In the matter of an arbitration
under the Arbitration Rules of
the United Nations Commission
on International Trade Law (2021)
PCA Case No. 2023-40
Permanent Court of Arbitration
Peace Palace
The Hague
The Netherlands
Day 3
Wednesday, 18 September 2024
Hearing on Preliminary Objections
Before:
PROFESSOR GABRIELLE KAUFMANN-KOHLER
MR WILLIAM KIRTLEY
PROFESSOR DONALD MCRAE
ZEPH INVESTMENTS PTE LTD
Claimant
-v-
THE COMMONWEALTH OF AUSTRALIA
Respondent
BRYCE WILLIAMS, registrar and legal counsel,
LILIA MENDOZA-ROSALES, assistant legal counsel, and
BENJAMIN CRADDOCK, senior case manager, appeared for
the Permanent Court of Arbitration.
Tribunal Secretary: LUKAS MONTOYA
Transcript produced by Trevor McGowan,
Georgina Vaughn and Lisa Gulland.
Trevor McGowan CR
CLIVE F PALMER, Claimant's representative and director
GEORGE SPALTON KC, counsel and Claimant party assisting
DR ANNA KIRK, counsel and Claimant party assisting
KRIS BYRNE, counsel and Claimant party assisting
MICHAEL SOPHOCLES, counsel and Claimant party assisting
ANNA PALMER, counsel and Claimant party assisting
BALJEET SINGH, administrator, Claimant party assisting
and director
DANIEL JACOBSON, counsel and Claimant party assisting
THOMAS BROWNING, counsel and Claimant party assisting
JONATHAN SHAW, counsel
EMILY PALMER, director
DECLAN SHERIDAN, director
LEANNE McCORMACK, administrative assistant
DOMENIC MARTINO, corporate advisor to the Claimant
SANDRA MARTINO, assistant to Mr Martino
NUI HARRIS, director of Claimant's subsidiary company
REGINA NOMMENSEN, assistant to Mr Harris
YEVHENIYA SOPHOCLES, counsel
SCOTT BIRKETT, expert witness
GEORGE SOKOLOV, Claimant party assisting
DR STEPHEN DONAGHUE KC, Solicitor-General of Australia
SAMUEL WORDSWORTH KC, Essex Court Chambers
PROFESSOR CHESTER BROWN, 7 Wentworth Selborne Chambers
DR NAOMI HART, Essex Court Chambers
DR ESME SHIRLOW, Shirlow International Law Office
PENELOPE BRISTOW, counsel assisting the Solicitor-General
JESSE CLARKE, general counsel, Office of International Law
LUCY MARTINEZ, counsel (investor-state disputes), Office of
International Law
KYLE DICKSON-SMITH, principal legal officer, Office of
International Law
STEPHANIE BROWN, senior legal officer, Office of
International Law
CHARLES LIGHT, senior legal officer, Office of
International Law
ERIN MANUEL, senior legal officer, Office of
International Law
JEREMY SHIRM, director, Department of Foreign Affairs
and Trade
CRAIG BYDDER, Solicitor-General of Western Australia
ANNIE TAN, senior assistant state solicitor,
Western Australia
JOHN LOPEZ, Opus 2 International
Closing statement on behalf of Respondent ...................1
By Dr Donaghue ...................................1
By Mr Wordsworth ...................................2
Tribunal questions ..............................16
Tribunal questions ..............................20
Tribunal questions ..............................21
By Professor Brown ................................29
By Mr Clarke ....................................49
By Dr Hart ......................................52
By Dr Donaghue ....................................58
Questions from TRIBUNAL .............................79
Closing statement on behalf of Claimant ...................80
By Mr Palmer ....................................80
Tribunal questions ..............................113
Tribunal questions ..............................115
Tribunal questions ..............................121
By Dr Kirk ......................................124
Tribunal questions ..............................130
By Mr Palmer ....................................145
By Dr Kirk ......................................157
Discussion re procedural matters ........................167
[Page 1]
(10.32 am)
THE PRESIDENT: Good morning to everyone. We are starting
Day 3 of this hearing. We are ready to listen to the
Respondent's answers to the Tribunal questions and
closing remarks.
Is there anything that needs to be raised before
we start?
DR DONAGHUE: No, there is not.
THE PRESIDENT: Not on your side.
Dr Kirk?
DR KIRK: Not from our side.
THE PRESIDENT: No, fine.
Then we can start. As you know, you have two hours,
and then we will have the lunch break, and thereafter we
will listen to the Claimants.
Dr Donaghue.
Closing statement on behalf of Respondent
DR DONAGHUE: Thank you, Madam President, members of
the Tribunal.
We propose to focus in our closing remarks on
answering the questions that the Tribunal has asked. So
to that end, we will structure our address this morning
as follows: Mr Wordsworth KC will address the answers to
the Tribunal's questions 1 and 4; Professor Brown will
[Page 2]
then address the answer to question 3; Mr Clarke will
address the answer to question 5. Then Dr Hart will
then make some submissions about burden of proof before
handing back to me. I'll address question 2 and then,
depending how we're going for time, I might make some
brief overview submissions by way of closing about the
facts as they relate to the key issues as we see them.
There are some slides that various members of our
closing team will be using, which we'll provide to the
Tribunal in hard copy and which will be coming up on the
screen. Some of us will be using slides, and some,
Opus 2.
So if that is convenient to the Tribunal, I would
hand the floor to Mr Wordsworth.
MR WORDSWORTH: Thank you very much, Madam President.
I kick off with question 1, which of course is which
of four dates may be relevant to assessing "substantive
business operations". And the question has highlighted
the date of the alleged breach, the date of the
investor's request for consultations, the date of the
State's notification of denial of benefits and then the
date of the actual denial.
It is, of course, essential to focus on the wording
of this specific free trade agreement; indeed, of
course, the way the question is put asks us to focus on
[Page 3]
that issue.
So could we have F1/1/158 on the screen, please.
This is Article 11(1) of the FTA (CLA-1), which you will
be very familiar with.
Opus, can we please have F1/1/158.
THE PRESIDENT: We have it with us, so I think you can
proceed.
MR WORDSWORTH: Thank you very much.
"Following notification ..."
And that, of course, is one potential date:
"... a Party may deny the benefits of this
Chapter ..."
Which is another potential date:
"(b) to an investor of another Party that is
a juridical person of such other Party and to
investments of that investor if an investor of the
denying Party [1] owns or controls the juridical person
and [2] the juridical person has no substantive business
operations in the territory of any Party other than the
denying Party."
This obviously contains no express date for
assessing the alleged substantive business operations.
One possible date would be the date of actual
denial, and this would always be a backstop date.
However, the aim of the application of Article 11(1)
[Page 4]
must be a fair assessment of the business operations of
the investor in the natural course of that business; for
example, before any potential adverse impact by
potentially unlawful acts of the respondent state.
It also follows from this that the date of actual
denial would make little sense in many cases because the
investor would already have been put on notice under
Article 11(1) by receipt of the notification of the
intent to deny.
So if the date of actual denial was regarded as the
relevant date, it would be open to the investor to seek
to improve its position post-notification, and that
cannot be the intention.
Another possibility is the date of notification.
However, this needs to be considered along [with] the
consultation provision, which is Article 19(1); so that
is F1/1/169, so 169 in the same document. You see
there:
"In the event of an investment dispute referred to
in Article 18.1 ..."
So obviously it's defined, that's the definition
provision:
"... the disputing parties shall as far as possible
resolve the dispute through consultation, with a view
towards reaching an amicable settlement. Such
[Page 5]
consultations, which may include the use of non-binding,
third party procedures, shall be initiated by a written
request for consultations delivered by the disputing
investor to the disputing Party."
This obligation to consult must, of course, be
performed in good faith, and it is also predicated on
the existence of a dispute. And the aim is that the
parties may be able to resolve and, through
consultation, seek to resolve the dispute without
arbitration.
It would follow that although the dispute has been
notified through the request, and there may be
subsequent events that, for example, fall within the
dispute and amount to a breach of the treaty, a tribunal
will always be wary of a party seeking to put subsequent
facts on the ground simply with a view to improving its
position on the dispute.
This is not a strict rule, but we say it just is
a rule that's really going to the weight of the
evidence. It's of less value to you as a Tribunal if,
subsequent to the request for consultation, either the
state or the investor has been seeking to change the
position in relation to the substantive business
operations.
That approach, which reflects a more general
[Page 6]
approach in terms of assessing evidence, protects both
parties' interests. Investors should not, in the usual
course, be able to improve its position on substantive
business operations by putting new facts on the ground,
such as suddenly employing 50 new people after the
consultation period has begun. And likewise, the state
should not, in the usual course, be able to improve its
position by seeking to impact the status of the
investor's operations. And those operations of the
investor and their viability may -- for example, in the
case of a holding company -- be very susceptible to how
the underlying investment is treated within the
respondent state's jurisdiction.
So the position, as we see it, is broadly analogous
to what one sees in a state-to-state case, where a court
is looking at the issue of effectivité in a case where
they are seeking to establish who does or does not have
a good title to territory. And the long-standing
approach of the ICJ, and of course other tribunals, is
to place limited or no weight on supposed effectivité
after the date of crystallisation of the dispute.
The rationale for that applies equally here. The
basic point is that a tribunal will not be greatly
assisted in a legal assessment of title where a state,
knowing that there is a dispute, decides to build
[Page 7]
a lighthouse, decides to station its troops, or
otherwise seeks to assert its jurisdiction to try and
build up its position in relation to a dispute that
everybody already has identified as existing, and
thereby seek to improve its claim. There is no point in
giving effect to a position where a party is seeking
literally sometimes just to try to put facts on the
ground.
So that is the basic thinking behind why Australia
is saying that 14 October 2020, the date of the request
of the consultations, at the latest, is the relevant
date in this case. And that's also why we've been
a little hesitant of just accepting the Claimant's
suggested date of 13 August 2020 -- that is the date of
the alleged breach -- as at that date Australia had not
been formally notified of the alleged breach and the
claim being brought with respect to that breach.
But we do say that this is an issue on timing where
there is no one answer. For example, the investor would
not be appropriately protected if, prior even to the
alleged breach, the state had engaged in some
potentially unlawful acts that reduced the operations of
the investor in the home state. To similar effect, if
an investor had purported to create substantive business
operations a few weeks before it alleges breach, or
[Page 8]
before the alleged breach, this is a matter a tribunal
would likely also consider when assessing relevant
dates.
All of this comes with the caution that of course
the Tribunal is going to have in mind that it's going to
be very important to approach past cases by reference to
the specific treaty wording they're looking at, but also
very much by reference to the specific facts that they
are looking at. Of course, there's the treaty point
that many treaties don't have the same steps of
consultation, followed by notification, followed by
denial. But the facts also, as we sought to indicate,
are also very important in the given case.
We do see as persuasive the reasoning in the
Guaracachi case. That's F2/69/142 (RLA-69), if we could
go to that, please. Paragraph 376, picking up from the
end of the first line:
"The Tribunal cannot agree with the Claimants when
they argue that the Respondent is precluded from
applying the denial of benefits clause retroactively.
The very purpose of the denial of benefits is to give
the Respondent the possibility of withdrawing the
benefits granted under the BIT to investors who invoke
those benefits. As such, it is proper that the denial
is 'activated' when the benefits are being claimed.
[Page 9]
377. The Contracting Parties to the BIT could have
agreed otherwise, but they decided not to do so.
Instead they agreed that a Contracting Party could deny
benefits (including the benefit of having a dispute
decided by an arbitral tribunal) subject to meeting
certain conditions, none of which entails that such
denial is only effective in relation to disputes arising
after the notification of such denial or ... any other
limitation period ..."
Et cetera.
"378. On the contrary, the Tribunal agrees that the
denial can and usually will be used whenever an investor
decides to on invoke one of the benefits of the BIT. It
will be on that occasion that the respondent State will
analyse whether the objective conditions for the denial
are met and, if so, decide on whether to exercise its
right to deny the benefits contained in the BIT, up to
the submission of its statement of defence.
379. As a matter of fact, it would be odd for
a State to examine whether the requirements of
Article XII had been fulfilled in relation to
an investor with whom it had no dispute whatsoever. In
that case, the notification of the denial of benefits
would -- per se -- be seen as an unfriendly and
groundless act, contrary to the promotion of foreign
[Page 10]
investments. On the other side, the fulfilment of the
aforementioned requirements is not static and can change
from one day to the next, which means that it is only
when a dispute arises that the respondent State will be
able to assess whether such requirements are met and
decide whether it will deny the benefits of the treaty
in respect of that particular dispute."
So we would submit that is persuasive reasoning.
But within that persuasive reasoning, there is a degree
of flexibility that is being accorded to the tribunal.
I would note that Guaracachi is cited with approval
in Big Sky v Kazakhstan -- that's Exhibit RLA-85 --
which you'll recall the Claimant relied on in opening,
and I refer you to paragraph 276. There, you may
recall, the tribunal saw the need for some flexibility
because it was concerned about pre-notice steps being
taken by the state to undermine the substantive business
operations in the home state.
Before departing this topic, there is the point on
the facts, which is to make the point that in this case
not too much turns on whether the Tribunal in fact were
to settle on dates 1, 2, 3 or 4, because no one is, as
we understand it, pointing to a marked increase of
activity between dates 1 and 2, the alleged breach [and]
the request for consultations; and as we understand it,
[Page 11]
the same applies so far as concerns the 22 [December]
2020 and 14 June 2021 dates.
So with your leave, I would move on to question 4.
And again, if we can go back to Article 11(1) of the
treaty on the screen, at F1/1/158. Thank you.
If we could go, in fact, on to the next page,
because here, as a starting point, of course we are
focusing on the phrase "substantive business
operations". And the Tribunal already has on board our
point that the term "substantive" already itself imports
the requirement that the business operations be real and
genuine, and as such would not include operations set up
for a sham purpose.
The need for the business operations to be real,
authentic and genuine is, as we understand it from the
Claimant's pleadings, common ground, and I didn't
understand the Claimant to withdraw from that position
in its opening submissions on Monday. But of course our
position as to the need for the substantive business
operations to be real, authentic and genuine is
supported by the various cases that the
Solicitor-General took you to on Monday morning.
THE PRESIDENT: Maybe I should say: the Tribunal's question
goes to whether you can have real, genuine operations,
authentic operations. Because in real life, the
[Page 12]
operations are there, yet they are there for a purpose
that is not really the business purpose of these
operations, but for a different purpose that in this
case would allegedly be treaty protection. And that is
why we thought that the very words of "genuine",
"authentic", "real" do not necessarily answer our
question.
MR WORDSWORTH: Absolutely, Madam President, and I want to
approach that through two angles: first, the issue of
interpretation, of course good faith interpretation; but
then the second prism, which is of performance, and good
faith performance.
What I'm doing in making this introductory
submission is that when you're looking at the term
"substantive" and you're interpreting that as a matter
of good faith -- and of course the Tribunal does that
under Article 31(1) of the Vienna Convention -- the word
"substantive", as understood correctly as genuine, real,
authentic, takes on the meaning of "genuine" as in not
being of a sham nature, i.e. put in place for
an improper purpose.
One gets to that, as a matter of good faith
interpretation, simply by asking the question: could it
have been the intention of the treaty parties to
establish a test for "substantive business operations"
[Page 13]
that could be subverted by the creation of business
operations in essence in bad faith, in order simply to
deprive the host state of the important right of being
able to deny benefits?
So as a matter of good faith interpretation, purpose
does feature; but it also features as a matter of good
faith performance of the arbitration agreement.
If I can take this in a number of steps.
First, as is common ground between the parties, and
as is, of course, supported by the ordinary wording of
Article 11(1), as well as multiple cases, the denial of
benefits provision applies just as much to the existence
of the offer to arbitrate as it does to the substantive
provisions of Chapter 11.
Of course, you can see that if we go back to the
preceding page, because the ordinary meaning of the
words ... (Pause)
"Following notification, a Party may deny the
benefits of this Chapter: ..."
And of course "this Chapter" includes the offer to
arbitrate and all the related provisions in Section B of
Chapter 11.
As is also uncontroversial, the Claimant has
purported to accept the offer to arbitrate contained in
Article 20; and of course a claimant is not able to
[Page 14]
change any of the terms pursuant to which an offer to
arbitrate was made or that condition its existence or
application. These are all established, of course, by
the relevant treaty parties, and all the Claimant can do
is either accept the offer or not accept the offer. It
cannot change any of the relevant conditions or
preconditions.
Of course, when the offer is accepted, that is
generally regarded as establishing an agreement to
arbitrate, which is likewise generally regarded as being
governed by international law. And of course it's very
difficult to see what other law it could be governed by
in a situation where the offer is contained within
a treaty governed by international law and all the
Claimant does is to accept the offer; it can't change
any of the terms, it can't change the nature of the
offer. So the resultant agreement must be governed by
international law.
Now, two things follow from those preliminary
points. First, the offer has been accepted subject to
the right of the host State to deny benefits. As part
of its acceptance, the Claimant has accepted that the
State may deny the right to arbitrate in certain
specified situations.
Second, the agreement to arbitrate is subject to the
[Page 15]
obligation to arbitrate in good faith. One can get that
by various routes: of course, one gets there by
Article 26 of the Vienna Convention, obligation to
perform in good faith. It applies to all international
agreements. Of course, one also gets there as a matter
of general principle. And of course, in this case, the
Claimant has on multiple occasions asserted the
existence of an obligation to arbitrate in good faith in
the various preliminary issues that the parties have
been fighting over. And indeed, the Tribunal has taken
the step in its procedural order of 12 September 2023 to
refer to this essential principle.
And where a claimant state seeks to prevent a state
from being able to exercise a right that the treaty
confers with respect to the offer to arbitrate, through
establishing business operations in a claimed home state
for the purpose of defeating that right, and then seeks
to rely before the arbitral tribunal on the facts on the
ground that it has brought into being, it is engaged in
a performance of the arbitration agreement that is
otherwise than in good faith. And it follows that the
motivation or the reason for setting up the operations
very much do matter.
One can see that again in one of Professor
Bin Cheng's classic formulations. If we could have
[Page 16]
F2/101/6 on the screen, please. This is
Exhibit RLA-101. If I can pick it up roughly halfway
down:
"A reasonable and bona fide exercise of a right in
such a case is one which is appropriate and necessary
for the purpose of the right (i.e. in furtherance of the
interests which the right is intended to protect). It
should at the same time be fair and equitable as between
the parties and not one which is calculated to procure
for one of them an unfair advantage in the light of the
obligation assumed."
And the premise of the Tribunal's question 4 is that
there is precisely such a calculation.
THE PRESIDENT: So would you say this is an abuse of the
arbitration agreement?
MR WORDSWORTH: I am going to come to that, Madam President,
in a moment. But yes, of course you can see it through
the prism of abuse of the arbitration agreement. The
submission that I'm making before I get to that point is
actually: it's a failure to perform the arbitration in
good faith.
You can go that extra step, as of course many of the
cases on abuse of right or abuse of process do, and they
characterise there being a specific abuse of the right
to arbitrate. We're putting this slightly differently,
[Page 17]
in the sense there is an obligation to perform the
arbitration agreement in good faith; here, as I've
identified, there is a failure to perform that
arbitration agreement in good faith.
THE PRESIDENT: And the difference is a difference in level
because the threshold for abuse of right is higher? Or
what difference does it make to say "performance not in
good faith" as opposed to "abuse"?
MR WORDSWORTH: Potentially, there is a difference possibly
in threshold. It's rather unclear, isn't it? Because
when one looks at the case on abuse, there is that
conflation between a failure to exercise the right to
arbitrate in good faith, and then leaping on a little
bit to say: well, that is positively an abuse of right
or abuse of process.
THE PRESIDENT: But that's the cases. I'm interested in the
concepts, in the reasoning.
MR WORDSWORTH: I think the concepts are very, very closely
related indeed, because the existence of the abuse is
predicated on the failure to exercise the right in good
faith. So maybe it's just a difference in terms of
formulation, as opposed to a real difference in the
principle.
THE PRESIDENT: I see abuse as a manifestation of the
principle of good faith, but I'm not sure about the
[Page 18]
level.
MR WORDSWORTH: Yes. Well, certainly the submission we are
putting to you is about that same manifestation of
a failure to act in good faith.
If one continues with what Professor Bin Cheng is
saying:
"A reasonable exercise of the right is regarded as
compatible with the obligation."
And that, of course, is here the obligation to
arbitrate in good faith.
"But the exercise of the right in such a manner as
to prejudice the interests of the other contracting
party arising out of the treaty ..."
And this is precisely what is happening as per the
assumed facts: the Respondent State having an interest
in being able to see that the terms of its agreement to
arbitrate are not undermined by subterfuge.
And he continues:
"... is unreasonable and is considered as
inconsistent with the bona fide execution of the treaty
obligation, and a breach of the treaty."
One can see then, in a case like Phoenix Action, how
that analysis then turns into the analysis of abuse.
And there is probably the correspondence between the two
principles: the failure of good faith and the abuse.
[Page 19]
If we look at Phoenix Action at F2/91/44 (RLA-91),
paragraph 107:
"The principle of good faith has long been
recognized in public international law, as it is also in
all national legal systems. This principle requires
parties 'to deal honestly and fairly with each other, to
represent their motives and purposes truthfully, and to
refrain from taking unfair advantage ...' This principle
governs the relations between States, but also the legal
rights and duties of those seeking to assert
an international claim under a treaty. Nobody shall
abuse the rights granted by treaties, and more
generally, every rule of law includes an implied clause
that it should not be abused. This is stated for
example by Hersch Lauterpacht:
'There is no right, however well established, which
could not, in some circumstances, be refused recognition
on the ground that it has been abused.'"
Then as to the issue of the effect of the
motivation, which question 4 asks, because there is
a lack of good faith and/or an abuse, there are
inevitably procedural consequences so far as concerns
denial of benefits. The right to arbitrate under the
arbitration agreement, which must be performed in good
faith, must be "refused recognition", to borrow the
[Page 20]
words of Hersch Lauterpacht.
So on the assumed facts of question 4, the claim is
inadmissible and the Tribunal would be precluded from
exercising its jurisdiction.
Can I then turn briefly to the issue of "no
investor" and "no investment".
THE PRESIDENT: Can I just ask one clarification.
I understood you before to say that your submission
is that there is a performance that is not in good
faith, and therefore a breach of the treaty. And your
final sentence rather made me think that your submission
was a reference to the Hersch Lauterpacht quote, that
your submission is rather one of abuse.
So you will tell me it makes no difference in the
end, and you will probably be right, legally. But just
to make sure that I well understand what the
submission is.
MR WORDSWORTH: Sorry, the submission is both. I hope I was
clear.
THE PRESIDENT: Okay, good.
MR WORDSWORTH: As I said, as to the issue of the effect of
the motivation, because there is a lack of good faith
and/or an abuse.
THE PRESIDENT: Okay, good. That's clear.
MR WORDSWORTH: So absolutely we put it on both bases,
[Page 21]
insofar as there is a difference.
(Slide 2) So, Madam President, if I can turn briefly
to the issues of "no investor" and "no investment".
The Tribunal will recall that the Claimant on Monday
handed up a list of cases, and on that list I think
there were 40 or so that were said to go to "no
investor"/"no investment". It wasn't being said what
particular issue they went to or why they are relevant.
You will also recall that on Monday we put up
a two-page slide identifying the relevant treaty
language in the cases on "making ... an investment", the
specific Article 2(d) issue, and we identified the
language; we identified whether there was a contribution
in those cases.
(Slides 3-5) So that table is now on the screen
before you. What we've done is simply to add, so far as
we can see, the cases from the Claimant's list handed up
to you on Monday that go to that issue of the making of
an investment. So we hope that is of assistance.
I don't propose to take you through that now, but
I suspect all these cases are reasonably familiar to the
Tribunal. You will see the key point is that they all
have different wording, and indeed they all involve some
form of active contribution by a foreign investor.
THE PRESIDENT: I have been asking myself whether the
[Page 22]
distinction active/passive is not unnecessary, because
if you have a requirement for a contribution, then
a contribution is making an allocation, and so it would
imply an active behaviour, would it not?
MR WORDSWORTH: Well, that --
THE PRESIDENT: That could be an argument, let's put it that
way.
MR WORDSWORTH: Well, we say --
THE PRESIDENT: If we didn't have the word "making" here,
would we discuss or not the requirement of an "active"
contribution? And is a contribution not by definition
"active"? That is my point.
MR WORDSWORTH: Madam President, we would, because we'd get
there through the definition, correctly understood, of
the term "investment". Because "investment" of itself,
under AANZFTA, as I submitted on Monday, requires that
there be the inherent characteristics of an investor,
i.e. some form of contribution, i.e. risk. So you're
already there.
But we're making a separate, freestanding submission
specifically with respect to the ordinary meaning of
"make ... an investment", which itself, we do say, does
require you to do something. What does it require you
to do? It requires you to make a contribution.
And when you're assessing what is required, you have
[Page 23]
to look at all the relevant facts. In the facts of this
case, when we say all that's happened is that MIL has
acquired the astonishingly valuable shares in Mineralogy
for nothing, and then MIL has transferred those valuable
shares to Zeph for nothing, and we also know what is the
purpose behind that transaction, that's just a feature
which helps you identify that there has been no
contribution. Looking at those relevant facts, there
has been no contribution, no making of an investment.
THE PRESIDENT: Do I understand your submission correctly
that if the Tribunal thinks that an investment has the
inherent characteristic of contribution, that actually,
in and of itself, would suffice to require an allocation
of resources by the investor?
MR WORDSWORTH: That's correct, Madam President.
THE PRESIDENT: And that the word "making" does reinforce
that understanding? Or do I over-interpret what you're
saying?
MR WORDSWORTH: Well, I wouldn't put it as "reinforcing",
because we're putting these as separate points on
interpretation. But if you look at some of the cases,
what you do see is that they treat them as being
reinforcing.
I think it's AMF or Rasia where they're looking
specifically at the treaty language, including the fact
[Page 24]
of making an investment. And in looking at the question
of whether an investment has inherent characteristics,
even though it's the "every kind of asset" type of
language, it is saying: yes, because we look at all the
relevant language.
So you can get there really looking at either
separately or together.
THE PRESIDENT: Thank you.
MR WORDSWORTH: If I can just pick up very quickly a few
points on the evidence that came out yesterday that go
to our case on there being no investor, no investment.
Firstly, that Mr Palmer appeared to accept that in
financial terms that there had been no contribution. Do
you recall yesterday his suggestion, as a fallback
position in the absence of any meaningful financial
contribution, he was saying: well, look at the mere fact
of them being a Singapore company and having the shares;
the shares in the Singapore company and the rights that
attach to those shares and the specific features of
those shares, that somehow in itself was making some
form of a contribution to Mineralogy. That's transcript
Day 2, pages 211 to 212. And we just say, of course,
that is not any meaningful form of contribution.
So no initial contribution; and likewise, no
contribution by way of the so-called "active
[Page 25]
management".
Of course, none of the people relied on as witnesses
are here, save for Mr Palmer. And there are no
documents to support the alleged contribution through
some active management, save for the alleged
contribution of Emily Palmer, which you'll recall was
covered yesterday in the evidence, and there was
reference to the function she fulfilled at Mineralogy.
But of course, she would anyway be fulfilling that
function, regardless of whether she is said to have
a Zeph hat on or not. And I refer you to Day 2,
page 237, lines 13 to 22.
You'll recall the third way the contribution was put
was by way of the supposed reinvestment of profits. And
of course that fails at the first hurdle. Article 2(j):
there was never an investment in the first place. You
don't even get within this provision by reference to the
definition of returns in the treaty.
(Slide 6) Then as to the second point, which is that
the supposed return has to be invested by the Claimant,
there was never a recommendation even of a dividend by
the Mineralogy directors. That's Day 2, [page] 228
lines 6 to 10. And Mr Palmer accepted that it was
a requirement for a dividend to be declared, and we can
see that on the slide, we've got the relevant evidence,
[Page 26]
and that's Day 2, page 222. You see there he is
accepting what is plain from the relevant clause of the
Mineralogy constitution.
(Slide 7) He also accepted that the annual accounts
could not somehow be changing retrospectively what had
happened in the relevant financial year; that's on our
second slide here. That's Day 2, page 232:
"Question: ... the decision to approve the accounts
can't be changing what happened retrospectively in the
financial year to which the accounts relate? You would
agree with that?
"Answer: Yes."
(Slide 8) It also became all the more evident that
what is happening in terms of any relevant decisions is
that these are taken by Mr Palmer, and the Claimant
simply does not enter into the picture in any meaningful
way. You can see that at page 230 of yesterday's
transcript:
"Question: So we can just ignore the corporate
forms?
"Answer: All I'm saying is that I don't live my
life on corporate forms; I make decision. And the
decision that I made, in whatever capacity, was to keep
the money in Mineralogy and not pay it to Zeph.
And I acknowledge that it could have been paid to
[Page 27]
Zeph ..."
Tellingly:
"... if I had decided to pay it -- or, sorry, if the
Claimant wanted it, they could have got it."
So there indeed the corporate forms are truly
ignored and one sees that what's really happening here,
which is that it is Mr Palmer who controls what happens,
Zeph has done nothing, and the actual corporate forms
are neither here nor there.
It's useful here to point to the unchallenged
evidence of Professor Lys that the profits of Mineralogy
somehow count four times as retained earnings. If we
could go to D2/7/16, and this is Professor Lys's second
report. (Pause) You see paragraph 57 at the bottom:
"To the extent that the decision to retain profits
instead of paying them out can be considered a form of
investment from an economics point of view, such
a decision represents an investment made by Mineralogy
to reinvest them into itself, and Zeph has no role
whatsoever in that decision -- Zeph cannot control or
force that issue. (As an aside, Mr Palmer, in his
capacity as owner of MIL, also has no direct say in the
matter. I explain this matter in more detail in my
discussion on the board of directors ...)"
Could we then go to footnote 32 at the bottom of the
[Page 28]
page:
"I note that the logic underlying the Claimant's
assertion leads to a paradoxical conclusion of quadruple
counting any retention of earnings by Mineralogy: first
as an investment by Mineralogy, second as an investment
by Zeph, third as an investment by MIL, and finally as
an investment by Mr Palmer."
So of course it just doesn't make sense, the way
this is being put to you. And all these same points on
the absence of contribution also go to the absence of
risk. Mr Palmer was unable to point to any legally
relevant risk.
(Slide 9) If we go to the fourth slide here, that's
at page 269 of the transcript of Day 2. I think we have
a slide of this. You see there, there was in essence
the acceptance that the inherent risk was of losing the
dollar; and Mr Palmer said:
"Of losing the dollar, but also losing -- part of it
is rights and obligations that you have in shares;
they're dealt with in the constitution of the
companies."
So again, there is no serious case of any real risk
in making the investment.
Madam President, may I hand over to Professor Brown
to continue.
[Page 29]
THE PRESIDENT: Thank you.
PROFESSOR BROWN: (Slide 10) Madam President, members of
the Tribunal, I will be addressing the third question
that you posed, on the foreseeability issue, which of
course arises in the context of the abuse of process
objection.
To recall, that question is an assumption, and it is
an assumption in three parts, followed by a number of
questions.
First, we were asked to assume that a corporation
restructures to gain treaty protection with a specific
disagreement in mind; and that in that case, if the
corporation has that specific disagreement in mind,
it means that it's foreseeable. We are then asked to
assume, further, that the disagreement in question does
not lead to the invocation of treaty protection. And
then we are asked to assume, finally, that another
disagreement arises, as such not foreseeable. And the
Tribunal's question in relation to these three steps was
whether the invocation of treaty protection for the
other disagreement is abusive or not.
And then, Madam President, members of the Tribunal,
there were a few add-on questions: whether the answer
would change if, instead of saying "disagreement", which
you chose as a neutral term, we would use the word
[Page 30]
"dispute" [or] we would use the term "measure".
I'll begin with the first part of the assumption:
that is, if a corporation restructures to gain treaty
protection with a specific disagreement in mind, and if
it has it in mind, it means that it's foreseeable.
The way that assumption 1 is stated is of course
correct, but it's not the case that foreseeability is
the only relevant test. There is also the situation
where there is a pre-existing dispute, which is well
known from the Philip Morris Asia case, which is RLA-95,
and other decisions and awards such as Pac Rim
v El Salvador, RLA-43, [and] Tidewater v Venezuela,
which is RLA-93. And these are all collected together
in the Philip Morris Asia award at paragraphs 545
to 554.
(Slide 11) One of those other decisions and awards
is of course Mobil v Venezuela, which is RLA-92. And
the tribunal there said, at paragraph 205, which is
extracted on the screen, that:
"With respect to pre-existing disputes, the
situation is different and the Tribunal considers that
to restructure investments only to gain jurisdiction
under a BIT for such disputes would constitute, to take
the words of the Phoenix Tribunal, 'an abusive
manipulation of the system of international investment
[Page 31]
protection ..."
So if there is a pre-existing dispute, then
foreseeability is not relevant.
Foreseeability is relevant where there is not yet
a dispute, but there is a need for a test as to whether
the dispute that is then notified in the future is
a motivating factor for the restructuring. And in the
first part of assumption 1, it matters that the
restructure has taken place with an abusive purpose in
mind, and there is no question that it has in fact taken
place with an abusive purpose in mind. The abuse is all
the more clear because there is a foreseeable dispute,
and the intent is to gain investment treaty protection
with respect to that dispute.
Then in part B of the assumption, the disagreement
doesn't lead to the invocation of the treaty protection.
This is different from the usual situation, where
an investor may make an investment, and this may be
structured in order to secure the benefit of treaty
protection, including ISDS protection, with respect to
any unknown future dispute.
Of course, there's nothing wrong with that. There
are multiple decisions and awards that confirm that it
is permissible to structure investment to take advantage
of an investment treaty in respect of unknown future
[Page 32]
disputes. And there are multiple authorities on that
point: Mobil v Venezuela, RLA-92, is one such authority,
and there are several others which I don't need to
trouble with you.
But in the assumption which has been provided to us
by the Tribunal, there is an abusive purpose to the
restructure in the first part of the assumption. And in
Australia's submission, that abusive purpose cannot
simply be put to one side when assessing what happens
next, even though that disagreement that the investor
had in mind doesn't lead to the invocation of investment
treaty protection.
So turning to the third part of the assumption,
where there is another "disagreement", to use the
Tribunal's neutral term, which as such is not
foreseeable. The question here is whether the
invocation of treaty protection is abusive in those
circumstances.
We say this has to be a fact-sensitive matter which
has to take account of all of the relevant
circumstances. And there are three specific areas of
facts that are likely to be important in that
assessment: firstly, what the substance is of the second
disagreement; secondly, the timing of the second
disagreement; and thirdly, the measure which is at issue
[Page 33]
in the second disagreement. I will address these in
turn.
The first of these factors is the substance of the
second disagreement. And this is relevant if there is
any connection between the two disagreements: if they,
for instance, involve the investor being exposed to the
same sort of state conduct, which the investor has
responded to already through seeking the treaty
protection in the first place.
It would also be relevant if the second disagreement
concerned the same state actors, the same investment
vehicle, and the same investment -- for instance, the
same investment contract, such as a state agreement --
as well as any other relevant factors. This has to be
a holistic assessment.
Another relevant factor may be the involvement of
the same specific state representative, where there are
cases of personal animosity. For example, where
something is happening like two bulls are butting heads,
first in relation to disagreement 1 and then the same
thing happens in relation to disagreement 2, then we say
this is a relevant factor in relation to considering
whether commencing an investment treaty claim in
relation to disagreement 2 would be abusive.
Turning to the timing of the second disagreement,
[Page 34]
one can think of hypothetical examples which throw this
issue into sharp relief. For instance, suppose the
situation is that the corporate restructure is carried
out in week 1 to gain treaty protection with
disagreement 1 in mind; that might be a taxation
measure. But then in week 2, disagreement 2 arises; and
that might be the cancellation of a permit. And then in
week 3, the treaty is invoked in relation to
disagreement 2, being the cancellation of the permit.
Now, it would appear rather odd for that not to be
considered abusive. There has been no investment other
than for the purposes of treaty protection for
an abusive purpose during a period of just two weeks.
There has been no possibility for the state to get any
benefit in relation to a genuine investment before
a claim is submitted.
These first two factors, substance and timing,
explain why recent cases have emphasised the
significance of there being deteriorating relations
between the investor and the host state.
(Slide 12) In this respect, in the case BRIF
v Serbia, which is RLA-136, which is extracted on the
slide, the claim was brought by two Serbian companies
which had acquired Luxembourg nationality through
a restructure in 2019, in circumstances where the two
[Page 35]
Serbian companies were already in dispute with the
respondent, the Republic of Serbia, and had in fact been
in dispute with the Serbian authorities for around
12 years at the time of the restructuring.
At paragraph 208, as you can see on the slide, the
tribunal observed that:
"... what needs to be foreseeable is a dispute
originating from deteriorated circumstances affecting
an investment in the host State. The abuse is in
manipulating the system, being aware that facts at the
root of a dispute ..."
And I interpose that that is the type of factors
that I've been outlining in the present case:
"... have already taken place negatively affecting
the investment and could lead to investment treaty
arbitration, irrespective of how a claimant labels the
same facts as leading to a 'domestic' or
an 'international' dispute."
(Slide 13) In Cascade v Turkey (RLA-98), a case
which I took you to a number of times on Monday morning,
here the Belgian claimant had acquired shares in CMD,
a media company in Turkey, which was being shut down on
national security grounds as part of the Government of
Turkey's actions against the movement inspired by the
exiled cleric Fethullah Gülen.
[Page 36]
I took you, as I said, to a number of passages of
Cascade on Monday, but not to this particular paragraph.
At paragraph 347, the tribunal held that:
"... the Tribunal agrees with prior awards that
describe foreseeability as a continuum between
unforeseeable disputes and highly probable disputes,
with most cases falling somewhere between the two
extremes (and thus, by definition, not precisely at
either). That is because in many cases, specific
government action is preceded by some period of
deteriorating relationships, and the longer the
relationship deteriorates, the more foreseeable adverse
State action may become. That is presumably why the
Pac Rim tribunal described the exercise of drawing
a line on the continuum as not necessarily clear cut,
and 'recognize[d] that, as a matter of practical
reality, the dividing-line will rarely be a thin red
line, but will include a significant grey area.' And
that is precisely why it is necessary to conduct
a holistic analysis that focuses on all relevant factors
and not to focus too rigidly on just one, such as the
precise degree of foreseeability on the date of
investment. In considering all relevant factors, the
Tribunal does agree that there will be a high threshold
to meet the test for showing abuse of process, but that
[Page 37]
is because it will be only in unusual circumstances that
the evidence points to a likely sham transaction, rather
than one made for genuine commercial purposes. But
a high threshold for proving abuse does not equate to
a requirement to prove that adverse State action is
already highly probable on the date of the investment."
(Slide 14) And in this case, in Cascade v Turkey,
the tribunal ultimately held, at paragraph 444, that the
claimant's acquisition of the shares in the media
company was:
"... designed to repackage under a foreign flag
an investment actually made by domestic investors in
their home State, at a time and in an atmosphere when
adverse actions by the ..."
The redacted text is no doubt the Turkish
authorities:
"... were reasonably foreseeable."
I come then to the third factor to be considered,
and that is the relevant measure at issue in the second
disagreement, and whether that specific type of measure
is foreseen. This is also linked to the second part of
the Tribunal's question, which I'll come to.
Here what is relevant is the character of the
government measure; in our case, being a legislative
measure adopted by the Western Australian Parliament
[Page 38]
that effected a unilateral modification of the
State Agreement. This is, firstly, what was threatened
in relation to the mine continuation proposals issue
involving the CITIC parties; secondly, what was
anticipated might be used in relation to the Balmoral
South proposal and the arbitration proceedings; and
thirdly, what in fact happened, with the Amendment Act
as enacted in August 2020.
Now, turning to the Tribunal's hypothesis of this
second disagreement, Australia's submission is that this
has to be assessed on a fact-sensitive basis.
We note at the outset that it is not Australia's
position that the submission of a claim to arbitration
in respect of such a second disagreement would always be
abusive; nor is Australia's position that it would never
be abusive. Clearly there are cases where the
substance, the timing and the character of the measure
at issue in the second disagreement will be such that it
would be abusive for an investment treaty claim to be
submitted in relation to that second disagreement.
Thus, in Australia's submission, it will be abusive
to submit a claim concerning the second disagreement to
investor-state arbitration in the following
circumstances.
Firstly, where the second disagreement concerns the
[Page 39]
same sort of state conduct by the same state actors,
particularly in a context of deteriorating relations or
personal animosity, and where that conduct is directed
at the same investment vehicle.
Secondly, where the second disagreement is
sufficiently proximate in time; again, this being
a fact-specific enquiry. In the usual course, if this
happens many years later, it may be insufficiently
proximate, leaving aside other considerations.
And thirdly, where the second disagreement is
effected by the same sort of measure, having regard to
its character, effect and the relevant author of that
state measure.
I come then to the Tribunal's further follow-up
questions. The first of these is what the impact would
be if the word "disagreement", which the Tribunal
deliberately chose as being a neutral term, were
replaced by the term "dispute".
We see the terms "disagreement" and "dispute" as
being interchangeable. This, accordingly, does not
affect our analysis.
(Slide 15) This is consistent with the well-known
dictum of the International Court of Justice which was
exemplified in the ICJ's judgment in Georgia v Russia,
which is RLA-133, at paragraph 30, where the
[Page 40]
International Court of Justice collected its consistent
jurisprudence on this matter:
"The Court recalls its established case law ...
beginning with the frequently quoted statement by the
Permanent Court of International Justice in the
Mavrommatis Palestine Concessions case in 1924:
'A dispute is a disagreement on a point of law or fact,
a conflict of legal views or of interests between
two persons.'"
If the term "measure" were inserted instead of the
neutral term "disagreement", that would make the test
more exacting. But that is not the approach of
investment tribunals. In this respect, I refer to the
cases I cited in opening on Monday morning; and I also
refer to Australia's submissions in the SOPO at
paragraphs 312 to 316 and in the ROPO at paragraph 248
to 250.
(Slide 16) On this issue, let me come to the
Claimant's slide on foreseeability, which was slide 32
of its slide deck.
In that slide, the Claimant suggests that there were
certain decisions and awards which supported two
propositions. Firstly, that the measure giving rise to
the dispute must be well defined, and there are a series
of cases cited in support of that proposition:
[Page 41]
Tidewater, Mobil, Aguas del Tunari and Clorox. And then
other cases that supported the proposition, apparently,
that the specific measure must be foreseeable, and there
were cited: Philip Morris Asia, again Clorox, Natland,
Alverley and Ipek.
But the Claimant's citation of cases under these two
headings is incorrect, and I'll briefly go through those
decisions and awards. If I can begin then with the
cases cited for the proposition that the measure giving
rise to the dispute must be well defined.
(Slide 17) The first of those, chronologically at
least, is Aguas del Tunari v Bolivia, which is CLA-185.
Now, this is, with respect, a rather dated case, from
2005, and it predates many of the decisions and awards
that have considered this question.
The tribunal's award and decision on this point is
really not to the point. It doesn't subject this issue
to close analysis. There is really no discussion of
relevant findings by the ICSID tribunal in this case of
the foreseeability of the dispute or of the measure
giving rise to the dispute, nor is there anything about
anything being well defined.
The only discussion of foreseeability in that case
concerns the foreseeability of rights and civil unrest
in Bolivia in relation to the claimant's concession,
[Page 42]
which you can see extracted at paragraph 329 on the
slide. So no assistance can be found from that award.
(Slide 18) As for Mobil v Venezuela (RLA-92), this
case is, in fact, not about foreseeability. Rather, if
we can look at the extract of paragraphs 204 and 205 on
the slide:
"As stated by the Claimants ..."
Quoting from paragraph 204:
"... the aim of the restructuring of their
investments in Venezuela through a Dutch holding was to
protect those investments against breaches of their
rights by the Venezuelan authorities by gaining access
to ICSID arbitration through the BIT."
And the tribunal says this was "perfectly legitimate
... as ... concerned future disputes".
And in paragraph 205, the tribunal notes that it was
different with respect to pre-existing disputes, and
that that would be abusive, quoting Phoenix Action. And
the claimants were indeed conscious of this, looking at
the highlighted section in the last few lines, that the
Claimants had stated that:
"... they 'invoke ICSID jurisdiction on the basis of
the consent expressed in the Treaty only for disputes
arising under the Treaty for action that the Respondent
took or continued to take after the restructuring was
[Page 43]
completed'."
So this was about certain existing disputes and then
a future dispute, with no discussion as to the
foreseeability of that future dispute.
(Slide 19) As for Tidewater v Venezuela, RLA-93,
this also doesn't support the proposition that the
Claimant asserts. Here the ICSID tribunal noted at
paragraph 193 that there was:
"... [a] possibility that a dispute between the
Claimants and the Republic in relation to the
expropriation of the Claimants' assets in Venezuela was
reasonably foreseeable ...", et cetera.
Now, the Tribunal there is not talking in terms of
identifying with any specificity the expropriation
measure. It's talking about the substance of a dispute,
such as, for instance: what is the conflict of legal
views or interests? And here it was the parties' rights
and obligations in relation to a possible expropriation
under the treaty.
(Slide 20) I turn then to Clorox v Venezuela
(RLA-142), and I addressed this case in opening. And
the Swiss Federal Tribunal here is concerned again about
the foreseeability of the dispute, not the particular
measure.
If we can look at paragraph 5.4.2 on the slide.
[Page 44]
I didn't show you this in opening on Monday, but
I'll bring it up today. We can see in the extract
that's not highlighted that:
"To assess the foreseeability of the dispute during
the restructuring of the investment, one must not focus
on the point of view of the investor concerned. To the
extent that recourse to abuse of rights aims to limit
maneuvers that objectively do not deserve any
protection, it is rather appropriate to ask whether
a specific dispute would have been foreseeable for
a reasonable investor placed in the same situation as
the investor concerned."
So again, looking at the dispute, not the particular
specific measure.
(Slide 21) At paragraph 5.6, the tribunal applied
this test. And in that case, there had been a speech
made by the former President of Venezuela, where there
had been in fact a particular measure that had been
referred to. But that wasn't specifically identified;
it wasn't necessary for that to be specifically
identified, in the view of the tribunal.
Put simply, it was just something that the
tribunal -- the court, rather, the Swiss Federal
Tribunal, said that something has to be threatened or in
some way likely, but not specifically identified; and
[Page 45]
what was going to happen would actually have to infect
the investment; and that the effect of that would be of
such an extent as to lead to a conflict of legal views
or interests between the parties.
So again, in the view of the Swiss Federal Tribunal,
no need for an investor to foresee the specific measure
that would be implemented. Rather, what had to be
foreseen was a real possibility that something would
happen.
(Slide 22) I turn then to the Claimant's cases that
apparently stand for the proposition that the specific
measure must be foreseeable. And the Claimant here
cites Philip Morris Asia v Australia, RLA-95.
That is plainly not right on the face of
paragraph 554 of the award. I took you to this passage
on Monday, as I recall. I don't need to read it all
into the transcript. It is simply there as a reference
to there being:
"... gain[ing] the protection of an investment
treaty at a point in time when a specific dispute [is]
foreseeable."
And then the tribunal said:
"... [it] is foreseeable when there is a reasonable
prospect, as stated by the Tidewater tribunal, that
a measure which may give rise to a treaty claim will
[Page 46]
materialise."
So the tribunal didn't consider it necessary that
Philip Morris Asia could foresee the plain packaging
measure. It could have been some other measure that
interfered with their investment, such as another
tobacco control measure having an equivalent effect.
In any [event], we have to recall that the facts of
this case were peculiar, as I explained in opening, in
that a very specific measure had in fact be announced by
Australia, and draft legislation had been published --
in the form of the exposure draft of the plain packaging
bill -- well in advance. But even so, the test, as
formulated and adopted by the tribunal, did not require
foresight of that specific measure.
The Claimant also refers to Natland
v Czech Republic, which is CLA-235, which is another
judgment of the Swiss Federal Tribunal. This concerned
a renewable energy case against the Czech Republic. The
Claimant made no particular oral submissions on this
case in opening.
But the Swiss Federal Tribunal held that because
the host state had announced its intention to adapt the
feed-in tariff before expressly abandoning the measure,
following lobbying from foreign investors and banks, the
investors could have reasonably expected that their
[Page 47]
investment would not be subject to a similar measure; in
that case, something like the solar levy.
Now, the Swiss Federal Tribunal thereby implicitly
confirmed that the dispute between the investors and the
host state encompassed not only the adaptation of the
feed-in tariff, the measure in that case that was
originally envisaged, but also similar measures that the
host state could implement to achieve the same outcome.
(Slides 23-34) Now, the Claimant then cited Alverley
and Ipek, and these are in fact cases that assist the
Respondent. I'll come to those in a moment. But before
doing so, I also note that the Claimant failed to
mention other decisions cited by the Respondent in its
written submissions, like the award in Cascade v Turkey
(RLA-98). I've raised this case already. But the
tribunal there provided a persuasive analysis, which it
described as being consistent with the approach in
Philip Morris Asia, of what must be foreseeable for the
purposes of an abuse of process objection.
I took you to paragraphs 350 and 351 in opening on
Monday morning; I don't need to read them to you again.
But we submit that this is the correct approach in
cases such as the present, particularly the express
recognition by the Cascade tribunal that the state might
adopt measure X, rather than measure Y, against
[Page 48]
a background of a deteriorating relationship between the
investor and the host state; and the investor who seeks
to bring a claim in respect of measure X, rather than
measure Y, is no less guilty of an abuse.
(Slide 25) This is also the way that the awards in
Alverley, RLA-71, and Ipek, RLA-99, should be correctly
understood.
The Alverley tribunal expressly recognised that
disputes may evolve over time, such that:
"... it is not necessary that every contour of the
dispute as it is eventually laid before an arbitral
tribunal has to be foreseeable."
This is paragraph 385. The tribunal said:
"[Instead] [i]t is the dispute, not the detailed
claim, which has to be foreseeable."
(Slide 26) And to turn to Ipek briefly, which is
RLA-99, the tribunal referred to the foreseeability of
a measure which may give rise to a treaty claim. That
tribunal recognised that:
"... a test based on foreseeability must of its
nature include instances in which the specific State
measure has not yet been taken, such that the precise
State powers or mechanisms to be used, and their effects
on the investment, are not necessarily known to the
investor."
[Page 49]
So it cannot be right that this award in any way
supports the proposition that it is necessary for the
specific measure to be foreseen.
Madam President, members of the Tribunal, those are
my submissions on foreseeability. With your permission,
I will now pass to Mr Jesse Clarke.
THE PRESIDENT: Thank you.
MR CLARKE: Madam President, members of the Tribunal, good
morning.
I wasn't sure whether the Tribunal intended to take
a break this morning. We are happy to proceed; we are
in your hands, as you wish. My role is to simply
provide you with a brief answer to the fifth question on
joint interpretation, which will take about
three minutes. I can return and do that, or break, as
you wish.
THE PRESIDENT: Should we listen to you and then have
a break? Does that make sense?
MR CLARKE: We're very happy to proceed that way,
Madam President.
(Slide 27) So as I mentioned, my task this morning
is to provide a brief answer to the fifth question posed
yesterday concerning a possible request for a joint
interpretation pursuant to Article 27(2) of Chapter 11
of AANZFTA.
[Page 50]
As the Tribunal observed in its question, when it
previously raised this matter in October 2023, neither
the Respondent nor the Claimant proposed to request
a joint interpretation at that time. And,
Madam President, members of the Tribunal, the position
of the Respondent on this issue has not changed. At
this advanced procedural stage of the arbitration,
Australia does not propose to request a joint
interpretation.
In the preliminary objections phase of this case,
there are, of course, questions of interpretation of
specific provisions of AANZFTA that the Tribunal will
need to resolve. The Respondent has full confidence in
the Tribunal completing this important task without
needing to request a joint interpretation.
The Tribunal now has the benefit of Australia's
written and oral submissions on the proper
interpretation of the provisions of AANZFTA relevant to
our preliminary objections on "no investor"/"no
investment" and denial of benefits.
It is the Respondent's position that the textual
basis in AANZFTA for our preliminary objections is clear
and conclusive, and that the Tribunal should itself
properly determine any questions of interpretation of
the provisions of AANZFTA by having recourse to the
[Page 51]
well-established rules and principles of treaty
interpretation.
Should the Tribunal nevertheless itself propose to
request a joint interpretation from the AANZFTA treaty
parties, the Respondent would respectfully ask the
Tribunal to consult the parties prior to issuing any
such request, particularly identifying the specific
provision or provisions of AANZFTA on which a joint
interpretation might be requested, and the proposed
terms of any request.
Thank you, Madam President, members of the Tribunal.
That concludes my answer to that question.
THE PRESIDENT: We thank you for this answer. And we trust,
of course, that you have paid careful attention to the
wording of Article 27(2), which is the reason why we
asked the question. Once more:
"The tribunal shall ... request a joint
interpretation of any provision of this Agreement that
is in issue in a dispute."
It's quite a broad scope. And it's mandatory
language: it says, "The tribunal shall".
I am just emphasising this because we will have to
assess what exactly our task is under the treaty and of
course take this into account, and we will necessarily
also take into account the disputing parties' views.
[Page 52]
MR CLARKE: Thank you, Madam President.
THE PRESIDENT: Thank you.
Should we take a break now? How much more time do
you think you will spend, now being started?
DR DONAGHUE: Madam President, contrary to my initial
assessment, I think we will take our two hours. But
that is now only, by my reckoning, about 35 minutes from
now. So if you would prefer us just to continue and
complete, then we're content to do that. But we're --
THE PRESIDENT: We can certainly continue. Let me look at
the court reporter. (Pause)
DR DONAGHUE: I wasn't seeking to press the Tribunal to take
that course. We're happy either way.
THE PRESIDENT: No, that's fine. Let's move on then.
DR DONAGHUE: Thank you.
Next then, Dr Hart.
DR HART: (Slide 28) Good morning, Madam President. I will
be responding briefly to the Claimant's opening
submissions on the burden of proof in this case.
There is no question that the Claimant bears the
burden of proving that the basic jurisdictional
requirements of Chapter 11 of AANZFTA are satisfied,
including that Zeph is an investor and that it owns or
controls an investment. If any authority were required,
it may be found in the Carlos Sastre v Mexico award of
[Page 53]
2022, RLA-29, paragraph 147.
(Slide 29) In any event, the Claimant has readily
accepted that it bears this burden, as shown on the
current slide.
But the Claimant has fallen well short of
discharging the burden of showing it made a contribution
or that it assumed a risk. Take two examples from
yesterday alone.
First, in relation to Zeph's argument that it has
contributed to Mineralogy through so-called "active
management", Dr Donaghue asked Mr Palmer why Zeph had
not asked Ms Emily Palmer, Mr Sheridan, Mr Wong and
Ms Singh to present evidence of their roles. Mr Palmer
responded:
"None of your people have approached them and asked
them would they be a witness, which you could have."
That's at the transcript of yesterday, page 241,
line 25. But the onus was not on Australia to adduce
this evidence.
Secondly, on the reinvesting dividends argument,
Mr Birkett conceded yesterday that he had no evidence
that Zeph had turned its mind to this issue at all; see
pages 284 to 286 of the draft transcript. Zeph has not
otherwise offered any evidence of decision-making
specifically by Zeph -- as opposed to Mr Palmer, as the
[Page 54]
controller of the Mineralogy Group -- on the question of
retained earnings. Given its burden of proving it has
made an investment, this lack of evidence is fatal to
its argument.
Australia accepts that it formally bears the burden
in relation to its denial of benefits and abuse of
process objections. But, given the Claimant's unique
access to facts and evidence relevant to these
objections, the appropriate approach to the burden of
proof is more nuanced than that.
(Slide 30) In relation to denial of benefits, this
was confirmed in AMTO v Ukraine, RLA-72, paragraph 65,
which undoubtedly the Tribunal is well familiar with.
That tribunal referred to the "negative inferences"
which a tribunal could draw against a claimant which
does not provide evidence of those matters; "those
matters" including its activities within its home
jurisdiction.
(Slide 31) In Bridgestone v Panama, being RLA-30,
the tribunal stated at paragraph 289 that the burden
would be readily shifted to a claimant on "matters that
fall essentially within [its] knowledge".
(Slide 32) That same approach applies in relation to
Australia's abuse of process objection. In the Alverley
v Romania case, RLA-71, the tribunal explained at
[Page 55]
paragraph 364 that where a respondent alleges an abuse
of process:
"... a claimant may not simply shield itself behind
the fact that the burden is on the respondent."
Evidence on matters such as "the motive for
a transfer of assets and the nature of the corporate
structure are possessed by the claimant", which
therefore "bear[s] the burden of adducing evidence to
explain its actions -- evidence to which it alone has
access".
(Slide 33) How have these principles played out in
this case? Madam President, allow me to show you
Procedural Order No. 4, and specifically the grounds on
which the Claimant resisted many of the Respondent's
requests for document production.
As part of its so-called "Over[arching] Objection",
the Claimant expressly recognised that on the rationales
for the restructure, it bore the burden of proof. In
this response, which is now on the screen, the Claimant
was telling the Tribunal that there was no need to order
it to produce documents: it, the Claimant, already had
every incentive to provide any documents it had because,
unsurprisingly, it was required to prove its own
commercial rationale.
(Slides 34-35) It made similar statements
[Page 56]
specifically in relation to Australia's request 3,
concerning the purpose of the corporate restructuring,
as well as requests 4 and 8, each concerning aspects of
the availability of financing for coal projects from
Singaporean banks.
Given those statements, it really is remarkable that
Zeph has been unable to provide a cogent explanation,
let alone one supported by evidence, for the
restructuring.
(Slide 36) It gave the same response to Australia's
request 14, which concerned due diligence reports and
business valuations by Zeph relating to the Kleenmatic
and the engineering companies. And yet, to this day,
Zeph has not been able to explain its involvement in
these companies, and has instead resorted to
increasingly outlandish explanations.
For example, yesterday Mr Palmer suggested for the
first time that the urgency of incorporating Zeph was
driven by the need to acquire the three failing
engineering companies, which he saw as "a good
opportunity", despite having no documented due
diligence. That's at page 35 of yesterday's transcript.
When Dr Donaghue asked him why he had never given
this evidence in his seven witness statements in these
proceedings, Mr Palmer answered:
[Page 57]
"Well, you've never asked me before."
That's page 36, line 12.
But on issues where Zeph is required to explain and
evidence its behaviour, there is no question of it
needing to be asked.
Zeph has attacked Australia's evidence on the ground
that its multiple expert witnesses, as well as
Mr Vickers, weren't there on the ground with Zeph, and
thus can't speak to the facts.
As the AMTO, Bridgestone and Alverley tribunals
recognised, of course a respondent state isn't witness
to the internal workings of a claimant company, so it
can't be expected to give the same evidence as the
company itself.
But what Australia has done in these proceedings is
ask reputable independent experts, with decades of
relevant experience, to take an objective look at the
behaviour of Mineralogy, Mr Palmer and Zeph, as well as
the contemporaneous documentary record -- such as it
is -- and see if they can make any sense of it at all,
in light of the rationales presented by the Claimant.
Uniformly, they could not.
If Zeph felt that Australia's witnesses weren't
qualified, it could have put on countervailing expert
evidence by individuals who it felt possessed the
[Page 58]
necessary credentials. It also could have
cross-examined Australia's experts. When it came to
Mr Vickers, it could have provided documents showing,
for example, that Zeph did have a real physical presence
in Singapore at its registered addresses. But it did
none of those things.
Instead, what we heard from Mr Palmer yesterday is
that he hadn't even read Australia's evidence. See the
draft transcript at page 37, line 5; page 38, line 21;
page 87, line 23; and page 161, line 5.
Madam President, I will now hand over to the
Solicitor-General, Dr Donaghue.
THE PRESIDENT: Thank you.
DR DONAGHUE: Thank you, Madam President, members of
the Tribunal.
(Slide 37) Can I start with question 2. The
Tribunal will recall that that question asks us again to
make some assumptions -- to assume the Tribunal views
the facts on the record as showing two streams of
events: one stream linked to the disagreement with the
CITIC parties and one stream relating to the
disagreement about the BSIOP proposal -- and, under this
assumption, asks about the connecting factors that may
exist between those two streams.
Can I start my answer to that question by referring
[Page 59]
back to the legal submissions that Professor Brown has
already made in the context of question 3, because the
legal framework obviously affects the factual connecting
factors that need to exist.
As Professor Brown explains, we contend that where
one has the same state actors, the same investment
company, the same investment contract -- as in the State
Agreement -- underlying the matter, the same personnel
at the heart of the dispute -- Premier McGowan on the
one hand, Mr Palmer on the other -- that they are all
relevant. So if the Tribunal accepts that legal
framework that Professor Brown has just developed, then
that broadens out the range of connective factors that
are relevant to the answer to question 2. We submit
that here you have overlap on all of those matters.
Of course, as Professor Brown also developed, in
point of time, you have -- the "BSIOP dispute", if I can
call it that, that goes right back to 2012, and that
continues until the Amendment Act. So it's
a long-running dispute; broader in point of time than
the CITIC proposal, relating in part to an issue under
the same State Agreement, in relation to an area of land
closely proximate to the BSIOP area of land, and
involving -- as I'll come to develop in just a moment --
at least some level of shared facilities with the
[Page 60]
Balmoral proposal. So there is some evidence that the
Tribunal hasn't yet seen that I'll take you to that
shows those levels of proximity.
But the overlap with people, the overlap with time
and the overlap in the general subject matter are all
important, in our submission, because where those
matters aren't present, it's not difficult to untangle
facts; but where they are, where the same people are
doing thing at the same time in relation to multiple
different matters, you have the problem that events in
the real world don't come with subheadings or with
labels. So when people are speaking, and in what
Mr Palmer called a "war" yesterday, between himself and
Western Australia, there aren't clear demarcation lines,
necessarily, as to who might get damaged in particular
salvos, if I can continue that analogy.
So here we submit -- and I know the Tribunal has
this point, so I won't waste too much of our time
repeating it. But you will recall I took Mr Palmer
yesterday -- and I won't take the Tribunal back to it
now -- to Exhibit R-90, which was a document from
Mineralogy on 6 August 2018 submitting the notice of
arbitration that instituted what led to the second
McHugh award. So that was Mineralogy stating in terms
with Western Australia, "We are in dispute with you as
[Page 61]
to our entitlement to damages under the BSIOP proposal".
Obviously, because that's the second award, it takes
its place in what was already a very long-term decline
of relationships between Mineralogy and Western
Australia. But it does mean that only a few months
before the restructure took place, Mineralogy had
instituted a formal arbitral proceeding about damages
under Balmoral with respect to Balmoral South, and that
dispute was there at the same time as the CITIC dispute,
which was the immediate subject matter for Premier
McGowan to announce in the Western Australian Parliament
that, with the support of the opposition, they were
looking at unilaterally amending the State Agreement.
And notwithstanding Mr Palmer's repeated references
yesterday to an academic paper provided by a former
Premier of Western Australia in the mid-1990s, we had
proximate statements by the current Premier, with the
support of the current opposition leader, that expressly
threatened unilateral amendment of the State Agreement.
Now, Mr Palmer says it was inconceivable that that
would ever happen. But in our submission, it was very
conceivable that it would happen, because it was being
announced as a prospect with bipartisan support in the
Western Australian Parliament.
Once that's on the table as something that the
[Page 62]
Western Australian Parliament might be prepared to do,
in my submission it's necessarily on the table in
relation to any problems under the State Agreement,
including the very long-running problems relating to the
BSIOP. That may not have been the trigger for the
immediate announcement, but once that tool is on the
table, in our submission, it's not hard to see that the
tool might be deployed in relation to any of the
dimensions of the ongoing disagreements between
Western Australia and Mineralogy.
In strong support of that submission is the fact
that this is exactly how Mr Palmer himself understood
it. You will recall that I took Mr Palmer to a letter
that he signed on 15 October 2019 (R-145), four days
after the second McHugh award was granted. It was
a letter evidently copied from the 4 February letter,
Exhibit R-141, which was the first threatened
investor-state proceeding on behalf of Mineralogy.
The text is almost identical, except for the first
paragraph. And it expressly says, "Zeph is concerned
that the State not act in a way that will undermine our
right to damages pursuant to the second McHugh award".
Now, the critical thing about that letter -- that's
a very important letter, in our submission, because it
shows, a long time before the Amendment Act, Mr Palmer
[Page 63]
foreseeing unilateral action against Mineralogy with
respect to Balmoral South. But he didn't foresee that
because Premier McGowan made another threat, made
a threat in relation to Balmoral. Nothing happened in
October to precipitate that letter except the making of
the award. The threat that Mr Palmer was responding to
in drafting that letter about Balmoral and the McHugh
award was the November threat that had been made
originally by Premier McGowan. There was no further
or ...
So it wasn't so much that Mr Palmer was seeing CITIC
as in a silo from Balmoral. Premier McGowan makes
a threat about unilateral amendments, and Mr Palmer sees
that threat as extending to his victory in the second
McHugh award in a way that warrants the shot across the
bow represented by the letter one sees at R-145.
Can I just ask the operator to bring up Mr Palmer's
answers about this. I think it is G/2/41 (Day 2),
page 147 of the transcript, or actually starting on
page 146 at line 8. So I put to Mr Palmer:
"... that's ... the same language as appears in the
4 February letter[?]"
We're discussing Exhibit R-145. And he says:
"And it was written for the same reasons."
So he's saying he was writing about Balmoral for the
[Page 64]
same reasons as he'd written on 4 February in making the
first threat that Zeph would bring investor-state
proceedings.
Then over the page at 147:
"Question: What it shows is that in October 2019,
you were contemplating the possibility that there might
be a legislative interference with the awards made by
Michael McHugh?
"Answer: I was contemplating that the Premier had
said in Parliament that he planned to do this --
interfere with the agreement -- back in 2018 ..."
And I said:
"... just [to] clarify: 'to do this' [you mean] to
unilaterally amend the State Agreement?"
Mr Palmer said:
"To repeal unilaterally the State Agreement [that's
what I meant]."
So he viewed the threat as extending across the
board to issues between Mineralogy and WA, and the
letter at [R-]145 supports that.
So in terms of connective tissue between the
two disputes, we submit that because Mr Palmer and
Premier McGowan were, to use Mr Palmer's words, "butting
heads", they were at war over all of these issues, a new
dimension having been introduced into their
[Page 65]
relationship, which was, "If you don't play ball, we
will legislate unilaterally to take away your rights",
that can't just be put in the box of CITIC; it was
broader.
That's all by way of material the Tribunal had
already seen; can I just alert you to a few other
documents you may not have.
Can we first bring up R-113, which is E2/113/10.
This is the mine continuation proposal that CITIC had
submitted in December 2017. So this is the revised
version. It was initially submitted in 2016; a revised
version in 2017.
If the operator could then bring up -- so it's
E2/113/10, I hope. You can see near the bottom of that
page, the last paragraph:
"Mineralogy ..."
So this is CITIC writing this:
"Mineralogy raised a concern with respect to the
interaction between this Proposal ..."
The mine continuation proposal:
"... and the proposed Balmoral South Iron Ore
Project ... particularly in relation to the proposed
location of the Port stockyard layout at Cape Preston."
That's the shipping facility that Mr Palmer referred
to a number of times, where you ship the ore out of the
[Page 66]
area.
"To address Mineralogy's concerns, Sino Iron and
Korean Steel have modified the proposed configuration of
[the] stockyard ..."
So CITIC is saying, "Well, we've addressed the
problem". But Mineralogy continued not to agree to
approve this proposal, so evidently it was not satisfied
that CITIC had successfully addressed its difficulty.
In this same document, if we bring up E2/113/[32],
you can see a map. I'm not sure that the Tribunal has
seen one of these maps before, and it's entirely our
fault. Late in the piece, we thought the Tribunal might
be assisted by the maps, which was what the controversy
was about in the few days before the hearing about the
provision of further materials.
But if the Tribunal looks at the map, you'll see the
land area at the top that looks perhaps a bit like
a nose or a bill: that's Cape Preston. And the facility
at the top, you can see an overlap there involving
green, which are approved proposals, and blue, which is
the mine continuation proposals.
So there was an overlap. Part of the mine
continuation proposal are the big blue areas you see
below, which are mainly in relation to tailings
facilities and matters of that kind, but there was work
[Page 67]
being done with respect to the port; or there were
proposals extended to things that CITIC wanted to do,
rather, with respect to the port.
Now, I emphasise that because if one then goes to
the next document, which is C-196 --
THE PRESIDENT: Just to make sure that we get the reference
right, this is R-113, page 33; is that what it is?
DR DONAGHUE: I think 32, but --
THE PRESIDENT: But it's R-113?
DR DONAGHUE: R-113, that is correct.
THE PRESIDENT: Thank you.
DR DONAGHUE: If we could next bring up C-196. I think it
is E1/196/1085.
Now, this document -- I think I've actually probably
taken you well into the text. But the front page of
this document shows that it is the Balmoral South Iron
Ore Project proposal for the Western Australian
Government, dated August 2012. So this is the original
Balmoral South proposal.
And if we go back to the page I specified, which was
1085, you can see 1.[10], "Common land use":
"This section has been prepared in accordance with
Clause 6(2) ... of the [State Agreement]. It describes
areas of common use land and facilities required for the
BSIOP.
[Page 68]
The SIP ..."
Which is defined at the top of the page, Sino Iron
Project:
"... will be entering into production within the
next 6 to 12 months."
This is back in 2012.
"Under commercial agreements with Mineralogy that
govern the development, operation and use of shared
infrastructure facilities for the transport and export
of iron ore products, the SIP and BSIOP will share
existing common infrastructure, with BSIOP extending
those facilities as required."
And there's a description.
So BSIOP was going to share with Sino Iron. The
mine continuation proposal was making developments in
relation to the port, including with respect to shared
facilities or infrastructure, and Mineralogy and CITIC
were in dispute about that.
You can see, to make good that last point, the last
document I'm going to take you to, which is CLA-70,
which is F1/70/1. This is one of many domestic court
judgments given in respect of litigation involving some
combination of Mineralogy, CITIC, the State of Western
Australia. You can see it's a monstrous judgment: it's
900 pages long.
[Page 69]
On the first page, you can see a list, in the second
half of the page, of the parties. Sino Iron,
Korean Steel and CITIC are suing: (1) Mineralogy;
(2) Mr Palmer; and (3) the State of Western Australia.
So while it is true that this was litigation between
CITIC and Mineralogy, it is not true that Western
Australia were out of the picture. They were a party to
this litigation and they were represented by senior
counsel, KC, or SC in Western Australia. So they were
there as a participant in the litigation.
I obviously can't -- and the Tribunal doesn't need
to -- go to all of the detail of this. But the judge,
Justice Kenneth Martin, had to deal with a lot of the
alleged problems between Mineralogy and CITIC in respect
of the mine continuation proposal.
If the operator could take us forward to page 85, so
F1/70/85. Sorry, if we go to the previous page first,
you can see that the judge is describing "Key functional
components of the 2017 [mine continuation proposal]";
that's the first document I showed you.
Then if we could go back over to paragraph (d), you
will see:
"... an increase in the capacity for existing stock
piles and associated infrastructure at the Sino Iron
Terminal Facility situated within Mineralogy's ..."
[Page 70]
That's one of Mineralogy's tenements.
"This aspect of the MCPs also carries acquisition of
extra tenure ramifications, manifested in the context of
Mineralogy's long-standing and openly communicated plan
to [expand the] multi-user export facility at
Cape Preston. The extra areas at the Cape Preston Port
proposed to be used for greater volumes of stockpiling
of concentrate prior to ... movement and loading for sea
export, presents as one of the most controversial tenure
areas in dispute in the Primary Trial ..."
So all I'm seeking to illustrate from this is that
one can't easily slice the world up into neat pie slices
with CITIC and Balmoral. Parts of the dispute between
CITIC and Mineralogy related to facilities that were
intended to be common to both, and that was part of the
issue that underlay those disputes.
And CITIC, having been unable to secure the support
of Mineralogy -- or Mineralogy needed to make the
proposal for the mine continuation under the State
Agreement; that was how it worked. And it was
Mineralogy's refusal to put forward that proposal, as
sought by CITIC, that led CITIC to seek to involve
Western Australia, and that led Premier McGowan to make
the announcement in November that said, "If you don't
support this, we're going to look at unilateral action".
[Page 71]
So that, we submit, is another illustration of
connective tissue, which supports the primary argument
I made and the propositions that I put based on R-145.
That's all I propose to say in answer to question 2.
Can I use our last ten minutes to make some pretty brief
overarching observations about some of the key
evidentiary issues as they relate to point in contest
between the parties.
The first is -- and these points all really go to
a combination of the denial of benefits objection and
the abuse objection. I will rely on what Mr Wordsworth
already said about "no investor"/"no investment" and the
evidence that fell from Mr Palmer about that.
The first point is that while the evidence has
journeyed broadly across various explanations for the
restructure and various explanations for the urgency of
the restructure, it happily landed on a clear statement
from Mr Palmer that he agreed that Zeph was incorporated
in a situation of urgency in January 2019. He said that
at G/2/13 (Day 2), which is page 34 of the transcript,
and it was quite unequivocal.
So Zeph was incorporated urgently in January 2019.
Why? Well, as I say, we've had a lot of reasons in the
seven witness statements from Mr Palmer; or not in all
of them, but I think in four of them. The reasons for
[Page 72]
the urgency that we were given yesterday were wholly
new.
The business opportunity provided by the engineering
companies, that's again page 34 of the transcript, and
the need urgently to purchase industrial property in
an industrial estate in Christchurch in New Zealand as
to MIL: in our submission, both of those, that shifted
position was inherently implausible.
As to the engineering companies, not only had he
never said it before -- and when asked about that,
the evidence was, "Well, I'm just not used to being
accountable to anyone", he said at [pages] 41 to 42 --
but as the Tribunal has seen, Professor Lys analysed the
financial state of those companies in detail: they were
going broke, if they weren't broke already. At the time
term that they were acquired, no due diligence appears
to have been conducted.
The idea that it was necessary to change the planned
timeline for a restructure of the group to acquire those
failing companies is not one that the Tribunal should
accept. While Mr Palmer says it was a good opportunity,
it evidently wasn't: he lost 91% of the investment. And
there was no reason to think that anything different was
going to happen, given Professor Lys's analysis, which
really hasn't been challenged.
[Page 73]
As to the absence of due diligence, Mr Palmer said,
"Well, SGD 3.5 million is trivial to me". But then
almost in the next breath, he says, "But I acquired
an $11 million property in New Zealand because it gave
me great financial comfort to have some assets offshore
in a different jurisdiction". Not only is that a very
difficult answer to accept on its face, given the value
of Mineralogy in the hundreds of millions of dollars,
and not only was it not an explanation he's ever given
before, but there's an evident tension between saying,
on the one hand, "I wouldn't even blink if I lose
3.5 million", and then saying, "I get significant
comfort from 11 million", in the next breath.
Now, what Mr Palmer had said in his witness
statement, in his first witness statement at
paragraph 131, is that when the Chinese Government
lodged an appeal from the royalties judgment, he
concluded that the appropriate and prudent course was to
wait for the judgment, because that judgment was worth
at least hundreds of millions, and I think he said in
answer to me yesterday actually billions of dollars to
Mineralogy.
Having made a decision that you shouldn't
restructure until you know the outcome of such a very
substantial revenue stream, the proposition that you
[Page 74]
change your plans to acquire failing engineering
companies or an industrial property in New Zealand is
ridiculous.
The Tribunal should, in our submission, accept that
the urgency that Mr Palmer now agrees attended the
incorporation of Zeph is only able to be explained by
the fact that there was an imminent threat, as he saw
it, of unilateral amendment of the State Agreement to
Mineralogy's disadvantage; that the attempt to acquire
treaty protection against that threat in New Zealand had
failed because of the side agreement between Australia
and New Zealand, and so he needed a Singaporean company.
That's why the urgent restructure happened, and none of
the other attempts to explain it have survived scrutiny.
Very briefly, as to the two main suggested
rationales for the restructure, there are, we submit,
multiple reasons why the coal financing rationale should
not be accepted by the Tribunal.
First, there was clearly no need to have a company
based in Singapore to raise finance in Singapore. So
even if Mr Palmer did want to raise finance for
Waratah Coal in Singapore, he could have done it without
incorporating Zeph, and there was no proper reason to
think otherwise. All you've really been given as
an explanation for the corporate vehicle is Mr Palmer's
[Page 75]
unassisted recall of a 16-year-old conversation, said to
have occurred in Singapore in 2008, with lawyers who
were there to talk about an IPO. It's not a strong
foundation for saying he needed to incorporate
a Singaporean company.
So he didn't need a Singaporean company. There are
no contemporaneous documents to suggest that the
reasoning had anything to do with coal finance. The
coal finance rationale does not explain the urgency at
all, because Waratah Coal was years away from being
ready to be funded, as Mr Rogers explains in some detail
in his reports.
Fourth, as Mr Rogers also explains, publicly
available lending policies of the banks, on the one
hand, with respect to new thermal coal projects, and the
amount of debt that was sought to be raised -- which
Mr Palmer says was 8 billion, in circumstances where
less than 300 million had been loaned globally across,
I think, the last 20 years -- both of those
considerations cause Mr Rogers to explain that even
a cursory examination of the issue would have made it
plain that there was no prospect of raising debt finance
for Waratah Coal.
What have you got against that? Almost nothing.
You've got a press report in The Straits Times,
[Page 76]
which refers to the same database that Mr Rogers looks
at. But when Mr Rogers interrogates the Straits Times
article, mostly it was about coal power stations;
it wasn't about coal mines at all.
You've got reliance on the Coal-Fired Power Bill,
which I put to Mr Palmer, which just had nothing to do
with the funding of new coal mines at all. So he gave
you, as one of the three main reasons for restructuring
his corporate group to Singapore, a bill which he said
he studied, and which evidently, on its face, is about
Commonwealth Government funding for power stations, not
about private funding for coal mines. So that
justification which Mr Palmer relied upon as the main
reason for restructuring just doesn't hold water.
The other main reason was personal tax finance,
which, as Mr Palmer accepted, was really just a plan
that caused him to need to cease being an Australian tax
resident and to break his ties with Australia. As to
that, we say again it clearly doesn't explain the
urgency of the restructure.
Actually, Mr Palmer was frank in his acceptance of
that. So on page 86 of yesterday's transcript -- I'm
afraid I haven't got the Opus reference -- I put to him:
"It follows from [his] description of [the tax plan
that he] had in mind that ... there was no urgency about
[Page 77]
the restructure to achieve that, because you could
control when dividends were paid?"
And he said:
"Exactly ... on that point, there was no urgency to
do it."
So it's accepted it doesn't explain the urgency
because he could control the dividends. He accepts that
he didn't even raise the plan with his wife until two
and a half years later, at which point it was
immediately vetoed.
And there was evidence that Mr Palmer wasn't able to
contradict from both Professor Cooper and Associate
Professor Phua that to get the tax advantage, you didn't
need a Singaporean company.
Mr Palmer said as to that, "I needed to become
a resident of Singapore". But there is no basis to
think, and no evidence, that to satisfy the residency
requirements, even if you needed to put some money into
the economy, that the only way to do that was to
restructure the whole group through Singapore.
Obviously Mr Palmer had money available that he could
have used to meet an asset test or activities test of
some kind, if that were necessary. And he didn't even
seek advice about what he needed to do until 2004.
So, given that it doesn't explain the urgency and
[Page 78]
you didn't need a corporate restructure, in our
submission, that rationale fails as well.
So you have ultimately, at the end of the day,
an accepted urgent restructure, unexplained by the
reasons that Mr Palmer has given you, but explained
completely by the only contemporaneous documents that we
have on this point: the letters that were sent on
18 January and 4 February. And even though he has no
contemporaneous documents, Mr Palmer says as to them,
"They are bluff and bluster and I didn't mean what
I said".
In our submission, the Tribunal should find that he
did mean what he said: that these companies were
incorporated for the purpose that they state. And what
that means is that insofar as the Tribunal's questions
to us said, "Assume the Tribunal finds, in effect, the
abuse of purpose", that assumption should be found to be
made good. So, factually, the premise is established;
and then we get to the legal issues that my colleagues
have addressed the Tribunal on.
I think I've hit the mark exactly, I hope. So thank
you for your attention. Those are our submissions.
THE PRESIDENT: Very exactly, according to my watch.
Absolutely. So we thank you for your presentations.
Do my colleagues have questions for counsel at this
[Page 79]
stage?
(12.33 pm)
Questions from TRIBUNAL
MR KIRTLEY: My only question would be where you draw
the line in terms of when a restructuring can take
place. When do you draw the line? I think it is
accepted by Australia that a restructuring can take
place in order to take advantage of treaty protection.
But at what point does that become abusive?
PROFESSOR BROWN: Thank you for the question, Mr Kirtley.
I think it would be simply through application of
the tests that have been developed through tribunals,
such as the Philip Morris Asia tribunal. If there's
an existing dispute, obviously, at the time of the
restructure, that's something that would be abusive.
And where there's a foreseeable dispute, and the purpose
of the restructure is in order to gain treaty
protection, then through that test of foreseeability, as
I developed in my submissions earlier today, that would
also be abusive; including in that sort of situation
where there are potentially two disagreements, or
a second disagreement can be developed.
That would be the orthodox application of the
principles that have been developed by tribunals.
MR KIRTLEY: Okay, thank you.
[Page 80]
THE PRESIDENT: Fine. If there's nothing further for now,
we can take the lunch break.
I said yesterday that we would take an hour and 15.
If that is still fine with the Claimant, then we could
resume at 2.00. Is this fine?
DR KIRK: Yes, thank you.
THE PRESIDENT: Good. Have a good lunch, everyone.
(12.35 pm)
(Adjourned until 2.00 pm)
(2.01 pm)
THE PRESIDENT: I think we are ready to resume.
Mr Palmer, you have joined us now. Good afternoon.
MR PALMER: Thank you.
THE PRESIDENT: So --
MR PALMER: We can begin?
THE PRESIDENT: Absolutely.
Closing statement on behalf of Claimant
MR PALMER: Thank you, Madam President, for the opportunity
to answer some very important questions that the
Tribunal has identified.
I propose to proceed today by first dealing with
each question by number and providing the Claimant's
answers. I will then summarise important points that
need to be considered in respect of the Respondent's
objections; in particular, a recap on the evidence with
[Page 81]
respect to the denial of benefits questions, and the
context and purpose of the restructuring which took
place in January 2019.
Subsequently, I will be assisted by Dr Anna Kirk in
dealing with Respondent's objections: firstly, on
"investor"/"investment"; secondly, on the foreseeability
issues and the abuse of process.
The Claimant will then conclude with summary
comments, prior to closing for the day.
Question 1:
"So the first question is about the timing for the
Tribunal to assess the requirements for denial of
benefits. We understand the parties' positions: the
Claimant says 13 August 2020; the Respondent says not
later than 14 October 2020, but agrees [has agreed in
the past] to 13 August 2020.
The Tribunal is tasked with applying a treaty
provision, and therefore we think we have to make our
own assessment of what the correct date is; obviously
considering the parties' submissions, but still.
There are four dates, in our understanding, that
could come into play. One is, of course,
13 August 2020: that's the amendment of the Amendment
Act. The second one is 14 October 2020, which is the
request for consultation under the treaty. The third
[Page 82]
one is 22 December, when the Respondent announces it is
considering denying benefits; that's Exhibit C-153. And
the fourth and last one is 14 June 2021, which is
Exhibit C-155, which is the actual date of the denial of
benefits letter.
So we would be assisted if you could comment on
these dates and say which one[] may be relevant ..."
That was the question that --
THE PRESIDENT: Can I just interrupt you for a logistical
point.
Is the public webcast on? Because it's not on the
screen on which I usually watch it. That's fine.
I just want to know whether it is running.
MR WILLIAMS: Yes, it is.
THE PRESIDENT: Fine. Good. Apologies.
MR PALMER: As the Tribunal has rightly noted, the Claimant
has identified 13 August 2020 as the date on which it is
appropriate to consider the tests under the denial of
benefits issue, and the Respondent then alighted on that
submission and focused on that date. The Claimant has,
however, sought to emphasise that whatever date one
adopts, the Respondent's objection should be dismissed.
Without prejudice to that position, and turning to
the Tribunal's question and recognising that what
matters here is that the Tribunal reaches the correct
[Page 83]
decision by reference to the treaty, it is right to
approach matters as follows.
Article 11 is necessarily the starting point. It
provides, in (1)(a) and (b), that a party may deny the
benefits to an investor that "has no substantive
business operations in the territory of [the other]
Party".
The use of the present tense, "has", might, on one
view, be suggested to refer to the date on which a state
announces it is considering denying benefits, or even on
the date of the actual denial of benefits. However,
that would be emphatically wrong. Any denial of
benefits provision ought to operate at the earliest
possible date. This is essentially the position that
the parties had previously adopted and is the position
that the Claimant adopts.
It's right to proceed on that basis for three
reasons. The first matter is one of procedural
fairness: the evidence has been adduced on that basis
and I was cross-examined on that basis. The second,
which I will build on briefly below, is that the
earliest date is the most fair and reasonable approach
to construction of treaty provisions. The third, and
aligned with the second, is that the construction is the
most faithful to the text, object and purpose of the
[Page 84]
provision and its operation in practice.
I make that submission for the following reason.
It makes sense to take the earliest date of the four
provided by the Tribunal because the extent to which
an investor falls within a denial of benefits clause
should be tested by reference [to] the events at the
date of the state's wrongful act. Any later date risks
the test which the investor might never be in a position
to meet, given the conduct of the state.
For example, if it faced a full expropriation which
denudes an investor of the ability to conduct any form
of business, a test which adopts a later date will risk
imposing on an investor a hurdle that would be
impossible to overcome, because it would never have
a business at the relevant date which is capable of
complying with a denial of benefits clause, regardless
of the propriety of its conduct.
That is the point made by the tribunal in Big Sky,
which is Exhibit RLA-85, albeit obiter, at 276, and
without any real discussion of the jurisprudence
concerning the various possible points in time at which
the test could be assessed. It says:
"For this purpose, it does not logically follow that
the only relevant date for examining such activities
would be the date of a request for arbitration. It is
[Page 85]
quite a common characteristic of investment treaty
arbitrations that by the time a request for arbitration
is filed, a claimant-investor is fairly or completely
inactive aside from the arbitration itself, in large
part because of the negative business effects it
attributes to a host State. Because of this, if the
only relevant date was the start of an arbitration,
then, in theory, a respondent State could assure itself
of protection under the denial of benefits clause as
long as it took such significant action against
a claimant-investor as to completely rid it of any
current business activities (e.g. a complete and total
expropriation). This simply cannot be the proper
analysis under such a clause, which is why tribunals
have analyzed business activities more broadly with
respect to the relevant date."
That approach provides a predictable framework for
the test. And it's consistent with the analysis that
the relevant dispute, for the purposes of the abuse of
process test, i.e. if one looks at the specific dispute
which has arisen and considers whether it was
foreseeable at the date of incorporation of the relevant
entity, then one uses the date on which the dispute
crystallised for the purpose of the denial of benefits
test. It's a sensible, predictable and fair basis on
[Page 86]
which to approach the test.
It is also a fair approach bearing in mind that the
state bears the burden of proving that the requirements
of a denial of benefits clause have been met; a point
which ought to be emphasised in this instance, given
that the Respondent has failed to adduce direct factual
evidence in support of its position that there was no
substantive business being conducted at the material
time. Instead, it relies upon third parties, whether
experts or investigators, none of whom are in a position
to comment on the actual business being carried on as
direct witnesses.
For good order, a similar point well may be made
about the 14 October 2020 date; from the State's
perspective, being the date of the request for the
consultations and being a date under the control of the
Claimant. That again militates in favour of the
earliest date.
For the avoidance of doubt, and without prejudice to
the matters set out above, the Claimant's case remains
strong regardless of the date on which the substantive
business activities fall to be assessed.
It bought the engineering companies in early 2019.
It entered into the cleaning business joint venture in
January 2020. While the engineering businesses had
[Page 87]
declined, they still traded and existed on all the dates
mentioned by the Tribunal. The cleaning joint venture
was a sizeable, profitable business as at January 2020,
and remains so today. In fact, it has increased its
profitability. Accordingly, there is no material
difference in the Claimant's business operations on any
of the dates proposed by the Tribunal.
I will now refer to question 2.
Firstly, I understood Mr Wordsworth raised
a question of the connection between the CITIC project
and the litigation between Sino Iron and Mineralogy in
the Supreme Court of Western Australia. I'll just make
a few comments on that.
The first is that both the State and myself and
Mineralogy were defendants in that [case], and
Sino Iron, Korean [Steel] and CITIC were the plaintiffs.
So it wasn't a dispute between the State of Western
Australia and myself.
And secondly, I'd point out here that the State of
Western Australia sought no relief, and was not granted
any relief, even though we won the judgment; that the
plaintiff's action was dismissed; and that the State
really was just there as an observer.
It's appalling that this matter has not been
accurately stated by the Respondent.
[Page 88]
I will now proceed to answer, on behalf of the
Claimant, question 2.
In responding to this question, it is the Claimant's
respectful position that there are no connecting factors
between the CITIC disagreement and the BSIOP
disagreement. Instead, it's important that the Tribunal
approaches them as two discrete matters.
The Claimant refers the Tribunal in the first
instance to its written submissions, and in particular
the section of the Rejoinder starting at paragraph 289,
in which the disputes are analysed one by one.
The best way to deal with this is to start with the
CITIC dispute. There has perhaps been relatively little
discussion of this, and so hopefully this summary will
help the Tribunal, as it's crucial to be 100% about
this, given Australia's attempt to obfuscate and allege
that these issues are connected when they are simply
not.
Between 2006 and 2007, Mineralogy sold two of its
subsidiaries, Korean Steel Proprietary Limited and
Sino Iron Proprietary Limited, to subsidiaries of CITIC
Limited, a Hong Kong-based corporate entity listed on
the Hong Kong Stock Exchange, at that time
majority-owned by the People's Republic of China.
On 21 March 2006, Mineralogy entered into two
[Page 89]
written contracts with Sino Iron and one with
Korean Steel. These contracts were described as mining
right and site lease agreements. I'll call them
"MRSLAs" for convenience.
In 2008, CITIC guaranteed the obligations of
Korean Steel and Sino Iron under the MRSLAS. However,
from 2013 onwards, following the refusal of the Western
Australian Government to approve more projects, which
was the subject of the domestic arbitration, the
relationship between Mineralogy and the CITIC parties
deteriorated. The parties became embroiled in a series
of commercial disputes. Two of these protracted
litigation battles bear mention, in contrast to the
dispute before the Tribunal.
In 2013, Mineralogy initiated proceedings against
the CITIC parties in relation to substantial royalties
under the MRSLA which had not been paid. The dispute
turned upon the correct interpretation of the formula
for the calculation of the royalties under the MRSLA.
Mineralogy's position was vindicated in a judgment
delivered by the Western Australian Supreme Court on
24 November 2017, which awarded Mineralogy nearly
US$150 million in unpaid royalties for the period ended
31 December 2013 to 31 March 2017. And on
9 December 2016, the CITIC parties provided Mineralogy
[Page 90]
with a draft mine continuation proposal for the
expansion of the Sino Iron and Korean Steel projects.
In December 2017, the CITIC parties submitted a new
draft proposal to Mineralogy and sought their approval
for additional tenements of land without the payment of
any money. Under the State Agreement, Mineralogy, as
a co-proponent of any projects being developed on our
property, must approve that proposal and the grant of
additional land. However, the CITIC companies refused
to negotiate or pay for any additional land that they
wanted, and did not offer Mineralogy any payment in
return for a substantial additional tenure sought by
them.
It was in October 2018 that the CITIC parties
commenced legal proceedings in the Supreme Court of
Western Australia seeking injunctive relief to compel
Mineralogy: (1) to grant them additional tenure under
the MRSLA for no consideration; and [2] to submit the
MCPs as co-proponent under the State Agreement. No
tenure was sought, or could be sought, under the
State Agreement.
This litigation was totally unsuccessful for the
CITIC parties in 2023, when the Supreme Court of Western
Australia held that there was no implied or expressed
contractual obligation which required Mineralogy to
[Page 91]
grant tenure to the CITIC parties under the MRSLA, and
no obligation on Mineralogy to submit the MCPs under the
State Agreement.
Just pausing there, the CITIC claims were purely
commercial disputes between two commercial parties being
litigated in the courts. In both cases, the subject
matter of the litigation was the interpretation of
rights and obligations under contracts between those
parties.
Western Australia was not a party to the dispute,
had no involvement in the contractual aspect of the
dispute. No relief was sought against the State in the
CITIC disagreement. The CITIC parties did not seek
orders compelling the State to force Mineralogy to
submit proposals. It was joined in the proceedings for
form only, to be kept informed; and joined as
a defendant, not as a plaintiff. CITIC's claims
concerned proposals yet to be submitted, rather than
having already been considered under the
State Agreement.
Despite a measure of political rhetoric, which
turned out to be entirely empty rhetoric, consistent
with the Claimant's case on foreseeability and my
evidence in cross-examination yesterday,
Western Australia did not take any steps to legislate in
[Page 92]
relation to this dispute.
In terms of the BSIOP matter, Mineralogy and
International Minerals initiated the BSIOP arbitration
by notice of dispute dated 7 November 2012. The
arbitration was commenced under clause 42 of the
State Agreement. The subject of the dispute was that
the Minister for State Development refused to consider
the BSIOP proposal for the development of a project
under the State Agreement.
On 19 March 2013, retired Australian High Court
judge Michael McHugh AC KC was appointed as the
arbitrator by order of the Chief Justice of Western
Australia, Wayne Martin.
By an award dated 20 May 2014, the first BSIOP
award, Mr McHugh held that the BSIOP proposal was
a proposal for the purposes of the State Agreement.
Mr McHugh further held that Western Australia had
breached the State Agreement when the Premier of Western
Australia, as the Minister of State Development, failed
to give a decision on the BSIOP proposal within the time
required by clause 7(2) of the State Agreement.
Mineralogy wished to claim damages from Western
Australia consequent upon Western Australia's breach of
the State Agreement, as found in the first award.
Turning to events in 2018 and 2019. It's crucial
[Page 93]
that the Tribunal considers this chronology carefully
because when one looks objectively at what was going on
and the steps being taken by Western Australia in the
arbitration, it beggars belief that we are even
discussing foreseeability of a dispute concerning the
Amendment Act.
In August 2018, Mineralogy commenced a second
arbitration to arbitrate their claim for damages.
Western Australia considered that the right to recover
those damages was heard and determined under the first
award, and that the legal effect of the first award was
that Mineralogy was foreclosed from pursuing those
damages.
Ultimately, it was agreed that this dispute should
be referred to Mr McHugh for determination. On
20 December 2018, Mr McHugh accepted his appointment as
arbitrator.
The second BSIOP arbitration progressed throughout
2019. By an award dated 11 October 2019, the second
award, Mr McHugh determined that Mineralogy's right to
recover damages had not been heard in the first
arbitration and had not been determined in the first
award. Accordingly, Mineralogy was not foreclosed from
pursuing damages arising from any breach of the
State Agreement.
[Page 94]
That was the date, 11 October 2019, that Mineralogy
even knew that it would be able to pursue a claim for
damages, and that was a date which is some nine to
ten months after the restructuring that we've been
talking about in this arbitration. So up to that time,
the Claimant didn't even know they had a claim.
On 31 October 2019 -- as I said, please make note of
that date -- Western Australia challenged the second
BSIOP award in the Supreme Court of Western Australia
under an appeal and review regime of the Commercial
Arbitration Act of 1985.
The appeal challenging the second award failed. In
a judgment delivered on 28 February 2020,
Kenneth J Martin dismissed the State's appeal.
Since Western Australia's challenge to the second
BSIOP award had failed, Mineralogy was entitled to
pursue its damages claim. It remained for the parties
to progress to a third phase of arbitration to determine
those damages.
On 26 June 2020, Western Australia and Mineralogy
participated in a directions conference before
Mr McHugh. Mr McHugh issued procedural directions for
a three-week damages hearing, which was to begin on
30 November 2020.
Following the directions hearing, the parties took
[Page 95]
the following actions in furtherance of this third
arbitration, which we have referred to in this
arbitration as the "State Agreement arbitration", or the
"BSIOP arbitration", I think, from the Respondent.
The arbitrator raised the question with the parties
that before he would proceed with the arbitration,
he required that the parties enter into an arbitration
agreement. On 8 July 2020, Mineralogy and
Western Australia, and Mr McHugh as arbitrator, signed
an agreement for the arbitration of damages claims,
which has been referred to by the Claimant as
"the arbitration agreement" in this arbitration.
On 5 August 2020, Mineralogy and Western Australia
and the Honourable Wayne Martin AC KC, the former
Chief Justice of the Supreme Court of Western Australia,
executed an agreement for mediation to be held on a date
before 31 October 2020.
Western Australia received service of Mineralogy's
claims and statements of evidence for the arbitration.
However, Western Australia itself failed to comply with
the obligation to file and serve its own documents.
On 11 August 2020 at 5.00 pm, the Western Australian
Attorney-General, John Quigley, introduced the
Amendment Act into the Western Australian legislature.
On 13 August 2020, the Western Australian Parliament
[Page 96]
enacted the Amend[ment] Act. The following day, Western
Australia State Solicitor's Office wrote to Mr McHugh to
inform him that the third arbitration had been
terminated by the Amendment Act.
Now, again pausing, I've already dealt with some
defining features of the CITIC contractual claims. But
it's also important to emphasise the features of the
BSIOP matter which make it wholly separate from the
CITIC claims.
None of the CITIC parties were involved, for
a start. It was being pursued in arbitration with
Western Australia, a state entity. The BSIOP matter
involved a breach by the State of Western Australia, not
Mineralogy. The timing was different. And the various
ad hoc arbitration agreements being entered into were
between Mineralogy and the State of Western Australia.
The relief sought was in no sense connected, whether as
a matter of fact, common sense or law.
The CITIC matter proceeded to be determined in
Mineralogy's favour in the Supreme Court of Western
Australia, which is Exhibit CLA-70.
Australia has sought to conflate the disputes by
adopting a crude analysis of certain underlying facts,
such as the land sought by CITIC and the land which was
subject to the BSIOP proposal. It's like saying in
[Page 97]
Paris: any dispute in Paris is joined, because it's
happening in Paris. There might be 4,000, 5,000
disputes at a time in Paris, but they're not all linked
just because they're in Paris. They're all about
different matters, different issues, different parties,
different reliefs, different time periods. Certainly
the location is not a basis to link a dispute.
Australia has sought to conflate the disputes by
adopting a crude analysis, as I said, of the underlying
facts. But that is preposterous. The disputes were
legally and factually distinct. One matter was
a contractual dispute with a counterparty and one was
a dispute with the government; [which] Mr McHugh
recognis[ed], on the basis of evidence from the State,
in the second award, when he observed that the
litigation between Mineralogy and the CITIC parties had
no direct connection with the BSIOP arbitrations between
Western Australia and the Australian [companies].
This is at the second award by Mr McHugh, which is
Exhibit C-443, and you'll find that at paragraph 100,
which relevantly stated -- and I'll put it up for you
now -- oh, we haven't got it. So I'll just have to read
it. It's only short:
"None of the proceedings had any direct connection
with any of the Arbitrations between the present
[Page 98]
parties."
That's a finding by a former High Court judge of
the Australian High Court, an eminent jurist with
an international reputation.
I'm going to turn to the Tribunal's third question
next, about foreseeability. But before I do, I want to
make an important point, while we all have the facts and
the chronology of the BSIOP matter in our minds.
If one starts with the events of August 2020, the
time of the Amendment Act -- let us not forget that
the Respondent accepts that those events were not
foreseeable -- and we work backwards, one can see that
there is nothing in the fact pattern which renders the
events more foreseeable at any point in time. Put
another way, if the events were not foreseeable the day,
the week, the month before the Act was promulgated, then
they cannot be foreseeable at a more distant point in
time.
Just highlighting a few points.
In 2018, [Western] Australia took part in the second
arbitration, agreeing to appoint a sole arbitrator.
There was no suggestion at that time that they were not
acting in good faith in doing so. That proceeded in
2019: again, absolutely no suggestion that Western
Australia was not acting in good faith in taking part in
[Page 99]
the arbitration from my perspective, and I note it's not
said that they were acting in bad faith at that time.
If that is right, the Amendment Act dispute simply
cannot be objectively or subjectively foreseeable.
It seemed to be suggested in cross-examination
yesterday that there was a point of a foreseeable
dispute at some point in 2019 and 2020. But that is
a wholly improper question in light of the Respondent's
concession that the Amend[ment] Act was not foreseeable,
and it is one which I firmly reject.
Western Australia took steps in court in late 2019
and early 2020, and in mid-2020 took part in hearings
before the sole arbitrator. Again, no question of them
acting duplicitously or in bad faith in doing so.
I relied on them taking part in those proceedings, and
it was not put to me yesterday that I somehow thought at
the time that they were acting in bad faith or preparing
to unravel the agreement. Indeed, it would have been
an abuse of those proceedings for the State not to have
conducted themselves as they did -- in good faith.
They signed the documents as part of those
proceedings, the arbitration agreement and the mediation
agreement, just seven days before the Amendment Act;
namely, agreements to arbitrate and to mediate with
senior Australian judges. Again, no question of
[Page 100]
a dispute being on the horizon; no hint that these
people were plotting secretly against us and misleading
us dishonestly.
So no question of any form of foreseeable dispute in
2018 or 2020 re the BSIOP matter; far from it. I've
already explained the position in relation to the CITIC
matter both as a matter which was unrelated to the BSIOP
proceedings and one that did not give rise to a dispute
or a foreseeable dispute.
Finally, it's up to Respondent to allege and prove
facts, and to establish the foreseeability of dispute,
but they have not called any witnesses on this issue.
They have instead admitted that the Amendment Act was
not foreseeable. They have not called politicians to
substantiate their stance or explain their position.
That alone dictates that the foreseeability arm to the
Respondent's abuse objection should be rejected very
firmly by this Tribunal.
I will now deal with question 3. Before turning to
a detailed response to this very important question,
there are two points to draw to the fore at the outset.
Firstly, it bears emphasis that when considering
foreseeability in this particular context, a mere
possibility that a dispute might occur will not be
sufficient, because it is a perfectly legitimate act of
[Page 101]
corporate planning to restructure an investment to
obtain treaty protection against a general risk of
future disputes with a host state.
I refer the Tribunal to the following cases in
support of that proposition: Clorox v Venezuela, which
is Exhibit RLA-142, at [paragraph] 5.6; Tidewater
v Venezuela, which is Exhibit RLA-93, at
[paragraph] 184; Levy v Peru, which is Exhibit CLA-188,
at [paragraph] 184; and Philip Morris v Australia, which
is Exhibit RLA-95, at [paragraph] 540.
Secondly, the first limb of the question posed
suggests that if a party has a disagreement in mind,
it's foreseeable. But we need to be careful about that,
as of course the test is objective, leaving aside for
the purposes any debate arising out of the use of the
word "disagreement".
Turning to the specific question, the invocation of
treaty protection in the circumstances outlined above is
not abusive. The general principle is that it's
a perfectly legitimate act of corporate planning to
restructure an investment to obtain treaty protection
against the general risk of future disputes with a host
state. The authorities for that proposition were
referred to earlier, namely: Clorox, Tidewater, Levy
v Peru, Philip Morris.
[Page 102]
Let me be absolutely clear: it is not an abuse of
right to invoke treaty protection in respect of
an unforeseeable dispute because the Claimant was
restructured to gain treaty protection in light of
a separate foreseeable dispute.
The dividing-line between a legitimate restructure
and abuse of process occurs when the relevant party can
see the actual dispute or can foresee a specific future
dispute as a very high probability, not merely as
a possibility. This is supported in Pac Rim, which is
RLA-33, at [paragraph] 2.99; and in Philip Morris,
Exhibit RLA-95, at [paragraph] 547.
[In] the example provided by the Tribunal, the
foreseeable dispute falls on the abusive side of the
dividing line. The second unforeseeable dispute falls
on the other side: the restructuring was not carried out
in light of that dispute, and it is therefore not
an abuse to invoke treaty protection for that
unforeseeable dispute.
Starting with Clorox v Venezuela, Exhibit CLA-182,
the Swiss Federal Tribunal observed that because "abuse
of rights is an exceptional remedy, the criterion of
foreseeability of the dispute must be assessed
restrictively", at paragraph 5.2.3.
The arbitral tribunal in that case addressed
[Page 103]
concepts of object foreseeability at a level of
probability directly as follows. I would like to go to
this in its entirety (CLA-239). It's on the screen. At
[paragraph] 447:
"The object of foreseeability must be a specific
dispute. As the Tribunal in the case of Tidewater
v Venezuela stated, it is perfectly legitimate for
an investor to seek the protection of a treaty to
protect itself from the general risk of litigation with
a host State. In order to offer this protection to
their investors, States sign investment protection
treaties with arbitration clauses."
At 448, it is the foreseeability of a specific
dispute that must be assessed, and the parties agree
that:
"... 'a foreseeable dispute is more than a possible
dispute: the simple possibility that a dispute may arise
between an investor and a State of another nationality
is not enough to constitute an abuse of process.
Foreseeability must refer to a specific type of dispute,
namely, not to any dispute in general, but to a specific
type of dispute that, eventually, proves to be the one
challenged by the restructured investor."
I think that's important. It's a specific dispute,
and it's got to be the one that was eventually
[Page 104]
challenged by the restructured investor.
So the question for this arbitration is: was the
Amendment Act dispute foreseeable? Because that's the
dispute that's being challenged in this arbitration, and
all the claims that have been made by the Claimant
emanate from breaches incurred by the Amendment Act of
the treaty.
In 450 --
THE PRESIDENT: Before you go there, can I just ask --
can we just go to the slide before -- do you see
a difference, or is there none, between saying
"a specific dispute" and "a specific type of dispute"?
MR PALMER: I don't think there's a difference. I think
it's semantic --
THE PRESIDENT: It's just semantics?
MR PALMER: No, no, there's a difference with "a specific
type of dispute". It's general, it's not specific.
It's a play on words. A specific type: what type?
The word "specific" really means it's a dispute.
I think the safe way of looking at it is: it's the
dispute that's before the Tribunal that's being assessed
in the arbitration. That's a "specific dispute",
I think.
And I think in Clorox, later in my reading --
I can't give you the quote here -- but it basically
[Page 105]
indicated that the claims emanating from the measure, if
we want to call it a "measure", or the "breach" or
whatever, is what we have to look at. And that is the
specific claims that are before the Tribunal, nothing
else.
THE PRESIDENT: Thank you.
MR PALMER: At 450:
"... it is important to identify the first
measure ..."
This is what we are talking about:
"... or practice constituting the alleged breach of
the Treaty ..."
So if we look at 450:
"... it is important to identify the first measure
or practice constituting the alleged breach of the
Treaty ..."
And in our case, the first measure or practice
constituting the alleged breach of the treaty are the
claims we make under this arbitration, that being the
Amendment Act.
"... and to determine whether its adoption or
implementation was foreseeable at the critical date."
That decision underscores the need to approach this
with real intellectual rigour and discipline. It is
a test which must be grounded squarely and exclusively
[Page 106]
on the one and sole dispute which is said to have given
rise to the investment arbitration in question.
It cannot be relied on by a state as an amorphous,
catch-all argument. Leading different alleged disputes
to adopt that approach would be to ride roughshod over
rational for proper abuse of process objections and the
need to apply a high, restrictive threshold to such
objections. The specific dispute must be considered by
reference to the claim advanced. Therefore, [if] it was
the case that a party incorporates an entity for
a historic foreseeable dispute, but one that never
materialises, then a later dispute which was not
foreseeable should not fall outside the scope of
protection afforded to an investor.
Consistent with that submission, and by way of
example, I refer to Ipek v Turkey, Exhibit RLA-99. The
tribunal emphasised that the object of foreseeability
must be a specific dispute which is to be determined by
reference to the essence of the Claimant's claim; see
paragraph 320 and paragraph 325.
As a matter of law, a distinction is to be drawn
between the restructuring of an investment at a time
when the investor seeks to protect itself from the
general risk of future disputes with the host state,
which is a legitimate goal, and no abuse of investment
[Page 107]
treaty protection, and where a specific dispute was
foreseeable, namely when there is a reasonable prospect
that a measure which may give rise to a treaty claim
will materialise.
In the context of this case, the Tribunal proceeds
on the basis of what must be reasonably foreseeable --
that is foreseeable to a reasonable person in the
position of the investor -- [which] is the risk that
the Republic will expropriate all or part of its
business, which is the essence of the Claimant's claim
in these proceedings.
The above analysis is borne out by the approach in
Mobil v Venezuela, Exhibit RLA-92, a case I am aware
Madam President is familiar with. It concerned
a corporate restructure, designed to gain treaty
protection, at a time where there were existing disputes
with the host state.
The Dutch claimant, Mobil BV, was inserted into the
ownership chain of the Venezuelan investments,
Mobil Venezuela, in 2006. At the time of the
restructuring, it was acknowledged that there were
disputes between the parties concerning enactment of
higher royalty and income taxes; see paragraphs 19 and
202. It was also accepted that the sole purpose of the
restructuring was to obtain treaty protection; see
[Page 108]
paragraphs 190 and 204.
In January 2007, Venezuela announced measures to
nationalise certain oil projects, including those of
Mobil Venezuela. By June 2007, Mobil's investment had
been fully expropriated. Mobil BV brought a claim under
the Netherlands-Venezuela BIT in respect of the
expropriation of its investment. Venezuela argued that
the claim constituted an abuse of right because the
restructuring was effected at a time when this dispute
was foreseeable.
The Mobil tribunal was careful to distinguish
between different disputes in its assessment of
foreseeability. In respect of the pre-existing tax and
royalty disputes, for which the claimant did not invoke
the protection of the treaty, it was clear that the
tribunal did not have jurisdiction.
However, the existence of those pre-existing
disputes did not disqualify the tribunal's jurisdiction
in respect of the Nationalisation Law, which was enacted
after the restructuring. It is implicit that the
tribunal's reasoning that the adverse tax and royalty
measures which Venezuela had already impressed upon
Mobil were not sufficient to put it on notice that
Venezuela might foreseeably take further adverse
measures against its interest.
[Page 109]
Similarly, the tribunal in Tidewater v Venezuela,
which is Exhibit RLA-93, found that one of the two
purposes for restructuring of the claimant was to
protect Tidewater from the risk of expropriation [by]
incorporation of an investment vehicle in a state having
investment treaty arrangements with Venezuela. See
paragraph 183, which says that a restructure was carried
out in light of pre-existing, and therefore foreseeable,
disputes with Venezuela's national oil company, which
predated the incorporation of Tidewater Barbados in 2009
and the transfer to it of Tidewater's Venezuelan
business, in paragraph 184.
However, as in Mobil, the fact that the
restructuring was carried out in light of an existing
foreseeable dispute did not deprive the claimant of the
right to invoke the treaty for future disputes which
were unforeseeable at the time of the restructuring.
Accordingly, the tribunal held that it was not an abuse
for Tidewater to bring a claim under the treaty in
respect of an unforeseeable expropriation law passed by
Venezuela after the date of restructuring; see
paragraphs 196 and 197.
In terms of the language in the question, it is the
Claimant's position that anything less than specific
dispute does not engage the abusive provisions, if that
[Page 110]
is what is meant by the final part of the question. The
Claimant considers it's right to adopt the language used
in the authorities.
I will now deal with the fourth question that
the Tribunal sought the Claimant's answers on.
The Claimant's position on this question is quite
simple and straightforward: respectfully, no, it does
not matter. There can be no question of motive for
establishment of operations in Singapore somehow
undercutting an otherwise good response to a denial of
benefits objection.
The point has not been taken by the Respondent and
it cannot now be taken. The purpose of denial of
benefits clauses is to limit the use of corporate
restructuring as a means of treaty-shopping. Denial
clauses operate to exclude investors which are simply
an intermediary for interests substantially foreign by
permitting a respondent state to deny benefits of
a treaty to an entity that does not have an economic
connection to a state or on whose nationality it relies.
By incorporating a denial of benefits clause in
a treaty, the parties have patently turned their minds
to the issue of treaty-shopping and to the criteria
necessary to establish the requisite economic
connection. Here, in the AANZFTA, the [state parties]
[Page 111]
chose substantive business operations as the criteria
which would permit companies owned by a national of the
host state of the investment to benefit from the
protections offered by AANZFTA to nationals of their
claimed home state.
The treaty sets out the prerequisites for such
coverage. It cannot be an abuse to fulfil the express
criteria on which states have agreed. Otherwise, for
example, for a treaty which only required simple
incorporation to be an investor, incorporation with
motivation of treaty coverage would be an abuse. That
cannot be correct.
Moreover, there are further sound reasons for the
Claimant's stance, and I will summarise these now.
The denial of benefits provision operates by
reference to the treaty wording. It's not another form
of abuse. Denial of benefits does not import the more
general concepts of good faith which one finds in the
abuse objection.
Denial of benefits provisions operate on
a case-by-case basis under the relevant treaty, whereas
abuse of process imports general principles as a form of
customary international law, which floats above the
express provisions of a treaty.
The threshold to establish substantive or, where
[Page 112]
applicable, substantial business operations is not
especially high, consistent with the fact that tribunals
aren't looking at motive; instead they are focused on
the facts. See, for example, GCG v Colombia (RLA-180)
at [paragraph] 141.
Put another way, if a tribunal accepts that the
claimant has overcome the abuse objection, it would be
perverse to dismiss the claim on the basis of a denial
of benefits in circumstances where the claimant has met
the test by the express wording of the treaty.
In fact, contrary to Mr Wordsworth's submissions
this morning, the Claimant would go further and say: not
only would any such finding be perverse, whether by
purported reference to broad good faith obligations or
the arbitration agreement, it is not open to this
Tribunal, as a matter of law on the issues before the
Tribunal, to widen the ambit of the denial of benefits
objection.
The Claimant would also note that if some form of
value judgment is being exercised by the Tribunal on
a broader-brush basis -- which is, of course, not the
correct approach on this issue -- the Tribunal should
respectfully reflect on Respondent's conduct in relation
to the Amendment Act and treat them as vindicating any
form of protective step which it is alleged the Claimant
[Page 113]
has taken.
THE PRESIDENT: Can I just ask you a question in this
respect.
MR PALMER: Certainly.
THE PRESIDENT: You say that denial of benefit does not
inform the general concept of good faith, if I have
understood you correctly, unlike abuse of process.
You recognise that when we interpret a treaty
provision under the Vienna Convention, we have to do
this in good faith. Does that not play into this
somehow? Or what would you say?
MR PALMER: I'd say two things, I guess.
The Tribunal has seen a lot of submissions about
estoppel and about acquiescence, about all of these
types of issues, and generally tribunals don't want to
go near it. They prefer to look at the treaty itself,
the black-and-white treaty, because they recognise that
the parties making the treaty are the preeminent people
from [whom] we've got to seek our guidance. And we all
recognise that all treaties are different. But we're
dealing with a particular treaty, where people have come
together and set up a particular test that's been
prescribed, and they've done that for a reason.
So a general provision in the Vienna Convention like
that I don't think can override the actual agreement
[Page 114]
between the parties to the treaty, who have thought
about this question, who have decided what they want to
do. They could have put all sorts of tests -- which
you're very familiar with from other treaties -- there,
but they chose a specific test.
So I would say the job of the Tribunal is to
determine whether that test has been met or it hasn't
been met, and nothing any further than that.
And certainly in the case of the Respondent --
I mean, I don't want to bore the Tribunal with how
we would say their behaviour has not been one which
would justify any sort of consideration of things like
the rules of equity, even in an English court system.
The Amend[ment] Act is, by its very nature, something
which is just beyond description, beyond being
perceived, I think.
THE PRESIDENT: I see that this is your submission. But of
course here we are not dealing with the Amendment Act
itself; that's an issue for the merits.
MR PALMER: Sure.
THE PRESIDENT: Here we are dealing with jurisdiction and
preliminary objections.
MR PALMER: Certainly. Certainly. But I --
THE PRESIDENT: So we need to stick to those, I suppose.
MR PALMER: I think so. But I think we need to stick to the
[Page 115]
treaty: the treaty that's before us, the treaty that's
there in black and white, the treaty that the parties to
the treaty have thought about and decided to put
a specific test on. And certainly I don't see how that
can be overridden.
That's my personal view on it, and the Claimant's,
I suppose.
THE PRESIDENT: Thank you.
MR PALMER: Is that alright? Does that answer --
THE PRESIDENT: That answers my question, yes.
MR PALMER: Where did I finish?
The Claimant would also like to note that if some
form of value judgment is being exercised by a tribunal
on a broad-brush basis, which of course is not
correct ... I think I've gone through that section.
I now deal with the question that you asked,
question 5. And the Claimant's position is that on this
issue, it remains as its previous stance, reserving its
right to change its position at any later point in time
during this arbitration.
THE PRESIDENT: When you say -- I'm not sure -- have you
concluded your answer on question 5, or ...?
MR PALMER: At question 5, we're dealing with Article 27(2),
and we're saying that our position remains unchanged at
this point in time.
[Page 116]
THE PRESIDENT: But you make a reservation for later stages.
Are you meaning that refers to if this arbitration
proceeds to the merits?
MR PALMER: Exactly, yes.
THE PRESIDENT: Not during this preliminary stage?
MR PALMER: Not during this preliminary stage.
THE PRESIDENT: Fine.
MR PALMER: But if it does proceeds to the merits, there
will be different issues; it may be appropriate to
invoke 27(2). It's hypothetical at this stage, I think.
THE PRESIDENT: Yes, thank you.
MR PALMER: As promised in my opening, in response to the
President's enquiry and invitation about the Claimant's
position in respect of the matter of "investor" and
"investment", the Claimant now responds to the
Tribunal's invitation.
The Claimant must confirm to the Tribunal that the
Respondent has wrongly and untruthfully stated the
Claimant's position with respect to the Respondent's
"investor"/"investment" objection. The Claimant has
done nothing of the sort, but merely reiterated and
clarified alternative arguments in its Rejoinder, as set
out in paragraphs 130 [to] 172 of the Claimant's
Rejoinder, which are consistent with the primary
position of the Respondent, which is set out in
[Page 117]
paragraphs 252 to 347 of the Claimant's Response.
After I explain two of the Claimant's alternative
arguments, Dr Anna Kirk will further assist the Tribunal
in understanding the Claimant's primary position.
I will first go to two alternative arguments that
the Claimant wishes to make, based on the AANZFTA treaty
itself. We have a slide there, I think. (Pause)
The Respondent's first admission that we've referred
to earlier is at paragraph 64 of its Reply, that:
"... Australia does not dispute that the share swap
was both lawful and effective in transferring ownership
of the shares in Mineralogy to Zeph."
AANZFTA, in Chapter 11, Article 2(c), states,
inter alia, that:
"... investment means every kind of asset owned or
controlled by an investor, including but not limited to
the following: ..."
And it lists "shares".
In the circumstances, it's curious, to say the
least, for the Respondent to dispute that the Claimant
has made an investment. The Respondent has conceded
that the Claimant became the owner of the shares
following the lawful and effective share swap. The
admission that the share swap was legal and effective in
transferring ownership of the shares in Mineralogy to
[Page 118]
the Claimant is necessarily an admission of ownership by
the Claimant of the asset, namely the Mineralogy shares.
This is therefore an admission by the Respondent of the
existence of the Claimant's investment within the
meaning of Chapter 11, Article 2(c) of AANZFTA.
Current evidence already filed with the Response and
the Rejoinder makes it clear that the Claimant is
an investor of Australia, has made investments in
accordance with the requirements of AANZFTA, Chapter 11.
Article 2(d) states, when dealing with an "investor
of a Party", it means:
"... a natural person of a Party or a juridical
person of a Party that seeks to make, is making, or has
made an investment in the territory of another
Party ..."
Importantly, the relevant footnote 4 -- which is on
the third line of the slide, I think -- provides
certainty, and states as follows:
"For greater certainty, the Parties understand that
an investor that 'seeks to make' an investment refers to
an investor of another Party that has taken active steps
to make an investment. Where a notification or approval
process is required for making an investment,
an investor that 'seeks to make' an investment refers to
an investor of another Party that has initiated such
[Page 119]
notification or approval process."
The Claimant participated in the share swap on
29 January 2019, as set out in Exhibit C-562, and
formally advised the Respondent's ASIC, by
Exhibit C-484, of the share swap on 8 February 2019.
The Claimant, immediately following the share swap,
started preparing its application pursuant to
Section 601CD of the Corporations Act 2001, which is
Exhibit [CLA-]161. Section 601CD states as follows:
"(1) A foreign company must not carry on business in
the jurisdiction unless:
(a) it is registered under this Division; or
(b) it has applied to be so registered and the
application has not been dealt with."
"Carrying on business in Australia" is defined in
Section 21 of the Corporations Act as follows:
"(1) A body corporate that has a place of business
in Australia, or in a State or Territory, carries on
business in Australia, or in that State or Territory, as
the case may be.
(2) A reference to a body corporate carrying on
business ... includes a reference the body:
(b) administering, managing, or otherwise dealing
with, property situated in Australia, or in the State or
Territory, as the case may be, as an agent, legal
[Page 120]
personal representative or trustee ... or otherwise."
Importantly, also in Exhibit CLA-161 is
Section 601CE of the Corporations Act, which sets out
what matters must be addressed in an application for
registration, which states as follows -- I think they're
listed on the slide in front of you:
"Subject to this Part, where a foreign company
lodges an application for registration under this
Division that is in the prescribed form and is
accompanied by:
(a) a certified copy of a current certificate of its
incorporation or registration ...
(b) a certified copy of its constitution ...
(c) a list of its directors containing personal
details of those directors that are equivalent to the
personal details of directors referred to in [another
section of the Corporations Act] 205B(3) ...
(d) if that list includes directors who are:
(i) resident in Australia ...
(ii) members of a local board of directors;
A memorandum that is duly executed by or on behalf
of the foreign company and states the powers of those
directors ...
(f) notice of the address of:
(i) if it has in its place of origin a registered
[Page 121]
office ...
(ii) otherwise -- its principal place of
business ...
(g) notice of the address of its registered office
under section 601CT ..."
It goes on to say, as you can see, that ASIC, if
that material is provided, must grant it permission.
THE PRESIDENT: Can I ask you: if I understand you
correctly, you refer to this Act in relation to
footnote 4, 2(d).
MR PALMER: That's correct.
THE PRESIDENT: That's right.
MR PALMER: I've got one --
THE PRESIDENT: I must say -- and I will be interested in
what you say about it -- to me, footnote 4 deals with
the status of an investor pre-investment, when the
investment is not yet made but the investor has only
taken steps, and what steps are sufficient or what steps
are not sufficient to qualify as an investor.
Now, Zeph had made the investment, had made the
share swap --
MR PALMER: Can I just respond to that, before we go too far
in the argument?
THE PRESIDENT: Yes, please.
MR PALMER: I mean, during the opening for the Respondent,
[Page 122]
they said that the fact that the ownership transfer was
legally effective did not necessarily mean that it had
made an investment under the treaty. That's what they
said. That was their --
THE PRESIDENT: Why did they say that?
MR PALMER: I don't know. I don't know.
THE PRESIDENT: I put it to you that the Respondent said so
because they consider that the share swap was not
a contribution because it contributed no value to the
investment.
MR PALMER: Okay. So let's just assume for the argument
that they're correct, right? In that circumstance, it
hasn't made an investment but it's seeking to make one,
in this two-step process.
THE PRESIDENT: That's why you're addressing this?
MR PALMER: That's correct.
THE PRESIDENT: Okay, thank you. That's clear.
MR PALMER: The Claimant completed its application for
registration and notification with ASIC, as set out in
Exhibit C-97, on 8 March 2019. So because of the volume
of material since its acquisition, it lodged that on
8 March. And the Claimant was registered as a foreign
company in Australia, which is required by the ASIC Act,
as set out in Exhibit C-482, on 29 March 2019.
The Claimant submits that by the above matters,
[Page 123]
it is a certainty that it is an "investor of a Party" as
provided by Article 2(d), in accordance with the
certainty given by footnote 4: that it initiated its
notification and approval process required by
Section 601CE of the Corporations Act to allow it to be
a foreign company operating in Australia.
So just summarising there, we are saying: on one
hand, it has ownership, it's required to have ownership,
it's a section of the treaty that says if it's got
ownership, it's an investment. On the other hand, we
say it is an investor because it has pursued seeking
an investment to the stage where it has made its
notification, and footnote 4 and the treaty itself deems
it to be an investor.
So it has complied with "investment", it has
complied with "investor". That's my submission.
THE PRESIDENT: I understand. And what is your answer to
the objections that are made in respect of the verb
"make" in 2(d)?
MR PALMER: So if we go back and look at the
construction ...
DR KIRK: Perhaps I can help, because that's exactly what
I'll address now.
MR PALMER: Yes, so what we're doing is I'll now ask
Dr Kirk.
[Page 124]
THE PRESIDENT: If you have organised yourself differently,
I don't want to interfere.
MR PALMER: Okay.
THE PRESIDENT: I just thought that --
MR PALMER: Dr Kirk was going to address that point.
THE PRESIDENT: Fine. Then address it when you have planned
to do so.
MR PALMER: I will now ask Dr Kirk to address the Tribunal
on behalf of the Claimant to further deal with matters
set out as the Claimant's primary position, because
I was dealing first with two alternative positions.
Okay, thank you. Dr Kirk.
THE PRESIDENT: Thank you.
DR KIRK: Thank you very much.
So I will briefly address the Tribunal on the
Claimant's position on the investment and investor
objections: in particular, whether an active
contribution is required for an investor to have made
an investment. The Claimant's position on these issues
is set out in the response at paragraphs 271 to 364 and
the Rejoinder at paragraphs 147 to 157.
As the tribunal in RENERGY v Spain (CLA-179)
observed, the majority of the investment cases support
the conclusion that an active contribution from the new
owner is not required. It's there on the slide. The
[Page 125]
tribunal says at [paragraph] 571:
"In a larger number of cases, tribunals have
rejected the suggestion that the current owner of assets
must have made an active contribution to qualify as
an investor. In several cases tribunals have held that
the acquisition of the assets was sufficient."
In other words, the majority of tribunals have
rejected the submission now made to you by the
Respondent.
To this end, the Tribunal should not accept at face
value the Respondent's table at slides 42 and 43 of
their opening slides. Please read the cases carefully.
Of course, we know you will.
In reality, the position on active contribution by
an investor is markedly different on a proper analysis
of the cases, and I will seek to draw out some of the
key points now.
In Addiko Bank v Montenegro (RLA-52), a case that
the Respondent says supports its position that an active
contribution by an investor is required to make
an investment, the tribunal interpreted the same treaty
wording that is at issue here. The case involved
a transfer of shares for no consideration. The tribunal
did not find that the requirement to make an investment
necessitated any active contribution. The tribunal said
[Page 126]
at paragraph 352, and that's up there on the screen:
"The Tribunal is of the view that the ordinary
meaning of the verb 'making' includes an act of
acquiring an investment which can be defined as gaining
possession or control of, or getting or obtaining
something. The emphasis is not on the exchange of
monetary value for title or possession, but on the act
of obtaining title or possession. Thus, 'making'
an investment includes instances in which title or
possession is obtained over an asset that qualifies as
an investment."
It is submitted that this is the sensible and
natural meaning of the phrase "make an investment", and
is the meaning that should be adopted here. It is not
a case of "making a meal", to pick up on Mr Wordsworth's
language. To "invest" does not require in and of itself
further active steps, unlike perhaps making a meal, not
least because there are a number of forms that
an investment can take. And you picked up on this this
morning, Madam President. They include active or
passive or otherwise.
Now, in emphasising this point, this most certainly
is not a change by the Claimant in its position. The
Claimant has always said that ownership of the
investment is key. Provided that the Claimant has
[Page 127]
obtained ownership of the shares, and in this case by
a share swap, it has made an investment in accordance
with the plain meaning of the treaty.
A similar finding was made by the tribunal in
AMF Aircraftleasing v Czech Republic (RLA-49), another
case that the Respondent suggests supports its position.
The tribunal in that case said that the treaty provides
that investors must be authorised to make an investment.
The ordinary meaning of these terms indeed indicates
that the investor has to act and effectively engage in
the action of making an investment. In other words, all
that is required is that the claimant acted to make
an investment; in the present case, by engaging in the
share swap.
The position in Addiko was adopted in the recent
case of Sea Search-Armada v Colombia (CLA-242). Again,
the treaty at issue contains substantially the same
definition of "investor" as the AANZFTA. In that case,
the rights at issue were assigned to the investor by
a related company. There is no indication in the award
that any consideration whatsoever was paid for the
assignment of the rights.
The tribunal upheld the investment. It said that
there was no requirement for an active or personal
contribution from the claimant, as the original
[Page 128]
investment satisfied any requirement for a contribution.
The tribunal relied on the Addiko case and on
Kim v Uzbekistan in rejecting any requirement for
an active or personal investment by the investor.
As I have mentioned, in both Addiko and
Sea Search-Armada, no consideration at all was paid for
the assets acquired. These cases involved a straight
transfer of assets. This was also the case in Levy
v Peru (CLA-188, paragraph 148), where the tribunal
said:
"It is clear that the Claimant acquired her rights
and shares free of charge. However, this does not mean
that the persons from whom she acquired these shares and
rights did not previously make very considerable
investments of which ownership was transmitted to the
Claimant by perfectly legitimate legal instruments."
In all of these cases, if any requirement for
contribution exists, it is satisfied by the original
investment or contribution. There is no requirement for
any active additional contribution from the person
acquiring the investment.
Additional cases which confirm this position are set
out in the Response at [paragraphs] 322 through to 329.
These cases are all consistent with the position taken
by the Swiss Federal Tribunal in Clorox v Venezuela.
[Page 129]
And this is the first Swiss Federal Tribunal decision on
this (RLA-144), rather than the one we have been looking
at on abuse of right.
In this decision, the Federal Tribunal overturned
the arbitral decision, finding that the verb -- in that
case "invested" or "to invest" -- required an active
contribution. In that case, the shares in the
investment had been transferred to the claimant without
any payment or consideration. The arbitral tribunal
found that there had been no transfer of value, and
therefore that no investment had been made.
The Swiss Federal Tribunal in Clorox rejected the
very arguments now being made by the Respondent, and
said at paragraph 3.4.2.7 that the term "invested" did
not require an active investment be made by the investor
in exchange for the assets. The holding of assets was
sufficient to show that the Claimant had invested in
those assets.
The Swiss court went on to say that the arbitral
tribunal was wrong to impose additional conditions on
the investor, being the condition of active contribution
that was not expressly stated in the words of the
treaty.
The Swiss Federal Tribunal also confirmed that
an arbitral tribunal was not permitted to deny
[Page 130]
jurisdiction on the basis that the original investment
was carried out by another entity and then transferred
to the claimant through a corporate restructuring.
There are many other cases in the Claimant's
Response and Rejoinder that come to a similar
conclusion, and the Claimant continues to rely on all of
these.
In its Reply, the Respondent relies on Montauk
Metals v Colombia (RLA-147), which is a June 2024
decision, to support its position. The tribunal in
Montauk only briefly considered the meaning of "make
an investment", and while it did say that an active
contribution was required, the tribunal expressly relied
on the original arbitral decision in Clorox in coming to
that conclusion. That is the award that was annulled by
the Swiss Federal Tribunal for being incorrect. And it
appears that the tribunal in Montauk was not aware that
the Clorox decision had been annulled: it simply doesn't
refer to it.
THE PRESIDENT: Can I just ask you a question.
When you speak of "an active investment", as opposed
to just "an investment", do you mean an investment that
is made with a payment? What does the "active" mean?
Do I have to actively manage the corporation? What is
the "active" about?
[Page 131]
DR KIRK: I am simply reflecting the Respondent's
submission. They are the ones who are saying that "made
an investment" means an active contribution.
THE PRESIDENT: But what the Respondent says is: to have
an investment, you must make contribution, meaning you
have to provide something of value. And I hope I am not
distorting the Respondent's submission.
But my question is: what has to be active? What
does this "active" stand for? The cases often say
"active", but have people really thought about what
needs to be active? For what does it stand? I'm not
sure all the cases use "active" with the same
connotation.
DR KIRK: They may not. In my submission, "active" -- or at
least, from the Claimant's side, all that is required as
far as an active contribution is concerned is engaging
in the act of obtaining the title to the investment.
And I will come to that --
THE PRESIDENT: That's why you spoke of the participation?
DR KIRK: Exactly.
THE PRESIDENT: Yes, good. Thank you.
DR KIRK: And I will speak a little more about
restructurings in a minute, which may fill that out.
THE PRESIDENT: You have answered my question.
DR KIRK: The Respondent also relies in its written
[Page 132]
submissions on Standard Chartered v Tanzania, one of the
cases that most clearly imposes a requirement for
an active investment, whatever that might mean. That
case has generally not been followed by subsequent
tribunals.
Indeed, the tribunal in Koza v Turkmenistan
(CLA-180, paragraph 231) said that the finding in
Standard Chartered that investments must be made by
an investor in some active way, rather than simply
passive ownership, resulted from -- and these are the
words on the slide -- "a somewhat strained reading of
the words 'of', 'by' and 'made'" in the relevant BIT.
And it is precisely this "strained reading" that the
Respondent advocates for here. It should be rejected,
just as it was in the Koza case.
Similarly, in Nachingwea v Tanzania (RLA-47,
paragraph 153), the tribunal considered the case of
Standard Chartered, and concluded that:
"... this Tribunal is unable to agree [with the
Standard Chartered case] that such a requirement of
active contribution can be said to arise by virtue of
the use of the word 'made' in Article 1(a) of the BIT.
That an investment has to be 'made' does not necessarily
imply that an investment has to be 'actively made'.
There is a distinction between the two and this Tribunal
[Page 133]
would be very reluctant to conclude, without more, that
'made' equates with 'actively made'."
I have only referred to a few of the cases in the
submissions. But you can see, even from this high-level
review, that the position accords with the conclusion of
the esteemed authors Dolzer, Kriebaum and Schreuer in
their 2022 text Principles of International Investment
Law (CLA-191, page 81), which is on the slide now.
It says:
"It follows from these authorities that the
preponderant view is that mere ownership or control of
the investment will suffice to bestow the status of
an investor. In other words, according to the majority
view, it seems that an active contribution by the
current owner of the assets is not required."
Before moving on, I also wish to recall some of the
additional matters that appear actually largely agreed
between the parties, or at least not contested. And
I say this by reference to paragraph 61 of the ROPO.
First, a share swap, including a cashless share
swap, in and of itself is a legitimate way of obtaining
an investment. This was clearly established in Mobil
v Venezuela and a number of other cases discussed at
paragraphs 284 to 286 of the Claimant's Response, and
the Respondent quite rightly does not contest this.
[Page 134]
Second, an investment can be acquired through
a corporate restructuring. There is absolutely nothing
wrong with acquiring an investment in this manner,
whether by share swap, transfer or otherwise, as
confirmed in cases such as Levy v Peru, Tidewater
v Venezuela and Aguas del Tunari v Bolivia, amongst many
others.
There is nothing unusual about the restructure in
the present case or the share swap that went on. It
reflects standard corporate practice and is similar to
many of these other cases where investments have been
found.
These two points are important also in regard to the
President's questions to Mr Palmer yesterday on the
nominal value of the shares swapped versus the economic
reality that you were discussing, and also on the risk
point that was raised.
As I said, the share swap in the present cases is
an entirely standard commercial practice, commonly used
when restructuring a corporate group. We've actually
heard a lot in this hearing about Mr Palmer's
unconventional way of approaching business. He
certainly does not do business or manage his affairs in
a way that we all might be used to seeing in cases like
this, and for the most part he has been very successful
[Page 135]
in his idiosyncratic approach.
Funnily enough, on the share swap, he was entirely
conventional. And share swaps or transfers have been
recognised by investment tribunals time and again as
being a legitimate way of making an investment in the
context of corporate restructurings. This is
an established principle and it should be the end of the
matter.
It follows from this that issues of nominal or face
value are also irrelevant in the context of corporate
restructuring. And this was confirmed in RENERGY
v Spain (CLA-179), which distinguished the case of
KT Asia on the basis that KT Asia where a nominal value
in the exchange was at issue did not involve a corporate
restructuring.
The nominal value issue simply does not arise in
context of a corporate restructuring. It is important
to note that after the share swap, just as an aside,
MIL, the parent, retained very, very valuable assets, in
the form of both Zeph and Mineralogy. And that was the
purpose of the share swap.
Given the case authorities on this issue, and the
continual recognition that corporate restructuring using
share swaps creates legitimate investments, it would be
incongruous of this Tribunal to then say that the shares
[Page 136]
transferred in a restructuring are not an investment as
they do not satisfy any risk or contribution element
that may exist because they were part of a standard
corporate restructuring. In none of the cases I have
mentioned have elements of risk or contribution been
deemed unsatisfied simply because the transaction was
a face-value share swap or share transfer as part of
a regular corporate restructuring.
As I have also stated earlier, it is
a well-established principle that any requirement for
contribution inherent in the term "investment", as it
may be, is satisfied by the original investment and does
not require a brand new investment from every investor
that subsequently acquires the asset. Both the original
contribution and the inherent risks involved in the
investment are transferred with that asset to the new
investor.
I do emphasise here that obviously this is not
an ICSID Convention arbitration. It is far from clear
that the inherent characteristics that one implies into
the definition of "investment" in the ICSID Convention
can be implied into a treaty such as the AANZFTA, where
the state parties have provided a very clear definition
of "investment" that already includes carve-outs for
commercial contracts for sale of goods and services, and
[Page 137]
similar types of transactions.
The state parties to the AANZFTA have been very
clear about what an "investment" means, and this should
be respected. You have our submissions on this point in
the Response and I just want to make sure it's clear
that we continue to rely on those.
So returning to the points that I was making before
I went off on that little tangent. The third point that
I wanted to make -- and it's related to what I've just
been discussing -- is that the adequacy of the
contribution paid is irrelevant. And this, again, is
an agreed point by the Respondent.
The tribunal in Gavrilovic v Croatia (CLA-195)
confirmed that the amount of the purchase price is
immaterial, and that an investigation into the adequacy
of the consideration is not required. The Respondent,
as I've said, has expressly agreed with us in the ROPO.
Similarly, in Invesmart v
[Page 145]
15:52 1
That's at paragraph 558. And we would say that that
2
is applicable not just to the definition of "investor"
3
but also to Article 11 on substantive investment. It is
4
clearly the role of the Tribunal to interpret that
5
provision and apply it.
6
Just on that point, I think it's important to
7
emphasise that it's the Claimant's position that the
8
Claimant was acting in good faith when it invested in
9
these Singapore businesses. And just to remind the
10
Tribunal that it is of course legitimate to restructure,
11
as we all agree, in order to obtain treaty protection.
12
So it must also be legitimate to bring oneself within
13
the provisions of the treaty in order to ensure that
14
treaty protection exists, and that would include
15
ensuring you have a substantive business, if that's
16
a requirement under the treaty.
17
So as long as the restructuring and the treaty
18
protection itself is legitimate, there could be no basis
19
to say that the denial of benefits "substantive
20
business" section is illegitimate or an abuse,
21
separately from that general abuse of right point.
22
Thank you.
23 MR PALMER: Thanks, Madam President.
24
I'd like to summarise for the Tribunal the decision
25
I made to offshore in June 2018 and the subsequent
[Page 147]
15:55 1
an article evincing that Mineralogy's own bank had
2
decided not to fund any new coal projects.
3
So in early June 2018, as the evidence shows at
4
paragraphs 119, 122 and 123 of my first witness
5
statement, these three documents were in my possession.
6
And I reached the conclusion, after considering the
7
documents in June 2018, that the coal project's chances
8
of obtaining the billions of dollars needed for its
9
development in Australia were non-existent.
10
The Claimant would submit that that decision I faced
11
was then, as a director of Mineralogy and Waratah Coal
12
and personally, was: should the project be closed, and
13
over $125 million sunk cost written off or lost, or was
14
there some other possibility to obtain coal funding? In
15
short, was there a positive decision I could take, for
16
long-term commercial reasons, to avoid this type of
17
major and significant downside?
18
The answer can be found in Exhibit [C-]167, which is
19
a news article from The Straits Times in Singapore which
20
confirms that coal funding was available in Singapore.
21
In my evidence before the Tribunal yesterday
22
I explained the purpose of seeking to raise debt funding
23
in Singapore, with the assistance of international banks
24
whose regional headquarters were based in Singapore, and
25
[that] that was how the system worked; and how such
[Page 146]
15:53 1
events that are demonstrated by the evidence, and bring
2
all that together; in so doing, answering some of the
3
obvious questions that the Tribunal and the Respondent
4
raised during my cross-examination yesterday.
5
This matter is addressed in the evidence in my first
6
witness statement at paragraphs 113 to 139 and evidence
7
given by me yesterday.
8
I'd like to start at the beginning. Firstly, I'd
9
refer to Exhibit [C-]166, which I did in my opening,
10
which is a letter dated 12 December 2017 from the
11
Premier of Queensland to the Prime Minister of Australia
12
vetoing funding of $1 billion for the Adani Coal
13
Project.
14
In paragraph 123 of my first witness statement,
15
I explained that the Adani Coal Project is located
16
alongside the Claimant's project in Queensland. And as
17
I stated in the Claimant's opening, I note that the
18
Adani Coal Project was eventually funded through
19
Singapore.
20
Secondly, I refer to Exhibit R-484, which is a draft
21
bill entitled "Coal-Fired Funding Prohibition Bill",
22
which was legislation then currently before the
23
Australian Parliament, inter alia, banning the funding
24
of coal projects.
25
Thirdly, I refer to Exhibit C-165, which is
[Page 148]
15:56 1
arrangements were available in Singapore and were not
2
available in Australia.
3
I also explained in my evidence given in
4
cross-examination to the Tribunal that I had been
5
involved in and was familiar with fundraisings in
6
Singapore. I explained -- and I'll go to the sections
7
on the transcript in a second -- I explained that one of
8
my companies had previously borrowed $100 million to
9
fund three ships in Singapore. Construction funding had
10
been raised by each ship transaction incorporating
11
a separate company that had been established to fund
12
each ship's constructions.
13
We see the transcript at Day 2, page 29, from
14
lines 2 to 6; and page 272, from lines 21 to 23.
15
The Claimant submits that it's logical, considering
16
the previous success my company had experienced in
17
borrowing funds in Singapore, that the structure used in
18
doing so could be adopted in raising loan funds in
19
Singapore.
20
Paragraphs 126 to 130 of my first witness statement
21
further expand on why Singapore was attractive from
22
a fundraising perspective. The Claimant submits it was
23
a simple commercial decision, being: should the coal
24
project be closed down and millions of dollars written
25
off, or should the project have a go and seek to
[Page 149]
15:57 1
restructure in Singapore? A simple, straightforward
2
commercial decision. The Claimant submits that most
3
commercial companies would choose life over death while
4
there were prospects of obtaining funding offshore, and
5
that is what I decided to do in June 2018, as the
6
evidence shows.
7
I adopted in my fifth witness statement at
8
paragraph 51 matters set out in the witness statement of
9
Nui Harris dated 29 January 2024. I confirmed in that
10
statement that I instructed Mr Harris on or about
11
July 2018 to engage London economist Mr James King to
12
prepare a comprehensive report in respect of the coal
13
project that could be used to provide to potential
14
lenders in Singapore.
15
These reports --
16 DR DONAGHUE: Madam President, we object to this.
17
Mr Harris's statement was withdrawn for the purposes of
18
this jurisdictional hearing, including the King reports
19
to which it referred.
20 MR PALMER: No, no.
21
DR DONAGHUE: Mr Palmer can't now, in closing submissions,
22
proceed as if that report is in evidence.
23
MR PALMER: With respect, Madam Chairman, you will recall
24
that in the pre-conference hearing there was the
25
question about the exhibits, and it was ruled at that
[Page 151]
16:00 1
having checked with my team: we do accept that the King
2
exhibits are in. But the Harris statement is not.
3
MR PALMER: That's correct, yes.
4 THE PRESIDENT: But clarified that the withdrawal did not
5
extend to the exhibits, absolutely. Right.
6
So the reference to the Harris statement can be
7
made -- you can refer to your statement, of course, that
8
says you asked Mr Harris to do this. You cannot refer
9
to his statement.
10
MR PALMER: I haven't.
11
THE PRESIDENT: You can refer to the exhibits to his
12
statements.
13
MR PALMER: That's correct.
14 THE PRESIDENT: Is that a clear direction?
15
MR PALMER: That's how I look at it.
16
So in my statement, I confirmed that I instructed
17
Mr Harris on or about July 2018 to engage London
18
economist Mr James King to prepare a comprehensive
19
report in respect of the coal project which could be
20
used to provide for potential lenders. These reports
21
can be found at Exhibit C-472 and Exhibit C-474, and
22
each of the members of the Tribunal should read them.
23
Mr King provided his independent report in late
24
September 2018, and the two Singapore companies --
25
which is on the record -- were incorporated on
[Page 150]
15:59 1
same time that the exhibits were not being withdrawn,
2
and that was stressed to the other side. I realise
3
Mr Donaghue wasn't there at that time, but that was what
4
was discussed.
5
And I referred to paragraph 51 of my statement,
6
which was made on 29 January 2024, and I have not
7
withdrawn my statement from any evidence.
8 THE PRESIDENT: It's fine, certainly your statement is in
9
the record; that is not an issue. Can you rephrase what
10
you have said just without referring to Mr Harris? Or
11
stick to your statement.
12
MR PALMER: In my statement, I confirm -- in my statement at
13
paragraph 51, if Mr Donaghue wants to look at it -- that
14
I instructed Mr Harris to do certain things --
15 THE PRESIDENT: Yes.
16 MR PALMER: -- and that's what I'm confirming now.
17
And I'm also confirming that in the current
18
exhibits, the reports that were developed for the coal
19
project are current exhibits in this arbitration. And
20
those exhibits weren't withdrawn.
21 THE PRESIDENT: Let us just check, because I don't remember
22
what we said at the pre-hearing conference about the
23
exhibits to the statements that were withdrawn. It's
24
addressed at paragraph 6 of PO5.
25 DR DONAGHUE: Perhaps, Madam President, I should clarify,
[Page 152]
16:01 1
30 November 2018.
2
In my evidence yesterday -- I will give the
3
transcript and lines in a minute -- I confirmed that it
4
was proposed that a Singapore company be used to raise
5
loan funds. And the Claimant submits that this was in
6
accordance with the structure that my companies had
7
previously used when raising loan capital in Singapore.
8
I also explained in my evidence yesterday that I was
9
interested in the shipping industry in Singapore, indeed
10
had raised money in the shipping. And during
11
yesterday's hearing, I stated at page 35 of the
12
transcript, from line 22:
13
"Well, I'd have to look at his statements at the
14
time. But at the time, anyway, this is what he said to
15
me, right? And we wanted to get into shipping because
16
we'd already funded three ships through Singapore in our
17
nickel business, all carriers, and we thought that that
18
was a good sector to get into."
19
In my cross-examination evidence yesterday, further
20
detailed on page 175 of the transcript, from line 20, as
21
follows:
22
"Our evidence has always been that we purchased
23
those companies because we wanted to get into the marine
24
sector, and that they had significant licences and
25
facilities in Singapore which we thought we could invest
[Page 153]
16:03 1
in and expand. That's our evidence."
2
That was the quote.
3
Continuing on page 176 of the transcript for Day 2,
4
in answer to a question from the Respondent, I stated:
5
"... it was pretty hard to get government licences
6
and concessions. So when it became available,
7
Michael Mashayanyika thought we should move quickly, and
8
I accepted his recommendation and did it."
9
As set out in Exhibit C-70, the Claimant was
10
incorporated on 21 January 2019, and Exhibit C-507
11
confirms that the engineering companies
12
[GCS] Engineering Service Pte Ltd, Visco Engineering
13
[and] Visco [Offshore] were acquired by the Claimant on
14
31 January 2019.
15
During my cross-examination yesterday, commencing at
16
line 9 of page 176 of the transcript, I stated:
17
"... the first thing we did was to look at the
18
conditions of the Indian workers that were brought in to
19
be contract labourers on ships, and we thought that they
20
weren't up to a proper human rights standard. And then
21
we increased those facilities and tried to make sure
22
there was additional concessions. In Singapore, the
23
human -- the health and safety regulations for immigrant
24
workers are less than they should be, and not the same
25
as Singaporean workers. So that was our first concern."
[Page 155]
16:05 1
paragraph 86, the engineering companies provided
2
contract maintenance to major shipyards operating in
3
Singapore. During the Covid-19 pandemic, there was
4
an unexpected slowdown in demand and they went into
5
voluntary liquidation.
6
As the Amendment Act was enacted on 13 August 2020,
7
if the Claimant had been incorporated for the purpose of
8
treaty protection purposes, it would not have placed the
9
engineering companies into liquidation in October 2020.
10
The engineering companies would have been maintained for
11
the purposes of that protection. The facts are that the
12
engineering companies were not maintained. This is
13
a telling fact which destroys the unsubstantiated and
14
scandalous allegations of the Respondent in this regard.
15
I will now deal with the abuse of process objection,
16
before calling on Dr Kirk to continue.
17
The evidence is clear that the Claimant has
18
a substantive business in Singapore, and did at the time
19
the Amendment Act became law on 13 August 2020. As the
20
Tribunal noted in Procedural Order No. 4, the Respondent
21
has confirmed the Amendment Act was not foreseeable.
22
All claims before the Tribunal in the dispute that
23
the Tribunal is considering are as a consequence of the
24
Amendment Act. If there was no Amendment Act, there
25
would be no dispute and there would be no arbitration.
[Page 154]
16:04 1
The Claimant submits that once the Claimant had
2
acquired the engineering companies, it found that they
3
were, in effect, labour hiring companies keeping Indian
4
immigrant workers in subhuman conditions that were
5
a disaster. The Claimant submits that by the end of
6
[2019], worker condition matters had been remedied.
7
As stated at page 179, line 6 to page 190, line 20
8
of the transcript from Day 2, the Claimant entered into
9
the Kleenmatic joint venture on 24 January 2020 and
10
acquired a 90% interest, about a year after the Claimant
11
acquired the engineering companies. The remaining 10%
12
interest was later acquired. See transcript page 191
13
from line 2.
14
During my cross-examination yesterday, at transcript
15
page 181 from line 8, I referred to these cleaning
16
companies Mr Mashayanyika had brought to my attention.
17
I stated:
18
"... we were getting, I think about 2% or 3% for the
19
funds we had on term deposit, or on deposit generally
20
with banks, and this is showing a yield close to 10%."
21
The Claimant submits that it is normal business
22
decisions to seek high returns on investment when it is
23
available. The Claimant accepts the proposition of the
24
Respondent that the engineering companies were not
25
profitable. As stated in my fifth witness statement at
[Page 156]
16:07 1
The Claimant has complied with the terms of the treaty
2
and has a substantive business in Singapore, which
3
it has established in good faith, perfectly properly,
4
inter alia, on 24 January 2020. Consequently, the
5
[Claimant] meets the test set out in the treaty.
6
Before I turn to a few closing observations of the
7
facts, can I seek to emphasise the following in relation
8
to the rationale for incorporation of the Claimant,
9
while it is only relevant if the Tribunal rejects our
10
case on foreseeability.
11
I would like to make it clear that there is no
12
proper basis to reject the Claimant's evidence on
13
rationale. As I hope the Tribunal will have gathered
14
from my evidence yesterday, I am an honest person who
15
deals with matters swiftly and fairly. I was prepared
16
to make concessions yesterday even when the point
17
arguably cut across the Claimant's case. And
18
I explained to the President how I manage my business.
19
I'm an honest man and gave my evidence honestly.
20
I am dismayed that the Respondent persists in using
21
words like "bad faith", "sham", "lack of credibility",
22
in circumstances where I have made clear my position.
23
They have sought to adduce expert evidence about
24
questions and rationale, but it does not mean that the
25
Tribunal should reject my evidence on the facts. That
[Page 157]
16:08 1
is the reality of the position. It's why speculation
2
from third parties, none of whom are witnesses of fact,
3
about what might or might not have been done should be
4
rejected.
5
I will now turn to some of the facts. I will now
6
hand over to Dr Kirk to complete this section of the
7
Claimant's case.
8 DR KIRK: Thank you very much.
9
I just want to start by addressing the
10
15 October 2019 letter (R-145) that Dr Donaghue spoke
11
about this morning.
12
The Claimant submits that there is no connection to
13
be drawn between the Amendment Act and the threats made
14
by Mr McGowan over the CITIC dispute by virtue of this
15
October 2019 letter. The cases are clear: to be
16
reasonably foreseeable, the dispute has to be a real or
17
reasonable prospect; not just something you can imagine,
18
not just a mere possibility.
19
In January 2019, the Claimant did not even know for
20
certain that it had the right to claim damages in the
21
BSIOP dispute. That was not confirmed until the
22
October 2019 award in the second BSIOP arbitration.
23
One could hardly say that removal of that right was
24
a real prospect in January 2019, ten months before the
25
right had even been confirmed. Surely, for a measure
[Page 159]
16:11 1
statute, it challenged the second award in the courts,
2
and it lost. It then participated in the third
3
arbitration. It signed the arbitration agreement. It
4
attended directions hearings. It agreed a timetable for
5
submissions. It agreed a hearing date and a date on
6
which the award for damages in the third arbitration
7
would be issued. It signed the mediation agreement.
8
Now, if it's the Respondent's position, as it said
9
this morning, that abuse of right is a fact-specific
10
enquiry, then these are the facts that are very, very
11
important. All the indicators were that Western
12
Australia would go through the normal dispute resolution
13
process required by the State Agreement and the
14
Western Australian Arbitration Act. In these
15
circumstances, it is just not plausible to say that the
16
Amendment Act was a real prospect at any time in 2019,
17
or indeed before it was passed.
18
To this end, it is agreed by the parties, and
19
established or recorded in Procedural Order 4, that the
20
Amendment Act was not even conceived of until May 2020.
21
I have popped up on the screen again that text from
22
Mr Quigley. There is no mention here in this text of
23
the CITIC dispute or of any earlier threats. To all
24
intents and purposes, this is a sudden idea that has
25
occurred to Mr Quigley in the middle of the night,
[Page 158]
16:10 1
removing a right to be a real prospect, the right itself
2
must first exist.
3
When Mineralogy did learn that it had the right to
4
damages, it sent off what might be described -- and in
5
fact, the Solicitor-General also described it this
6
morning -- as "a shot across the bows", warning the
7
Government not to interfere with its newly confirmed
8
right.
9
Again, as the Solicitor-General said, there had been
10
no threat by Western Australia that it would interfere
11
in any way with Mineralogy's rights in the BSIOP
12
dispute. Indeed, there has never been any threat on the
13
record that it would interfere with the BSIOP dispute.
14
Mineralogy might, of course, have been concerned;
15
it might even have been slightly paranoid. It might
16
have been imagining all sorts of potential ways its
17
rights could be interfered with, given the size of the
18
dispute. But this does not make the Amendment Act
19
a real prospect in either October 2019 and certainly not
20
in January 2019.
21
Quite frankly, it appears the letter had no effect
22
at all, and went largely unnoticed.
23
The Western Australian Government continued,
24
quite properly, the process that had been started back
25
in 2012. In accordance with the relevant arbitration
[Page 160]
16:13 1
thanks, apparently, to the fact that he no longer had
2
a girlfriend. This sudden idea dreamed up in the wee
3
hours of 23 May 2020 cannot possibly have been
4
reasonably foreseeable or a real prospect in
5
January 2019 or in October 2019.
6
The Tribunal will know that the facts in this case
7
are markedly different from many of the cases where the
8
abuse of rights argument has succeeded. In these cases,
9
like in Philip Morris, discussed this morning, they
10
involved detailed announcements by governments of
11
well-thought-through policies.
12
Even in Clorox v Venezuela, a case we have discussed
13
a lot, where the government announced that it was going
14
to implement price control measures to regulate products
15
that exceeded a certain profit margin and create a new
16
entity charged with implementing those measures -- the
17
announcement that prompted Clorox to undertake
18
a corporate restructure and obtain treaty protection --
19
even this announcement was not enough to make the law
20
enacted six months later foreseeable.
21
The tribunal held, and the Swiss court agreed, that
22
the President's speech was so general that a reasonable
23
observer could not objectively have foreseen the
24
specific dispute that eventuated. Clorox could not
25
reasonably have anticipated from the President's speech
[Page 161]
16:15 1
announcing the measure what range of products would be
2
impacted by the new price law, nor the manner in which
3
the law would be applied.
4
Applying this reasoning to the present case, there
5
is no possibility that the vague statements made by
6
Mr McGowan in November 2018 about Western Australia
7
considering its options in the best interests of the
8
people, which might even include perhaps amending the
9
State Agreement, could ever foreshadow the present
10
dispute or even, quite frankly, any dispute that might
11
have eventuated, but didn't, on the CITIC matter. His
12
statements were simply too vague.
13
It is not conceivable when one considers the terms
14
of the Amendment Act that it could have been foreseeable
15
in a western democracy. Of course, as we know, it was
16
developed in secret. And it went further than even just
17
considering options; indeed, it went so far as to
18
curtail judicial power and to exempt politicians and
19
government officials from the criminal law. How that
20
could be foreshadowed from the statements of Mr McGowan
21
in November 2018 is hard to know.
22
There are a number of cases in the record where
23
disputes or disagreements between the parties existed
24
prior to the restructure for treaty protection, and
25
these disputes were often the reason for the
[Page 163]
16:19 1
treaty jurisdiction for a dispute that was already in
2
existence.
3
The Tidewater tribunal dismissed that argument,
4
saying that the subject of the treaty claim was the law
5
expropriating assets, and that this was clearly distinct
6
from the commercial dispute between the subsidiary and
7
the state entity. The existence of that commercial
8
dispute did not mean that Venezuela's later
9
expropriatory actions should have been expected.
10
Importantly, it was relevant to the tribunal's
11
assessment of foreseeability that at the time of the
12
restructure, the subsidiary and the state entity were
13
acting in a manner consistent with continuing the will
14
to trade, and in the usual way that would be expected to
15
resolve the dispute between them. The conduct pointed
16
against a reasonably foreseeable expropriation of the
17
claimant's investment.
18
Similarly in this case, the Western Australian
19
Government at all times acted in a manner that would
20
objectively appear as though they were anticipating
21
their participation in the domestic arbitration process.
22
From May 2020 onwards, this was clearly a deliberate
23
ploy to ensure that Mineralogy did not anticipate the
24
Amendment Act.
25
Similarly in Mobil v Venezuela (RLA-92), that case
[Page 162]
16:17 1
restructure: simply to gain treaty protection. However,
2
the tribunals in those cases have confirmed that it does
3
not constitute abuse of right or process where that
4
dispute is separate or only tangentially connected to
5
the dispute to be decided by the tribunal.
6
A heightened state of tension, hostility or dispute
7
between an investor and the host state simply does not
8
mean any particular adverse measure or specific dispute
9
is reasonably foreseeable. I have already referred to
10
the Clorox decision (CLA-182), which is apposite.
11
In Tidewater v Venezuela (RLA-93), the claimant's
12
subsidiary had been engaged in an ongoing commercial
13
dispute with a state entity over arrears payable under
14
various invoices and whether the subsidiary's contract
15
with the state entity should be renewed. It was
16
a significant dispute at that time between the Tidewater
17
subsidiary and the Venezuelan state entity.
18
After this dispute arose, the Tidewater Group
19
restructured to gain treaty protection. And the claim
20
before the tribunal related to a law that was then
21
enacted by the state after the restructure which
22
expropriated the assets of the subsidiary. Venezuela
23
alleged that the treaty claim was merely an extension of
24
the pre-existing commercial dispute and that the
25
claimant had been incorporated to access investment
[Page 164]
16:21 1
concerned a corporate restructure designed specifically
2
and expressly to gain treaty protection at a time where
3
there were already existing disputes with the host
4
state. The state had already started to impose
5
increased royalties and income tax rates on the claimant
6
when the claimant restructured to obtain treaty
7
protection. And Mr Palmer referred to this earlier.
8
Mobil was quite candid that its motivation for the
9
restructure was to gain treaty protection, due to its
10
concerns about the possibility of more adverse treatment
11
in the future. After the restructure, the government
12
implemented various measures to nationalise certain oil
13
projects, including the claimant's.
14
The Mobil tribunal held that the existence of the
15
pre-existing disputes, which were not the subject of the
16
arbitration before that tribunal, did not disqualify the
17
tribunal's jurisdiction in respect of the
18
Nationalisation Law, which was enacted after the
19
restructuring.
20
Finally, in Aguas del Tunari v Bolivia (CLA-185),
21
it was a case that involved an investment that had faced
22
strong popular opposition for a considerable time. At
23
the time of the restructure, citizen groups and civil
24
society organisations had expressed strong concern about
25
the concession, and had, in some cases, called for its
[Page 165]
16:22 1
annulment. The protests eventually turned violent and
2
the Bolivian President declared a state of siege. The
3
Bolivian authorities then terminated the concession.
4
Bolivia objected that the restructure had occurred
5
at a time when the level of protests meant that the
6
events that followed, including termination, were
7
foreseeable. The tribunal disagreed. The general
8
public unpopularity and calls from interest groups for
9
the concession to be annulled made it imaginable that
10
the concession would be cancelled, but did not raise
11
a foreseeable prospect that the government would in fact
12
act to terminate the concession. That measure was
13
imaginable, but not foreseeable in the relevant sense
14
until the riots broke out on a larger scale in the
15
following year after the restructuring had occurred.
16
I think I'll leave those there, given the time.
17 MR PALMER: I think our time has run out.
18 THE PRESIDENT: No, I have seen that you are now
19
five minutes over time. But I thought that with the
20
permission of the Respondent, to whom you offered time
21
yesterday, I would not interrupt you.
22 MR PALMER: Thank you.
23 THE PRESIDENT: But I don't know how much more time you
24
have.
25 MR PALMER: I think we can conclude there, if we could just
[Page 167]
16:25 1
thank all of those people, Madam Chair. Thank you.
2
THE PRESIDENT: Thank you.
3
So we have now concluded your closing remarks and
4
your answers to the Tribunal questions. Let me just see
5
whether my colleagues have any additional questions.
6
No. I don't either. And you don't either. Fine.
7
Thank you very much for addressing our questions in
8
a detailed fashion. That will be very helpful in our
9
deliberations.
10
I would like now to summarise what the Tribunal has
11
this mind with respect to procedural aspects that we
12
need to cover. If needed, we can have a break
13
thereafter and you can consult within teams to see how
14
you want to react; or if it is obvious and a break is
15
not needed, we can just carry on.
16
The first point is that we will need transcript
17
corrections to have a final transcript available. That
18
is pre-redaction process. And we are in your hands
19
about the time limit. That time limit, once we have the
20
final transcript, then the redaction process as it is
21
specified in PO3 starts; and once that is concluded, the
22
transcript will be uploaded on the PCA website.
23
We had said at the pre-hearing conference, and also
24
in PO5, that in principle there would be no post-hearing
25
briefs unless the Tribunal has specific questions. We
[Page 166]
16:24 1
have perhaps one minute of extra time.
2
THE PRESIDENT: Sure. No, no, I didn't want to cut you off.
3
So if you have a few more things to say, you may do so.
4 MR PALMER: I think we're happy to conclude there.
5
We just wanted to spend a minute to thank
6
Mr McGowan, our court reporter here, for the excellent
7
job that he's done. I thought that was important, to
8
thank Mr McGowan for that. And certainly to thank the
9
Tribunal for coming here. And also to thank the
10
Respondent, and every member of the Respondent's team,
11
who acted very professionally. It's very important that
12
we recognise that they're doing a professional job, and
13
they've certainly done that, and we want to thank them
14
very much.
15
Also the Claimant would like to thank the [PCA] team
16
for all the hard work that they've put in, and having
17
these facilities; and also all of the employees of the
18
Peace Palace that we can't forget. We couldn't be here
19
without them. So I think it doesn't hurt to pause to
20
remember those people and to think what they've done to
21
make this possible, because it really is important; not
22
just for this dispute, for other disputes, and for the
23
rest of the world. That's what the Peace Palace was
24
established for.
25
So I think it can't hurt to stop and I'd like to
[Page 168]
16:27 1
have asked our questions, and for now I think we feel
2
that we have what we need to deliberate and reach
3
a decision.
4
That being said, there's always a slight reservation
5
to be made that in case in the course of the
6
deliberation a specific issues comes up, then we would
7
ask for the parties' input. But that would be quite
8
a limited, specific question.
9
We would like to have statements of costs for this
10
phase of the proceedings. When I say "statements of
11
costs", I don't think we need submissions on costs,
12
because we know that we are under the UNCITRAL Rules;
13
we know that the UNCITRAL Rules have provisions on
14
allocation of costs. And unless the parties wish to
15
provide more, I don't think we need it.
16
What we need is, of course, an itemisation of the
17
costs by category. We do not need supporting
18
documentation, unless a party were to raise it after,
19
once the cost statement is filed or the Tribunal
20
ex officio would ask questions.
21
For that, we will also need a time limit. That has
22
to come when the different publication issues are
23
resolved, because that will still involve some time on
24
both teams' accounts.
25
So that leads me to the publication aspects. We
[Page 169]
16:29 1
have already mentioned the transcript. There is also
2
a provision in the annex to PO3 for publication of all
3
the submissions following the hearing to which the
4
submissions relate, and it is specified that this
5
implies the Notice of Arbitration, that was deemed
6
a statement of claim, and of course the four specific
7
preliminary objection submissions.
8
They cannot yet be published because the redaction
9
process with respect to the Rejoinder is not completed,
10
and the Tribunal would propose that we wait to have all
11
the submissions publishable to upload them on the
12
website. I think that was the idea of doing it after
13
the hearing.
14
We have asked ourselves what happens with the
15
PowerPoint presentations that were used during the
16
hearing. There is no provision in the annex to PO3.
17
However, there is a provision on supporting
18
documentation that says that supporting documentation
19
shall not be published. And we thought that, by analogy
20
to this provision, it might make sense not to publish
21
the PowerPoints, because they are a hybrid nature of
22
submission, and reproduction of exhibits and other
23
documents that are within the supporting documentation
24
are not publishable.
25
Then the last point is Procedural Order No. 5,
[Page 171]
16:33 1 THE PRESIDENT: Fine. I see that the Claimant agrees. So
2
we can go for three weeks from today.
3
MR WORDSWORTH: Thank you very much.
4
Then on issue 2, in principle, no PHBs, and you've
5
indicated no need for them. And the Respondent
6
understands and is content with that.
7
There is just one exception, where, as to
8
question 5, the Tribunal earlier today was emphasising
9
the issue on interpretation of 27(2), and suggesting
10
that the Tribunal may not have in fact any discretion so
11
far as concerns approaching the treaty parties.
12
Australia has not understood 27(2) in that way.
13
There are various textual reasons why that is. And we
14
are wondering whether the Tribunal would be assisted --
15
because obviously it's quite an important point -- on
16
hearing more from the parties on that specific issue;
17
just that issue. And those would be, obviously, limited
18
submissions, directed at assisting you, which would be,
19
I would have thought, up to five pages; but you could,
20
if you wished to, set a shorter limit.
21
But we hope that would be of assistance to the
22
Tribunal. And of course we are saying that in
23
circumstances where the Claimant has never stated
24
a specific position as to the interpretation of these
25
wordings; it has just maintained the position that no
[Page 170]
16:31 1
the publication: that the redaction process is also in
2
course. The Respondent has said that it has nothing to
3
redact, and the Claimant has not yet said. But the
4
deadline has not expired, so you will do it whenever --
5
unless you have an answer now; then that simplifies.
6
But the deadline is around 25 or 26 September.
7
Let me see whether my co-arbitrators have anything
8
to add to what I tried to summarise from our
9
discussions. No? No?
10
So a question to you: do you wish to have a moment
11
to confer before you react? Then we can have a break.
12
Or you can react immediately.
13
How is it on the Respondent's side?
14
MR WORDSWORTH: I think we can react immediately,
15
Madam President.
16 THE PRESIDENT: And that is also the case of the Claimant,
17
yes?
18 MR PALMER: (Inaudible: no microphone)
19 THE PRESIDENT: Good.
20
So let me turn to the Respondent. Mr Wordsworth.
21 MR WORDSWORTH: Thank you.
22
On transcript corrections, I think the only real
23
issue is the first date for completing corrections.
24
We'd suggest three weeks for that, just to enable the
25
parties to return to base and get on top of everything.
[Page 172]
16:35 1
issues on interpretation arise.
2 MR PALMER: I think we're content to limit submissions to,
3
say, three pages, in a limited period, at a time where
4
the Respondent could put its submissions in and we'd
5
have a seven-day period to respond, something like that.
6
I don't think it's a big issue.
7 THE PRESIDENT: I would have thought simultaneous
8
submissions, because you're both starting from the same
9
basis, which is what 27(2) means, essentially, for this
10
Tribunal.
11
DR KIRK: I was thinking there's probably a lot of common
12
ground between the parties on this, and I just wondered
13
if the Respondent wanted to put in a submission --
14 THE PRESIDENT: There is a lot of common ground, and
15
we understand that. And we want to specifically note on
16
the record that both parties have told us that they do
17
not consider that a joint interpretation should be
18
requested. We note that, and that is certainly helpful
19
for our purposes.
20
Maybe we take the proposal on board, and then I have
21
a short discussion when we have all the points with my
22
co-arbitrators and get back to you. But it is noted.
23
MR WORDSWORTH: Thank you very much, Madam Chairman.
24
Statement of costs: we understand the point that
25
there are to be no submissions on that; you are just
[Page 173]
16:37 1
interested in information and itemisation. That does
2
call into question the issue of -- obviously there are
3
the costs of this hearing, there are costs of the
4
proceeding overall, but also separate cost elements with
5
respect to, for example, the interim measures
6
application and the like.
7
We are approaching this on the basis that the
8
Tribunal will be assisted by an itemisation that sets
9
out those individual cost limbs. And although the
10
Tribunal is not requiring submissions, on the basis that
11
there is a rule or a potential rule as to costs
12
following the event, then we would submit it would be
13
useful for those matters to be itemised, and very
14
brief -- I mean truly brief -- submissions being made as
15
to why that itemisation is taking place.
16
THE PRESIDENT: When I said "itemisation", I said "by
17
category", and thereby I wanted to say: legal fees,
18
travel and other expenses and the like. I had not meant
19
by subject matter, whether it was for this hearing,
20
whether it was for the provisional measures.
21
Is that the proposal, that you identify according to
22
topic?
23 MR WORDSWORTH: That would be, Madam President.
24 THE PRESIDENT: Yes.
25 MR WORDSWORTH: Or at least identify what, if any, different
[Page 175]
16:40 1
final transcript -- that is the transcript established
2
on the basis of the parties' corrections. If there are
3
disagreements on corrections, the Tribunal will deal
4
with them, and then there will be a final transcript.
5
And that transcript will be subject to a redaction
6
process, like any submission.
7
MR PALMER: Okay.
8 THE PRESIDENT: So these matters should not be in the
9
publishable version for which the feed was cut, but
10
there might be others.
11
MR PALMER: Sure.
12
THE PRESIDENT: Yes. And then only will we publish the
13
transcript.
14
But the point was on the statement of costs.
15
MR WORDSWORTH: On the statement of costs -- sorry,
16
I thought perhaps you wanted me to complete first, the
17
Claimant having just addressed the issue of
18
publications.
19
I don't think we've got anything particular to add
20
so far as concerns the procedure you have outlined on
21
publication. The issue you raised was as to the
22
treatment of PowerPoints, and Australia is content with
23
the suggestion of the Tribunal thereto.
24
Then issue 5 I think is for the Claimant anyway
25
only.
[Page 174]
16:39 1
rule, or how the rule would apply so far as concerns
2
those individual parts of the proceeding.
3 THE PRESIDENT: It's also a point that I am noting now, and
4
we can discuss it among the Tribunal members and revert
5
when we have all the different points.
6 MR WORDSWORTH: Then just as to procedure for that,
7
we wouldn't see there's any huge rush in getting the
8
statement of costs to you, but obviously we'd be guided
9
by when the Tribunal wants those submissions. And we
10
are presuming the Tribunal is only going to want one
11
round of submissions.
12
Thank you.
13
THE PRESIDENT: Nothing on the different points of
14
publication?
15
MR WORDSWORTH: Yes, but I was thinking that possibly the
16
Claimant would be wanting to come in straight away on
17
the issue of statement of costs.
18 MR PALMER: Yes. You will remember during my
19
cross-examination we cut the broadcast at one stage in
20
relation to some of our directors' ability and duties
21
and bank accounts and things of that nature. So we are
22
requesting, I guess, in the publication of submissions
23
or the transcript, that that sort of material is
24
redacted.
25 THE PRESIDENT: It will be redacted. And once we have the
[Page 176]
16:42 1
MR PALMER: The Claimant is content with that too,
2
Madam President, yes.
3
THE PRESIDENT: There was the suggestion with respect to the
4
statement of costs that this would be itemised by topics
5
and there would be some submission.
6
MR PALMER: Well, we tend to agree with you that just by
7
category I think is the best way to go about it.
8
Otherwise we'll embark upon a very lengthy process which
9
may then distract from other things.
10
THE PRESIDENT: The idea was just to have one round, no --
11
MR PALMER: Yes, that's what I mean, I think.
12 THE PRESIDENT: Yes, good.
13
DR KIRK: Could I just ask the Tribunal a clarification
14
question around the transcripts.
15
Would it be helpful, when we are looking at
16
correcting the transcript, to add in any Opus 2
17
references that weren't expressly stated for documents
18
referred to, so that they can be hyperlinked for the
19
Tribunal? It could be something you consider.
20
THE PRESIDENT: The Tribunal works from -- at least for my
21
part -- the C-and R-references, and not from the Opus
22
references. But let me look at my colleagues. Same
23
thing?
24
PROFESSOR MCRAE: Same with me.
25
MR KIRTLEY: The same.
[Page 177]
16:43 1 THE PRESIDENT: Yes. So there is no need to spend time on
2
doing this.
3
DR KIRK: Thank you.
4 THE PRESIDENT: Anything that you wish to add, or any
5
question, before we discuss the very few points that
6
remain among the Tribunal members?
7
MR PALMER: No.
8 THE PRESIDENT: No?
9
MR WORDSWORTH: No, thank you.
10
(4.44 pm)
11
(The members of the Tribunal withdraw)
12
(5.04 pm)
13 THE PRESIDENT: So we looked at the different steps, and
14
I am summarising them. And where there were open
15
issues, I will make the proposals that the Tribunal has
16
about those.
17
So the first thing would be the transcript
18
corrections; if possible, agreed. And because I am
19
adding the "if possible, agreed", I add also a week. So
20
we would have four weeks from now, which is 16 October.
21
We confirm: no post-hearing briefs. However, it is
22
true that it would be helpful for us to have short
23
submissions on Article 27(2) of the treaty, about three,
24
five pages. I mean, we are not in kindergarten; you
25
will know what needs to be provided. It seemed to us
[Page 179]
17:08 1
are useful/appropriate from your point of view, you may
2
provide them, but the idea is that these are concise
3
comments.
4
We could provide application for reply if necessary.
5
That would really be if one of the parties thinks that
6
one specific aspect needs to be commented on. And the
7
application would have to be filed seven days after
8
submission. So if we keep to 31 January, it would be
9
application by 7 February.
10
As I mentioned just before, in the meantime, of
11
course the Tribunal will proceed to deliberate. It is
12
difficult for us to give you now an indication of when
13
an award on preliminary objection will be ready. We
14
will certainly want to be diligent and render an award
15
as soon as possible. At the same time, this hearing has
16
shown that there are a number of rather complex issues,
17
both factual and legal; there are certain aspects of
18
legal principle as well. And we understand the high
19
stakes involved in this case, which means that we want
20
to be careful in the way we handle this and issue
21
a good-quality decision.
22
So, having said that, I just would need the
23
reactions on this summary, if there is anything that
24
requires comment or clarification.
25
Mr Wordsworth.
[Page 178]
17:06 1
that 16 October might be a good deadline for that.
2
Then the statement of costs. And to get to the time
3
limit, I need to explain how we arrived at it. It is
4
driven by the completion of the redaction process.
5
The last item for the redaction process will be the
6
transcript. So once the transcript is final -- which
7
should be, hopefully, 16 October, or shortly thereafter
8
if there are outstanding matters -- then there is
9
a first 30-day time limit for designation and then there
10
is a 30-day time limit for objections. So that's
11
60 days. That leads us to just before Christmas.
12
So we thought that that would mean a statement of
13
costs could be prepared in the course of January. Now,
14
we understand that may not be a popular proposal in
15
Australia, so we thought end of January. But if you
16
want something early February, that should be fine with
17
us too. Not much later, because in the meantime we
18
will, of course, proceed with deliberation.
19
So we have now provided 31 January. But if you tell
20
us that is too soon, we can arrange that.
21
In terms of content of the statement of costs,
22
we would think it would be helpful that we have costs
23
distinguished between preliminary relief and other
24
costs; that means all other costs with respect to this
25
phase of the proceedings. If short explanatory comments
[Page 180]
17:10 1 MR WORDSWORTH: Only, Madam President, as you might have
2
anticipated, Australia would be very grateful, on the
3
statement of costs, if we could have that extra week, to
4
put us into early February.
5
THE PRESIDENT: Yes.
6
MR WORDSWORTH: I think that would be a 7 February date.
7 THE PRESIDENT: So that would be 7 February.
8
And that will make the application for reply --
9
we are not looking for replies really. The idea is that
10
if there is something burning that you feel needs to be
11
addressed, you may request that.
12
So that would be then, for the application,
13
14 February; and 7 February for the statement.
14 MR WORDSWORTH: Yes, absolutely. Thank you.
15
MR PALMER: That's acceptable to the Claimant.
16 THE PRESIDENT: Excellent. That's a wonderful consensus.
17
Is there anything that the parties would like to add
18
before we close this hearing?
19 MR CLARKE: Madam President, if you'll indulge me just very
20
briefly.
21
As is the nature of these disputes, many points are
22
contested, and some strongly. But I'd like to emphasise
23
that that does not extend to Mr Palmer's note of thanks
24
that he made earlier, with which the Respondent would
25
very much like to join, with respect to Mr McGowan, the
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PCA and of course the members of the Tribunal. We are
2
in full agreement on that, Madam President.
3
Australia greatly appreciates the professionalism
4
and dedication of, indeed, the court reporter, the
5
technicians, particularly those responsible for the
6
public live stream, our Opus 2 colleagues, the PCA and
7
their staff, of course the Secretary to the Tribunal and
8
the members of the Tribunal themselves.
9
We of course extend our thanks to the Claimant and
10
its legal team for its professionalism and commitment to
11
a smooth and efficient hearing. And if you'll indulge
12
me, may I extend my thanks to the members of the
13
Respondent's team, particularly and perhaps especially
14
those who couldn't join us here in The Hague. And
15
I wish everyone safe travels home.
16
Thank you, Madam President.
17
THE PRESIDENT: Thank you.
18
Anything on your side?
19 MR PALMER: Well, the only thing I can add is "Happy
20
Christmas and Happy New Year", because we probably won't
21
meet again until after Christmas and New Year! So all
22
the best for the season. And that goes to everybody.
23
Thanks very much.
24 THE PRESIDENT: Thank you!
25
So it remains for the Tribunal to thank all of those
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(5.15 pm)
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(The hearing concluded)
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who contributed to this hearing and to these
2
proceedings: the PCA team and the PCA for its
3
hospitality in the Peace Palace; the court reporter; the
4
technicians, the Opus technicians and those who handle
5
the live stream. It was logistically a relatively
6
complex hearing and it worked absolutely impeccably, so
7
that needs to be emphasised.
8
I would also like to thank the party representatives
9
who attended here and remotely. There are people who
10
are watching and participating, whom we are not seeing
11
but who have been part of this hearing, and we should
12
acknowledge that.
13
Then of course I would like to thank counsel for
14
very professional conduct of this arbitration, not only
15
during the hearing but also during the entire written
16
phase. It was remarkable in terms of the quality of the
17
submissions; but also, even though this is a difficult
18
dispute for both parties -- we understand that -- it has
19
been a very friendly, collegial atmosphere among
20
counsel. And that is very much appreciated because it
21
helps the Tribunal focus on the real issues, rather than
22
being distracted by all kinds of procedural incidents
23
and skirmishes.
24
So I wish now everyone a very safe trip back and
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I close this hearing. Thank you very much to everyone.