 493. ↩

¹⁶ Award, para. 509. ↩

¹⁷ Award, paras. 605, 615, 620. ↩

¹⁸ In its Supplementary Decision of 27 October 2023, the Tribunal clarified that the interest should accrue from 21 October 2015 - the date of the breach. ↩

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III. PROCEDURAL HISTORY

20. On 24 February 2024, ICSID received from the Claimants an application for partial annulment of the Award issued on 29 June 2023, as supplemented by the Decision on the Claimants’ Request for a Supplementary Decision dated 27 October 2023, together with Factual Exhibits A-001 through A-040 and Legal Authorities ALA-001 through ALA-044 (the “Application”).¹⁹ In their Application, the Claimants invoked the following two grounds for annulment: (i) manifest excess of powers (Article 52(1)(b) of the ICSID Convention), and (ii) failure to state reasons (Article 52(1)(e) of the ICSID Convention).

21. On 1 March 2024, the Secretary-General of ICSID registered the Application in accordance with Rule 50(2) of the ICSID Rules of Procedure for Arbitration Proceedings 2006 (the “ICSID Arbitration Rules").

22. By letter dated 1 May 2024, in accordance with Rules 6 and 53 of the ICSID Arbitration Rules, the Parties were notified that an ad hoc committee composed of Prof. Lawrence Boo, a national of Singapore, and designated as President of the Committee, Mr. Colm Ó hOisín SC, a national of Ireland, and Dr. Claudia Annacker, a national of Austria, had been constituted (the “Committee"). On that same date, the Parties were also notified that Ms. Marisa Planells-Valero, Senior Legal Counsel, ICSID, would serve as Secretary of the Committee.

23. On 29 May 2024, the Secretary of the Committee sent the Parties a draft Procedural Order No. 1, as well as a proposal to appoint Ms. Sarra Azaiez as an assistant to the President of the Committee.

24. On 14 June 2024, the Claimants submitted the Partial Withdrawal Application which was accompanied by Legal Authorities ALA-045 and ALA-046.²⁰ The Claimants stated that

[b]earing in mind the objective of judicial economy, Rand Investments Ltd., Kathleen Elizabeth Rand, Allison Ruth Rand, Robert Henry Leander Rand and Sembi Investment Limited (the ‘Rejected Claimants') have now decided to withdraw the Application in the part concerning the Tribunal's refusal to exercise jurisdiction over their claims. This withdrawal shall also terminate the Rejected Claimants' participation in this annulment proceeding.²¹

Accordingly, the Claimants requested that

the Committee exercise its powers under Article 44 of the ICSID Convention, in conjunction with Article 52(4) of the ICSID Convention,

¹⁹ Corresponding with Exhibits CE-001, CE-008, CE-017 to CE-019, CE-021 to CE-024, CE-029, CE-050, CE-062, CE-068, CE-105, CE-109, CE-137, CE-140, CE-142, CE-171, CE-172, CE-175, CE-417, and CE-908, and Legal Authorities CLA-001 to CLA-003, CLA-016, CLA-017, CLA-028, CLA-052, CLA-067, CLA-087 to CLA-089, CLA-091, CLA-116, CLA-160, CLA-183 to CLA-204, RLA-002, RLA-011, RLA-024, RLA-034, RLA-095, RLA-152, RLA-155, and RLA-171. ↩

²⁰ Which corresponded with Legal Authorities CLA-205 and CLA-206. ↩

²¹ Partial Withdrawal Application, para. 6. ↩

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and acknowledge: a. Rejected Claimants' partial withdrawal of the Application [...]; and b. that, as a result of the partial withdrawal of the Application, Rejected Claimants no longer participate in the annulment proceeding and the annulment proceeding shall continue as between Serbia and Mr. [William Archibald] Rand as the sole applicant.²²

25. On 15 June 2024, the Committee invited the Parties to submit their comments on draft Procedural Order No. 1, which were received on 17 June 2024.

26. On 20 June 2024, in accordance with ICSID Arbitration Rules 53 and 13(1), the Committee held a first session with the Parties by videoconference. Upon the Committee’s invitation the Respondent confirmed that it did not oppose the Claimants’ Partial Withdrawal Application including the Rejected Claimants’ requests to withdraw from the annulment proceeding. The Committee then instructed the Parties to confer and provide the Committee with a jointly proposed procedural calendar by 27 June 2024.

27. On 26 June 2024, the Parties informed the Tribunal that they had agreed on a procedural calendar.

28. On 3 July 2024, the Committee issued an order taking note of the discontinuance of the proceedings with respect to Rand Investments Ltd., Kathleen Elizabeth Rand, Allison Ruth Rand, Robert Harry Leander Rand and Sembi Investment Limited, in accordance with the Parties’ agreement, and deciding that, pursuant to Article 44 of the ICSID Convention, in conjunction with Article 52(4) of the ICSID Convention and ICSID Arbitration Rule 44, the proceedings were to continue solely as between Mr. Rand and the Respondent.

29. On 10 July 2024, the Committee issued Procedural Order No. 1 (“PO1") recording the agreement of the Parties on procedural matters and the Committee’s decisions on those where no agreement had been reached. PO1 provided, inter alia, that the applicable Arbitration Rules would be those in effect from 10 April 2006, that the procedural language would be English, and that the place of proceeding would be Washington D.C., United States. PO1 also set out the agreed procedural calendar for the proceeding.

30. In accordance with PO1, Ms. Sarra Azaiez was designated as the President of the Committee’s assistant with the Parties’ approval received on 17 June 2024. A copy of Ms. Azaiez’s declaration was circulated to the Parties on 19 June 2024. The Parties also agreed that Ms. Azaiez would be reimbursed for the expenses incurred in this proceeding as described in the Secretariat’s letter of 29 May 2024.

31. On 19 July 2024, the Applicant filed his Memorial on Annulment (the “Memorial on Annulment"), together with documentation from the original arbitration, including submissions, hearing documents, witness statements, expert reports, decisions from the Tribunal, Factual Exhibits CE-013, CE-015, CE-026, CE-027, CE-031, CE-039, CE-072, CE-085, CE-136, CE-143, CE-150, CE-166, CE-168,

²² Partial Withdrawal Application, para. 21. ↩

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CE-276 to CE-280, CE-366, CE-369, CE-370, CE-372, CE-415, CE-419, CE-593, CE-828, and RE-561, and Legal Authorities CLA-020, CLA-026, CLA-041, CLA-116, CLA-207 to CLA-217, and RLA-162.

32. On 1 November 2024, the Respondent filed its Counter-Memorial on Annulment (the “Counter-Memorial on Annulment"), together with documentation from the original arbitration, including submissions, hearing documents, witness statements, expert reports, decisions from the Tribunal, Factual Exhibits CE-28, CE-32, CE-46 to CE-48, CE-57 to CE-59, CE-78 to CE-79, CE-96, CE-97, CE-101, CE-220, CE-321, CE-348, CE-351, CE-385 to CE-390, CE-392 to CE-397, CE-399 to СЕ-411, CE-722, CE-812, CE-814, RE-6 to RE-13, RE-15, RE-20, RE-21, RE-24, RE-25, RE-29 to RE-33, RE-45, RE-59, RE-60, RE-62, RE-94, RE-95, RE-97, RE-99, RE-166, RE-210, RE-218 to RE-221, RE-258, RE-271, RE-325, RE-356, RE-363, RE-364, RE-368, RE-370, RE-389, RE-390, RE-405, RE-406, RE-409, RE-459, RE-473, RE-515 to RE-517, RE-562, RE-605, and RE-646 (updated), Legal Authorities RLA-5, RLA-13, RLA-23, RLA-35, RLA-44, RLA-94, RLA-168, RLA-172, CLA-05, CLA-32, CLA-81, CLA-90, CLA-111, Annex-8, and New Legal Authorities RLA-0209 to RLA-0262.

33. On 7 February 2025, the Applicant filed his Reply on Annulment (the “Reply on Annulment”), together with hearing documents from the original proceeding, Factual Exhibits CE-141, CE-158 to CE-161, CE-255, CE-553, CE-888, and Legal Authorities CLA-045, CLA-064, CLA-085, CLA-168, CLA-218 to CLA-224, RLA-073.

34. On 30 April 2025, the Committee invited the Parties to comment on draft Procedural Order No. 2 (“PO2"), regarding the organization of the hearing. The Parties reverted on 13 May 2025.

35. On 16 May 2025, the Respondent filed its Rejoinder on Annulment (“Rejoinder on Annulment"), together with hearing documents presented in the original proceeding, Factual Exhibits CE-0517 and RE-0327, and Legal Authorities CLA-0154, CLA-0157, RLA-0111 and RLA-0263 to RLA-0285.

36. On 19 May 2025, the Committee held a pre-hearing organizational meeting with the Parties by videoconference, with the ICSID Secretariat in attendance.

37. On 20 May 2025, the Committee issued PO2 on the hearing organization.

38. A hearing on annulment was held at the Corte de Arbitraje de Madrid, in Madrid, Spain from 12-13 June 2025 (the “Hearing”). The following persons were present at the Hearing:

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39. The Parties filed their submissions on costs on 18 July 2025.

40. The proceeding was closed on 7 April 2026.

IV. THE PARTIES’ REQUESTS FOR RELIEF

41. The Applicant requests the Committee that:

a) pursuant to Article 52 of the ICSID Convention and Rule 50 of the ICSID Arbitration Rules, the Award issued in this case be annulled, concerning the quantification of damages, in paragraphs 693-697, 699(i.), 699(ii.), 699(iv.), 699(v.) and 699(vi.), 707 except items “Other Construction Land”, “Agricultural land”, “Other fixed assets",

[Page 9]

“Deferred tax assets” and “Payment to Canadian suppliers”, 708 first sentence, the second part of the second sentence starting with “resulting” and the last sentence, 717(d) before “together” and 717(g) to the extent it relates to claims for damages;

b) pursuant to Article 52 of the ICSID Convention and Rule 50 of the ICSID Arbitration Rules, the Award issued in this case be annulled, concerning the negative decision on jurisdiction, in paragraphs 228, 232 second sentence, 237 first, second and last sentence, 270-273, 274 third and last sentence, 275, 277 first sentence after "Beneficially Owned Shares", the word “only” in first and second sentence of paragraph 281, the word “only” in paragraph 290, 333, 343 third sentence, 344-345, 471 the second part of the first sentence starting with the word “but”, 717(b) to the extent it relates to Mr. Rand's claims under the Canada-Serbia BIT, and 717(g) to the extent they relate to Mr. Rand's claims under the Canada-Serbia BIT;

c) pursuant to Article 52 of the ICSID Convention and Rule 50 of the ICSID Arbitration Rules, the Award issued in this case be annulled, concerning the decision on costs, in paragraphs 716, 717(e) and 717(f); and

d) pursuant to Articles 61(2) and 52(4) of the ICSID Convention, the Respondent is ordered to pay Mr. Rand's costs of this annulment proceeding, together with the Centre's costs.²³

42. Serbia requests that the Committee:

A. Dismiss Applicant's request for annulment of the award rendered on 29 June 2023 in its entirety.

B. Order Applicant to reimburse Respondent all its costs of the proceedings, with interest.²⁴

V. THE PARTIES’ POSITIONS AND THE COMMITTEE’S ANALYSIS

43. The Committee will first address Mr. Rand’s request for partial annulment under Article 52(1)(b) of the ICSID Convention for manifest excess of powers in Section A below, followed by his request for partial annulment under Article 52(1)(e) of the ICSID Convention for the Award’s failure to state reasons in Section B below, and his request for annulment of the Award’s costs decision t in Section C below.

²³ Reply on Annulment, para. 380. ↩

²⁴ Rejoinder on Annulment, para. 337. ↩

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A. Manifest Excess of Powers

(1) Applicable Standard

a. The Applicant’s Position

44. According to the Applicant, it is “widely accepted" that an ICSID tribunal’s failure to exercise jurisdiction constitutes an excess of powers.²⁵

45. The Applicant explains that there are two approaches to the interpretation of the term “manifest”: (i) that the excess of powers must be “substantial” or “serious” meaning that the excess must have significant consequences and refers to Vivendi Universal S.A. v. Argentine Republic (“Vivendi’)²⁶ and Victor Pey Casado and President Allende Foundation v. Republic of Chile I (“Pey Casado”)²⁷ in support of this approach; and (ii) that the excess of powers must be “clear” and “obvious”, meaning that the excess need not be serious but must be “discerned with little effort and without deeper analysis.”²⁸ Asserting that both standards are satisfied in the present case, the Applicant takes no position on which of the two approaches should be applied.²⁹

b. Serbia’s Position

46. According to Serbia, Article 52(1)(b) of the ICSID Convention allows annulment only in exceptional cases and in limited circumstances.³⁰ The Respondent states that a majority of ad hoc committees have defined the term “manifest” as “obvious”³¹, “clear, self-evident”³², capable of being identified “with certainty and immediacy, without it being necessary to engage in elaborate analyses of the award”³³ or as a “defect that is obvious, or so evident on a first reading of the document without need for further investigation or inquiry.”³⁴

²⁵ Memorial on Annulment, paras. 252-253. ↩

²⁶ Memorial on Annulment, para. 255, citing to RLA-155, Compañía de Aguas del Aconquija S.A. and Vivendi Universal S.A. v. Argentine Republic, ICSID Case No. ARB/97/3, Decision on Annulment, 3 July 2002. ↩

²⁷ Memorial on Annulment, para. 256, citing to CLA-192, Víctor Pey Casado and President Allende Foundation v. Republic of Chile I, ICSID Case No. ARB/98/2, Decision on the Application for Annulment of the Republic of Chile, 18 December 2012. ↩

²⁸ Memorial on Annulment. para. 257; Reply on Annulment, paras. 298-300. ↩

²⁹ Memorial on Annulment, para. 258. ↩

³⁰ Counter-Memorial on Annulment, para. 264. ↩

³¹ RLA-233, Azurix Corp. v. The Argentine Republic, ICSID Case No. ARB/01/12, Decision on the Application for Annulment of the Argentine Republic, 1 September 2009, para. 68. ↩

³² RLA-220, CDC Group plc v. Republic of Seychelles, ICSID Case No. ARB/02/14, Decision on Annulment, 29 June 2005, para. 41. ↩

³³ CLA-187, Mr. Patrick Mitchell v. Democratic Republic of the Congo, ICSID Case No. ARB/99/7, Decision on the Application for Annulment of the Award, 1 November 2006, para. 20. ↩

³⁴ RLA-223, RREEF Infrastructure (G.P.) Limited and RREEF Pan-European Infrastructure Two Lux S.à r.l. v. Kingdom of Spain, ICSID Case No. ARB/13/30, Decision on Annulment, 10 June 2022, para. 22; Counter-Memorial, paras. 264, 266; Rejoinder on Annulment, para. 241. ↩

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47. Citing Kiliç v Turkmenistan, Serbia asserts that a manifest excess of power must be simultaneously self-evident and material for the outcome of the case, i.e., have “serious consequences for a party."³⁵

48. Serbia submits that the term “manifest” also serves to set “the balance of power" by empowering ICSID tribunals to determine their own jurisdiction under Article 41(1) of the ICSID Convention, while limiting the scope of review by ad hoc committees.³⁶ The Respondent emphasizes that an ad hoc committee may not reassess jurisdictional findings de novo, nor annul an award because it would have reached a different evaluation of the facts, law, or evidence.³⁷

49. Serbia submits that annulment under Article 52(1)(b) of the ICSID Convention is subject to a high threshold and warranted only in exceptional circumstances where a tribunal’s interpretation is unreasonable and untenable, such that it is “unacceptable to any reasonable person”,³⁸ or when it “cannot be supported by any reasonable arguments.”³⁹ It adds that even an incorrect decision or a serious misapplication of the law does not constitute a ground for annulment.⁴⁰

c. The Committee’s Analysis

50. An annulment proceeding is a limited form of review on the five grounds set forth in Article 52(1) of the ICSID Convention, not an appeal or retrial. The ad hoc committee in Soufraki v. United Arab Emirates (“Soufraki"), for example, observed:

annulment review, although obviously important, is a limited exercise, and does not provide for an appeal of the initial award. In other words [...] 'an ad hoc committee does not have the jurisdiction to review the merits of the original award in any way. The annulment system is designed to safeguard the integrity, not the outcome, of the ICSID arbitration proceedings.’⁴¹

³⁵ Counter-Memorial on Annulment, para. 267 citing to RLA-217, Kiliç İnşaat İthalat İhracat Sanayi Ve Ticaret Anonim Şirketi v. Turkmenistan, ICSID Case No. ARB/10/1, Decision on Annulment, 14 July 2015, para. 53. ↩

³⁶ Counter-Memorial on Annulment, para. 269. ↩

³⁷ Counter-Memorial on Annulment, para. 270. ↩

³⁸ Annex-8, Cyprus Popular Bank Public Co. Ltd. v. Hellenic Republic, ICSID Case No. ARB/14/16, Decision on Annulment, 30 November 2022, para. 199. ↩

³⁹ Counter-Memorial on Annulment, para. 272; citing to RLA-219, Cortec Mining Kenya Limited, Cortec (Pty) Limited and Stirling Capital Limited v. Republic of Kenya, ICSID Case No. ARB/15/29, Decision on Application for Annulment, 19 March 2021, para. 129. ↩

⁴⁰ Counter-Memorial on Annulment, para. 272. ↩

⁴¹ CLA-190, Houssein Nuaman Soufraki v. United Arab Emirates, ICSID Case No. ARB/02/7, Decision of the ad hoc Committee on the Application for Annulment of Mr Soufraki, 5 June 2007, para. 20. ↩

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51. It follows from the limited scope and nature of annulment review that a party may not introduce or supplement arguments that it could and should have presented during the arbitration or retroactively fill gaps in its case.⁴²

52. To establish a ground for annulment under Article 52(1)(b) of the ICSID Convention, an applicant must demonstrate a manifest excess of powers. Article 52(1)(b) provides in relevant part as follows:

(1) Either party may request annulment of the award by an application in writing addressed to the Secretary-General on one or more of the following grounds:

[...]

(b) that the Tribunal has manifestly exceeded its powers;

[...].

53. It is well-established, and the Parties do not contest, that an ICSID tribunal may exceed its powers not only by asserting jurisdiction that it does not have but also by declining to exercise jurisdiction with which it was endowed by the applicable instrument of consent and the ICSID Convention.⁴³

54. However, in either case, an excess of powers must be manifest. Most ad hoc committees have interpreted the term “manifest" in Article 52(1)(b) of the ICSID Convention as referring to an excess of powers that is plain, clear, obvious and capable of being readily identified, in accordance with the term’s ordinary meaning.⁴⁴ The Committee agrees with this approach.

55. A mere misapplication or incorrect application of the law would therefore not satisfy the threshold of a manifest excess of powers. An excess of powers is only manifest if a tribunal’s jurisdictional decision is untenable. As long as a tribunal’s disposition is tenable, an excess of powers would not be patent, clear, obvious, or easy to see or understand. In this respect, the Committee agrees with the ad hoc committee in TECO v. Guatemala (“Teco”):

[I]n determining whether a tribunal has committed a manifest excess of powers, an annulment committee is not empowered to verify whether a tribunal's jurisdictional analysis or a tribunal's application of the law was correct, but only whether it was tenable as a matter of law. Even if a committee might have a different view on a debatable issue, it is simply

⁴² CLA-189, Klöckner Industrie-Anlagen GmbH and others v. United Republic of Cameroon and Société Camerounaise des Engrais, ICSID Case No. ARB/81/2, Decision of the Ad Hoc Committee, 3 May 1985, para. 83; RLA-275, Rasia FZE and Joseph K. Borkowski v. Republic of Armenia, ICSID Case No. ARB/18/28, Decision on Annulment, 5 November 2024, para. 143; RLA-162, Teinver S.A., Transportes de Cercanías S.A. and Autobuses Urbanos del Sur S.A. v. The Argentine Republic, ICSID Case No. ARB/09/1, Decision on Argentina’s Application for Annulment, 29 May 2019, para. 86. ↩

⁴³ RLA-256, ICSID, Updated Background Paper on Annulment (March 2024), para. 93. ↩

⁴⁴ RLA-256, ICSID, Updated Background Paper on Annulment (March 2024), para. 89. ↩

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not within its powers to correct a tribunal's interpretation of the law or assessment of the facts.⁴⁵

56. Accordingly, the Committee’s role is not to determine whether the Tribunal’s jurisdictional analysis was correct, but only whether it was tenable. If an apparent excess of powers is “susceptible of argument ‘one way or the other,”⁴⁶ or “if reasonable minds differ as to whether or not the tribunal issued a correct decision`,”⁴⁷ or if “more than one interpretation is possible,”⁴⁸ the excess of powers would not be manifest.

57. This also follows from Article 41(1) of the ICSID Convention, which confirms that "[t]he Tribunal shall be the judge of its own competence.”⁴⁹ ICSID annulment proceedings do not permit a de novo review of jurisdiction, which would be tantamount to an appeal.⁵⁰ The Committee therefore cannot annul the Award, or any part of it, simply because it has a different understanding of the facts, interpretation of the law, or appreciation of the evidence than the Tribunal. Rather, the Applicant must demonstrate an excess of powers that was evident and that it was this lapse that led the Tribunal to decline jurisdiction over certain of his claims.

58. The Committee will now turn to the specific instances of alleged manifest excess of powers invoked by the Applicant under Article 52(1)(b) of the ICSID Convention.

⁴⁵ CLA-186, TECO Guatemala Holdings, LLC v. Republic of Guatemala, ICSID Case No. ARB/10/23, Decision on Annulment, 5 April 2016, para. 78; See also CLA-205, NextEra Energy Global Holdings B.V. and NextEra Energy Spain Holdings B.V. v. Kingdom of Spain, ICSID Case No. ARB/14/11, Decision on Annulment, 18 March 2022, para. 80; RLA-221, Fraport AG Frankfurt Airport Services Worldwide v. The Republic of the Philippines, ICSID Case No. ARB/03/25, Decision on the Application for Annulment of Fraport AG Frankfurt Airport Services Worldwide, 23 December 2010, para. 44; RLA-226, Duke Energy International Peru Investments No. 1 Ltd. v. Republic of Peru, ICSID Case No. ARB/03/28, Decision of the Ad Hoc Committee, 1 March 2011, para. 99; RLA-219, Cortec Mining Kenya Limited, Cortec (Pty) Limited and Stirling Capital Limited v. Republic of Kenya, ICSID Case No. ARB/15/29, Decision on Application for Annulment, 19 March 2021, para. 129. ↩

⁴⁶ RLA-220, CDC Group plc v. Republic of Seychelles, ICSID Case No. ARB/02/14, Decision on Annulment, 29 June 2005, para. 41. ↩

⁴⁷ RLA-237, Standard Chartered Bank (Hong Kong) Limited v. Tanzania Electric Supply Company Limited (TANESCO), ICSID Case No. ARB/10/20, Decision on the Application for Annulment, 22 August 2018, para. 183. ↩

⁴⁸ RLA-215, Daimler Financial Services AG v. Argentine Republic, ICSID Case No. ARB/05/1, Decision on Annulment, 7 January 2015, para. 187. ↩

⁴⁹ RLA-225, S.A., Peter de Sutter and Kristof De Sutter v. Republic of Madagascar, ICSID Case No. ARB/17/18, Decision on Annulment, 14 October 2022, para 104. ↩

⁵⁰ CLA-193, Perenco Ecuador Limited v. Republic of Ecuador, ICSID Case No. ARB/08/6, Decision on Annulment, 28 May 2021, para. 94. ↩

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(2) Whether The Tribunal Manifestly Exceeded Its Powers By Declining Jurisdiction Over Mr. Rand’s Indirect Shareholding

a. The Applicant’s Position

59. The Applicant asserts that the Tribunal manifestly exceeded its powers when it declined jurisdiction over his 3.9% shareholding in BD Agro, held indirectly through his Serbian company, MDH Serbia. According to the Applicant, the Tribunal ignored the investment definition of the Canada-Serbia BIT and instead elevated the typical characteristics of an investment under the Salini test into firm jurisdictional requirements.⁵¹ The Applicant asserts that the Tribunal also failed to inform him that it would apply the Salini test and require evidence of his contribution with respect to his Indirect Shareholding.⁵² Finally, the Applicant asserts that the Tribunal ignored certain contributions he made to BD Agro, despite recognizing these contributions in relation to the Beneficially Owned Shares.⁵³

60. First, the Applicant contends that his Indirect Shareholding satisfies the investment definition in Article 1(1) of the Canada-Serbia BIT, which defines the term “investment” to include “a share, stock or other form of equity participation in an enterprise," and that the Indirect Shareholding need not satisfy any additional requirements.⁵⁴ The Applicant points out that the drafters of the ICSID Convention deliberately left the term “investment” undefined.⁵⁵ The Applicant further argues that absent special circumstances, such as abuse, the Salini test in any event does not apply to the ownership of shares and that even tribunals that otherwise applied the Salini test found that shareholders do not need to satisfy additional conditions.⁵⁶

61. Second, the Applicant asserts that the Tribunal failed to inquire about his payment for the Indirect Shareholding and to invite him to submit evidence of such payment.⁵⁷ According to the Applicant, he could not anticipate that the Tribunal would apply a more demanding test than the one stipulated in the Canada-Serbia BIT.⁵⁸

62. Third, the Applicant contends that the Tribunal ignored his contributions to BD Agro. According to the Applicant, certain of his contributions recognized by the Tribunal as relevant with respect to his investment in the Beneficially Owned Shares also related to his Indirect Shareholding.⁵⁹ Such contributions included the Applicant’s management of BD Agro’s business as well as a EUR 2.2

⁵¹ Memorial on Annulment, Section V.B.1.; Reply on Annulment, Section III.Β.1. ↩

⁵² Memorial on Annulment, Section V.B.2.; Reply on Annulment, Section III.Β.2. ↩

⁵³ Memorial on Annulment, Section V.B.3.; Reply on Annulment, Section III.Β.3. ↩

⁵⁴ Memorial on Annulment, para. 266; Reply on Annulment, para. 310. ↩

⁵⁵ Reply on Annulment, para. 315. ↩

⁵⁶ Reply on Annulment, para. 323. ↩

⁵⁷ Memorial on Annulment, para. 261(b),281-285; Reply on Annulment, para. 330. ↩

⁵⁸ Memorial on Annulment, paras. 281, 284; Reply on Annulment, para. 333. ↩

⁵⁹ Reply on Annulment, paras. 334-335. ↩

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million financial contribution to BD Agro.⁶⁰ By failing to consider these contributions with respect to his Indirect Shareholding, the Tribunal reached the untenable conclusion that his contributions towards BD Agro are relevant and sufficient for one part of his shareholding, but not for the other.⁶¹

63. The Applicant concludes that the Tribunal’s refusal to exercise jurisdiction over the claims related to his Indirect Shareholding decreased the compensation awarded to him by almost EUR 800,000.⁶²

b. Serbia’s Position

64. The Respondent asserts that the Tribunal correctly declined jurisdiction under Article 25(1) of the ICSID Convention over Mr. Rand’s Indirect Shareholding when it concluded that mere ownership of shares does not constitute proof of allocation of resources and that Mr. Rand had failed to prove that he paid for his Indirect Shareholding in BD Agro.⁶³

65. First, according to the Respondent, a contribution of capital is an essential element of the notion of “investment” under Article 25(1) of the ICSID Convention.⁶⁴ Serbia emphasizes that the Applicant already argued before the Tribunal that the ICSID Convention imposed no requirements in addition to those in the investment definition of the Canada-Serbia BIT and that the Tribunal considered and rejected this position.⁶⁵ In essence, the Applicant therefore impermissibly seeks to appeal the Tribunal’s decision to decline jurisdiction over his Indirect Shareholding.⁶⁶

66. Serbia asserts that the large majority of ICSID tribunals rejected the subjectivist approach under Article 25(1) of the ICSID Convention and instead adopted an objective approach, independent of the definition of the term "investment" in the instrument of consent.⁶⁷ It adds that even tribunals that rejected the Salini test nevertheless examined whether the requirement of a contribution was satisfied.⁶⁸

67. Serbia further emphasizes that an ad hoc committee must not annul a jurisdictional finding as long as the tribunal’s interpretation is tenable even if the committee considers the interpretation to be incorrect.⁶⁹ Serbia submits that the Tribunal’s finding that Article 25(1) of the ICSID Convention

⁶⁰ Memorial on Annulment, para. 288; Reply on Annulment, para. 336. ↩

⁶¹ Memorial on Annulment, para. 288. ↩

⁶² Memorial on Annulment, para. 290. ↩

⁶³ Counter-Memorial on Annulment, para. 275. ↩

⁶⁴ Counter-Memorial on Annulment, para. 276. ↩

⁶⁵ Counter-Memorial on Annulment, paras. 271-273. ↩

⁶⁶ Counter-Memorial on Annulment, paras. 277-278. ↩

⁶⁷ Counter-Memorial on Annulment, para. 279. ↩

⁶⁸ Counter-Memorial on Annulment, para. 297; Rejoinder on Annulment, para. 270. ↩

⁶⁹ Counter-Memorial on Annulment, paras. 286-287; Rejoinder on Annulment, para. 265. ↩

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required the Claimant to prove a contribution with respect to his Indirect Shareholding is at the very least tenable.⁷⁰

68. Second, Serbia contends that the Salini test was extensively discussed during the arbitration⁷¹ and that Serbia repeatedly pointed out that Mr. Rand had failed to submit any evidence of his alleged contribution in relation to the Indirect Shareholding.⁷² According to Serbia, the Tribunal’s application of the Salini test to the Indirect Shareholding could not have come as a surprise to Mr. Rand.⁷³ In any event, it was Mr. Rand’s burden to establish his contribution pursuant to the general principle “he who asserts must prove.”⁷⁴

69. Third, Serbia argues that the Tribunal’s decision not to attribute Mr. Rand’s contribution in relation to his Beneficially Owned Shares to his Indirect Shareholding concerns assessment of the evidence.⁷⁵ Serbia submits that pursuant to ICSID Arbitration Rule 34(1), it is for the Tribunal, not for the Committee, to weigh the evidence adduced in the arbitration.⁷⁶ The Applicant essentially invites the Committee to assess evidence de novo and substitute its findings for those of the Tribunal.⁷⁷

70. Serbia asserts that Mr. Rand in any event relies on circumstantial evidence to argue that his contributions with respect to the Beneficially Owned Shares are also attributable to his Indirect Shareholding. According to Serbia, such circumstantial evidence is unsuitable to establish a contribution with respect to the acquisition of a nominal, indirect shareholding of a public joint stock company.⁷⁸ Serbia further points out that Mr. Rand had never argued before the Tribunal that his contribution in relation to the Beneficially Owned Shares also constituted his contribution in relation to the Indirect Shareholding, and that the Applicant is barred from rearguing his case in the annulment proceeding.⁷⁹

с. The Committee’s Analysis

71. The Tribunal declined jurisdiction over Mr. Rand’s Indirect Shareholding on the ground that the notion of investment in Article 25(1) of the ICSID Convention requires a contribution or allocation of resources and that there was no evidence that Mr. Rand had paid for the Indirect Shareholding.

⁷⁰ Counter-Memorial on Annulment, para. 273. ↩

⁷¹ Counter-Memorial on Annulment, para. 311. ↩

⁷² Counter-Memorial on Annulment, paras. 315-323. ↩

⁷³ Counter-Memorial on Annulment, paras. 311-312; Rejoinder on Annulment, para. 279. ↩

⁷⁴ Counter-Memorial on Annulment, para. 316. ↩

⁷⁵ Counter-Memorial on Annulment, paras. 317-320. ↩

⁷⁶ Counter-Memorial on Annulment, para. 319. ↩

⁷⁷ Counter-Memorial on Annulment, para. 320. ↩

⁷⁸ Counter-Memorial on Annulment, paras. 322-324. ↩

⁷⁹ Counter-Memorial on Annulment, paras. 325-327. ↩

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72. Mr. Rand asserts that in declining jurisdiction over his Indirect Shareholding, the Tribunal manifestly exceeded its powers because: (i) the Indirect Shareholding falls within the investment definition of the Canada-Serbia BIT and need not satisfy any other requirement; (ii) the Tribunal failed to inquire about the payment for the Indirect Shareholding and did not invite him to submit evidence of such payment; and (iii) certain of his contributions to BD Agro that the Tribunal recognized as relevant with respect to his Beneficially Owned Shares also related to his Indirect Shareholding.

73. The Committee will first examine whether the Tribunal’s conclusion that the term "investment" in Article 25(1) of the ICSID Convention has an objective meaning, independent of the definition of investment in the Canada-Serbia BIT and requiring a contribution or allocation of resources⁸⁰ is reasonably tenable.

74. The Tribunal based its conclusion that the notion of investment in Article 25(1) of the ICSID Convention requires a contribution, as well as a certain duration and risk, on the ordinary meaning of the term “investment.”⁸¹ While this interpretation has not been universally accepted, numerous ICSID tribunals have interpreted the term “investment” in Article 25(1) of the ICSID Convention as having an objective inherent meaning that is independent from the parties' consent to ICSID arbitration and implies at least a contribution by the investor, a certain duration, and risk.⁸² As the Tribunal noted,⁸³ this position is consistent with many previous awards, including awards that required a contribution for shares to constitute an investment for purposes of Article 25(1) of the ICSID Convention.⁸⁴

75. The Committee concludes that the Tribunal’s interpretation of Article 25(1) of the ICSID Convention is tenable and not implausible as a matter of law. The Applicant has not demonstrated that the interpretation adopted by the Tribunal is an interpretation that is “not subject to debate.”⁸⁵ The

⁸⁰ Award, para. 228. ↩

⁸¹ Award, para. 228. ↩

⁸² See e.g., RLA-236, Raymond Charles Eyre and Montrose Developments (Private) Limited v. Democratic Socialist Republic of Sri Lanka, ICSID Case No. ARB/16/25, Award, 5 March 2020, para. 293; CLA-111, Orascom TMT Investments S.à r.l. v. People's Democratic Republic of Algeria, ICSID Case No. ARB/12/35, Award, 31 May 2017, para. 370; CLA-90, Mr. Saba Fakes v. Republic of Turkey, ICSID Case No. ARB/07/20, Award, 14 July 2010, para. 108; RLA-172, Global Trading Resource Corp. and Globex International, Inc. v. Ukraine, ICSID Case No. ARB/09/11, Award, 1 December 2010, para. 43; RLA-024, Quiborax S.A., Non-Metallic Minerals S.A. v. Plurinational State of Bolivia, ICSID Case No. ARB/06/2, Decision on Jurisdiction, 27 September 2012, para. 199; CLA-032, Vestey Group Ltd v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/06/4, Award, 15 April 2016, para. 187; CLA-016, Caratube International Oil Company LLP v. Republic of Kazakhstan, ICSID Case No. ARB/08/12, Decision on the Annulment Application of Caratube International Oil Company LLP, February 21, 2014, para. 163; RLA-258, S.W. Schill, L. Malintoppi, A. Reinisch, C. H. Schreuer, A. Sinclair (eds.), Schreuer's Commentary on the ICSID Convention, 3rd ed. (2023) Article 25, paras. 180-181 (“[T]he large majority of arbitral tribunals rightly has accepted that the notion of investment in Art. 25(1) has an objective meaning that is independent from the parties' consent."). ↩

⁸³ Award, para. 228. ↩

⁸⁴ E.g., RLA-024, Quiborax S.A., Non-Metallic Minerals S.A. v. Plurinational State of Bolivia, ICSID Case No. ARB/06/2, Decision on Jurisdiction, 27 September 2012, para. 233. ↩

⁸⁵ CLA-205, NextEra Energy Global Holdings B.V. and NextEra Energy Spain Holdings B.V. v. Kingdom of Spain, ICSID Case No. ARB/14/11, Decision on Annulment, 18 March 2022, para. 81 (citing to Alapli ↩

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Tribunal’s interpretation is based on the general rule of treaty interpretation codified in Article 31(1) of the Vienna Convention on the Law of Treaties. It is also supported by a significant number of investment treaty decisions and awards, which confirms that the question is at least susceptible of argument. The Tribunal’s conclusion on this point therefore cannot be considered a manifest excess of powers.

76. The Committee will now turn to the Applicant’s argument that the Tribunal failed to inform him that it would require evidence of his contribution with respect to the Indirect Shareholding and to invite him to submit such evidence.

77. The Applicant has not explained how the Tribunal’s alleged procedural error could constitute a manifest excess of powers. The Committee does not consider that the Applicant’s allegation is relevant in the context of Article 52(1)(b) of the ICSID Convention. What matters for purposes of Article 52(1)(b) is whether the Tribunal manifestly exceeded its powers in finding that the Applicant was required to but had failed to establish that he made a contribution with respect to his Indirect Shareholding, not whether the Tribunal complied with procedural rules and principles in applying the applicable law, Article 25(1) of the ICSID Convention, to the facts of the case.

78. Finally, the Applicant argues that the Tribunal manifestly exceeded its powers by declining jurisdiction over his Indirect Shareholding because the Tribunal ignored certain contributions he made to BD Agro, despite recognizing the same contributions in relation to his Beneficially Owned Shares. The Applicant in essence disagrees with the Tribunal’s application of Article 25(1) of the ICSID Convention to the facts of the case, complaining that in applying Article 25(1), the Tribunal ignored relevant evidence. However, the Committee is not empowered to substitute its own findings of fact for those of the Tribunal, unless the Tribunal’s conclusions were not tenable on the evidence before it.

79. The Committee recalls that an annulment proceeding does not provide a claimant with an opportunity to introduce new arguments to satisfy its burden of establishing jurisdiction or to fill gaps in the jurisdictional case it presented to the tribunal.

80. In the arbitration, the Applicant presented his Beneficially Owned Shares and his Indirect Shareholding as separate investments.⁸⁶ The argument that certain of Mr. Rand’s contributions in relation to the Beneficially Owned Shares also constituted contributions with respect to the acquisition of his Indirect Shareholding was not before the Tribunal. Consistent with Mr. Rand’s position, the Tribunal analyzed the two categories of shareholdings separately and required evidence that Mr. Rand

Elektrik B.C. v. Republic of Turkey, ICSID Case No. ARB/08/13, Decision on Annulment, 10 July 2014, para. 82).

⁸⁶ Claimants’ Rejoinder on Jurisdiction, para. 309; Claimants’ First Post-Hearing Brief, para. 14. ↩

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paid for the acquisition of both the Beneficially Owned Shares and the Indirect Shareholding for the shares to constitute investments within the meaning of Article 25(1) of the ICSID Convention.⁸⁷

81. The Committee considers that, based on the arguments and the evidence before it, the Tribunal did not manifestly exceed its powers in declining jurisdiction over the Applicant’s Indirect Shareholding.

(3) Whether The Tribunal Manifestly Exceeded Its Powers By Declining Jurisdiction Over Mr. Rand’s Payments On Behalf Of BD Agro

a. The Applicant’s Position

82. The Applicant contends that the Tribunal manifestly exceeded its powers when it declined jurisdiction under the ICSID Convention and the Canada-Serbia BIT over loans he provided to BD Agro for the purchase of a new herd and its transport from Canada to Serbia (EUR 2,2 million) and the services of herd management experts (EUR 160,000).⁸⁸

83. First, according to the Applicant, the Tribunal departed from the investment definition of the Canada-Serbia BIT, as well as established case law, by imposing a duration requirement even though “loan[s] to an enterprise” are specifically listed as an investment in its Article 1(d).⁸⁹ The Applicant also argues that the ICSID Convention does not prescribe any specific duration for an investment to fall within the scope of Article 25(1) of the ICSID Convention. Duration may constitute a common characteristic, but it is not a necessary element of the notion of “investment” under the ICSID Convention.⁹⁰

84. The Applicant further submits that the duration requirement was in any event met because he held the bulk of the loans (EUR 2.2 million) since 2008, i.e., for seven years as of the valuation date, and the remaining part of the loans (EUR 160,000) since 2013, i.e., for more than two years as of the valuation date.⁹¹ The Applicant adds that the loans did not present a one-off provision of funds by a third party, but were part of an overall economic venture.⁹²

85. Second, according to the Applicant, the Tribunal also misapplied the carve-outs in the investment definition of the Canada-Serbia BIT. The Applicant asserts that under their plain meaning, the carve-outs in Article 1(k) and (l) of the Canada-Serbia BIT only exclude claims to money stemming from commercial transactions, and that the Tribunal ignored that those carve-outs only apply if claims to money do not involve the kinds of interests set out in subparagraphs (a) to (j).⁹³ The Applicant argues that the loans he granted to BD Agro were clearly linked to and involved his Beneficially Owned

⁸⁷ Award, para. 202. ↩

⁸⁸ Memorial on Annulment, Section V.C. ↩

⁸⁹ Memorial on Annulment, para. 308. ↩

⁹⁰ Memorial on Annulment, para. 309. ↩

⁹¹ Memorial on Annulment, paras. 313-315 ↩

⁹² Memorial on Annulment, paras. 316-317; Reply on Annulment, para. 365. ↩

⁹³ Memorial on Annulment, paras. 296-297. ↩

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Shares, which the Tribunal determined fell within the scope of Article 1(h) of the Canada-Serbia BIT.⁹⁴ The Applicant further notes that his interpretation of the carve-outs in the investment definition of the Canada-Serbia BIT is consistent with the interpretation by NAFTA tribunals of the nearly identical carve-outs in Article 1139(i) and (j) NAFTA.⁹⁵

86. The Applicant submits that the Tribunal’s excess of powers is manifest because the excess is obvious, has clear and serious implications a decrease by EUR 2.4 million in the amount of compensation awarded – and contradicts the plain wording of Article 1 of the Canada-Serbia BIT.⁹⁶

b. Serbia’s Position

87. Serbia contends that the Applicant ignores that the Tribunal held that his payments for the purchase and transport of heifers and herd management consulting services were not loans. Serbia further submits that even if the Applicant’s payments qualified as loans, they were expressly excluded from treaty protection under Article 1(k) and (l) of the Canada-Serbia BIT, and that the payments, in any event, did not meet the requirements under Article 25(1) of the ICSID Convention.

88. First, Serbia asserts that the Tribunal held that all that Mr. Rand had as a result of the Payments were claims to money against BD Agro, not loans.⁹⁷ This conclusion was based on the absence of any evidence other than Mr. Rand’s testimony that the Payments were loans⁹⁸ and that in BD Agro’s bankruptcy proceedings, Mr. Rand himself reported the EUR 2.2 million payment for the acquisition of the heifers as “unofficial uncommanded agency,” not as a loan.⁹⁹

89. Second, Serbia submits that the Tribunal correctly concluded that Mr. Rand’s claims against BD Agro fell into the carve-out in Article 1 of the Canada-Serbia BIT¹⁰⁰ and that expenditures made in furtherance of an investment and its day-to-day operations do not constitute separate investments.¹⁰¹

90. Serbia rejects the Applicant’s reliance on NAFTA jurisprudence as inapposite, arguing that the NAFTA cases on which the Applicant relies concern cross-border trade contracts and do not demonstrate that an investor’s payment on behalf of its investment and in furtherance of its performance creates a separate investment protected under the Canada-Serbia BIT.¹⁰²

⁹⁴ Memorial on Annulment, paras. 298-300. ↩

⁹⁵ Memorial on Annulment, paras. 303-304; Reply on Annulment, para. 350. ↩

⁹⁶ Memorial on Annulment, paras. 318-320. ↩

⁹⁷ Counter-Memorial on Annulment, para. 332. ↩

⁹⁸ Counter-Memorial on Annulment, para. 332. ↩

⁹⁹ Counter-Memorial on Annulment, para. 332; Rejoinder on Annulment, para. 291. ↩

¹⁰⁰ Counter-Memorial on Annulment, para. 333; Rejoinder on Annulment, para. 289. ↩

¹⁰¹ Counter-Memorial on Annulment, para. 335; Rejoinder on Annulment, paras. 298-299. ↩

¹⁰² Counter-Memorial on Annulment, paras. 336-338; Rejoinder on Annulment, paras. 300-301. ↩

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91. Serbia further emphasizes that the Applicant did not argue before the Tribunal that his claims to money fell outside the carve-outs of the investment definition of the Canada-Serbia BIT because they were linked to and involved his Beneficially Owned Shares.¹⁰³ Serbia submits that the Applicant should not be allowed to turn the annulment proceedings into an appeal by raising new arguments.¹⁰⁴

92. Serbia contends that even accepting the Applicant’s characterization of the Payments as loans, the Tribunal correctly concluded that the payments would still be excluded from treaty protection by virtue of the carve-out in Article 1(k)(ii) of the Canada-Serbia BIT, “claim[s] to money that arise[] from the extension of credit in connection with a commercial transaction, such as trade financing." According to Serbia, the Tribunal’s conclusion is consistent with the ordinary meaning of the terms of the carve-out, in their context,¹⁰⁵ as well as the drafting history of the Canada-Serbia BIT.¹⁰⁶

93. Serbia submits that the Applicant’s reading of the carve-out in Article 1 of the Canada-Serbia BIT is wrong. According to Serbia, the phrase "that does not involve the kinds of interests set out in subparagraphs (a) to (j)” only applies to Article 1(l), not to Article 1(k).¹⁰⁷

94. Serbia underscores that even if the Tribunal erred in its interpretation of the Canada-Serbia BIT, its interpretation did not affect the outcome of the Tribunal’s jurisdictional analysis because the Tribunal’s main reason for declining jurisdiction over the Payments was that they did not satisfy the duration requirement under Article 25(1) of the ICSID Convention.¹⁰⁸

95. Serbia refers to ICSID jurisprudence relating to the inherent meaning of an investment, including a certain duration, to conclude that the Tribunal’s application of the duration requirement does not constitute a manifest excess of powers.¹⁰⁹ While Serbia agrees with the Applicant that the ICSID Convention does not prescribe any specific duration, Serbia contends that the purpose of the duration requirement is to exclude short-term, one-off transactions from the scope of the ICSID Convention and that the Payments for the purchase and transport of the heifers and herd management services were one-off outlays that clearly did not satisfy the duration requirement.¹¹⁰

96. Serbia submits that the Applicant’s position that the Payments were part of an overall economic operation cannot dispense with the lack of duration.¹¹¹ Serbia also points out that Mr. Rand treated the Payments as a separate investment in the arbitration, distinct from his shareholding in BD Agro, and

¹⁰³ Counter-Memorial on Annulment, paras. 334 and 339; Rejoinder on Annulment, para. 293. ↩

¹⁰⁴ Counter-Memorial on Annulment, para. 339. ↩

¹⁰⁵ Counter-Memorial on Annulment, para. 344. ↩

¹⁰⁶ Counter-Memorial on Annulment, para. 345. ↩

¹⁰⁷ Counter-Memorial on Annulment, paras. 346-348. ↩

¹⁰⁸ Award, paras. 274-275; Counter-Memorial on Annulment, para. 350; Rejoinder on Annulment, para. 289. ↩

¹⁰⁹ Counter-Memorial on Annulment, para. 351. ↩

¹¹⁰ Counter-Memorial on Annulment, paras. 355-357. ↩

¹¹¹ Counter-Memorial on Annulment, para. 358. ↩

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his attempt to recharacterize them as forming part of an overall economic operation is tantamount to an appeal.¹¹²

с. The Committee’s Analysis

97. The Tribunal declined jurisdiction over payments made by Mr. Rand to replace BD Agro’s herd and transport the heifers from Canada to Serbia and to remunerate herd management experts. It did so on two independent grounds: the Payments (i) did not satisfy the duration requirement under Article 25(1) of the ICSID Convention;¹¹³ and (ii) were excluded by virtue of the carve-out of Article 1 of the Canada-Serbia BIT.¹¹⁴ The Tribunal rejected Mr. Rand’s position that the Payments constituted “loan[s] to an enterprise” under Article 1(d) of the Canada-Serbia BIT. It found that all that Mr. Rand had in respect of the Payments were claims to money, as confirmed by their registration as “unofficial uncommanded agency” in BD Agro’s bankruptcy, and that such claims were explicitly excluded from treaty protection by the carve-out in the investment definition of the Canada-Serbia BIT.¹¹⁵ It further concluded that even if the Payments constituted loans they would be excluded from treaty protection under Article 1(k) of the Canada-Serbia BIT.¹¹⁶

98. The Applicant asserts that the Tribunal manifestly exceeded its powers because it erred in reading a duration requirement into Article 25(1) of the ICSID Convention and that the Payments, in any event, satisfied any duration requirement since they were outstanding for several years. In addition, the Applicant claims that the Tribunal manifestly exceeded its powers when it concluded that the Payments were excluded from the investment definition of the Canada-Serbia BIT because: (i) the Payments constituted loans that fell within Article 1(d) of the Canada-Serbia BIT; and (ii) the Tribunal wrongly applied the exclusions in the investment definition, overlooking that the Payments involved his majority shareholding in BD Agro.

99. The Committee will examine each of these grounds in turn and consider whether any of them satisfies the threshold for annulment under Article 52(1) of the ICSID Convention.

100. First, the Tribunal derived the duration requirement from the ordinary meaning of the term “investment.”¹¹⁷ As stated above in paragraph 74, the Tribunal’s conclusion that the notion of investment in Article 25(1) of the ICSID Convention has an objective meaning, requiring a contribution, a certain duration and risk, finds support in numerous awards. It follows that the

¹¹² Counter-Memorial on Annulment, paras. 360-361; Rejoinder on Annulment, para. 308. ↩

¹¹³ Award, paras. 274-275. ↩

¹¹⁴ Award, paras. 343-345. ↩

¹¹⁵ Award, paras. 343-344. ↩

¹¹⁶ Award, para. 345. ↩

¹¹⁷ Award, para. 228. ↩

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Tribunal’s interpretation of Article 25(1) of the ICSID Convention is not untenable and therefore cannot be considered a manifest excess of powers.

101. The transactions underlying the Payments were one-off purchases of goods and services. Given the nature of these transactions, the Committee finds that the Tribunal’s conclusion that the Payments did not satisfy the duration requirement is at least arguable. The Committee therefore concludes that the Tribunal did not manifestly exceed its powers when it declined jurisdiction over the Payments under Article 25(1) of the ICSID Convention.

102. The Committee will now turn to the Applicant’s claim that the Tribunal manifestly exceeded its powers by declining jurisdiction over the Payments under the Canada-Serbia BIT.

103. The investment definition in Article 1 of the Canada-Serbia BIT reads as follows:

"investment" means:

(a) an enterprise;

(b) a share, stock or other form of equity participation in an enterprise;

(c) a bond, debenture or other debt instrument of an enterprise;

(d) a loan to an enterprise;

(e) notwithstanding subparagraphs (c) and (d) above, a loan to or debt security issued by a financial institution is an investment only where the loan or debt security is treated as regulatory capital by the Party in whose territory the financial institution is located;

(f) an interest in an enterprise that entitles the owner to share in income or profits of the enterprise;

(g) an interest in an enterprise that entitles the owner to share in the assets of that enterprise on dissolution;

(h) an interest arising from the commitment of capital or other resources in the territory of a Party to economic activity in that territory, such as under:

(i) a contract involving the presence of an investor's property in the territory of the Party, including a turnkey or construction contract, or a concession, or

(ii) a contract where remuneration depends substantially on the production, revenues or profits of an enterprise;

(i) intellectual property rights; and

(j) any other tangible or intangible, moveable or immovable, property and related property rights acquired in the expectation of or used for the purpose of economic benefit or other business purpose;

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but "investment" does not mean:

(k) a claim to money that arises solely from:

(i) a commercial contract for the sale of a good or service by a national or enterprise in the territory of a Party to an enterprise in the territory of the other Party, or

(ii) the extension of credit in connection with a commercial transaction, such as trade financing; or

(l) any other claim to money.

that does not involve the kinds of interests set out in subparagraphs (a) to (j);

104. The Applicant argues that the Payments were loans to BD Agro and as such fell within the scope of Article 1(d) of the Canada-Serbia BIT. However, the Tribunal found that, based on the evidence before it, the Payments did not constitute loans, but other claims to money. The Applicant has not presented any argument why this finding would constitute an annullable error.

105. The investment definition of the Canada-Serbia BIT contains an exhaustive list of assets that qualify as investments. Since Mr. Rand did not claim in the arbitration that the Payments fell into any category of investments other than Article 1(d) – “a loan to an enterprise" – the Tribunal’s analysis could, in principle, have stopped with its finding that the Payments did not constitute loans.

106. However, the Tribunal declined jurisdiction over the Payments on the ground that the claims to money resulting from the Payments fell within the carve-out of the investment definition of the Canada-Serbia BIT and that, even if the Payments were to constitute loans, they would fall within the exclusion in Article 1(k)(ii).

107. The Tribunal’s analysis is set forth in the following two paragraphs:

In the circumstances, all that Mr. Rand had in respect of the EUR 2.2 million and the EUR 160,000 payments, was a claim to money. This is all the more evident for the EUR 2.2 million payments as, in BD Agro's bankruptcy, these purchases were registered as 'unofficial uncommanded agency'in accordance with Article 220 of the Law on Contracts and Torts [Law on Obligations].' Such claims are expressly excluded under Articles 1(k) and (l) of the Canada-Serbia BIT, which provide that 'investment' does not mean:

(k) a claim to money that arises solely from: (i) a commercial contract for the sale of a good or service by a national or enterprise in the territory of a Party to an enterprise in the territory of the other Party, or (ii) the extension of credit in connection with a commercial transaction, such as trade financing; or

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(l) any other claim to money; that does not involve the kinds of interests set out in subparagraphs (a) to (j).¹¹⁸

In any event, even if the payments for the purchases of livestock and services were deemed to be loans, they would still be excluded under the Treaty. As was just seen, Article 1(k)(ii) excepts from the definition of investment 'the extension of credit in connection with a commercial transaction, such as trade financing.' The meaning of 'commercial transaction' is evident from Article 1(k)(i), which describes a commercial contract as a ‘contract for the sale of a good or service by a national or enterprise in the territory of a Party to an enterprise in the territory of the other Party. 'The purchase and transport of heifers as well as the provision of management services thus fall within the notion of 'commercial transaction.¹¹⁹

108. On one view, the Tribunal may be seen to have overlooked the final clause of the exclusions in Article 1(k) and (l) of the Canada-Serbia BIT – “that does not involve the kinds of interests set out in subparagraphs (a) to (j).” When recited in paragraph 344 of the Award, the clause is placed after the semicolon in Article 1(l) but on the same line, whereas in the text of the Canada-Serbia BIT¹²⁰ the clause is in a separate paragraph. Its inclusion in a separate paragraph may suggest that the clause is to be interpreted to limit the scope of both carve-outs to claims to money that are unaccompanied by or are not coupled with any of the interests previously listed in the definition,¹²¹ including Mr. Rand’s interest in the Beneficially Owned Shares, which the Tribunal found to fall within the ambit of Article 1(h) of the Canada-Serbia BIT.¹²²

109. However, the interpretation of the carve-out is open to debate. Article 1(k) has its own qualifying language, “a claim to money that arises solely from,” which may suggest that the final clause only applies to Article 1(l), and the travaux préparatoires of the Canada-Serbia BIT record the Contracting States' intention to exclude from the investment definition “a claim to money that arises from receivables as a result of a commercial contract for the sale of a good or service between economic entities of the two parties or loans taken in order to perform such contract,” thereby excluding treaty protection for “rights from so-called commercial risk which is not the purpose or aim of this Agreement."¹²³

110. The Committee considers that one might disagree with the Tribunal’s interpretation of the carve-outs of the investment definition of the Canada-Serbia BIT. However, its interpretation is not untenable. In

¹¹⁸ Award, para. 344. ↩

¹¹⁹ Award, para. 345. ↩

¹²⁰ CLA-001-ENG. ↩

¹²¹ See CLA-213, Canadian Cattlemen for Fair Trade v. United States of America, UNCITRAL, Award on Jurisdiction, January 28, 2008, paras. 143-144 (interpreting the investment definition in Article 1139 NAFTA, which is almost identical to the definition in Article 1 of the Canada-Serbia BIT). ↩

¹²² Award, para. 313. ↩

¹²³ RE-271, Report from the negotiations of the Agreement between Canada and the Republic of Serbia for the Promotion or Protection of Investments held in Ottawa between 23 and 25 May 2013, para. 5. ↩

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addition, the Tribunal could have declined jurisdiction over the Payments solely based on its finding that the Payments did not fall within the scope of Article 1(d) of the Canada-Serbia BIT. The Committee therefore finds that the Tribunal did not manifestly exceed its powers when it declined jurisdiction ratione materiae over the Payments.

B. Failure To State Reasons On Which The Award Is Based

(1) Applicable Standard

a. The Applicant’s Position

111. The Applicant submits that Article 48(3) of the ICSID Convention required the Tribunal to “deal with every question submitted to the Tribunal and state reasons on which the award is based.”¹²⁴ Reyling on Maritime International Nominees Establishment v. Republic of Guinea (“MINE”), it asserts that to satisfy the requirement to state reasons, an ICSID tribunal must provide reasoning that enables the parties to understand the factual and legal bases of its conclusions, i.e., “to follow how the tribunal proceeded from Point A. to Point B. and eventually to its conclusion.”¹²⁵

112. The Applicant contends that the following circumstances may give rise to a failure to state reasons within the meaning of Article 52(1)(e) of the ICSID Convention: (i) contradictory reasons, (ii) insufficient or inadequate reasons, (iii) the absence of reasons for an award or a particular aspect, and (iv) a failure to observe relevant evidence.¹²⁶

113. Relying on ICSID annulment jurisprudence, the Applicant defines contradictory reasoning as reasons that effectively cancel each other out, preventing the parties from understanding the tribunal’s decision, and insufficient or inadequate reasons as reasons that cannot, in and of themselves, be a reasonable basis for the solution arrived at.¹²⁷

114. The Applicant relied in particular on the decision of the ad hoc committee in Tidewater Inc. et al. v. Bolivarian Republic of Venezuela (“Tidewater"), where the committee found that the tribunal “contradicted its own analysis and reasoning by quantifying its estimation using one concrete criterion [...] which it had rejected as unreasonable.”¹²⁸ The committee held that “one part of the

¹²⁴ CLA-017, ICSID Convention, Article 48(3). ↩

¹²⁵ Memorial on Annulment, para. 80, citing to CLA-184, Maritime International Nominees Establishment v. Republic of Guinea, ICSID Case No. ARB/84/4, Decision of the Ad hoc Annulment Committee, 22 December 1989, para. 5.09. ↩

¹²⁶ Memorial on Annulment, para. 83. ↩

¹²⁷ Memorial on Annulment, paras. 85-86. ↩

¹²⁸ CLA-188, Tidewater Inc. et al. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/10/5, Decision on Annulment, 27 December 2016, para. 193. ↩

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Award, where a genuinely contradictory reasoning on the amount of compensation cancels out another reasoning with respect to the same compensation, must be annulled.”¹²⁹

b. Serbia’s Position

115. Serbia concurs with the Applicant that to satisfy the requirement to state reasons, an award must enable the reader to "follow how the Tribunal proceeded from Point A. to Point B and eventually to its conclusion." However, Serbia emphasizes that an ad hoc committee is not a court of appeal and should not assess “the adequacy of the reasoning”¹³⁰ or “the correctness of the reasoning, or whether it is convincing”;¹³¹ as long as it is possible to “follow the reasons, it is irrelevant what it thinks of their quality."¹³²

116. The Respondent submits that the threshold for annulment under Article 52(1)(e) of the ICSID Convention is very high, and annulment should occur only in a “clear case" under two conditions: the failure to state reasons must “leave the decision on a particular point essentially lacking in any expressed rationale”, and “that point must be necessary to the tribunal's decision.”¹³³ Citing Alapli Elektrik B.V. v. Turkey, Serbia stresses that the Applicant “bears the burden of proving that the Tribunal's reasoning on a point which is essential to the outcome of the case was either unintelligible or contradictory or frivolous or absent.”¹³⁴

117. Serbia submits that tribunals enjoy broad discretion in assessing evidence, particularly on compensation and quantum, and that annulment applications based on damages must satisfy a high standard.¹³⁵

¹²⁹ CLA-188, Tidewater Inc. et al. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/10/5, Decision on Annulment, 27 December 2016, para. 196. ↩

¹³⁰ CLA-184, Maritime International Nominees Establishment v. Republic of Guinea, ICSID Case No. ARB/84/4, Decision of the Ad hoc Annulment Committee, 22 December 1989, para. 5.08. ↩

¹³¹ Counter-Memorial on Annulment, paras. 61,63,65; RLA-155, Compañía de Aguas del Aconquija S.A. and Vivendi Universal S.A. v. Argentine Republic, ICSID Case No. ARB/97/3, Decision on Annulment, 3 July 2002, paras. 64-65; RLA-231, Global Telecom and Holding S.A.E., v. Canada, ICSID Case No. ARB/16/16, Decision on Annulment, 30 September 2022, para. 79; CLA-188, Tidewater Inc. et al. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/10/5, Decision on Annulment, 27 December 2016, para. 172. ↩

¹³² CLA-206, S. W. Schill, L. Malintoppi, A. Reinisch, C. H. Schreuer, A. Sinclair eds., Schreuer's Commentary on the ICSID Convention: A Commentary on the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, 3rd ed. Cambridge University Press (2022), p. 1349. ↩

¹³³ Counter-Memorial on Annulment, paras. 61, 64. ↩

¹³⁴ Counter-Memorial on Annulment, para. 64; citing to RLA-247, Alapli Elektrik B.V. v. Turkey, ICSID Case No. ARB/08/13, Decision on Annulment, 10 July 2014, para. 202. ↩

¹³⁵ Counter-Memorial on Annulment, paras. 67, 70; citing to CLA-185, Wena Hotels Ltd. v. Arab Republic of Egypt, ICSID Case No. ARB/98/4, Decision (Annulment Proceeding), 5 February 2002, para. 93, CLA-193, Perenco Ecuador Limited v. Republic of Ecuador, ICSID Case No. ARB/08/6, Decision on Annulment, 28 May 2021, para. 363; CLA-205, NextEra Global Holdings et al. v. Spain, ICSID Case No. ARB/14/11, Decision on Annulment, 18 March 2022, para. 389. ↩

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118. According to the Respondent, the Applicant’s summary of the circumstances that may give rise to annulment under Article 52(1)(e) of the ICSID Convention is inaccurate and/or incomplete.¹³⁶ Serbia also recalls that the Tribunal is “not required to address in its award every argument made by the parties.”¹³⁷ Serbia asserts that an award’s reasoning can also be implicit, either by inference from the express terms of the award or by reference to evidence.¹³⁸

119. As to contradictory reasons, Serbia cautions that only “genuine contradictions", rather than "conflicting considerations" amount to a lack of reasons and adds that “genuine contradictions 'must be such as to be incapable of standing together on any reasonable reading of the decision.'”¹³⁹

120. Serbia rejects the Applicant’s position that insufficient or inadequate reasons constitute a ground for annulment. It maintains that Article 52(1)(e) of the ICSID Convention does not permit any review of the persuasiveness of reasons and that annulment is justified only where reasons are contradictory or frivolous, not merely insufficient or inadequate.¹⁴⁰

121. The Respondent further argues that ICSID tribunals are not required to address every argument or piece of evidence and that a failure to observe evidence may entail annulment only in exceptional cases where significant evidence is entirely ignored, as illustrated in Teco.¹⁴¹

с. The Committee’s Analysis

122. To establish a ground for annulment under Article 52(1)(e) of the ICSID Convention, an applicant must demonstrate that the award has failed to state the reasons on which it is based. Article 52(1)(e) provides in relevant part as follows:

(1) Either party may request annulment of the award by an application in writing addressed to the Secretary-General on one or more the following grounds:

[...]

(e) that the award has failed to state the reasons on which it is based.

¹³⁶ Counter-Memorial on Annulment, para. 72. ↩

¹³⁷ Counter-Memorial on Annulment, paras. 75, RLA-155, Compañía de Aguas del Aconquija S.A. and Vivendi Universal S.A. v. Argentine Republic, ICSID Case No. ARB/97/3, Decision on Annulment, 3 July 2002, para 87. ↩

¹³⁸ Counter-Memorial on Annulment, paras. 73-76. ↩

¹³⁹ Counter-Memorial on Annulment, paras. 77-78; citing to RLA-210, Continental Casualty Company v. The Argentine Republic, ICSID Case No. ARB/03/9, Decision on the Application for Partial Annulment of Continental Casualty Company and the Application for Partial Annulment of the Argentine Republic, 16 September 1011, para. 103. ↩

¹⁴⁰ Counter-Memorial on Annulment, paras. 79-81. ↩

¹⁴¹ Counter-Memorial on Annulment, para. 82; citing to CLA-186, TECO Guatemala Holdings, LLC v. Republic of Guatemala, ICSID Case No. ARB/10/23, Decision on Annulment, 5 April 2016. ↩

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123. The Parties agree, and the Committee concurs, that to satisfy the requirement to state reasons, the Award must enable the reader to follow how the Tribunal proceeded from point A to point B and eventually to its conclusion on both facts and law. Article 52(1)(e) of the ICSID Convention must be interpreted in the context of Article 48(3), which provides that “[t]he award shall deal with every question submitted to the Tribunal and shall state the reasons upon which it is based." If a tribunal provides “no express rationale for the conclusions with respect to a pivotal or outcome-determinative point, an annulment must follow.”¹⁴²

124. However, not every reason must be stated expressly. The Committee agrees with ad hoc committees that have concluded that reasons may be implicit, provided they can be reasonably inferred from the award.¹⁴³ In addition, the Committee must not review the substantive correctness, persuasiveness or quality of the Award’s reasoning, as ad hoc committees have consistently confirmed.¹⁴⁴ As long as it is possible to understand the factual and legal premises that led the Tribunal to its decision, there will be no ground for annulment under Article 52(1)(e) of the ICSID Convention.

125. The Parties further agree that contradictory reasons that effectively cancel each other out may result in annulment under Article 52(1)(e) of the ICSID Convention. The Committee concurs that reasons that cancel each other out so that no reasons at all are provided on a point that is necessary for the tribunal’s decision may amount to a failure to state reasons for purposes of Article 52(1)(e).

126. Finally, consistent with the purpose of annulment proceedings, viz. to safeguard the integrity of the ICSID arbitral process, lack of reasons on a point that has no impact on the eventual outcome does not warrant annulment.¹⁴⁵

¹⁴² RLA-263, Victor Pey Casado and President Allende Foundation v. Republic of Chile (II), ICSID Case No. ARB/98/2, Decision on Annulment, 8 January 2020, para. 186; See also RLA-279, Suez, Sociedad General de Aguas de Barcelona, S.A. and Vivendi Universal, S.A. v. Argentine Republic, ICSID Case No. ARB/03/19 (formerly Aguas Argentinas, S.A., Suez, Sociedad General de Aguas de Barcelona, S.A. and Vivendi Universal, S.A. v. Argentine Republic), Decision on Annulment, 5 May 2017, para. 152. ↩

¹⁴³ CLA-185, Wena Hotels Ltd. v. Arab Republic of Egypt, ICSID Case No. ARB/98/4, Decision (Annulment Proceeding), para. 81; RLA-218, Sodexo Pass International SAS v. Hungary, ICSID Case No. ARB/14/20, Decision on Annulment, 7 May 2021, para. 216; CLA-205, NextEra Energy Global Holdings B.V. and NextEra Energy Spain Holdings B.V. v. Kingdom of Spain, ICSID Case No. ARB/14/11, Decision on Annulment, 18 March 2022, para. 132; RLA-233, Azurix Corp. v. The Argentine Republic, ICSID Case No. ARB/01/12, Decision on the Application for Annulment of the Argentine Republic, 1 September 2009, para. 54; RLA-232, Enron Corporation and Ponderosa Assets, L.P. v. Argentine Republic, ICSID Case No. ARB/01/3 (also known as: Enron Creditors Recovery Corp. and Ponderosa Assets, L.P. v. The Argentine Republic), Decision on the Application for Annulment of the Argentine Republic, 30 July 2010, para. 75. ↩

¹⁴⁴ RLA-256, ICSID Updated Background Paper on Annulment, para. 111. ↩

¹⁴⁵ CLA-207, Watkins Holdings S.à r.l. and others v. Kingdom of Spain, ICSID Case No. ARB/15/44, Decision on Annulment, 21 February 2023, para. 134; RLA-247, Alapli Elektrik B.V. v. Republic of Turkey, ICSID Case No. ARB/08/13, Decision on Annulment, 10 July 2014, para. 202; RLA-263, Victor Pey Casado and President Allende Foundation v. Republic of Chile (II), ICSID Case No. ARB/98/2, Decision on Annulment, para. 186; CLA-190, Houssein Nuaman Soufraki v. United Arab Emirates, ICSID Case No. ARB/02/7, Decision of the ad hoc Committee on the Application for Annulment of Mr Soufraki, 5 June 2007, para. 126. ↩

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(2) Whether The Tribunal Failed To State Reasons In Declining Jurisdiction Over Mr. Rand’s Payments For BD Agro

a. The Applicant’s Position

127. The Applicant asserts that the Tribunal failed to state any reasons for its conclusion that the Payments did not satisfy the duration requirement in Article 25(1) of the ICSID Convention. The Applicant contends that the Award does not allow the reader to follow the Tribunal’s reasoning since the Award neither indicates the required duration nor does it state the facts on which the Tribunal relied to conclude that the Payments did not meet the duration requirement.¹⁴⁶

128. The Applicant submits that the Tribunal’s failure to explain the duration criterion and consider the actual duration of the Payments constitutes a ground for annulment under Article 52(1)(e) of the ICSID Convention.¹⁴⁷

b. Serbia’s Position

129. Serbia argues that the Award’s explanation why the Payments do not meet the duration requirement under Article 25(1) of the ICSID Convention is adequate. According to Serbia, this conclusion is self-evident and inevitably follows from the Tribunal’s characterization of the Payments as one-off expenditures, which by their nature cannot satisfy the duration requirement.¹⁴⁸ According to Serbia, no further explanation is needed since the Tribunal’s reasoning can be inferred from the Award and can easily be followed. There is therefore no failure to state reasons.¹⁴⁹

c. The Committee’s Analysis

130. The Tribunal concluded that it lacked jurisdiction ratione materiae over the Payments because they did not satisfy the duration requirement under Article 25(1) of the ICSID Convention.

131. The Applicant argues that the Award fails to state the reasons for this conclusion because the Award neither indicates the required duration nor does it reveal the facts on which this conclusion is based.

132. The Award’s reasoning on the duration requirement is limited to the following paragraph:

The Claimants allege that Mr. Rand made payments of approximately EUR 2.2 million for the replacement of BD Agro's herd. In addition, through Rand Investments, Mr. Rand also paid approximately EUR 160,000 to remunerate the services provided to BD Agro by herd management experts Messrs. Wood and Calin. The Tribunal is not convinced that these payments satisfy the duration criteria of the objective

¹⁴⁶ Memorial on Annulment, paras. 322-323. ↩

¹⁴⁷ Memorial on Annulment, para. 324. ↩

¹⁴⁸ Counter-Memorial on Annulment, paras. 363-364; Rejoinder on Annulment, para. 325. ↩

¹⁴⁹ Counter-Memorial on Annulment, para. 365; Rejoinder on Annulment, para. 329. ↩

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definition of investment in Article 25(1) of the Convention. For instance, the payment of consulting fees by Rand Investments does not have a significant duration, and the Claimants have not established the contrary.¹⁵⁰

133. The Award provides no express rationale for its conclusion that the Payments do not satisfy the duration requirement under Article 25(1) of the ICSID Convention. Nor does it elaborate on the legal standard of the duration requirement or the factual premises underlying its conclusion that the Payments fell short of the required duration. However, given the Tribunal’s conclusion that the Payments were not investments protected under the Canada-Serbia BIT, any alleged failure to provide reasons regarding the duration requirement would have made no difference to its dismissal of jurisdiction over the Payments. Any such failure would therefore not justify an annulment under Article 52(1)(e) of the ICSID Convention of the Tribunal’s dismissal of jurisdiction over the Payments.

(3) Whether The Award Fails To State The Reasons For The Valuation of the Construction Land

(i) Rejection Of The Batajnica Evidence

a. The Applicant’s Position

134. The Applicant submits that the Tribunal contradicted its own reasoning because it found that land located in the Batajnica area was not comparable to the 279 acres of land designated for construction of business and commercial areas in Zones A, B and C in Dobanovci (the "Construction Land"), but then accepted Serbia’s reliance on an asking price for land in the same area.¹⁵¹ The Applicant contends that the Tribunal first rejected his evidence, namely the “Batajnica transactions,” on the basis that “[t]here are [...] major differences between the Batajnica land and [the Construction Land] that make the former an unsuitable comparator.”¹⁵² However, the Tribunal subsequently accepted Serbia’s valuation, which relied on five asking prices, including one for land in the Batajnica area.¹⁵³

135. The Applicant further maintains that the Tribunal rejected the reliance by his quantum expert, Dr. Hern, on the Batajnica transactions post-dating the valuation date, i.e., 21 October 2015, but nevertheless accepted Serbia’s reliance on asking prices with unknown dates.¹⁵⁴ The Applicant notes that the Tribunal rejected his evidence because "[t]he Batajnica assessments, dating from March to August 2016, do not meet this requirement,”¹⁵⁵ i.e., the requirement that the information used for

¹⁵⁰ Award, para. 274. ↩

¹⁵¹ Memorial on Annulment, paras. 93-102; Reply on Annulment, paras. 43-56. ↩

¹⁵² Award, para. 693 (third bullet point). ↩

¹⁵³ Memorial on Annulment, paras. 96-97. ↩

¹⁵⁴ Memorial on Annulment, paras. 103-108; Reply on Annulment, paras. 61-66. ↩

¹⁵⁵ Award, para. 693 (third bullet point)(ii). ↩

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valuation pre-date the valuation date. Yet, the Tribunal accepted Sebia’s evidence, including two asking prices from 2015 without further details. The Applicant emphasizes that no documentary proof or exact dating was provided for those listings, making it impossible to determine whether they pre-or postdate the valuation date.¹⁵⁶

136. The Applicant concludes that these contradictions justify annulment under Article 52(1)(e) of the ICSID Convention,¹⁵⁷ and asserts that if the Tribunal had accepted the Batajnica transactions as comparable, the valuation of the Construction Land would have been higher by at least EUR 36 million and up to EUR 61 million.¹⁵⁸

b. Serbia’s Position

137. The Respondent contests the Applicant’s first argument,¹⁵⁹ noting that the Tribunal rejected his reliance on the Batajnica transactions for valuing the Construction Land on three grounds: the transactions did not meet international standards, occurred in 2016 after the valuation date, and concerned land in a different location.¹⁶⁰

138. As to the location, Serbia submits that the Tribunal never made a broad ruling that all land in the Batajnica municipality was incompatible. Rather, the Tribunal found that the specific land relied upon by Claimants was incompatible with the land in Zones A, B and C.¹⁶¹ Serbia notes that the report of its real estate expert, Ms. Danijela Ilić, contains no indication that the advertised land was located in the same area as the land involved in the Batajnica transactions. Accordingly, Serbia maintains that there is no contradiction in the Tribunal’s reasoning, and even if there was a contradiction, it would not affect the outcome, as there are two other grounds supporting the Tribunal’s decision. Therefore, annulment is not justified.¹⁶²

139. Regarding those two other grounds, Serbia first stresses that, unlike the Batajnica transactions, Ms. Ilić’s valuation is based on asking prices that comply with international standards and were recorded in 2013, i.e. before the valuation date.¹⁶³

140. Serbia then submits that the Applicant’s second contention – that the Tribunal contradicted its own reasoning by rejecting the Batajnica transactions for postdating the valuation date while accepting asking prices with unknown dates – fails for three reasons.

¹⁵⁶ Memorial on Annulment, paras. 105-106. ↩

¹⁵⁷ Memorial on Annulment, paras. 98-100,102. ↩

¹⁵⁸ Memorial on Annulment, paras. 101,108. ↩

¹⁵⁹ Counter-Memorial on Annulment, paras. 84-91. ↩

¹⁶⁰ Award, para. 693 (third bullet point (i)(ii)(iii)); Counter-Memorial on Annulment, para. 87. ↩

¹⁶¹ Award, para. 693 (third bullet point). ↩

¹⁶² Counter-Memorial on Annulment, paras. 88-89. ↩

¹⁶³ Counter-Memorial on Annulment, para. 90. ↩

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141. First, the Respondent contends that the Applicant does not challenge the Tribunal’s failure to provide reasons but the correctness of its assessment of evidence. Serbia emphasises that such a challenge falls outside the scope of annulment review, as the Tribunal alone has the discretion to assess evidence, especially in quantum,¹⁶⁴ and ad hoc committees should not review the correctness of such evaluation.¹⁶⁵

142. Second, the issue of the dates of the asking prices was never raised during the arbitration proceedings and cannot be introduced at the annulment stage. Relying on the annulment decision in Wena Hotels Ltd. v. Arab Republic of Egypt (“Wena”), Serbia emphasizes that a party cannot seek annulment under Article 52(1)(e) of the ICSID Convention based on arguments that have not been presented during the proceedings before the Tribunal.¹⁶⁶

143. Third, even if the Applicant’s argument were accepted, its impact on the outcome of the dispute would be negligible. Excluding two asking prices would leave three unchallenged, resulting in a marginal increase of only EUR 0.3 per square meter. Citing Vivendi, Serbia submits that even if an annullable error is found, ad hoc committees have discretion to determine whether the error warrants annulment.¹⁶⁷ In Serbia’s view, any error would be negligible and should not lead to annulment.

с. The Committee's Analysis

144. The Tribunal awarded damages to Mr. Rand based on a valuation of BD Agro’s core and non-core assets, which included (i) the Construction Land in Zones A, B and C in Dobanovci; (ii) additional construction land in Dobanovci and Bečmen (the “Other Construction Land”); and (iii) agricultural land in Ašanja, Deč, Ugrinovci and Dobanovci (the “Agricultural Land”).

145. The Tribunal assessed the value of the Construction Land based on its size (which the Tribunal determined to be 279 hectares)¹⁶⁸, the market price (considering comparable land sales), applicable discounts (where attributes are not comparable), any distress sale discount, and thereafter accounting

¹⁶⁴ CLA-185, Wena Hotels Ltd. v. Arab Republic of Egypt, ICSID Case No. ARB/98/4, Decision (Annulment Proceeding), 5 February 2002, para. 91; CLA-188, Tidewater Inc. et al. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/10/5, Decision on Annulment, 27 December 2016, para. 192; RLA- 211, UABE Energija v. Republic of Latvia, ICSID Case No. ARB/12/23, Decision on Annulment, 8 April 2020, para. 221. ↩

¹⁶⁵ Counter-Memorial on Annulment, paras. 93(1) – 95. ↩

¹⁶⁶ Counter-Memorial on Annulment, paras. 96 – 97; citing to CLA-185, Wena Hotels Ltd. v. Arab Republic of Egypt, ICSID Case No. ARB/98/4, Decision (Annulment Proceeding), 5 February 2002, para. 82. ↩

¹⁶⁷ Counter-Memorial on Annulment, paras. 98-99, citing to RLA-155, Compañía de Aguas del Aconquija S.A. and Vivendi Universal S.A. v. Argentine Republic, ICSID Case No. ARB/97/3, Decision on Annulment, 3 July 2002, para. 66. ↩

¹⁶⁸ Award, para. 691. ↩

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for the liabilities to which BD Agro was exposed. The Committee notes that the Tribunal had before it several valuation reports:¹⁶⁹

1. The valuation of Mr. Pero Mrgud, a Serbian court expert, of December 2014 submitted to the Belgrade Commercial Court with the amended pre-pack reorganization plan on 6 March 2015 (the “Mrgud Valuation”), valuing the Construction Land to arrive at the equity value of BD Agro at EUR 71 million;
2. The report of Claimant's real estate expert, Mr. Krzysztof Grzesik, who reviewed evidence from (i) comparable transactions; (ii) contemporaneous valuations by other valuers; and (iii) contemporaneous valuations of tax authorities;
3. The valuations prepared by Dr. Richard Hern (Claimant's quantum expert) and Mr. Sandy Cowan (Serbia's quantum expert);
4. The First Confineks Valuation of 5 December 2015 (the “First Confineks Valuation”),¹⁷⁰ which was prepared for administering BD Agro following the seizure of the Beneficially Owned Shares – valuing the fair market value of BD Agro as EUR 57.2 million; and
5. The Second Confineks Valuation of 4 February 2016 (the "Second Confineks Valuation")¹⁷¹, which updated and revised the valuation to EUR 56.3 million.

146. The Applicant's criticism appears to center on the Tribunal's observation:

Dr. Hern relies on value of the land in Batajnica as the main source of evidence for his upper bound price of 30 EUR/m2, finding that, by its characteristics, that land was comparable to the land in Zones A, B, and C. There are, however, major differences between the Batajnica land and Zones A, B, and C land that make the former an unsuitable comparator.¹⁷²

147. The Tribunal went on to point out that:

1. Value assessments by tax authorities are not property valuations based on international standards;
2. The information and data used in valuation must predate the valuation date, while the values relied upon by Dr. Hern were from March to August 2016, i.e., after the valuation date; Dr. Hern had also expressed concerns about the comparability of the Batajnica land

¹⁶⁹ Award, para. 640, 692. ↩

¹⁷⁰ CE-142, Report on the valuation of assets, liabilities and capital of BD Agro Dobanovci (December 2015). ↩

¹⁷¹ CE-172, Confineks d.o.o. Beograd, Report on the Valuation of Assets, Liabilities and Capital of BD Agro AD Dobanovci (January 2016). ↩

¹⁷² Award, para. 693. ↩

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and the Zones A, B, and C land in that the “Batajnica land is close to the Batajnica settlement and to major traffic infrastructure (highway, roads, and railway)”, whereas “Zones A, B, and C land is located some distance away from Dobanovci and has no access to any roads or railway.”¹⁷³

148. The Committee understands these observations as the Tribunal's bases for not accepting the upper bound value of EUR 30/sqm that Dr. Hern had derived from the tax assessments of land in Batajnica rather than as an outright rejection of using as a comparator any valuation of land sold or sought to be sold in the Batajnica area. There is therefore no contradiction in the Tribunal's acceptance of Ms. Ilić's valuation, which may have included other land in the Batajnica area based on asking prices from 2013, i.e., prior to the valuation date. In any event, the criticism levied by the Applicant challenges the Tribunal's weighing of the evidence presented before it, which falls outside the scope the Committee's mandate. This reason for annulment must therefore be rejected.

(ii) Reliance on Asking Prices

a. The Applicant's Position

149. First, the Applicant submits that the Tribunal contradicted its own reasoning when it rejected Dr. Hern's reliance on the First Confineks Valuation on the ground that it "does not refer to evidence of comparable transactions”,¹⁷⁴ while accepting Ms. Ilić's valuation, which relied solely on five asking prices without any comparable transactions.¹⁷⁵ Mr. Rand asserts that the First Confineks Valuation valued the Construction Land at approximately EUR 67 million, which is EUR 25 million more than the valuation adopted by the Tribunal.¹⁷⁶

150. Second, the Applicant notes that it is indisputable that asking prices have the lowest evidentiary value and that actual transaction data is more relevant.¹⁷⁷ Accordingly, the Tribunal rejected the Mrgud Valuation for relying on asking prices, yet contradicted its own reasoning by accepting Ms. Ilić's valuation, which was also based on asking prices despite the availability of actual transaction data.¹⁷⁸ The Applicant states that the Tribunal's rejection of the Mrgud Valuation led to a EUR 45 million difference in BD Agro's valuation.¹⁷⁹

¹⁷³ Award, para. 693 (third bullet point (iii)). ↩

¹⁷⁴ Award, para. 693 (first bullet point). ↩

¹⁷⁵ Memorial on Annulment, para. 112. ↩

¹⁷⁶ Award, paras. 692-707; Memorial on Annulment, para. 114; Reply on Annulment, para. 75. ↩

¹⁷⁷ Memorial on Annulment, paras. 115-117. ↩

¹⁷⁸ Award, para. 696. ↩

¹⁷⁹ Award, para. 707; Memorial on Annulment, para. 121. ↩

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b. Serbia's Position

151. Regarding the Applicant's first argument, Serbia submits that the Tribunal did not reject Dr. Hern's valuation because it lacked comparable transactions, but because it was based on “mass appraisals" conducted by tax authorities,¹⁸⁰ which carried “little evidentiary weight,”¹⁸¹ and did not correspond to international valuation standards.¹⁸²

152. According to Serbia, the Tribunal's remarks on the First Confineks Valuation reflected the view of the Claimants' own expert, Mr. Grzesik, who considered that valuation to be “secondary evidence” because “it did not refer to evidence of comparable transactions.”¹⁸³

153. Serbia argues that the Tribunal's acceptance of Ms. Ilić's valuation does not contradict its reasoning, as no expert rejected asking prices as a valid source under international standards. Serbia stresses that the issue with the First Confineks Valuation arose from the absence of evidence supporting its determination of the price of the Construction Land.¹⁸⁴

154. Serbia submits that the Applicant's second argument is also without merit.¹⁸⁵ It explains that the Tribunal did not reject the Mrgud Valuation because it relied on asking prices, but because “it provided no information about the sources of these prices or when they were published.”¹⁸⁶ By contrast, Ms. Ilić's valuation provided asking prices with clearly identified sources and publication dates, none of which was contested by the Claimants during the arbitration.

155. Serbia reiterates that the Parties' experts agreed that asking prices are legitimate evidence of market prices under international valuation standards. While Mr. Grzesik described them as the “lowest level of evidence", he confirmed their legitimacy and acknowledged their common use by Serbian valuers.¹⁸⁷

c. The Committee's Analysis

156. As reflected in the Award,¹⁸⁸ the Claimants had used the First Confineks Valuation, which valued the Construction Land at EUR 24/m², to support Dr. Hern's lower bound price of the land at EUR 22/m². The Tribunal rejected this approach, reasoning that the Claimants' own real estate expert, Mr. Grzesik, did not rely on that valuation as he had treated it as “‘secondary evidence’ because [the First Confineks

¹⁸⁰ Award, para. 693 (first bullet point). ↩

¹⁸¹ Award, para. 693; Counter-Memorial on Annulment, para. 101. ↩

¹⁸² Counter-Memorial on Annulment, para. 103. ↩

¹⁸³ Award, para. 693 (first bullet point); Counter-Memorial on Annulment, para. 102. ↩

¹⁸⁴ Counter-Memorial on Annulment, para. 103. ↩

¹⁸⁵ Counter-Memorial on Annulment, para. 107. ↩

¹⁸⁶ Award, para. 693 (second bullet point); Counter-Memorial on Annulment, para. 106. ↩

¹⁸⁷ Counter-Memorial on Annulment, para. 108. ↩

¹⁸⁸ Award, para. 693 (first bullet point). ↩

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Valuation] does not refer to evidence of comparable transactions.”¹⁸⁹ If there was any contradiction, it would have arisen from the Claimants' own submissions. The Tribunal did nothing more than accept the view advanced by the Claimants' own real estate expert and thus disregarded the First Confineks Valuation.

157. The rejection of the Mrgud Valuation, too, was based on Mr. Grzesik's view that the valuation was “based on asking prices, was flawed, because it provided no information about the sources of these prices or when they were published.”¹⁹⁰ It is clear that the Tribunal agreed with Mr. Grzesik's observation that the lack of information sources undermined the Mrgud Valuation and was thus not considered as appropriate. The Tribunal did not, as a matter of principle, reject the use of asking prices.

158. In the Committee's view, the Tribunal's decision under this heading is not contradictory or in any way inconsistent. The Tribunal's decision was in fact based on its assessment of the Claimants' expert real estate evidence. This reason for annulment is therefore rejected.

(iii) Application Of A 30% Discount On The Value Of The Construction Land

a. The Applicant's Position

159. The Applicant asserts that the Tribunal provided insufficient, inadequate and contradictory reasoning when it accepted a 30% discount on the value of the Construction Land.

160. First, the Applicant contends that the Tribunal failed to provide sufficient reasoning for applying a 30% discount, and merely stated “[f]ailing more precise indications in the record about the size of this deduction, it appears reasonable to the Tribunal to accept the 30% discount applied by Ms. Ilić.”¹⁹¹ Citing the annulment decision in Perenco v. Republic of Ecuador (“Perenco”),¹⁹² the Applicant asserts that the Tribunal's findings relating to the discount should be annulled because the Tribunal failed to sufficiently explain why a 30% discount should apply, which led to an undervaluation of BD Agro's assets by up to EUR 25 million.¹⁹³

161. Second, the Applicant asserts that the Tribunal contradicted its own position expressed during the hearing, where the Presiding Arbitrator said “I know you are saying this is a matter of judgment, but then one exercises judgment in consideration of a number of factors, otherwise it becomes arbitrary,

¹⁸⁹ Award, para. 693 (first bullet point). ↩

¹⁹⁰ Award, para. 693 (second bullet point). ↩

¹⁹¹ Award, para. 697; Memorial on Annulment, para. 123. ↩

¹⁹² CLA-193, Perenco Ecuador Limited v. Republic of Ecuador, ICSID Case No. ARB/08/6, Decision on Annulment, 28 May 2021, para. 466; Memorial on Annulment, paras. 125-127. ↩

¹⁹³ Memorial on Annulment, para. 127. ↩

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so how do you justify your 30%?".¹⁹⁴ Yet, the Tribunal accepted Ms. Ilić's 30% discount, even though she did not refer to any factors or evidence other than her “experience in valuation of land.”¹⁹⁵

162. Third, the Applicant submits that the Tribunal did not provide tenable reasons for applying any discount. The Award contains only two purported reasons for the discount, i.e. the size of the Construction Land and road and infrastructure access.

163. Regarding the size of the Construction Land, the Applicant submits that the Tribunal applied a 30% discount on the basis that “the representative comparables chosen by Ms. Ilić and BD Agro's land were of a different size” and that “the large area of BD Agro's land on sale may have pushed the price down."¹⁹⁶ The Applicant highlights that the Construction Land parcel is in fact smaller (17,000 m²) than the median size comparators (30,000 m²), and therefore, more valuable. Accordingly, no discount should have been applied.¹⁹⁷

164. The Applicant adds that the Tribunal also contradicted its own reasoning by admitting that “BD Agro may have been able to split its land into smaller parcels before selling it, making any discount on the sale of the land as a whole inapposite.”¹⁹⁸ Moreover, during the cross-examination, Ms. Ilić abandoned her position that the size of the Construction Land was a reason for a 30% discount and attributed the discount to the lack of infrastructure..¹⁹⁹

165. As to road access, the Tribunal concluded that “[w]hile the comparators had access to the roads and other infrastructure, this was not the case for BD Agro's land.”²⁰⁰ The Applicant submits that the Tribunal's reasoning is insufficient and inadequate. Mr. Cowan, Serbia's quantum expert, admitted that the land plots advertised in the announcements submitted by Serbia as evidence did not identify the specific location of each land plot, making it impossible to determine the precise location of the comparators and their access to infrastructure.²⁰¹

166. According to the Applicant, the application of the discount was arbitrary, as the Tribunal applied it despite Ms. Ilić's admission that both BD Agro's farm adjacent to the Construction Land and BD Agro's Other Construction Land in Dobanovci had access to road and infrastructure.²⁰² The Applicant submits that the Construction Land had full access to relevant infrastructure through the BD Agro

¹⁹⁴ Transcript, Hearing on Jurisdiction and Merits, Day 8, dated 20 July 2021, 170:22-171:02; Memorial on Annulment, paras. 128-129. ↩

¹⁹⁵ Ilić First Expert Report, para. 9.1 (recte para. 9.93). ↩

¹⁹⁶ Award, para. 697. ↩

¹⁹⁷ Memorial on Annulment, paras. 132-134; Reply on Annulment, paras. 88-89. ↩

¹⁹⁸ Award, para. 697; Memorial on Annulment, para. 135. ↩

¹⁹⁹ Memorial on Annulment, para. 133. ↩

²⁰⁰ Award, para. 697. ↩

²⁰¹ Transcript, Hearing on Jurisdiction and Merits (Cowan), Day 8, dated 20 July 2021, 143:17-146:19; Memorial on Annulment, para. 137. ↩

²⁰² Memorial on Annulment, paras. 139-140. ↩

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farm and that the “Tribunal should have applied a premium, rather than a discount to the Value of the Other Construction Land."²⁰³

167. The Applicant contends that even accepting the price per meter square of the Construction Land proposed by Ms. Ilić based on asking prices, i.e. EUR 21 per m², the 30% discount resulted in a EUR 18 million reduction in the assessed value of the Construction Land.²⁰⁴ Relying on the annulment decision in Soufraki,²⁰⁵ the Applicant concludes that the reasons provided by the Tribunal are insufficient and inadequate to justify the application of the discount and therefore warrant annulment under Article 52(1)(e) of the ICSID Convention.

b. Serbia's Position

168. The Respondent contends that the Applicant's challenges of the 30% discount “do not stand scrutiny.”²⁰⁶ It stresses that the Tribunal had discretion in determining compensation, including the application of a discount as long as it “explains the process leading to the estimation.”²⁰⁷ Citing the annulment decision in Wena, Serbia adds that there is no requirement for the Tribunal to provide detailed reasons.²⁰⁸

169. Serbia submits that (i) the Tribunal provided reasons for the application of the discount that are easy to follow, (ii) the inadequacy or insufficiency of reasons does not warrant annulment, and (iii) the Tribunal provided reasons for setting the discount at 30%.

170. First, Serbia points out that the Applicant challenges the quality and correctness of the Tribunal's reasoning, which fall outside of the scope of annulment review. Rather, the scope of the inquiry is limited to the question whether the Tribunal's reasoning can be followed and understood, which Serbia affirms is the case.²⁰⁹ The Award first addresses size as a factor in applying a discount and rejects a discount on the basis of the size of BD Agro's land,²¹⁰ finding that BD Agro could have split its land, which made any discount based on size “inapposite.”²¹¹ The Award then addresses road and infrastructure access as a reason for a discount, noting the Claimants' concern about the comparators' exact location, but concluding that “the descriptions of the comparators make clear that they were

²⁰³ Reply on Annulment, paras. 91-92. ↩

²⁰⁴ Memorial on Annulment, para. 143. ↩

²⁰⁵ CLA-190, Houssein Nuaman Soufraki v. United Arab Emirates, ICSID Case No. ARB/02/7, Decision of the ad hoc Committee on the Application for Annulment of Mr Soufraki, 5 June 2007, paras. 122-123. ↩

²⁰⁶ Counter-Memorial on Annulment, para. 111. ↩

²⁰⁷ CLA-188, Tidewater Inc. et al. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/10/5, Decision on Annulment, 27 December 2016, para. 192. ↩

²⁰⁸ Counter-Memorial on Annulment, para. 111, citing to CLA-185, Wena Hotels Ltd. v. Arab Republic of Egypt, ICSID Case No. ARB/98/4, Decision (Annulment Proceeding), 5 February 2002, para. 91. ↩

²⁰⁹ Counter-Memorial on Annulment, para. 114. ↩

²¹⁰ Award, para. 697. ↩

²¹¹ Counter-Memorial on Annulment, para. 116. ↩

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equipped with infrastructure and had access to road" and that “Ms. Ilić's testimony that these differences justify a discount was not seriously rebutted.”²¹²

171. Serbia notes that the Applicant does not dispute that infrastructure and road access justify a discount, but challenges the Tribunal's failure to state reasons for the difference in access to infrastructure between the advertised land and Zone A, B and C land.²¹³ Serbia further notes that Exhibit RE-561, which contains the asking prices collected by Ms. Ilić, confirms that all advertised plots had road and infrastructure access, as the Tribunal found.²¹⁴ Serbia submits that the Applicant relies selectively on Ms. Ilić's testimony, overlooking her clarification that Zones A, B and C cover 279 hectares, most of which lack road access and are largely inaccessible.²¹⁵ Hence, Serbia rejects the Applicant's allegation that the application of the same discount to farm land was arbitrary and points out that the Claimants never raised this issue in the arbitration.²¹⁶

172. Second, the Respondent argues that inadequate or insufficient reasons are not a ground for annulment.²¹⁷ Serbia asserts that none of the annulment decisions invoked by the Applicant addresses the quality of the reasons, noting that Soufraki and Mitchell v. Democratic Republic of the Congo defined inadequate and insufficient reasons in terms of their comprehensibility rather than their quality.²¹⁸

173. Third, the Respondent contends that the Applicant's position that the Tribunal did not provide reasons for the size of the discount is “nebulous” and “contradictory.”²¹⁹ Serbia observes that the Applicant himself quoted the Tribunal's reasoning that “failing more precise indication in the record about the size of the deduction”, it “appears reasonable to the Tribunal to accept the 30% discount applied by Ms. Ilić”²²⁰ only to then state that the 30% size of the discount “is without explanation.”²²¹ Serbia submits that the Tribunal did provide a sufficient explanation, which can be easily followed.²²²

174. Serbia asserts that the Tribunal properly exercised its broad discretion in determining the applicable discount. It notes that while the Claimants had failed to offer any indication as to the appropriate size of the discount and only objected to the application of any discount, the Respondent had submitted expert evidence from Ms. Ilić. Serbia maintains that the absence of “more precise indications in the

²¹² Award, para. 697; Counter-Memorial on Annulment, paras. 117-120. ↩

²¹³ Memorial on Annulment, para. 136. ↩

²¹⁴ Counter-Memorial on Annulment, paras. 121-122. ↩

²¹⁵ Counter-Memorial on Annulment, para. 123. ↩

²¹⁶ Counter-Memorial on Annulment, para. 124. ↩

²¹⁷ Rejoinder on Annulment, paras. 54-62. ↩

²¹⁸ Counter-Memorial on Annulment, paras. 127-131. ↩

²¹⁹ Counter-Memorial on Annulment, para. 132. ↩

²²⁰ Memorial on Annulment, para. 123, citing to Award, para. 697. ↩

²²¹ Memorial on Annulment, para. 125 and Counter-Memorial on Annulment para. 123. ↩

²²² Counter-Memorial on Annulment, paras. 132-133. ↩

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record regarding the size of this deduction”²²³ broadened the Tribunal's discretion and reduced its obligation to provide detailed reasoning. In these circumstances, the Tribunal was entitled to rely on Ms. Ilić's 30% figure, which it found “reasonable.”.²²⁴ Serbia adds that, unlike in Perenco, the Tribunal adopted a nominal value accompanied by an explanation, and mere disagreement with this reasoning does not constitute a ground for annulment.

175. Finally, the Respondent clarifies that the Presiding Arbitrator's question that a discount based solely on expert judgment would be “arbitrary”, was posed to Mr. Cowan, not Ms. Ilić.²²⁵ Serbia further explains that Ms. Ilić did justify the 30 % discount, stating that it reflected her experience in land valuation and was due to the presence of infrastructure and access roads. Accordingly, the Tribunal's reliance on her assessment was not arbitrary. Serbia concludes that the Applicant's argument is an attempt to question the Tribunal's assessment of evidence, which falls within the Tribunal's discretion under ICSID Arbitration Rule 34(1) and does not constitute a reason for annulment.²²⁶

с. The Committee's Analysis

176. The Applicant criticises the Tribunal for not providing reasons, or acting arbitrarily, in accepting Ms. Ilić's testimony that the value of the Construction Land be discounted by 30%, citing a passage of the transcript of the evidentiary hearing to suggest that the Tribunal (or at least the Presiding Arbitrator) had taken the view that the imposition of a 30% discount was arbitrary. The referenced passage, as correctly pointed out by Serbia, was indeed an exchange between the Tribunal and Mr. Cowan (Serbia's quantum/accounting expert). A fuller extract below makes clear the subject of the discussion:²²⁷

²²³ Award, para. 697; Counter-Memorial on Annulment, para. 135. ↩

²²⁴ Counter-Memorial on Annulment, para. 136. ↩

²²⁵ Counter-Memorial on Annulment, paras. 139-140. ↩

²²⁶ Counter-Memorial on Annulment, paras. 118, 120, 121, 125, 126, 141, 143. ↩

²²⁷ Transcript, Hearing on Jurisdiction and Merits, Day 8, dated 20 July 2021, 169.05 to 171.09. ↩

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05 THE PRESIDENT: And then you quote statements relating only 06 to DCF valuation. Now, are you saying that the discount 07 only applies to a DCF valuation, or does the discount 08 also apply to an asset-based valuation? 09 A. The discount could also apply to an asset-based 10 valuation. 11 THE PRESIDENT: And how do you justify this? 12 A. It is a difficult one to justify which is why I have 13 applied my rule of thumb of 30%. Based on the situation 14 of the business, is how I analysed it and justified it. 15 The empirical evidence is difficult to support the 16 discount. I have read on Kantor and also Pratt, both 17 apply discounts for a distressed business, a going 18 concern that is under financial distress, they do 19 mention they would also apply a discount on an 20 asset-based method. 21 THE PRESIDENT: But that will still comply with the 22 definition of fair market value that implies buyer and 23 seller who are not under compulsion? 24 A. Yes, it comes down to acting knowledgeably, that a buyer 25 would be aware of the situation that the seller was in.

PAGE 170 (15:11) 01 They are both still willing, because there is a reason 02 to agree to a price to sell, that the seller needs to 03 sell and the buyer wants to buy, but they would come to 04 a price that was negotiated, and that's where the 05 discount comes in, that the value of the individual 06 assets -- or the value of the whole is less than if you 07 sold the individual assets. 08 THE PRESIDENT: So did I understand you correctly before, in 09 answer to a question you said that the discount only 10 applies to the valuation of the business as a whole, as 11 opposed to valuing parts, or did I misunderstand that? 12 A. I think I would have to look at the transcript, but 13 I believe that's what I said, that if you were valuing 14 a business on a liquidation basis, you typically value 15 on an asset by asset basis, and then, as counsel 16 suggested, you would sell each asset individually, 17 whereas if you are -- what I have performed here is 18 a valuation of BD Agro as a whole, and I have deemed 19 that a willing buyer would look at it in the whole and 20 offer a discount to the seller in order to proceed with 21 the transaction.

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22 THE PRESIDENT: That is about the principle of the discount, 23 but then the level of this discount, can you explain 24 better why you come to 30%? I know you are saying this 25 is a matter of judgment, but then one exercises judgment

PAGE 171 (15:12) 01 in consideration of a number of factors, otherwise it 02 becomes arbitrary, so how do you justify your 30%? 03 A. Well, I deemed 50% was too high, and in a bankruptcy 04 Doing Business suggests 65.5% recovery rate so I deemed 05 that to be too high. 30% to some extent was derived 06 from the pre-pack plan in March, where management 07 accepted that they would be willing to sell unencumbered 08 assets at 70% of their market value, hence the 30% 09 discount.

177. The exchange between Mr. Cowan and the President related to Mr. Cowan's application of a 30% discount when computing BD Agro's assets. Mr. Cowan in fact disclosed that “management accepted that they would be willing to sell the unencumbered assets at 70% of their market value, hence a 30% discount.”²²⁸ This was a distress sale factor that the Tribunal was concerned with and not related to the valuation of the Construction Land.

178. The Tribunal accepted a 30% discount on the value of the Construction Land. In coming to this view, the Tribunal had taken into account the approaches and views of the experts and the factors considered by them. The Tribunal evaluated Ms. Ilić's evidence and found her approach reasonable:

The Tribunal finds Ms. Ilić's overall approach reasonable. She used asking prices in her analysis, first reducing them by 10% to account for likely price negotiations between buyer and seller, the usual practice in Serbia being to apply a 10-15% reduction between asking and actual price. She then applied a 30% discount to reflect differences between the comparables which she uses and BD Agro's land.²²⁹

179. In her First Report Ms. Ilić said that she had “applied a further 30% discount to account for the larger size of BD Agro's land and other factors such as the existence of infrastructure and access road.”²³⁰ The Tribunal considered whether a large size constituted a relevant basis for a discount but decided that it could not of itself be sufficient, agreeing that a larger plot could still be sub-divided and sold.²³¹ The Tribunal however accepted that Ms Ilic's discount was based also on “other important differences

²²⁸ Transcript, Hearing on Jurisdiction and Merits, Day 8, dated 20 July 2021, 171.06 to 171.09. ↩

²²⁹ Award, para. 696. ↩

²³⁰ Award, para. 695 ↩

²³¹ Award, para. 697. ↩

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between the comparators chosen by Ms. Ilić and BD Agro's land”²³² such as “they were equipped with infrastructure and had access to roads.“ The Tribunal also found that “Ms. Ilić's testimony that these differences justify a discount was not seriously rebutted.”²³³ It accepted that buyers would need to “incur costs and spend time in developing BD Agro's land and would factor the development costs and “time into the price offered.”²³⁴

180. The Committee is unable to find any basis to suggest that the Tribunal failed to state reasons in applying a discount to the comparable values of the land to arrive at the likely price achievable for the Construction Land. The Claimants' failure to provide an alternative discount value to that suggested by Serbia's expert left the Tribunal to apply its own judgment. It did so by considering the reasonableness of the basis for the discount and Ms. Ilić's expertise. The fact that the Tribunal had indicated that, absent “more precise indications in the record about the size of this deduction it appears reasonable to accept the 30% discount applied by Ms. Ilic”²³⁵ does not detract from the exercise of the Tribunal's judgment and assessment. It is not the role of this Committee to reassess the evidence before the Tribunal and substitute its own findings for those of the Tribunal. This reason for annulment is therefore rejected.

(iv) Alleged Contradiction in the Application of the Tribunal' Own Valuation Methodology

a. The Applicant's Position

181. The Applicant asserts that the Tribunal contradicted its own valuation methodology by accepting Ms. Ilić's valuation, which fails to comply with the six key valuation principles adopted by the Tribunal.

182. As to the first key valuation principle – that valuations must rely on actual comparable transactions as the primary, most relevant evidence²³⁶ – the Applicant asserts that the Tribunal contradicted this principle by accepting Ms. Ilić's valuation based on five asking prices²³⁷ and excluding, without providing any explanation, two comparable transactions, one abutting BD Agro's property and another in a nearby industrial zone.²³⁸

²³² Award, para. 697. ↩

²³³ Award, para. 697. ↩

²³⁴ Award, para. 697. ↩

²³⁵ Award, para. 697. ↩

²³⁶ Award, para. 693 (first bullet point); Memorial on Annulment, para. 144(1); Reply on Annulment, para. 128(1). ↩

²³⁷ Referring to RE-561, Asking prices for KO Dobanovci. ↩

²³⁸ Memorial on Annulment, paras. 145-149; Reply on Annulment, paras. 130-136. ↩

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183. As to the second key valuation principle – that asking prices have the lowest evidentiary value and that valuations should not rely on asking prices lacking supporting information²³⁹ – the Applicant asserts that the Tribunal contradicted this principle by relying solely on five asking prices with unverified dates, sources, and locations, while disregarding available comparable transactions.²⁴⁰ The Applicant alleges that the links provided by Ms. Ilić do not lead to the specific advertisements referenced and that those advertisements are not accessible on the hosting websites. Furthermore, the Applicant submits that even Mr. Cowan, Serbia's quantum expert, confirmed that the location of the land plots in the advertisements cannot be determined from Ms. Ilić's evidence.²⁴¹

184. As to the third principle – that the valuation should only rely on evidence from comparable areas²⁴² – the Applicant asserts that the Tribunal specifically identified Batajnica as a non-comparable area²⁴³ but nevertheless relied on Ms. Ilić's valuation, one of whose five asking prices related to a land plot in Batajnica.²⁴⁴

185. As to the fourth principle – that the valuation should only rely on evidence pre-dating the valuation date,²⁴⁵ - the Applicant asserts that the Tribunal contradicted its own reasoning because it relied on two asking prices with no verifiable dates, making it unclear whether they predate the valuation date.²⁴⁶

186. As to the fifth principle – that a discount is justified where evidence used in the valuation relates to comparable land with better access to infrastructure²⁴⁷ – the Applicant contends that the 30% discount applied by Ms. Ilić is based on five asking prices, supported solely by screenshots of the advertisements, which do not demonstrate better access to infrastructure, thereby contradicting the fifth principle.²⁴⁸

187. As to the sixth principle – that smaller land plots are more valuable per square meter than comparable larger land plots²⁴⁹ – the Applicant contends that the Tribunal contradicted the principle by applying

²³⁹ Award, para. 693(second bullet point); Memorial on Annulment, para. 144(2); Reply on Annulment, para. 128(2). ↩

²⁴⁰ Memorial on Annulment, paras. 150-154; Reply on Annulment, paras. 137-143. ↩

²⁴¹ Memorial on Annulment, para. 153. ↩

²⁴² Memorial on Annulment, para. 144 (3); Reply on Annulment, para. 128(3). ↩

²⁴³ Award, para. 693(third bullet point). ↩

²⁴⁴ Memorial on Annulment, para. 155; Reply on Annulment, paras. 144-147. ↩

²⁴⁵ Award, para. 693(third bullet point); Memorial on Annulment, para. 144(4); Reply on Annulment, para. 128(4). ↩

²⁴⁶ Memorial on Annulment, para. 156; Reply on Annulment, paras. 148-153. ↩

²⁴⁷ Award, para. 697; Memorial on Annulment, para. 144(5), and Reply on Annulment, para. 128(5). ↩

²⁴⁸ Memorial on Annulment, paras. 157-159; Reply on Annulment, paras. 154-156. ↩

²⁴⁹ Award, para. 697; Memorial on Annulment, para. 144 (6); Reply on Annulment, para. 128(6). ↩

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a 30% discount, despite the Construction Land parcel being smaller (17,000 m²) than the median size comparators (30,000 m²) used by Ms. Ilić.²⁵⁰

188. The Applicant concludes that the Tribunal's reasoning was contradictory and therefore warrants annulment of the relevant parts of the Award.

b. Serbia's Position

189. Serbia submits that the Tribunal did not adopt the six "key principles” that the Applicant claims it adopted and that the alleged contradictions are a repetition of the Claimants' arguments in the arbitration.²⁵¹ As to the first principle, Serbia asserts that the Tribunal never endorsed the principle that the valuation should be based on actual comparable transactions as the primary, most relevant evidence. Serbia submits that the Applicant misrepresents the Award and Ms. Ilić's report.²⁵² It argues that although the experts agreed that actual comparable transactions are preferable, this does not imply that they "must" be used where no such comparable exists. In such circumstances, reliance on asking prices is consistent with international standards.²⁵³

190. Regarding the Applicant's criticism that the Tribunal ignored two actual land transactions in Dobanovci, Serbia explains that Ms. Ilić considered these transactions but excluded them due to their proximity to a residential area. Serbia points out that the Claimants' experts likewise did not rely on these transactions.²⁵⁴ Serbia concludes that the Tribunal implicitly accepted Ms. Ilić's approach by adopting her valuation and emphasises that the Tribunal was not required to address every argument explicitly. It further contends that the Applicant's allegation merely challenges the Tribunal's evidentiary assessment and as such does not warrant annulment.²⁵⁵

191. As to the second principle, the Respondent submits that the Applicant again challenges the Tribunal's assessment of evidence.²⁵⁶ It states that three of the five advertisements showed exact dates, while the remaining two were published in 2015, which it submits was sufficient.²⁵⁷ It adds that the Claimants never questioned the timing of the advertisements during the arbitration and that the Applicant is therefore precluded from raising such arguments at the annulment stage.

192. Serbia rejects the Applicant's allegations concerning Exhibit RE-561, asserting that Mr. Cowan's difficulty in identifying the land in one advertisement stemmed from a faulty map and limited

²⁵⁰ Memorial on Annulment, para. 160; Reply on Annulment, paras. 157-159. ↩

²⁵¹ Counter-Memorial on Annulment, para. 145. ↩

²⁵² Counter-Memorial on Annulment, paras. 146, 151. ↩

²⁵³ Counter-Memorial on Annulment, para. 147. ↩

²⁵⁴ Counter-Memorial on Annulment, paras 148-149. ↩

²⁵⁵ Counter-Memorial on Annulment, para. 150. ↩

²⁵⁶ Counter-Memorial on Annulment, paras. 153,155. ↩

²⁵⁷ Counter-Memorial on Annulment, para. 154. ↩

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materials, while the other two advertisements contained maps and sufficient textual details to establish the location of the land plots.²⁵⁸ Serbia also contends that the Applicant's allegations concerning the web links lack merit as Ms. Ilić submitted screenshots of the advertisements, the authenticity of which was never contested, and the links provided were to the hosting websites. Serbia adds that the advertisements are no longer accessible due to the passage of time.²⁵⁹

193. As to the third principle, Serbia reiterates that the Tribunal did not exclude all land in the Batajnica municipality as incompatible and that there is no indication that the advertisement relied upon by Ms. Ilić concerned the same area as the excluded transactions.²⁶⁰

194. As to the fourth principle, Serbia submits that the Claimant misstates the Tribunal's reasoning, which accepted reliance on information pre-dating the valuation date regardless of whether it was included in evidence that pre- or post-dated the valuation date. Serbia further notes that Ms. Ilić confirmed that the two challenged asking prices predated the valuation date, and that the Claimants did not raise this issue during the arbitration, precluding the Applicant from raising the issue at the annulment stage.²⁶¹

195. As to the fifth principle, that a discount is justified where evidence used in the valuation relates to comparable land with better access to infrastructure, Serbia submits that the Applicant's allegations concerning Ms. Ilić's 30% discount have already been extensively refuted.²⁶²

196. Regarding the sixth principle, that smaller land plots are more valuable per square meter than comparable larger land plots, Serbia submits that the Applicant's argument is based on a misreading of the Award and asserts that the Tribunal considered but rejected the principle. Instead, the Tribunal granted a discount based on access to infrastructure.²⁶³

с. The Committee's Analysis

197. As can be seen from the summary of the Applicant's position (paras. 181 to 188 above), this ground for annulment largely repeats the challenges raised by the Applicant as discussed and rejected above under sections B (3) (i) to (iii) (see paras above 134 to 180). There is no need to revisit these allegations but for the sake of completeness, they will briefly be addressed below.

198. The Applicant has attributed “six principles” to the Tribunal and then argues that the Tribunal failed to apply them in its valuation analysis. The Committee agrees with Serbia that the Tribunal did not establish the six valuation methodology principles that the Applicant alleges were contradicted.

²⁵⁸ Counter-Memorial on Annulment, para. 157. ↩

²⁵⁹ Counter-Memorial on Annulment, para. 158. ↩

²⁶⁰ Counter-Memorial on Annulment, paras. 159, 160. ↩

²⁶¹ Counter-Memorial on Annulment, para. 161. ↩

²⁶² Counter-Memorial on Annulment, paras. 162, 163, Section II.5. ↩

²⁶³ Counter-Memorial on Annulment, paras. 164-165. ↩

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Rather, the Tribunal simply explained how it had assessed the evidence and why it accepted the valuation presented by Serbia's experts. For ease of reference to the Applicant's arguments, the Committee will nevertheless continue to use the “principles" as articulated by the Applicant as a descriptor for his arguments.

199. The first “principle” is that the Tribunal accepted that the use of comparable transactions should be preferred over the asking prices, but the Tribunal proceeded to accept Ms. Ilić's use of asking prices. This is dealt with in paragraphs 144 to 148 above where the Committee concluded that the Tribunal did not, as a matter of principle, reject the use of asking prices and had given it the weight it thought proper. A simple reading of paragraph 693 (first bullet point as identified by the Applicant) of the Award shows that the Tribunal declined to use the numbers suggested by the Applicant's valuation expert (Dr. Hern) as they were drawn from a “category of mass appraisals" by the tax authorities and would “carry little evidentiary weight when valuing specific individual property.” Dr Hern also relied on data that Mr. Grzesik (Claimant's real estate expert) said were “too old” and should be disregarded. There is no basis to criticise the Tribunal's decision as contradictory to any principle of valuation.

200. The second “principle” relates to the Tribunal's acceptance of Ms. Ilić's valuation and of her “relying solely" on five asking prices, which the Applicant says had unverified dates, sources, and locations, while rejecting the Mrgud Valuation for the same reason. As observed above (see paragraphs 156 to 157), it was again Mr. Grzesik who had “opined that Mr. Mrgud's valuation, based on asking prices, was flawed, because it provided no information about the sources of these prices or when they were published”²⁶⁴. This complaint is in reality a complaint regarding the Tribunal's evaluation and assessment of the evidence. As pointed out by Serbia, Ms. Ilić had provided screenshots of the advertisements for the sale of the land,²⁶⁵ which were not challenged during the arbitration. Questions relating to the precise location of the advertised land should not be reconsidered in the annulment proceedings. The fact that these advertisements are no longer accessible on the hosting sites may well be a matter of lapse of time and is of no concern to the Committee.

201. As to the third “principle," the Applicant's criticism, like his criticism relating to the second principle, invites the Committee to revisit the Tribunal's assessment of the evidence. In paragraph 693 of the Award, the Tribunal set out its reasons for rejecting Dr. Hern's valuation and instead adopting Mr. Cowan's valuation (who relied on Ms. Ilić's valuation): the values of the Batajnica transactions were derived from value assessments by tax authorities (rather than property valuations), the information used post-dated the valuation date, and the Batajnica land used by Dr. Hern benefitted from infrastructure and proximity to settlement. Quite clearly the Tribunal did not decide that all Batajnica

²⁶⁴ Award, para. 693(second bullet point) ↩

²⁶⁵ RE-561. ↩

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land values were unusable, but that the specific Batajnica comparables selected by Dr. Hern were not appropriate. The Committee therefore sees no basis for the Applicant's criticism.

202. As to the fourth “principle," the Applicant argues that the Tribunal ruled that it could only consider pre-valuation date evidence but failed to verify the dates of the asking prices of the properties, suggesting that some of these could have included post-valuation date asking prices. The Committee disagrees. The Tribunal did not exclude post-valuation date evidence; rather, it ruled that the valuation must be made based on pre-valuation information and data. Ms. Ilić testified at the hearing that she had used only pre-valuation date information, and no Party raised any objection to her testimony. This criticism therefore also fails.

203. As to the fifth “principle," the Applicant argues that although the Tribunal stated that it should use values of comparables, when applying the discount, it relied solely on advertised asking prices taken from screenshots, without evidence that these were for comparable properties. The Committee notes, however, that the Tribunal mentioned that “the representative comparables chosen by Ms. Ilić and BD Agro's land were of a different size”²⁶⁶, indicating that the Tribunal accepted that they were comparables, except for differences in size. The Tribunal then addressed the Applicants' observation as to the difficulty of establishing the location of the comparators but was satisfied that “the descriptions of the comparators make clear that they were equipped with infrastructure and had access to roads. Ms. Ilić's testimony that these differences justify a discount was not seriously rebutted.”²⁶⁷ The Applicant is again inviting the Committee to second-guess the Tribunal's assessment and its judgment as to appropriate comparables. The Committee will not do so.

204. As regards the final sixth “principle,” the Committee refers to its reasoning above (at paragraphs 179 to 180). The Tribunal did provide reasoning in applying the discount, and it did not apply a discount based on the size of the plots as it acknowledged that larger land can still be sub-divided. The Tribunal applied a 30% discount based on “other important differences between the comparators chosen by Ms. Ilić and BD Agro's land,” in particular infrastructure and road access.²⁶⁸

205. The Committee concludes that the Applicant has not established any contradiction or inconsistency with the principles and approaches the Tribunal had adopted. The Applicant's submission is, in essence, an attempt to relitigate the Tribunal's assessment of the evidence, which falls outside the scope of annulment under Article 52(1)(e) of the ICSID Convention. Accordingly, this reason for annulment is rejected.

²⁶⁶ Award, para. 697. ↩

²⁶⁷ Award, para. 697. ↩

²⁶⁸ Award, para. 697. ↩

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(v) Alleged Failure to Consider Key Evidence in the Valuation of the Construction Land

a. The Applicant's Position

206. The Applicant asserts that Ms. Ilić's First Expert Report included two relevant transactions involving land plots in Dobanovci (the “Dobanovci Transactions”), which she later excluded from her valuation because the plots were located near a residential area. However, during the hearing, Ms. Ilić changed her position, stating that the exclusion was due to the plots' connection to a municipal road.²⁶⁹

207. The Applicant emphasises that the Dobanovci Transactions were key evidence, heavily relied upon in support of the Claimants' valuation.²⁷⁰ However, the Tribunal ignored those transactions without explanation and did not comment on them in the Award, which resulted in an undervaluation of BD Agro's value by EUR 45 million.²⁷¹

208. The Applicant further submits that the Tribunal ignored other relevant evidence for the valuation of the Construction Land, namely the Nova Pazova and Stara Pazova transactions (the “Pazova Transactions”), as well as the Second Confineks Valuation.²⁷² The Applicant asserts that this evidence supports a significantly higher value of the Construction Land and points out that the Tribunal relied on the Second Confineks Valuation in its valuation of BD Agro's liabilities.²⁷³

209. The Applicant referred to Teco, where the ad hoc committee held that a tribunal cannot “simply gloss over evidence upon which the Parties have placed significant emphasis, without any analysis and without explaining why it found that evidence insufficient, unpersuasive or otherwise unsatisfactory" and annulled the award on the basis that the tribunal had disregarded evidence that could have been relevant to the outcome of the case.²⁷⁴

b. Serbia's Position

210. Serbia submits that the Applicant's position that the Tribunal ignored key evidence, namely the Dobanovci Transactions, is without merit, and was already addressed during the arbitration. Additionally, none of the Claimants' experts relied on those transactions in their valuations.

211. Serbia asserts that Ms. Ilić maintained at the hearing the same position that she had taken previously, namely that the transactions should be excluded because they were “located near urbanised

²⁶⁹ Memorial on Annulment, paras. 118, 169-173. ↩

²⁷⁰ Memorial on Annulment, paras. 166-174. ↩

²⁷¹ Memorial on Annulment, paras. 121, 169. ↩

²⁷² Memorial on Annulment, paras. 166-168. ↩

²⁷³ Award, para. 699; Memorial on Annulment, para. 168. ↩

²⁷⁴ CLA-186, TECO Guatemala Holdings, LLC v. Republic of Guatemala, ICSID Case No. ARB/10/23, Decision on Annulment, 5 April 2016, para. 131; Memorial on Annulment, paras. 176-177. ↩

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residential area.”²⁷⁵ Serbia further submits that the Tribunal did not ignore key evidence, but referred to several steps of Ms. Ilić's valuation, including her comparison of Construction Land sales involving the two Dobanovci Transactions, and ultimately found her “overall approach reasonable.”²⁷⁶ In Serbia's view, the Tribunal thereby accepted her exclusion of those transactions and her reliance on asking prices, while implicitly rejecting the Claimants' criticisms of her methodology. Serbia maintains that the relevance of the Dobanovci Transactions in any event concerns the Tribunal's assessment of the evidence, which falls within the exclusive competence of the Tribunal and outside the scope of the Committee's review.²⁷⁷

212. The Applicant also contends that the Tribunal ignored the Second Confineks Valuation and the Pazova Transactions. As to the former, the Respondent submits that no Party or expert relied on the Second Confineks Valuation in valuing the Construction Land. Dr. Hern referred only to the First Confineks Valuation and noted that the two reports were not materially different. Serbia notes that the Claimants accepted Dr. Hern's report, and neither Mr. Grzesik nor Ms. Ilić relied on the Second Confineks Valuation. The Tribunal therefore had no reason to address it.²⁷⁸

213. As to the Pazova Transactions, Serbia submits that they were not central to Dr. Hern's valuation. Dr. Hern relied on the Mrgud Valuation and referred to the Pazova Transactions only as secondary evidence while acknowledging their limited comparability. Serbia argues that once the Tribunal had rejected the Mrgud Valuation, there was no basis to consider the Pazova Transactions. It further notes that these documents reflected a “valuation[s] of immovable[s]”²⁷⁹ presented by the tax authorities rather than actual transactions, which the Tribunal had already deemed unsuitable for valuation, and that most originated in 2016, after the valuation date.²⁸⁰

214. Serbia concludes that the Tribunal did not ignore key evidence and submits that the Tribunal's rejection of the evidence was implicit in its rulings on the limited relevance of tax authority valuations, the requirement that information must pre-date or coincide with the valuation date, and its specific findings regarding Ms. Ilić's valuation.²⁸¹ Furthermore, the challenged evidence was not relied upon by the Claimants' experts and could not have influenced the Tribunal's decision.

²⁷⁵ Counter-Memorial on Annulment, para. 178. ↩

²⁷⁶ Award, para. 696; Counter-Memorial on Annulment, para. 183. ↩

²⁷⁷ Counter-Memorial on Annulment, para. 181. ↩

²⁷⁸ Counter-Memorial on Annulment, paras. 169-170. ↩

²⁷⁹ Counter-Memorial on Annulment, para. 174. ↩

²⁸⁰ Counter-Memorial on Annulment, paras. 171-174. ↩

²⁸¹ Counter-Memorial on Annulment, para. 186. ↩

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215. Serbia contends that the Applicant's reliance on Teco is misplaced. Unlike the Teco tribunal, the Tribunal explicitly addressed the Parties' expert evidence, accepted Ms. Ilić's valuation, and implicitly rejected the Dobanovci Transactions.²⁸²

с. The Committee's Analysis

216. According to the Applicant, the Dobanovci Transactions were key evidence heavily relied upon by the Claimants in support of a higher valuation, but the Tribunal simply ignored them without providing any reasons. It is correct that the Tribunal did not discuss the Dobanovci Transactions, which were identified by Ms. Ilić. The Committee notes that, in their post-hearing briefs²⁸³ in the arbitration, the Claimants referred to the two Dobanovci Transactions mentioned by Ms. Ilić to support their case for the upper valuation price of EUR 30/m². These specific submissions were, however, made in support of Dr, Hern's valuation, which relied primarily on the Batajnica land, which the Claimants had presented before the Tribunal as being priced at EUR 27 to EUR 37/m².

217. The Applicant now suggests that the Tribunal simply disregarded his evidence and instead adopted the Respondent's evidence. In the Committee's view, the Tribunal was the sole judge of the relevance and weight of the evidence presented to it. The Tribunal considered the evidence tendered by the Claimants in support of their valuation, including the testimony of their valuation experts, who relied on the Batajnica land values but, ultimately, found the Respondent's valuation more persuasive. In determining quantum, a tribunal may have to consult experts on numerous factors, including location, land use, date of transaction, proximity to services, accessibility, development potential, and market conditions, after which a tribunal must eventually decide which of the expert valuations best reflects the value of the land. Having had the benefit of all the available evidence before it, the Tribunal preferred the Respondent's valuation. The fact that the Award does not mention a specific transaction does not mean that the Tribunal failed to consider the transaction. While a tribunal is required to decide every issue pertinent to the eventual outcome, it is not required to deal with every piece of evidence submitted by the parties. A tribunal's failure to do so does not amount to an annullable error. The Committee is satisfied that the Tribunal reached its decision after having considered the Parties' competing evidence and was entitled to prefer the evidence of one side over the other. This reason for annulment is therefore rejected.

²⁸² Counter-Memorial on Annulment, paras. 184-186. ↩

²⁸³ Claimants' First Post-Hearing Brief, paras. 308-312; Claimants' Second Post-Hearing Brief, para. 120(b). ↩

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(4) Whether The Award Fails To State Reasons For The Valuation Of Certain Of BD Agro's Other Assets

a. The Applicant's Position

218. In assessing compensation for the loss of Mr. Rand's interest in the Beneficially Owned Shares, the Tribunal valued BD Agro's equity by deducting liabilities from its assets as of the valuation date.²⁸⁴ It divided the assets into two categories: (i) farm assets, which included “Novi Becej”; and (ii) non-farm assets, which included “current assets."²⁸⁵ The Applicant asserts that the Tribunal failed to provide any reasons for its valuation of these two categories of assets.²⁸⁶

219. As to the “Novi Bečej” category, the Applicant asserts that the Tribunal failed to specify the assets included in this category, nor did it provide reasons for its valuation of EUR 0.2 million.²⁸⁷ The Applicant points out a divergence between the Parties on this matter: while the Claimants included, inter alia, a castle within this category and valued the entire category at EUR 0.8 million, the Respondent excluded the castle and assessed the category's value at EUR 0.2 million.²⁸⁸ The Applicant submits that the Tribunal did not identify which assets it considered under the “Novi Bečej” category, nor did it provide any reasoning justifying the EUR 0.2 million valuation adopted.

220. Regarding the “current assets” category, the Applicant notes that his expert, Dr. Hern, valued a broader category labelled “Other Current and Non-Current Assets” at EUR 7.4 million, with current assets comprising EUR 6.6 million of that total. In contrast, the Respondent's expert, Mr. Cowan, valued the current assets at EUR 5 million based on the Second Confineks Valuation.²⁸⁹

221. The Applicant contends that the Tribunal did not provide reasoning for its valuation of the assets at EUR 5 million, nor did it identify the specific assets within the category. He further considers it is impossible to determine whether the Tribunal adopted Serbia's expert report, which it considers flawed and based on post-valuation date evidence, or relied on another methodology.²⁹⁰

222. Relying on the annulment decisions in Pey Casado and CMS v. Argentina (“CMS”), the Applicant submits that the Tribunal's failure to provide any “express rationale for the conclusions”²⁹¹ regarding

²⁸⁴ Award, para. 699. ↩

²⁸⁵ Award, para. 707. ↩

²⁸⁶ Memorial on Annulment, paras. 182-190; Reply on Annulment, paras. 183-202. ↩

²⁸⁷ Award, para. 707. ↩

²⁸⁸ Memorial on Annulment, paras. 193-194. ↩

²⁸⁹ Memorial on Annulment, paras. 196-197. ↩

²⁹⁰ Memorial on Annulment, para. 199. ↩

²⁹¹ CLA-192, Victor Pey Casado and President Allende Foundation v. Republic of Chile I, ICSID Case No. ARB/98/2, Decision on the Application for Annulment of the Republic of Chile, 18 December 2012, para. 86. ↩

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the “Novi Bečej” and “current assets” categories creates a significant “lacuna in the Award.”²⁹² He adds that the valuation of these asset categories led to a difference of approximately EUR 2.2 million between the Parties' respective valuations.²⁹³

b. Serbia's Position

223. Serbia submits that the Tribunal provided reasons for its valuation of BD Agro's “Novi Becej” assets, arguing that the Applicant's challenge is based on a misreading and misinterpretation of both the expert reports and the Award.²⁹⁴ The Respondent asserts that the Tribunal properly relied on the reports of Serbia's experts, with Mr. Cowan adopting Ms. Ilić's valuation of EUR 0.2 million for the land alone and including the castle within the “other fixed assets" category, valued at EUR 18.8 million based on the Second Confineks Valuation. The castle was therefore accounted for in the Tribunal's valuation, albeit not separately or combined with the land as in Dr. Hern's approach.²⁹⁵

224. The Respondent notes that the Tribunal adopted Mr. Cowan's Third Expert Report "after adjusting it as necessary in light of the Tribunal's conclusions above.”²⁹⁶ Thus, the Tribunal's table at paragraph 707 of the Award includes the “Novi Becej” castle as part of “other fixed assets" without adjustment, and the “Novi Becej” land was listed separately, reflecting Mr. Cowan's table. The Respondent submits that the Tribunal's reasoning on this point is implicit but clear and sufficient. In any event, even if the Tribunal had failed to include the valuation of the castle, this omission would fall under Article 49(2) of the ICSID Convention and should have been addressed through a request for a supplementary decision, which Claimants failed to make.²⁹⁷

225. As to the “current assets" category, Serbia asserts that the Applicant's position that the Tribunal gave no reasons for valuing BD Agro's current assets at EUR 5 million is inaccurate. The Respondent explains that the Tribunal adopted Mr. Cowan's valuation, as set out in the table in his second report, and did not find it necessary to adjust the current assets figure. The Tribunal's reliance on the expert report constitutes a presentation of reasons.²⁹⁸

226. The Respondent notes that during the arbitration, Claimants did not object to Mr. Cowan's valuation of BD Agro's current assets or to his reliance on the Second Confineks Valuation. On the contrary, Claimants considered the First and Second Confineks Valuations “credible” and “not substantially

²⁹² RLA-152, CMS Gas Transmission Company v. Republic of 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, para. 97. ↩

²⁹³ Memorial on Annulment, para. 202. ↩

²⁹⁴ Counter-Memorial on Annulment, para. 197. ↩

²⁹⁵ Counter-Memorial on Annulment paras, 198-200. ↩

²⁹⁶ Award, para. 707 and note 593. ↩

²⁹⁷ Counter-Memorial on Annulment, para. 204. ↩

²⁹⁸ Counter-Memorial on Annulment, paras. 205-206. ↩

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different."²⁹⁹ According to Serbia, Mr. Rand is therefore precluded from challenging the Award on this basis.

227. Serbia further highlights that there is no substantial difference in the “current assets" values in the First and Second Confineks Valuations, adding that the Applicant has not identified which post- valuation date information was relied on by the Tribunal.³⁰⁰ Accordingly, the challenge to the Tribunal's valuation of the “current assets” does not stand scrutiny and should be rejected.

228. The Respondent refers to several annulment decisions, including in Vivendi, CMS, and Watkins Holdings v. Kingdom of Spain (“Watkins”), confirming that reasons may be implied in the award and asserts that the Applicant quotes selectively from these cases.³⁰¹ Serbia submits that the Tribunal provided implicit reasoning in its treatment of both the Novi Becej castle and land and BD Agro's current assets.

с. The Committee's Analysis

229. The Applicant is correct that the Award provides a value of EUR 0.2 million for the “Novi Becej” category of assets without mentioning the castle on the site or stating the specific reason for using the EUR 0.2 million valuation. The Award does, however, provide the source for the valuation in footnote 593, Mr. Cowan's Third Expert Report § 4.4, which states:

BD Agro - Market Value at 21 October 2015

230. A review of § 9.75 of Ms. Ilić's First Expert Report³⁰² indicates that BD Agro owned a seventy five percent share in cadastral parcel no. 22063/1. This share comprised 608 m² of the total building area of 810 m² and 40,352 m² of the surrounding land, which had a total area of 53,802 m² and was registered as public park land. The cadastre also recorded a restriction on the parcel based on its status as protected cultural heritage. A closer look at Appendix 3 Table 5 shows that the valuation covered

²⁹⁹ Counter-Memorial on Annulment, para. 207. ↩

³⁰⁰ Counter-Memorial on Annulment, paras. 208-209. ↩

³⁰¹ Counter-Memorial on Annulment, paras. 193 -195. ↩

³⁰² First Expert Report of Danijela Ilic, para. 9.75. ↩

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land generally, including land under buildings, and assessed parcel no. 22063/1 together with other parcels, such as parcel no. 22062, 21842 and 22414, on the same basis.³⁰³

231. The Committee notes that Ms. Ilić valued the forest, public park, and construction land at EUR 236,298, rising to EUR 238,146 if agricultural land is included. The Committee further notes that Mr. Cowan adopted a lower figure of EUR 200,000, without explaining the basis for this reduction in his reports. In the view of the Committee, this was likely due to a rounding exercise by Mr. Cowan, as his table only uses one decimal point in a million Euro. It is not disputed that Dr. Hern's valuation of EUR 800,000, based on the First Confineks Valuation, covered both the castle and the land.³⁰⁴ By contrast, the Committee notes that Mr. Cowan did not value the castle together with the land. Rather, he relied on Ms. Ilić's valuation for the land and treated the castle as part of the separate category of “other fixed assets,” valued at EUR 18.8 million on the basis of the Second Confineks Valuation.³⁰⁵ The Committee further notes that the Applicant accepts that Ms. Ilić's valuation excluded BD Agro's ownership of the castle and that the dispute concerned whether Mr. Cowan had included the castle within the category “other fixed assets.”

232. The Committee considers that the EUR 200,000 reflected in Mr. Cowan's Third Expert Report (see table reproduced in para 229 above) relates to the land assets at Novi Bečej only, while the castle was treated separately within “other fixed assets.” The Committee also notes that a comparison between Dr. Hern's figure of EUR 800,000 and Mr. Cowan's figure of EUR 200,000 is not a like-for-like comparison, since Dr. Hern valued both the castle and the land, whereas Mr. Cowan valued the land alone. The Committee recalls that it is not a court of appeal and cannot re-evaluate the evidence or reassess the correctness of the experts' valuations.

233. As regards the “current assets", the Tribunal had adopted § 4.4 of Mr. Cowan's Third Expert Report, which assigns a value of EUR 5 million to this category of assets. The Award refers to the Second Confineks Valuation, which in its summary provided the “current assets" of BD Agro as EUR 4,914,430. The Committee accepts that this is the source of the Tribunal's assessment. The Tribunal therefore had as its basis the Second Confineks Valuation and preferred that valuation to Dr. Hern's book value computations. In the Committee's view, the Award's reference to and acceptance of the Second Confineks Valuation was sufficient for the Award to value BD Agro's “current assets" at EUR 5 million.

234. The Committee therefore rejects this reason for annulment.

³⁰³ First Expert Report of Danijela Ilic, Appendix 3, Table 3.5. ↩

³⁰⁴ Counter-Memorial on Annulment, para. 198. ↩

³⁰⁵ Third Expert Report of Sandy Cowan § 4.4. ↩

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(5) Whether The Award Fails To State Reasons For The Valuation Of BD Agro's Liabilities

(i) Capital Gains Tax and Total Estimated Liabilities

a. The Applicant's Position

235. The Applicant explains that the Tribunal calculated BD Agro's equity by deducting its liabilities from its assets, grouping the liabilities into seven categories.³⁰⁶ The Applicant then contends that the Tribunal failed to state reasons for (i) its valuation of the capital gains tax (“CGT”) at EUR 5.7 million and (ii) the valuation of BD Agro's total estimated liabilities.

236. Regarding the value of CGT, the Applicant contends that the Tribunal failed to provide reasoning for its adoption of Mr. Cowan's valuation, despite a dispute between the Parties about the value, amounting to a difference of EUR 2.6 million.³⁰⁷ The Applicant argues that the Tribunal accepted Mr. Cowan's calculation of the CGT solely on the basis that it was “objective and logical,”³⁰⁸ without further explanation, thereby preventing Mr. Rand from understanding the basis of the Tribunal's conclusion.³⁰⁹

237. The Applicant further contends that the Tribunal failed to provide reasons for its valuation of BD Agro's total estimated liabilities. While the Tribunal initially stated that it would exclude "deferred tax liabilities" from this calculation, it later valued the total estimated liabilities as of EUR 42.2 million without clarifying whether or not “deferred tax liabilities” had been deducted.³¹⁰

238. The Applicant argues that if “deferred tax liabilities” were included, the Tribunal would have contradicted its earlier conclusion, resulting in a double counting of the CGT. In particular, the Applicant explained that if “deferred tax liabilities” were included in the final value of “total estimated liabilities," the CGT would be included in the Tribunal's calculations as a separate item valued at EUR 5.7 million and indirectly within the “deferred tax liabilities” amounting to EUR 3.1 million. The Applicant further contends that the Tribunal failed to engage with his expert evidence showing that this double-counting issue artificially inflated BD Agro's liabilities.³¹¹

³⁰⁶ Award, paras. 699-707. ↩

³⁰⁷ Memorial on Annulment, para. 239. ↩

³⁰⁸ Award, para. 699 (v). ↩

³⁰⁹ Memorial on Annulment, para. 236. ↩

³¹⁰ Award, para. 699 (i); Memorial on Annulment, para. 242. ↩

³¹¹ Memorial on Annulment, paras. 243-250. ↩

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239. In conclusion, and with reference to Teinver v. Argentina (“Teinver”),³¹² the Applicant submits that the Tribunal failed to state reasons on an outcome-determinative issue, thereby warranting annulment under Article 52(1)(e) of the ICSID Convention.

b. Serbia's Position

240. Regarding the value of the CGT, the Respondent submits that the Tribunal provided sufficient reasoning by comparing the Parties' experts' approaches and expressly adopting Mr. Cowan's valuation as it found it “objective and logical.”³¹³ The Respondent stresses that the Tribunal is not required to explain why it found Mr. Cowan's approach preferable, asserting that ad hoc committees have held that “the tribunal is required to state reasons for its decision, but not necessarily reasons for its reasons.³¹⁴

241. The Respondent rejects the Applicant's reliance on Teinver. It argues that Mr. Rand has not identified any specific arguments on the CGT that the Tribunal allegedly failed to address, nor explained why such arguments would have been outcome-determinative. It adds that the Tribunal was not required to address every submission expressly and that, as recognised in Wena and other cases, reasoning may be implicit. In Serbia's view, the Tribunal's reliance on Mr. Cowan's report satisfies the duty to state reasons.³¹⁵

242. The Respondent submits that recent ICSID annulment jurisprudence³¹⁶ confirms that a tribunal's decision to adopt one expert's valuation over another constitutes a sufficient statement of reasons. On this basis, the Respondent concludes that the Tribunal's approach to the CGT calculation does not constitute a failure to state reasons under Article 52(1)(e) of the ICSID Convention.

243. As to BD Agro's total estimated liabilities, the Respondent asserts that the Tribunal explicitly stated in its final calculation of EUR 42.2 million that deferred tax liabilities were excluded.³¹⁷ Accordingly, the Applicant's allegation of double-counting the CGT is wrong. Serbia further submits that the Tribunal did not ignore the double-counting issue raised by Dr. Hern. In fact, Dr. Hern identified a potential double-counting in Mr. Cowan's calculation, which Mr. Cowan addressed and corrected in

³¹² RLA-162, Teinver S.A., Transportes de Cercanías S.A. and Autobuses Urbanos del Sur S.A. v. Argentine Republic, ICSID Case No. ARB/09/1, Decision on Annulment, 29 May 2019, para. 210. ↩

³¹³ Award, para. 699 (v) and Counter-Memorial, paras. 254-256. ↩

³¹⁴ RLA-232, Enron Corporation and Ponderosa Assets, L.P. v. Argentine Republic, ICSID Case No. ARB/01/31, Decision on the Application for Annulment of the Argentine Republic, 30 July 2010, para. 222. ↩

³¹⁵ Counter-Memorial, paras. 260-262. ↩

³¹⁶ RLA-209, InfraRed Environmental Infrastructure GP Limited and others v. Kingdom of Spain, ICSID Case No. ARB/14/12, Decision on Annulment, 10 June 2022, para. 694. ↩

³¹⁷ Award, paras. 699 (i), 707. ↩

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his subsequent report. By adopting Mr. Cowan's calculation, the Tribunal implicitly accepted the reasoning given by Mr. Cowan, including his view on the double-counting issue raised by Dr. Hern.³¹⁸

244. Finally, the Respondent relies on decisions of ad hoc committees to show that a tribunal's reference to and acceptance of an expert report constitute adequate reasoning, and any factual or legal error in an expert report does not amount to a failure to state reasons.³¹⁹ Accordingly, the correctness of Mr. Cowan's calculation, including the issue of double-counting, is irrelevant for purposes of the analysis under Article 52(1)(e) of the ICSID Convention.

с. The Committee's Analysis

245. The Applicant's criticisms of the Tribunal's decisions relating to the calculation of the CGT and the overall liabilities of BD Agro for lack of reasons are unwarranted. The Committee will first address the Applicant's complaint about the Tribunal's calculation of the CGT and then turn to his complaint about the calculation of BD Agro's overall liabilities.

246. The Tribunal in paragraph 699(v) of the Award expressed its understanding that Dr. Hern's approach in calculating the CGT using the “deferred tax liabilities” in BD Agro's December 2015 balance sheet as a proxy was “based on the Claimants' instruction.” In this regard, the Award refers to Dr. Hern's First Expert Report paragraphs 144-145,³²⁰ in which Dr. Hern stated:

I understand from Counsel that the Claimant has been unable to obtain the necessary documents for the calculation of the capital gains tax, specifically the documents showing the original purchase price and the deductible capital loss. I have been therefore instructed to use the 'deferred tax liabilities' reported in BD Agro's 2015 balance sheet as a proxy of the capital gains tax that BD Agro would pay if it were to sell all of its assets at the price set out in Table 6.1. I note that the actual CGT that BD Agro would pay may differ from the amounts of deferred tax reported in the 2015 balance sheet of BD Agro, not least because my valuation is not the same as the valuation of assets in BD Agro's books. I reserve the right to update my calculations of the capital gains tax if the missing information on the original purchase price and the deductible capital loss becomes available in the future.

247. Quite clearly, Dr. Hern himself had some reservation as to the accuracy of using the previous year's deferred tax as a proxy to ascertain the CGT (“not least because my valuation is not the same as the valuation of assets in BD Agro 's books") and made an express reservation that he would rather use the original purchase price once available and would revise the CGT payable accordingly. The Committee

³¹⁸ Counter-Memorial on Annulment, para. 228. ↩

³¹⁹ Counter-Memorial on Annulment, paras. 229-230, citing CLA-185, Wena Hotels Ltd. v. Arab Republic of Egypt, ICSID Case No. ARB/98/4, Decision (Annulment Proceeding), 5 February 2002, para. 93, and RLA- 232, Enron Creditors Recovery Corporation (formerly Enron Corporation) and Ponderosa Assets, L.P. v. Argentine Republic, ICSID Case No. ARB/01/3, Decision on the Application for Annulment of the Argentine Republic, 30 July 2010, para. 94. ↩

³²⁰ Award, footnote 585, quoting from First Expert Report of Dr. Richard Hern, para. 145 [emphasis added]. ↩

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has no difficulty understanding why the Tribunal preferred Mr. Cowan's use of the book value of BD Agro's other assets as of 31 December 2013 as a better gauge of their purchase price and deducted that amount from the value of the land to estimate the 15% CGT payable, adopting his approach as “objective and logical.”³²¹

248. An issue related to BD Agro's deferred tax liability is the possibility of double counting of the CGT leading to an increase in the total estimated liabilities and thus reducing its net asset value. This concern was pointed out by Dr. Hern in his Second Expert Report.³²² Mr. Cowan accepted this point in his Second Expert Report and removed the additional CGT liability of EUR 3.1 million.³²³ Mr. Cowan then issued his Third Report, in which he set out his final valuation. The Tribunal relied on this valuation and reflected it in the table at paragraph 707 of the Award.

249. In respect of the total estimated liabilities, the Tribunal accepted Mr. Cowan's use of the EUR 40.4 million as reflected in BD Agro's 31 December 2015 financial statement, which was also adopted in the Second Confineks Valuation. The Tribunal then accepted Mr. Cowan's addition of another EUR 1.8 million being the additional interest that had accrued resulting from a higher loan quantum due to Banca Intesa. The Committee again has no difficulty understanding the Tribunal's approach and explanation. There is no contradiction with its previous position that the total estimated liabilities exclude "deferred tax liabilities." There is therefore no contradictory reasoning that may warrant annulment under Article 52(1)(e) of the ICSID Convention.

250. The Committee therefore rejects these reasons for annulment.

(ii) Reliance On Post-Valuation Evidence

a. The Applicant's Position

251. The Applicant highlights that, in several parts of the Award, the Tribunal declined to rely on evidence that post-dated the valuation date, i.e., 21 October 2015, including when it rejected the Batajnica transactions³²⁴ and Serbia's arguments relating to court proceedings initiated in 2018³²⁵ and when it determined that BD Agro was a going concern.³²⁶ Yet, the Tribunal accepted Serbia's correction to the value of BD Agro's debt vis-à-vis Banca Intesa based on evidence postdating the valuation date, which increased the liabilities by EUR 1.8 million.³²⁷

³²¹ Award, para. 699(v). ↩

³²² Second Expert Report of Dr. Richard Hern, paras 172-173. ↩

³²³ Second Expert Report of Sandy Cowan, paras 7.42-7.45 ↩

³²⁴ Award, para. 693 (third bullet point) (ii). ↩

³²⁵ Award, para. 690 (first bullet point); Memorial on Annulment, para. 204. ↩

³²⁶ Award, para. 685; Memorial on Annulment, para. 204. ↩

³²⁷ Award, para. 699(i); Memorial on Annulment, paras. 205(a), 210. ↩

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252. The Applicant also points to the Tribunal's reliance on the Second Confineks Valuation prepared several months after the valuation date, to determine BD's Agro's total estimated liabilities, which inflated the result by EUR 4.4 million.³²⁸

253. Finally, the Applicant notes that the use of BD Agro's financial statements dated 31 December 2015 to determine both total estimated liabilities and those arising from court proceedings inflated the valuation by an additional EUR 0.2 million.³²⁹

254. The Applicant submits that the Award's contradiction regarding the application of the post-valuation date evidence warrants annulment under Article 52(1)(e) of the ICSID Convention. In support, the Applicant refers to Pey Casado and MINE,³³⁰ where annulment was granted on the basis that the tribunal's damage calculation was “manifestly inconsistent.”³³¹

b. Serbia's Position

255. Serbia submits that the Applicant's allegations are erroneous and emphasises that the Tribunal never stated that it would not rely on “evidence” post-dating the valuation date. Rather, the Tribunal stated that it is “well accepted that the information used for valuation should originate on or before the valuation date."³³²

256. With respect to BD Agro's debt vis-à-vis Banca Intesa, the Respondent maintains that the Tribunal did not rely on information post-dating the valuation date. It explains that Mr. Cowan recalculated default interest for the period between 8 November 2013 and 21 October 2015 following Agrounija's amended claim. The Tribunal therefore did not contradict its approach that “the information used for valuation should originate on or before the valuation date.”³³³

257. With respect to the total estimated liabilities, Serbia submits that the Tribunal did not adopt the Second Confineks Valuation or BD Agro's 2015 financial statements but accepted Mr. Cowan's valuation, which was based on his own analysis and used the Second Confineks Valuation only as a starting point. Serbia recalls that the Claimants described the Second Confineks Valuation as “credible” and did not object to Mr. Cowan's reliance on it. Serbia concludes that the Applicant is therefore precluded from raising this objection.³³⁴

³²⁸ Award, paras. 699(i), 699(iv), 707, footnote 584; Memorial on Annulment, paras. 205(b), 210. ↩

³²⁹ Award, para. 699(i) and (iv); Memorial on Annulment, 205(c), 210. ↩

³³⁰ CLA-184, Maritime International Nominees Establishment v. Republic of Guinea (II), ICSID Case No. ARB/84/4, Decision for Partial Annulment of the Arbitral Award, 22 December 1989, para. 6.107. ↩

³³¹ CLA-192, Víctor Pey Casado and President Allende Foundation v. Republic of Chile I, ICSID Case No. ARB/98/2, Decision on the Application for Annulment of the Republic of Chile, 18 December 2012, paras. 285-286. ↩

³³² Award, para. 693, (third bullet point)(ii); Counter-Memorial on Annulment, para. 214. ↩

³³³ Award, para. 693, (third bullet point)(ii). ↩

³³⁴ Counter-Memorial on Annulment, para. 220. ↩

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258. The Respondent adds that the Applicant has not identified any post-valuation date information used by Mr. Cowan from either the Second Confineks Valuation or BD Agro's 2015 financial statements.³³⁵ Serbia further highlights the inconsistency in the Applicant's position: while challenging the Tribunal's reliance on BD Agro's 2015 financial statements, the Applicant simultaneously supports Dr. Hern's calculation, which relies entirely on the same statements.³³⁶

с. The Committee's Analysis

259. The Applicant's criticism of the Tribunal's reliance on post-valuation date reports when assessing BD Agro's liabilities either misstates or misunderstands the Tribunal's approach. The Tribunal consistently maintained that any data used for valuation must originate on or before the date of valuation.³³⁷ This does not mean, however, that reports of what had occurred on or before the valuation date that became available or were issued after the valuation date could not be considered. The Applicant's misunderstanding of the Tribunal's acceptance of Mr. Cowan's valuation and reference to the Second Confineks Valuation is obvious. The Second Confineks Valuation did not use post- valuation date information or data; it simply updated the information up to the valuation date. The increase in liabilities resulted from the increase in the loan amount and the interest accrued thereon, which the Tribunal found to be justified. The Award accordingly contains no contradictory reasoning that could give rise to annulment under Article 52(1)(e) of the ICSID Convention. This reason for annulment is therefore rejected.

(iii) Inclusion of Redundancy Payments

a. The Applicant's Position

260. The Applicant contends that the Tribunal made two clear findings: first, that the Privatization Agreement ceased to apply in 2011;³³⁸ and second, that BD Agro's valuation should not rely on evidence post-dating the valuation date.³³⁹ According to the Applicant, the Tribunal contradicted both findings when it concluded that redundancy payments under the Privatization Agreement remained mandatory even after the termination of the Agreement,³⁴⁰ and when it included redundancy payments made after the valuation date.³⁴¹

³³⁵ Counter-Memorial on Annulment, para. 221. ↩

³³⁶ Counter-Memorial on Annulment, para. 222. ↩

³³⁷ Award, paras. 685-686. ↩

³³⁸ Award, para. 613; Memorial on Annulment, paras. 214-215; Reply on Annulment, paras. 252-262; Applicant's Opening, Slide 159. ↩

³³⁹ Award, para. 693 (third bullet point)(ii). ↩

³⁴⁰ Award, para. 699(vi). ↩

³⁴¹ Memorial on Annulment, para. 215. ↩

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261. The Applicant adds that the Tribunal disregarded his evidence when it concluded that "[w]hile the Claimants submit that the redundancy program was voluntary, they offer no authority in support.”³⁴² The Applicant points to a statement in Dr. Hern's Second Expert Report that the redundancy payments originated from a government-initiated voluntary program implemented after the seizure of the Beneficially Owned Shares.³⁴³

262. The Applicant submits that the inclusion of the redundancy payments in BD Agro's liabilities reduced the company's equity value by EUR 0.7 million.³⁴⁴

b. Serbia's Position

263. The Respondent submits that the Tribunal's reasoning concerning the inclusion of redundancy payments in BD Agro's liabilities is not contradictory. Serbia asserts that the Claimants failed to demonstrate that the redundancy payments were voluntary; accordingly, the Tribunal concluded that the Claimants “offer[ed] no authority in support”³⁴⁵ of their position. The Respondent submits that the Applicant's assertion that such authority was provided is unsubstantiated and merely relies on an unsupported statement by Dr. Hern.³⁴⁶

264. The Respondent argues that the Applicant misrepresents the Tribunals' findings, noting that the Tribunal did not reject all post-valuation date evidence; rather it clarified that the “information” relied upon for the valuation must originate before that date.³⁴⁷ Serbia submits that the redundancy payments were recognised as mandatory by BD Agro's management while the company was under Mr. Rand's control.³⁴⁸ In any event, Serbia maintains that this issue concerns the correctness of the Tribunal's reasoning, which falls outside the scope of annulment.

265. Serbia further notes that the Tribunal's reference to the Privatization Agreement was presented only as an additional justification for including the redundancy payments.³⁴⁹ Moreover, the Tribunal did not find that the relevant obligation ceased upon payment of the purchase price.³⁵⁰ The Respondent submits that annulment for contradictory reasoning would require a clear and indisputable inconsistency, which is not present in this case.³⁵¹

³⁴² Award, para. 699(vi). ↩

³⁴³ Hern Second Expert Report, para. 182; Memorial on Annulment, paras. 214-215. ↩

³⁴⁴ Memorial on Annulment, para. 216. ↩

³⁴⁵ Award, para. 699 (vi). ↩

³⁴⁶ Counter-Memorial on Annulment, paras. 238-239. ↩

³⁴⁷ Counter-Memorial on Annulment, paras. 244. ↩

³⁴⁸ Counter-Memorial on Annulment, paras. 236, 237, 244. ↩

³⁴⁹ Award, para. 699 (vi). ↩

³⁵⁰ Counter-Memorial on Annulment, paras. 241-242. ↩

³⁵¹ Counter-Memorial on Annulment, para 244. ↩

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с. The Committee's Analysis

266. The Applicant refers to paragraph 612 of the Award, which states that the buyer's obligation in Article 5.3.4 of the Privatization Agreement had ceased to apply in 2011, to argue that it was inconsistent for the Tribunal to accept that BD Agro was obliged to make redundancy provisions pursuant to Annex 1 of that Agreement. Paragraph 612 of the Award deals with the buyer's negative obligation not to encumber the assets of BD Agro before it completed payment of the purchase price, and that once the same is paid, there would be no such limitation. The Tribunal was not there referring to any obligation of BD Agro, including any redundancy obligations to its employees.

267. The Applicant also refers to the Tribunal's statement in paragraph 617 of the Award, that "once the Agreement had ended, there was nothing left to be fulfilled, and hence no possible case of 'non- fulfilment.””³⁵² The paragraph again focuses on the buyer's obligation not to encumber BD Agro's assets during the term of the Privatization Agreement, not on BD Agro's obligations.

268. In allowing the redundancy payments as liabilities of BD Agro, the Tribunal rejected the opinion of the Claimants' expert as to the voluntary nature of such payments and instead referred to BD Agro's 2015 financial statements (when the Applicant was still in charge and control of the company) which recognised the company's obligations to make provisions for redundancy payments:

The Company recognizes severance at termination of employment when it is obviously obligatory: either to terminate the employment relationship with the employee, in accordance with adopted plan, without the possibility of withdrawal; or to provide severance pay for termination of employment as a result of an offer in order to encourage voluntary termination of employment with aim of reducing the number of employees. ").³⁵³

269. As such, the Award contains no genuine contradiction between the Tribunal's finding that the buyer's obligations, and specifically the buyer's obligation under Article 5.3.4 of the Privatization Agreement, terminated upon payment of the purchase price, and its inclusion of the redundancy payments in BD Agro's liabilities. Nor did the Tribunal impose a post-valuation date obligation or use post-valuation date data or information. The Award therefore contains no contradictory reasoning that could give rise to annulment under Article 52(1)(e) of the ICSID Convention.

³⁵² Reply on Annulment, para. 254; Applicant's Opening Statement, Slides 159-160 ↩

³⁵³ Award, footnote 588 quoting from CE-171, BD Agro AD Dobanovci, Notes to the Financial Statements for Year 2015, Note 2.19 (January 2016). ↩

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(iv) Calculation of the Conversion Fee

a. The Applicant's Position

270. The Parties' experts agreed that the development of BD Agro's land required its conversion from agricultural to industrial use, accompanied by payment of an adequate conversion fee. The Applicant argues that the Tribunal contradicted its own reasoning by stating that the fee “must be calculated on the basis of the previous year's tax assessment",³⁵⁴ while accepting the Respondent's valuation, which did not follow this approach.

271. The Applicant further asserts that Ms. Ilić based her valuation of the conversion fee on her own calculation of the market value of the average price of equivalent agricultural land and an arbitrary number for the valuation of the Construction Land.³⁵⁵ The Applicant notes that both figures exceeded those that would have resulted from a calculation based on the previous year's tax assessment, thereby inflating the conversion fee and reducing the compensation awarded to Mr. Rand by up to EUR 2.4 million.³⁵⁶

272. The Applicant submits that the Tribunal also contradicted its reasoning in calculating the conversion fee by referring to agricultural land values that none of the Parties had used.³⁵⁷ Relying on Tidewater³⁵⁸, the Applicant contends that the Tribunal's contradictory reasoning warrants annulment.

b. Serbia's Position

273. The Respondent submits that the Applicant's allegations of contradiction are misleading and contends that the Tribunal adopted the conversion fee used by Ms. Ilić because it found it “plausible” and the Claimants failed to provide “any contrary indication.”³⁵⁹

274. The Respondent further submits that whether Ms. Ilić applied the “previous year's tax assessment" method, or whether the Tribunal believed she did, is irrelevant. Even if the Tribunal erred in its factual conclusion, such a mistake would not constitute a ground for annulment.³⁶⁰ Serbia refers to a number of annulment decisions, including in NextEra v. Kingdom of Spain³⁶¹ and Watkins Holdings,³⁶² to

³⁵⁴ Award, para. 699(ii). ↩

³⁵⁵ Memorial on Annulment, para. 221(a), 221(b). ↩

³⁵⁶ Memorial on Annulment, para. 225. ↩

³⁵⁷ Award, para. 699(ii); Memorial on Annulment, para. 224. ↩

³⁵⁸ CLA-188, Tidewater Inc. et al. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/10/5, Decision on Annulment, 27 December 2016, para. 196. ↩

³⁵⁹ Award, para. 699(ii). ↩

³⁶⁰ Counter-Memorial on Annulment, para. 247. ↩

³⁶¹ CLA-205, NextEra Energy Global Holdings B.V. and NextEra Energy Spain Holdings B.V. v. Kingdom of Spain, ICSID Case No. ARB/14/11, 18 March 2022, Decision on Annulment, para. 391. ↩

³⁶² CLA-207, Watkins Holdings S.à r.l. and others v. Kingdom of Spain, ICSID Case No. ARB/15/44, 21 February 2023, Decision on Annulment, para. 257. ↩

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assert that ICSID tribunals have broad discretion in evaluating damages and that factual or computational errors do not constitute grounds for annulment.³⁶³

275. Finally, the Respondent submits that the Tribunal's reference to agricultural land values was accurate, as the figures cited correspond to the per square meter prices used by the Parties' experts. The Tribunal misstated the units as millions, but this was a technical oversight that could have been corrected under Article 49(2) of the ICSID Convention, not an annullable error.³⁶⁴

c. The Committee's Analysis

276. The Committee agrees that it may be difficult to understand paragraph 699(ii) of the Award at first reading. The Tribunal referenced Ms. Ilić's First Expert Report and her “detailed explanation for her approach" during the hearing as to how she had arrived at the “agricultural land price of EUR 3.4 million to which she applies a conversion of EUR 3.1 million.” This seems to be a misstatement of the source the Tribunal relied on (see FNs 580-581 of the Award) which recorded Ms Illic speaking to “EUR 3.4/m²” and “EUR 1/m²” and does not mention the actual conversion fees payable.

277. It is clear, however, that the Tribunal accepted Ms. Ilić's explanation that she had used the price assessed by the tax authority for agricultural land in the zone where BD Agro's land was located:³⁶⁵

08 THE PRESIDENT: Point taken. We will disregard the bracket. 09 On the conversion fee, Mr Grzesik said that you 10 have -- I understand that you are both of the view that 11 the diversion fee is based on 50% of the agricultural 12 land price, and then he noted, and I would like you to 13 comment on this, that when here you have calculated this 14 by €3.4/m2, while in your own valuation of agricultural 15 land, it was €1/m2. First of all, is it correct that 16 you have two different values for this price? And if 17 so, why? 18 A. (Interpreted) This is not an assessment, this is 19 a simulation of the determination of the fee in a way in 20 which a tax authority would normally do it. In my 21 report, in the annex, under "Conversion fee" subtitle, 22 I explain the procedure step by step, so the authority 23 that has to do the assessment of this conversion fee is 24 the Tax Authority. How do they do it? They take from 25 the previous year the assessment they made for tax

³⁶³ Counter-Memorial on Annulment, paras. 249-251. ↩

³⁶⁴ Counter-Memorial on Annulment, para. 253. ↩

³⁶⁵ Arbitration Tr., Day 7, 177-178. ↩

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PAGE 178 (16:11) 01 purposes, the annual taxation calculations, and of 02 course, if I am to simulate this procedure and arrive at 03 what the realistic figure would be, I would then go and 04 check what tax was assessed. There is a table I would 05 need to look at which shows the prices in individual 06 zones that were determined by the Tax Authority for the 07 previous year, so for 2014, the €3.4 is the price of 08 agricultural land in the zone in which BD Agro land was 09 located. 10 So the correct simulation of this fee -- this is not 11 something we are assessing, the Tax Authority does so, 12 in real life. So I mentioned that in my annex, and what 13 is done is that you take the price for the zone, for the 14 previous year, and you use 50% of this price for 15 agricultural land, so the price in the zone for 16 agricultural land is €3.4.

278. The Applicant asserts that Ms. Ilić in fact used her own figure – an “unexplained value of EUR 3.4 per m²" rather than the tax assessment value.³⁶⁶ However, this argument was not raised before the Tribunal during the hearing.

279. In the Committee's view, the Tribunal accepted in its best judgment and based on the arguments and evidence before it, Ms. Ilić's evidence and the computation made by Mr. Cowan. It is not the role of this Committee to reassess the same and substitute its own findings for those of the Tribunal. The Committee therefore rejects this reason for annulment.

(v) Inclusion of Liabilities related to Court Proceedings

a. The Applicant's Position

280. The Applicant asserts that the Tribunal explained its inclusion of liabilities related to court proceedings as follows: “Mr. Cowan included EUR 200,000 in BD Agro's liabilities. The Tribunal agrees, as the item was included in BD Agro's 2015 financial statements.”³⁶⁷

281. The Applicant submits that this reasoning is contradictory. While the Tribunal referred to BD Agro's 2015 financial statements, the corresponding footnote cited the Second Confineks Valuation.³⁶⁸ According to the Applicant, while both documents list court proceeding costs as "RSD 50,000,” equivalent to approximately “EUR 417”, the Tribunal adopted a different value of “EUR 200,000”, which inflated the value of BD Agro's liabilities.³⁶⁹ Finally, the Applicant contends that both

³⁶⁶ Applicant's Opening Statement, slide 163. ↩

³⁶⁷ Award, para. 699 (iv); Memorial on Annulment, para. 226; Counter-Memorial on Annulment, para. 233. ↩

³⁶⁸ Award, footnote 584; Memorial on Annulment, para. 228. ↩

³⁶⁹ Memorial on Annulment, paras. 227-229. ↩

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documents postdate the valuation date, notwithstanding the Tribunal's stated position that it would not rely on evidence arising after that date.³⁷⁰

b. Serbia's Position

282. Serbia submits that the Tribunal's reasoning on the court proceedings liabilities is not contradictory. First, the Respondent emphasizes that the Tribunal never stated that it adopted the value of the court proceedings based on the Second Confineks Valuation or BD Agro's 2015 financial statements. Rather, it referred to these documents solely to explain the inclusion of such liabilities as a category in BD Agro's overall liabilities. The Tribunal's agreement with Mr. Cowan's approach was limited to his inclusion of this category of liabilities in the valuation, as opposed to the specific amounts stated in those documents. On this basis, the Respondent contends that there is no contradiction in the Tribunal's reasoning.³⁷¹

283. As for the Applicant's argument that the Tribunal contradicted its reasoning by relying on documents post-dating the valuation date, the Respondent reiterates that the Tribunal never stated that it would exclude all such evidence. Rather it indicated that the valuation “information" should originate on or before that date.³⁷² The Respondent maintains that Mr. Cowan's analysis relied on BD Agro's 2015 financial statements and included only liabilities he considered “probable at the valuation date.”³⁷³ The Respondent submits that it was in any event within the Tribunal's discretion to assess the relevance of the evidence, and that its reliance on Mr. Cowan's reasoning is not subject to review by the Committee.

с. The Committee's Analysis

284. The Committee does not read the Tribunal's decision in paragraph 699(iv) of the Award in the manner suggested by the Applicant, namely as indicating that BD Agro's financial statements reflect court proceeding liabilities of only RSD 50,000. BD Agro's 2015 financial statements³⁷⁴ set out clearly, in a table in Section 41, that the company was involved in 71 pending court proceedings, in most of which it was named as the defendant. Some of the claims were substantial (e.g. case no. 6 - Vihor doo Beograd 14 P 4644/2013 - amount RSD 261,749,370.48; case no. 11 - Banca Intesa 5. Iv. 12725/2013 Beograd - amount RSD 1,069,971,699.86; case no. 25 by TP ZVEZDA 33P 4839/14 - amount RSD 7,831,977.00; case no. 13 - DDOR Novi Sad 26. P. 554/2014 – amount RSD 3,362,521.222).

³⁷⁰ Memorial on Annulment, para. 230. ↩

³⁷¹ Counter-Memorial on Annulment, para. 233. ↩

³⁷² Award, para. 690 (first bullet point). ↩

³⁷³ Counter-Memorial on Annulment, para. 234. ↩

³⁷⁴ CE-171, BD Agro AD Dobanovci, Notes to the Financial Statements for Year 2015, Note 2.19 (January 2016), section 41, pp. 20 -31. ↩

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285. The table setting out these pending claims recorded the respective plaintiffs as having succeeded in several claims, while most others were forecast with “uncertain" outcomes. The company however made “provisions on the basis of court proceedings in the amount of 50,000 dinars as of December 31, 2014.”³⁷⁵ There is no basis for the Applicant to now suggest that the total potential liability of these court proceedings ought to be RSD 50,000.

286. The Tribunal having considered these proceedings accepted Mr. Cowan's estimate of EUR 200,000 as BD Agro's liability.³⁷⁶ His estimate excluded the judgment in relation to the Banca Intesa loans. He also “did not include any contingent liabilities for which the outcome was deemed uncertain.”³⁷⁷

287. The Committee is unable to see how the Tribunal's decision, albeit brief, is contradictory. The Committee therefore rejects this reason for annulment.

C. Annulment of Costs Decision

288. The Applicant requests that the Committee annul the Tribunal's decision that the Parties each bear half of the costs of the arbitration and that the Parties bear their own legal and other costs³⁷⁸ as this decision was premised on the Tribunal's findings that Mr. Rand succeeded only in part of his claims and was awarded only a small part of the damages he sought.³⁷⁹ Accordingly, the Applicant submits that should the Committee uphold his Requests for Partial Annulment, the Tribunal's decision on costs should be annulled as well. On the contrary, Serbia first argues that since the Applicant has failed to demonstrate the existence of relevant grounds for annulment under Article 52(1) of the ICSID Convention, his request with regard to the decision on costs is moot.³⁸⁰ Serbia then adds that, even if the Committee was to annul a part of the Award, the decision on costs would still survive. According to Serbia, “it is beyond dispute that an ad hoc committee, in exercising its authority to annul the award or any part thereof should not annul any part of the award that has an independent basis and that is detachable from other parts affected by the annullable error.”³⁸¹

289. As the Committee has rejected all grounds for annulment, there is no basis to annul the Tribunal's costs decision.

³⁷⁵ CE-171, BD Agro AD Dobanovci, Notes to the Financial Statements for Year 2015, Note 2.19 (January 2016) section 41, p. 31. ↩

³⁷⁶ Third Expert Report of Sandy Cowan, para. 4.4, table. ↩

³⁷⁷ Third Expert Report of Sandy Cowan, para. 2.1. ↩

³⁷⁸ Memorial on Annulment, paras. 325-327 ↩

³⁷⁹ Award, para. 716. ↩

³⁸⁰ Counter-Memorial on Annulment, paras. 368-375. ↩

³⁸¹ Counter-Memorial on Annulment, para. 371. ↩

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VI. COSTS OF ANNULMENT PROCEEDINGS

290. The Parties submitted their cost statements on 18 July 2025 in which each Pary requested that its costs be borne by the other Party.

291. The Applicant's costs are stated as comprising EUR 405,251.38 for counsel fees and expenses, USD 425,000 for the filing fee and the advances on cost for the annulment proceedings,³⁸² and additional costs of EUR 22,198.38, CAD 55,026.62, and RDS 38,549 for travel and accommodation.

292. Serbia requested EUR [Redacted] for legal representation, EUR 20,384.24 for travel and accommodation, and EUR 1,688.31 for translation, amounting in total to EUR [Redacted] plus interest.

293. Article 61(2) of the ICSID Convention provides:

In the case of arbitration proceedings the Tribunal shall, except as the parties otherwise agree, assess the expenses incurred by the parties in connection with the proceedings, and shall decide how and by whom those expenses, the fees and expenses of the members of the Tribunal and the charges for the use of the facilities of the Centre shall be paid. Such decision shall form part of the award.

294. Article 62(1) of the ICSID Convention, together with ICSID Arbitration Rule 47(1)(j) (applicable by virtue of ICSID Arbitration Rule 53) gives the Committee discretion to allocate all costs of the proceeding, including attorney's fees and other costs, between the Parties as it deems appropriate.

295. The Committee adopts the approach that cost should generally follow the event viz. that the successful party should be entitled to the costs it has incurred. In this instance, the Applicant sought to annul the Award on several grounds and has failed in all. This means that Serbia, which made no application for annulment, has been put to unnecessary costs and expense in defending the Award. The Committee is of the view that the Applicant should reimburse Serbia for all costs it has incurred in these proceedings. The costs claimed by Serbia amount to EUR [Redacted]. The Committee finds this amount to be reasonable and allows it to be recovered from the Applicant in full.

296. Serbia has also sought interest on its costs but has not specified the date from which interest should run or the applicable rate. As Serbia has been compelled to incur costs in resisting the Annulment Application, it is only right and proper that it be compensated for the loss of use of those funds. The Committee, in exercise of its discretion, will adopt the same base interest and margin applied by the Tribunal in the Award of EURIBOR 6 months + 2% as at the date of this Decision until the same is fully and finally paid.

³⁸² The Applicant paid an ICSID filing fee of USD 25,000 in connection with his Application for Partial Annulment and USD 400,000 towards the costs of the annulment proceeding. ↩

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297. The costs of the proceeding, including the fees and expenses of the Committee, ICSID's administrative fees and direct expenses, amount to (in USD):

Committee Members' fees and expenses
Prof. Lawrence Boo 83,296.66
Dr. Claudia Annacker 88,732.64
Mr. Colm Ó hOisín 53,432.02

ICSID's administrative fees 156,000.00
Direct expenses 32,472.57
Total 413,933.89

298. The above costs have been paid out of the advances made by the Applicant pursuant to Administrative and Financial Regulation 15.³⁸³

299. Accordingly, the Committee orders that the Applicant shall bear his own costs and the legal costs and expenses incurred by Serbia in the sum of EUR [Redacted] together with interest at the rate of 4.594% per annum (being 2.594 ³⁸⁴ % + 2%) on a simple basis until the same is fully and finally paid.

300. The Applicant shall also bear the fees and expenses of the Committee, ICSID's administrative fees and direct expenses amount to USD 413,933.89.

VII. DECISION

301. For the reasons set forth above, the ad hoc Committee hereby DECIDES and ORDERS as follows:

1. The Applicant's application to partially annul the Award is dismissed in its entirety.
2. The costs of the annulment proceedings shall be borne by the Applicant in their entirety.
3. The Applicant shall bear his own costs and bear and pay Serbia's legal costs and expenses incurred in these annulment proceedings which the Committee fixes at EUR [Redacted] together with interest at the rate of 4.594 % per annum from date hereof on a simple basis until the same is fully and finally paid.
4. All other claims and requests are dismissed.

³⁸³ The remaining balance will be reimbursed to the Applicant. ↩

³⁸⁴ Source: https://www.euribor-rates.eu/en/current-euribor-rates/ ↩

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Signature

Dr. Claudia Annacker
Member of the ad hoc Committee

Date: 19 May 2026

Mr. Colm Ó hOisín SC
Member of the ad hoc Committee

Date:

Prof. Lawrence Boo
President of the ad hoc Committee

Date:

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Prof. Lawrence Boo
President of the ad hoc Committee

Date:

[Page 74]

Prof. Lawrence Boo
President of the ad hoc Committee

Date: 19 May 2026