KARNATAKA STATE LAW UNIVERSITY

INTERNATIONAL LAW MOOT COURT COMPRTITION

CASE CONCERNING, REQUESTING FOR AN ADVISORY OPINION OF THE

INTERNATIONAL COURT OF JUSTICE ON THE LEGALITY OF STABILISATION
CLAUSES IN INVESTMENT AGREEMENTS

ON SUBMISSION TO THE INTERNATIONAL COURT OF JUSTICE

THE PEACE PALACE, THE HAGUE, THE NETHERLANDS

MEMORIAL FOR THE REPUBLIC OF CRAIL IFIM LAW COLLEGE

Memorial on Behalf of the Respondents Team IFIM Law College.

TABLE OF CONTENTS
INDEX OF AUTHORITIES ....IV
STATEMENT OF JURISDICTION..VIII
QUESTIONS PRESENTED..IX
STATEMENT OF FACTS.X
PLEADINGS...1
1. That the International Court of Justice is not competent to render an advisory
opinion as requested by the UN General Assembly.1

2. That the international rules of investment law opt in general principles and
remedies and if UN principles are not required to resolve inconstancies4

3. That stabilization clauses in the BIT is valid under international law.12

PRAYER...XIII

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Memorial on Behalf of the Respondents Team IFIM Law College.

INDEX OF AUTHORITIES

Case Name

Page Number

Legality of the Threat or Use of Nuclear Weapons, Advisory Opinion, 1

1996 I.C.J. 226;
Legality consequences of Construction of a Wall in the Occupied 2
Palestine Territory, Advisory Opinion, 1996 I.C.J. 226;http://www.icjcij.org/docket/files/131/1677.pdf

Judgments of the Administrative Tribunal of the ILO upon Complaints 3

Made against Unesco (I.C.J. Reports 1956, p. 77)

Effect of Awards of Compensation Made by the United Nations 3

Administrative Tribunal (I.C.J. Reports 1954, p. 47)

Application for Review of Judgement No. 158 of the United Nations

Administrative Tribunal, Advisory Opinion, I.C.J. Reports 1973, p. 172,

para. 14

Conditions of Admission of a State in Membership of the United Nations

(Article 4 of the Charter), Advisory Opinion, 1948, I.C.J. Reports 19471948, p. 61

Parkerings-Compaignet v. Lithuania Award.

11

Feldman Karpa v. Mexico, Award and separate opinion, ICSID Case No 11

ARB(AF)/99/1; IIC 157 (2002);
Texaco v. Libya, 17 ILM 3 (1978), para. 88

12
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Memorial on Behalf of the Respondents Team IFIM Law College.

Duke Energy v. Ecuador Award

12

Saluka Award

12

LG& E Award

12

Methanex Corporation v. United States, Final Award on Jurisdiction and 13

Merits, Ad hocUNCITRAL Arbitration Rules; IIC 167 (2005)

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Memorial on Behalf of the Respondents Team IFIM Law College.

Bibliographical Material

Page No.

Kenneth J. Vandevelde, United States Investment Treaties: Policy and 5

Practice 7-22 (1992)
Ray C. Jones, NAFTA Chapter 11 Investor-to-State Dispute Resolution: 5
A Shield to Be Embraced or a Sword to Be Feared?, 2002 BYU L. Rev.
527, 529-31
E.I. Nwogugu, The Legal Problems of Foreign Investment in Developing 5
Countries 119-22 (1965)

David R. Adair, Investors' Rights: The Evolutionary Process of 5

Investment Treaties, 6 Tulsa J. Comp. & Int'l L. 195, 196-98 (1999);
David A. Gantz, Potential Conflicts Between Investor Rights and 5
Environmental Regulation Under NAFTA's Chapter II, 33 Geo. Wash.
Int'l L. Rev. 651, 719-20 (2001);
Todd S. Shenkin, Trade-Related Investment Measures in Bilateral 5
Investment Treaties and the GA TT: Moving Toward a Multilateral
Investment Treaty, 55 U. Pitt. L. Rev. 541, 570-76 (1994)

M. Sornarajah, International Law on Foreign Investment 231-37 (1994);

Anahid M. Ugurlayan, Armenia: Privatization and Foreign Direct 5

Investment in a Climate of Political and Economic Instability, 23 Loy.
L.A. Int'l & Comp. L. Rev. 427, 447-48 (2001).
Kenneth J. Vandevelde, The Bilateral Investment Treaty Program of the 5
United States, 21 Cornell Int'l L.J. 201 (1988);

Memorial on Behalf of the Respondents Team IFIM Law College.

Kenneth J. Vandevelde, U.S. Bilateral Investment Treaties: The Second
Wave, 14 Mich. J. Int'l L. 621 (1993).

Guillermo A. Alvarez & William W. Park, The New Face of Investment 5

Arbitration: NAFTA Chapter 11, 28 Yale J. Int'l L. 365, 366 (2003).

Adeoye Akinsanya, International Protection of Foreign Direct Investment 6

in the Third World, 36 Int'l & Comp. L.Q. 58 (1987);
Gerald Aksen, The Case for Bilateral Investment Treaties, in Private 6
Investors Abroad-Problems and Solutions in International Business in
1981, at 357 (Martha L. Landewehr ed., 1981);
Aron Broches, Bilateral Investment Protection Treaties and Arbitration of 6
Investment Disputes, in The Art of Arbitration, Liber Amicorum Pieter
Sanders 63 (Jan C. Shultsz & Albert Jan Van den Berg eds., 1982).

Jessica S. Wiltse, An Investor-State Dispute Mechanism in The Free 6

Trade Area of the Americas: Lessons from NAFTA Chapter Eleven, 51
Buff. L. Rev. 1145, 1153 (2003).

Antonio R. Parra, Provisions on the Settlement of Investment Disputes in 6

Modern Investment Laws, Bilateral Investment Treaties and Multilateral
Instruments on Investment, 12 ICSID Rev.-Foreign Investment L.J 287,
291-92 (1997)

Valpy FitzGerald, International Investment Treaties and Developing 6

Countries (Inst. of Dev. Studies), at
http://www.ids.ac.uk/tradebriefings/ti9.pdf

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Memorial on Behalf of the Respondents Team IFIM Law College.

U.S. Dep't of State, Updated U.S. Model Bilateral Investment Treaty 6

(Feb. 5, 2004), at
http://www.state.gov/documents/organization/29030.doc;

Ibrahim F.I. Shihata, Recent Trends Relating to Entry of Foreign Direct 7

Investment, 9 ICSID Rev.-Foreign Investment L.J. 47, 56 (1994);

Noah Rubins, Judicial Review of Investment Arbitration Awards, in

NAFTA Investment Law & Arbitration: Past Issues, Current Practice,

Future Prospects 354 (Todd Weiler ed., 2004)

Michael Reisman, Control Mechanisms in International Dispute

Resolution, 2 U.S.- Mex. L.J. 129 (1994).

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Memorial on Behalf of the Respondents Team IFIM Law College.

STATEMENT OF JURISDICTION

The Republic of Byzantia and the Republic of Crail have submitted the present dispute
concerning the Legality of Stabilisation Clauses in Investment Agreements, to the International
Court of Justice by Special communication dated 16th July 2015 addressed by the SecretaryGeneral of the United Nations to the President of the International Court of Justice. Both parties
shall accept the judgement of this court as final and binding and execute it in good faith in its
entirety.

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Memorial on Behalf of the Respondents Team IFIM Law College.

QUESTIONS PRESENTED

4. Whether the International Court of Justice is competent to render an advisory

opinion as requested by the UK General Assembly?
5. Whether the international rules of investment law opt in general principles and
remedies and if UN principles are required to resolve inconstancies.
6. Whether stabilization clause in the BIT is valid under international law.

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Memorial on Behalf of the Respondents Team IFIM Law College.

STATEMENT OF FACTS

The Republic of Byzantia is a democratic country which had signed 68 Bilateral Investment
treaties ( BITs) and 17 Double Taxation Avoidance Agreements (DTAAs). It acceded to the
International Centre for Settlement of Investment Disputes (ICSID) Convention on the
Settlement of Investment Disputes between States and Nationals of other States without
exclusions or reservations.
Golconda project and its details
To develop iron ore mine in Byzantia a multinational treaty was signed consisting of six parties. .
The project was called the Golconda Project, includes a gas-fired power plant with a total output
of up to 500 MW and other infrastructure, including a 280 km railway line, conveyor belts, and a
cargo port for importing natural gas and exporting iron ore. The six parties in the treaty are:
ARC, ARC Byzantia, being its wholly owned local subsidiary company for this project, the
government of the local province of Chagos , where the iron ore deposit is located, the
government of the local province of Lagos , where part of the railway line and the cargo port
were to be constructed, the government of Byzantia, and Byzantia Ferrous Company (BFC),
which is a wholly state owned corporation in Byzantia.
ARC, through ARC Byzantia, held 90% equity in the Golconda Project and BFC was to be
allocated 10% as free carry equity with profits to be shared after capital investment and
interest in the project were repaid or on completion of ten years from the date of commencement
of iron ore extraction, whichever was earlier. The agreement complied with all constitutionallegal procedures in Byzantia.
ARC envisaged an investment of up to US $ 8 billion for the project. Due to strong legal and
political opposition it became really difficult and protracted for acquisition of land and
environmental clearness.
Changes in mining and company laws and its impact
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Memorial on Behalf of the Respondents Team IFIM Law College.

In January 2008, the new central government in Byzantia presented draft legislative bills
proposing changes to its mining and company laws and invited further comments from
stakeholders.
Among the changes proposed, under the mining law, a levy equivalent to 100% of royalty on
iron ore should be paid to district mineral foundation for benefit to people in such districtadministration region. Further, under the company law, a sum equivalent to 5% of the average
net operating profit after tax for the preceding three years, or of average of such annual tax paid
in case the company has been in existence for a shorter duration, would be required to be spent
by the company on approved corporate social responsibility (CSR) initiatives.
ARC has stated its opinion on proposed statutory amends that these changes were detrimental to
the industry and economy of Byzantia and not in the best interest of the host communities and
state. It also said that these proposed amendments is not applicable to the project in view of the
stabilisation and good governance (hereinafter SGG) clause in the GPA. Further it stated that
the proposed legal amendments would render it economically unviable and also irreparably
damage Byzantias standing in the international financial market.
After extensive consultations with stakeholders, the draft bills were altered to address
weaknesses in the quality of the implementation processes prescribed therein but the financial
commitments required from companies remained unaltered. These changes were only applicable
to the Golconda project.
In January 2010, ARC served notice on Byzantia that it suspended to work for the project.
Further, Byzantia has given a legal notice to ARC that not left the Golconda project unproductive
and develop the project without delay. After further warnings Byzantia offered ARC a sum
equivalent to US $ 2.1 billion as full and fair compensation. After a lot of protest ARC accepted
the compensation to resolve the disputes.
ICSID Convention
In July 2011, ARC caused service of notice on Byzantia, initiating investment arbitration under
ICSID for breach of its investment treaty obligations. ARC is headquartered in the Republic of
Crail. Crail is also a party to the ICSID Convention and has a BIT with Byzantia.
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Memorial on Behalf of the Respondents Team IFIM Law College.

The Tribunals upheld ARC claim against Byzantia further it rejected due to not having
reasonably established with a sufficient degree of certainty in the circumstances of the project.
Byzantia filed for annulment of the arbitral award before the annulment committee but its request
was rejected by the committee.
Further Byzantia has used the principle of pacta sunt servanda to uphold its reputation and to
safeguard the international financial system. Crail has stated that Byzantias defense was based
on vague assertions concerning generic provisions and principles

xii

PLEADINGS

1. That the ICJ is not competent to render an advisory opinion on this subject.
The competence of the Court in this regard is based on Article 65, paragraph 1, of its Statute,
according to which the Court may give an advisory opinion on any legal question at the request
of whatever body may be authorized by or in accordance with the Charter of the United Nations
to make such a request1
Secondly, that the General Assembly, which seeks the advisory opinion, is authorized to do
so by Article 96, paragraph 1, of the Charter, which provides: The General Assembly or the
Security Council may request the International Court of Justice to give an advisory opinion on
any legal question. 2
One then needs to examine the scope of authority of the UNGA to seek for an advisory
opinion on this matter. The ICJ is often pressed to connect this link whilst seeking to establish its
own jurisdiction within the auspices of its ability to lay out its advisory opinion.3 Article 10 of
the Charter has conferred upon the General Assembly a competence relating to any questions or
any matters within the scope of the Charter. 4
The powers of the General Assembly are further elaborated under Article 11 of the UN
Charter, wherein the charter goes on to establish that in any matter concerning Principles of
Cooperation5 or concerning the maintenance of International Peace and Security 6 or calling the
attention of the states to an issue that may impact international peace and security7 or making
recommendations with respect to one state or states to the ICJ, the General Assembly shall have
powers to move such issues.

Article 65, ICJ Statute.

Article 96 Paragraph 1 ICJ statute.
3
Legality consequences of Construction of a Wall in the Occupied Palestine Territory, Advisory Opinion, 1996
I.C.J. 226;http://www.icj-cij.org/docket/files/131/1677.pdf
4
Art 10, UN Charter
5
Art 11(1), UN Charter.
6
Art 11(2) UN Charter.
7
Art 11(3) UN Charter.
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Memorial on Behalf of the Respondents Team IFIM Law College.

Further, we submit that 11(4) of the UN Charter clearly establishes that nothing in Article 11
shall limit the range of subject that the General Assembly can discuss or vote upon as allowed
for under Article 10.8
1.1 That the General Assembly cannot raise an advisory question in this matter.
The authority of the General Assembly to bring points to the fore and raise and advisory
request on behalf of are limited to matters within the auspices of the UN charter and that concern
international peace and security and matters generally concerning the developments in the
international community. In the instant case the UNGA has taken up a matter concerning a BIT
between two states and as to satisfy and entirely political motive moved the house to vote on this
issue.
The private trade arrangements in a bilateral arrangement are not a factor to be addressed by
the UNGA and falls squarely outside the scope of their power under Article 10 of the UN
Charter. Therefore the application to the ICJ itself in the first instance is invalid by a conjoint
reading of article 10 and 11 of the UN charter.
1.2 Alternatively, that the ICJ cannot exercise jurisdiction in this matter.
Firstly, the current point of advice is beyond the Court's competence to give an opinion on.
There is no clarity on the legality of the use of Advisory jurisdiction in such matters and doubs
have been voiced regarding the legality of the use of the advisory jurisdiction for the review of
Judgments of Tribunals. The contentious jurisdiction of the Court, it has been urged, is limited
by Article 34 of its Statute9 to disputes between States; and it has been questioned whether the
advisory jurisdiction may be used for the judicial review of contentious proceedings which have
taken place before other tribunals10 and to which individuals were parties.11
Secondly, Article 64 of the ICSID confers on the International Court of Justice
jurisdiction over disputes between Contracting States regarding the interpretation or application
of the Convention which are not settled by negotiation and which the parties do not agree to

Art 11(4) UN Charter.

Art 34 ICJ Statute
10
http://www.icj-cij.org/docket/files/57/6027.pdf
11
http://www.icj-cij.org/docket/files/57/6027.pdf
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Memorial on Behalf of the Respondents Team IFIM Law College.

settle by other methods. While the provision is couched in general terms, it must be read in the
context of the Convention as a whole. Specifically, the provision does not confer jurisdiction on
the Court to review the decision of a Conciliation Commission or Arbitral Tribunal as to its
competence with respect to any dispute before it. Nor does it empower a State to institute
proceedings before the Court in respect of a dispute which one of its nationals and another
Contracting State have consented to submit or have submitted to arbitration, since such
proceedings would contravene the provisions of Article 27, unless the other Contracting State
had failed to abide by and comply with the award rendered in that dispute.12
Thirdly, since the application cannot be to review the award rendered by ICSID, the ICJ
is also bound by the principles of res judicata and can therefore not render an opinion to alter the
rights of parties and their obligations already settled and clarified by the ICSID arbitration in this
instance.13
For all of the above reasons, the advisory jurisdiction of the ICJ cannot be validly
exercised in this matter.

12

Para 42, Report of The Executive Directors on The Convention on The Settlement of Investment Disputes
between States and Nationals of other States, IBRD March 18 1965.
13
Effect of Awards of Compensation Made by the United Nations Administrative Tribunal (I.C.J. Reports 1954, p.
47)

Memorial on Behalf of the Respondents Team IFIM Law College.

2. That the international rules of investment law opt in general principles and
remedies and do not need to adhere to the old regime of UN principles.
In order to avoid the historical difficulties associated with "gunboat diplomacy," countries
have promulgated treaties to promote foreign investment and instill confidence in the stability of
the investment environment.14 This movement began with Treaties of Friendship, Commerce and
Navigation,15 but soon moved beyond this as these treaties were limited commitments that did
not have a forum for resolving disputes.16 There were soon efforts to enact multilateral
investment treaties, which would grant investors and sovereigns a series of rights and obligations
in the hopes of fostering foreign direct investment. Given the difficulties in promulgating
sweeping reforms on a multilateral basis, these initiatives were largely unsuccessful. 17
Thereafter, various countries turned to bilateral treaties to secure rights for international
investors and encourage efforts to promote stable investment climates.18 Sovereigns quickly
learned that investment treaties can be a major tool for "enhancing the type of asset protection
that facilitates wealth-creating cross-border capital flows, bringing net gains for both host state
and foreign investors.19 The existence and negotiation of BITs has had a great influence on the
formulation of international public policy,20 and these treaties are now a touchstone of
international relations.21

14

See Kenneth J. Vandevelde, United States Investment Treaties: Policy and Practice 7-22 (1992) (describing the
evolution of foreign policy from the use of military force to treaties of friendship, navigation, and commerce, and
finally to bilateral investment treaties); Ray C. Jones, NAFTA Chapter 11 Investor-to-State Dispute Resolution: A
Shield to Be Embraced or a Sword to Be Feared?, 2002 BYU L. Rev. 527, 529-31 (describing the shift from
"gunboat diplomacy" to investment treaties);
15
E.I. Nwogugu, The Legal Problems of Foreign Investment in Developing Countries 119-22 (1965)
16
See, e.g., Gudgeon, supra note 8, at 108; see also David R. Adair, Investors' Rights: The Evolutionary Process of
Investment Treaties, 6 Tulsa J. Comp. & Int'l L. 195, 196-98 (1999); David A. Gantz, Potential Conflicts Between
Investor Rights and Environmental Regulation Under NAFTA's Chapter II, 33 Geo. Wash. Int'l L. Rev. 651, 719-20
(2001); Todd S. Shenkin, Trade-Related Investment Measures in Bilateral Investment Treaties and the GA TT:
Moving Toward a Multilateral Investment Treaty, 55 U. Pitt. L. Rev. 541, 570-76 (1994)
17
M. Sornarajah, International Law on Foreign Investment 231-37 (1994); see also UNCTAD, Fair And Equitable
Treatment at 11-12, U.N. Doc. UNCTAD/ITE/IIT/1l (Vol. III), U.N. Sales No. E.99.II.D.15 (1999).
18
See Anahid M. Ugurlayan, Armenia: Privatization and Foreign Direct Investment in a Climate of Political and
Economic Instability, 23 Loy. L.A. Int'l & Comp. L. Rev. 427, 447-48 (2001). Kenneth J. Vandevelde, The Bilateral
Investment Treaty Program of the United States, 21 Cornell Int'l L.J. 201 (1988); Kenneth J. Vandevelde, U.S.
Bilateral Investment Treaties: The Second Wave, 14 Mich. J. Int'l L. 621 (1993).
19
Guillermo A. Alvarez & William W. Park, The New Face of Investment Arbitration: NAFTA Chapter 11, 28 Yale
J. Int'l L. 365, 366 (2003).
20
Adeoye Akinsanya, International Protection of Foreign Direct Investment in the Third World, 36 Int'l & Comp.
L.Q. 58 (1987); Gerald Aksen, The Case for Bilateral Investment Treaties, in Private Investors Abroad-Problems

Memorial on Behalf of the Respondents Team IFIM Law College.

The number of BITs has exploded in recent years.22 In the 1990s alone, investment treaties were
negotiated at a rate of one every other day.23 Several multilateral investment treaties were also
enacted.24 ' At the same time as the number of bilateral investment treaties quintupled,25 foreign
direct investment has also experienced a fivefold increase.26
Investment treaties have two fundamental innovations, which represent a departure from
previous international agreements.27 First, they grant investors a series of specific substantive
rights, which help contribute to the stable investment climate of an investment.
offer investors direct remedies to address violations of those substantive rights.

28

29

Second, they

The provisions

of investment treaties are remarkably similar.30 While there are variations in the specific
substantive rights and obligations that result from treaty-specific negotiations, there are several
trends in the rights that Sovereigns choose to provide.31 In general, Sovereigns agree to protect
the investments of investors from the other Sovereign in their own territory. They do this by
delineating the specific substantive standards that govern the host state's treatment of an
investment.32

and Solutions in International Business in 1981, at 357 (Martha L. Landewehr ed., 1981); Aron Broches, Bilateral
Investment Protection Treaties and Arbitration of Investment Disputes, in The Art of Arbitration, Liber Amicorum
Pieter Sanders 63 (Jan C. Shultsz & Albert Jan Van den Berg eds., 1982).
21
see also Jessica S. Wiltse, An Investor-State Dispute Mechanism in The Free Trade Area of the Americas:
Lessons from NAFTA Chapter Eleven, 51 Buff. L. Rev. 1145, 1153 (2003).
22
See Eloise Obadia, ICSID, Investment Treaties and Arbitration: Current and Emerging Issues, ICSID News, Fall
2001, at 4
23
Vandevelde The Economics, supra note 8, at 469
24
Antonio R. Parra, Provisions on the Settlement of Investment Disputes in Modern Investment Laws, Bilateral
Investment Treaties and Multilateral Instruments on Investment, 12 ICSID Rev.-Foreign Investment L.J 287, 291-92
(1997)
25
ICSID, supra note 21, at 41-42
26
Valpy FitzGerald, International Investment Treaties and Developing Countries (Inst. of Dev. Studies), at
http://www.ids.ac.uk/tradebriefings/ti9.pdf
27
The Free Trade Agreement of the Americas ("FTAA") is currently being negotiated and is due to be finalized in
2005.
28
See generally Dolzer & Stevens
29
See Robin, supra note 8, at 943
30
Vandevelde The Economics, supra note 8, at 469
31
U.S. Dep't of State, Updated U.S. Model Bilateral Investment Treaty (Feb. 5, 2004), at
http://www.state.gov/documents/organization/29030.doc;
32
European BITs, for example, typically require a host government to provide fair and equitable treatment to
investments, permit the free transfer of the foreign company's earnings (unless there is an extraordinary trade
deficit), and permit expropriation only when there is a public purpose and appropriate compensation.

Memorial on Behalf of the Respondents Team IFIM Law College.

There are different permutations of the substantive rights granted to investors.33 A typical
investment treaty generally provides investors with a combination of up to seven different
substantive rights.34 First, investors are often guaranteed the payment of adequate compensation
in the event an investment is expropriated.35 Second, Sovereigns are prohibited from enacting
currency controls so as to promote the free flow of capital.

36

Third, Sovereigns are required not

to discriminate on the basis of nationality; this typically means investors cannot be treated worse
than the Sovereign's own citizens or other foreigners.37 Fourth, Sovereigns promise to treat
investments fairly and equitably.38 Fifth, Sovereigns promise to provide full protection and
security to an investment. 38 Sixth, sovereigns guarantee that investments will not be treated less
favorably than the minimum standard required by customary international law.

33

39

Finally,

See Reed et al., supra note 31, at 40. Reed explains that investment treaties "are the product of negotiation
between two sovereign States, and the exact scope and content of [investment treaties] vary considerably-even
among those signed by a single country. The variances reflect the States' different investment approaches and
respective bargaining positions." Id.
34
Ibrahim F.I. Shihata, Recent Trends Relating to Entry of Foreign Direct Investment, 9 ICSID Rev.-Foreign
Investment L.J. 47, 56 (1994); Vandevelde, Invesment Liberalization, supra note 8, at 506-07, 522.
35
see also Parra, Provisions, supra note 21, at 288-89; Ibrahim F.I. Shihata, Recent Trends Relating to Entry of
Foreign Direct Investment, 9 ICSID Rev.-Foreign Investment L.J. 47, 56 (1994); Vandevelde, Invesment
Liberalization, supra note 8, at 506-07, 522.
36
The Argentina-Jamaica BIT provides that neither country shall take any measure of nationalization or
expropriation or any other measure having the same effect against investments in its territory belonging to investors
of the other [country], unless the measures are taken in the public interest, on a non-discriminatory basis and under
due process of law. The measures shall be accompanied by provisions for the payment of prompt, adequate and
effective compensation. Agreement Between the Government of Jamaica and the Government of the Argentine
Republic on the Promotion and Reciprocal Protection of Investments, Feb. 8, 1994, Jam.-Arg., art. 4(1), at
http://www.unctad.org/sections/dite/iia/docsIbits/argentina-jamaica.pdf.
37
Article V(1) of the U.S.-Uzbekistan BIT provides that both countries shall permit all transfers relating to a
covered investment to be made freely and without delay into and out of its territory. Such transfers include: (a)
contribution to capital; (b) profits, dividends, capital gains, and proceeds from the sale of all or any part of the
investment or from the partial or complete liquidation of the investment; (c) interest, royalty payments, management
fees, and technical assistance and other fees; (d) payments made under a contract, including a loan agreement; and
(e) compensation [for expropriation and losses due to armed conflict], and payments arising out of an investment
dispute. Treaty Between the Government of the United States of America and the Government of the Republic of
Uzbekistan Concerning the Encouragement and Reciprocal Protection of Investment, Dec. 16, 1994, U.S.-Uzb., S.
Treaty Doc. No. 104-25 (1995), available at http://www.unctad.org/sections/dite/iia/docs/bits/us-uzbekistan.pdf.
38
Article 3 of the Denmark-Lithuania BIT provides that neither country "shall in any way impair by unreasonable or
discriminatory measures the management, maintenance, use, enjoyment or disposal of investments in its territory"
and that neither country shall subject investors or investments "to treatment less favourable than that which it
accords to its own [investments or returns and] investors or to investors of any third State." Agreement Concerning
the Promotion and Reciprocal Protection of Investments (with exchange of notes), Mar. 30, 1992, Den.-Lith., art
3(1-3), 1787 U.N.T.S. 245, 247, available at http://www.unctad.org/sections/dite/iia/docs/bits/denmarklithuania.pdf.
39
The specific formulation of this right will depend on the specific treaty at issue. Article 1105(1) of NAFTA
provides that "[e]ach Party shall accord to investments of investors of another Party treatment in accordance with
international law, including fair and equitable treatment and full protection and security." NAFTA, supra note 1, art.
1105, 32 I.L.M. at 639-40.

Memorial on Behalf of the Respondents Team IFIM Law College.

Sovereigns sometimes agree to honor commitments they have made regarding an investment.40
While some of these rights are a confirmation of obligations Sovereigns owe under customary
international law, others are new

2.1 That there are existing remedies for inconsistencies.

Inconsistent decisions generally arise under three typical scenarios. First, different tribunals
can come to different conclusions about the same standard in the same treaty. This might, for
example, involve the North American Free Trade Agreement ("NAFTA") tribunals coming to
different conclusions about the meaning of the same NAFTA article. Second, different tribunals
organized under different treaties can come to different conclusions about disputes involving the
same facts, related parties, and similar investment rights. These types of cases will typically
involve investments that have been structured to take advantage of multiple investment treaties
so that, when a dispute arises, claims can be brought by related corporate entities under different
treaties. Finally, different tribunals organized under different investment treaties will consider
disputes involving a similar commercial situation and similar investment rights, but will come to
opposite conclusions. The increase in the number of investment arbitrations and the tactical
structuring of investments to create claims under multiple investment treaties increases the
likelihood of inconsistent decisions.
Under the current framework, the options for addressing these inconsistent decisions are
limited. However, there is a system addressing inconsistencies across the investment treaty
network. A plethora of mechanisms was inherited from international commercial arbitration
wherein there are options to review awards to address procedural deficiencies. These options
range from requesting a modification of an award under applicable rules to attacking the award
in national courts on a number of grounds. In the first instance, a dissatisfied party can ask either

40

Article II(3)(a) of the U.S.-Estonia BIT provides that investments "shall enjoy full protection and security." U.S.Estonia BIT, supra note 37. The AustraliaUruguay BIT similarly provides that each party "accord within its territory
protection and security to investments and shall not impair the management, maintenance, use, enjoyment or
disposal of investments."

Memorial on Behalf of the Respondents Team IFIM Law College.

the tribunal or an arbitral institution to review and modify an award. The rules applicable to the
arbitration strictly circumscribe what type of conduct might justify modification.41
The most utilized option in investment arbitration for attempting to remedy inconsistent
decisions is to attack the award after it is made.42 Specifically, parties that have received
inconsistent arbitral awards have options to either: (1) annul the award or (2) try to vacate an
award at the seat of the arbitration and/or contest enforcement at the place where enforcement is
sought. But which option is available depends wholly upon whether an award is rendered under
the ICSID Convention.43
Inconsistent arbitral awards can be challenged at the place of arbitration. This means the
judicial review of an award is governed by the local arbitration law of the arbitral seat. While the
grounds for challenging awards tend to be narrow, certain trends have emerged for the review of
awards at the seat of arbitration. At one end of the spectrum, national laws permit the awards to
be reviewed on issues of law. At the other end of the spectrum, national legislation only permits
a challenge on specific, narrow grounds designed to promote the procedural integrity of the
arbitration process. Initiating a vacature proceeding is an option to challenge the award at the
place of arbitration. In contrast, there are also indirect opportunities to attack awards by blocking
an award's enforcement; and these challenges can be made in different courts where successful
parties are trying to enforce upon assets.
In order to have an ICSID Convention arbitration, both the investor's country and the Sovereign
must be signatories of the ICSID Convention and there must be a qualifying dispute.44 For these
ICSID Convention arbitrations, a losing party can only attack an award under the ICSID
Convention. ICSID permits parties to seek annulment of an award through an ad hoc committee
of three arbitrators who are appointed entirely by ICSID.45 An annulment proceeding is not an
appeal of the legal merits,46 rather, the ad hoc committee examines the procedural propriety of
the award. Annulment under the ICSID Convention is quite limited. The five available grounds
41

See ICSID art 49.

Noah Rubins, Judicial Review of Investment Arbitration Awards, in NAFTA Investment Law & Arbitration: Past
Issues, Current Practice, Future Prospects 354 (Todd Weiler ed., 2004)
43
ICSID Convention art 52.
44
Christoph H. Schreuer, The ICSID Convention: A Commentary (2001).
45
ICSID Convention art 52.
46
Christoph H. Schreuer, The ICSID Convention: A Commentary (2001).
42

Memorial on Behalf of the Respondents Team IFIM Law College.

are: (1) the original arbitral tribunal was not properly constituted, (2) the arbitral tribunal
manifestly exceeded its powers, (3) a tribunal member was corrupt, (4) there was a serious
departure from a fundamental rule of procedure, or (5) the award does not state the reasons upon
which it was based.47 A tribunal's mistake of law or fact cannot justify the annulment of an
award as neither of these are enumerated grounds.48
Thus, even under the current body of rules in International Investment Law, there are several
modes of correcting inconsistencies.
2.2 That there exists sufficient legitimacy within the system of rules that embody
International Investment Law since it co-opts basic principles of International Law.
The rule of law is essential to those participating in the global economy."49Without the
clarity and consistency of both the rules of law and their application, there is a detrimental
impact upon those governed by the rules and their willingness and ability to adhere to such rules,
which can lead to a crisis of legitimacy.50 Legitimacy depends in large part upon factors such as
determinacy and coherence, which can in turn beget predictability and reliability. 51 Related
concepts such as justice, fairness, accountability, representation, correct use of procedure, and
opportunities for review also impact conceptions of legitimacy.52 When these factors are absent
individuals, companies and governments cannot anticipate how to comply with the law and plan
their conduct accordingly, thereby undermining legitimacy.
47

ICSID Convention art 52(1).

ICSID Convention art 52.
49
Ren6 Lettow Lerner, International Pressure to Harmonize: The U.S. Civil Justice System in an Era of Global
Trade, 2001 BYU L. Rev. 229, 231.
50
See James Willard Hurst, Problems of Legitimacy in the Contemporary Legal Order, 24 Okla. L. Rev. 224, 224
(1971) (suggesting that "[l]egitimacy means simply the grounds on which at any given time most of the people
accept, or are willing to use, the legal order as they find it" and that it is premised upon the idea that "law should be
good for, and justly serve, the people who live within it"); Marjorie E. Kornhauser, Legitimacy and the Right of
Revolution: The Role of Tax Protests and Anti-Tax Rhetoric in America, 50 Buff. L. Rev. 819, 830-31 (2002)
(explaining that legitimacy justifies the moral authority of the existing order and any substantial challenge to
legitimacy threatens the capacity to govern).
51
See Thomas M. Franck, The Power of Legitimacy Among Nations 49 (1990) [hereinafter Thomas Franck, The
Power of Legitimacy] (explaining that the indicators of rule legitimacy in international law are determinacy,
symbolic validation, coherence, and adherence); see also Brower, Structure, supra note 128, at 52-86 (describing
Professor Franck's approach to legitimacy and using it as a useful prism for analyzing shortcomings in the NAFTA
context).
52
David D. Caron, The Legitimacy of the Collective Authority of the Security Council, 87 Am. J. Int'l L. 552, 56061 (1993); G.C.A. Junne, International Organizations in a Period of Globalization: New (Problems of) Legitimacy,
in The Legitimacy of International Organisations 189, 191, 195 (Jean-Marc Coicaud & Veijo Heiskannen eds.,
2001).
48

Memorial on Behalf of the Respondents Team IFIM Law College.

Determinacy involves using rules to convey clear and transparent expectations. 53 In the
context of investment arbitration, this means that investors' rights and Sovereigns' obligations are
expressly spelled out. Many rules, however, are inevitably indeterminate as they cannot feasibly
predict, in advance, all the situations to which the rule might possibly apply. Investment treaties,
like other types of rules, often enumerate a vague standard in an effort to use discretion to
promote fairness or facilitate agreement. There are costs to this approach, however, as
indeterminate rules obscure the boundaries of appropriate conduct and also facilitate the creation
of justifications for non- compliance.54 Such a difficulty raises concerns about the effectiveness
and correctness of the rules and undermines the legitimacy of the standard. Even if standards in
investment treaties have low textual clarity,55 they are not per se illegitimate. By having an
"authority recognized as legitimate" to provide clarification on the meaning and application of
rules, interpretation can rectify textual indeterminacy. The success of such "interpretive
determinacy," however, depends upon who does the interpretation, their authority to interpret,
and the coherence of the decisions they reach.56 The issue facing investment arbitration is
whether a neutral arbitral tribunal composed of private individuals, such as public international
law experts who may be chosen by the parties, can and actually does apply investment rights in a
correct and coherent manner. Coherence is another key element of legitimacy; it requires
consistency of interpretation and application of rules in order to promote perceptions of fairness
and justice.57 As aptly explained by Professor Thomas Franck, "[a] rule is coherent when its
application treats like cases alike when the rule relates in a principled fashion to other rules in the
same system. Consistency requires that a rule, whatever its content, be applied uniformly in
every 'similar' or 'applicable' instance."58 Even the different application of the same rule does not
necessarily undermine legitimacy "as long as the inconsistencies can be explained to the

53

Thomas M. Franck, Fairness in International Law and Institutions 30 (1995) [hereinafter Thomas Franck,
Fairness]. Determinacy has the same qualities of transparency and is synonymous with clarity. Thomas Franck, The
Power of Legitimacy, supra note 50 at 52.
54
Thomas Franck, Fairness, supra note 51, at 31; Thomas Franck, The Power of Legitimacy, supra note 50, at 5354.
55
For example, one might suggest that the standard of "fair and equitable treatment" lacks textual clarity
56
Thomas Franck, Fairness, supra note 51, at 31; Thomas Franck, The Power of Legitimacy, supra note 50, at 5354.
57
Thomas Franck, Fairness, supra note 51, at 31; Thomas Franck, The Power of Legitimacy, supra note 50, at 5354.
58
ibid

10

Memorial on Behalf of the Respondents Team IFIM Law College.

satisfaction of the community by a justifiable (i.e. principled) distinction."59 This means that
incoherence can be clarified on a case-by-case basis or by rationally connecting meaning with
other rules.60In this manner, facially inconsistent decisions can become coherent and minimize
perceived injustice and unfairness.
Establishing such a coherent jurisprudence is difficult, however, with new and relatively
untested standards. When there are a minimal number of cases and it is a challenge to find other
appropriate areas of developed jurisprudence from which to draw, decisions are often seen as
more "lawless."61 This challenge is relevant in investment treaty arbitration where new standards
are being applied for the first time, clever investors are testing the boundaries of their rights, and
arbitrators do not have the luxury of drawing upon a mature jurisprudence.62
Once investment arbitration jurisprudence has an opportunity to develop, and cases
define parameters regularly and consistently, indeterminate rules can move past the initial
"growing pains" to gain greater coherence.63 The resulting transparency of rules and fairness of
application can then minimize the tensions related to perceived unfairness between investors,
who have reasonable expectations of investment stability, and Sovereigns, who have obligations
to their nationals and expectations about the extent of their bargained-for treaty obligations.324
Such transparency will also promote legitimacy by enhancing the perception that tribunals render
decisions according to the correct procedures and thereby promote just and honest decision
making. 2 1 Despite the "growing pains," the literature acknowledges that using arbitral tribunals
to resolve investment disputes has been an important factor in fostering foreign investment,
encouraging transfers of capital and know-how exchanges, and providing a basis for the longterm benefits of investors and sovereigns alike.64
Therefore the need to rely on UN charter principles and therefore the ICJ Advisory
opinion is unfounded.

59

ibid
ibid
61
ibid
62
Tribunals have, however, been able to draw on case law from the World Trade Organization and the International
Court of Justice in analyzing certain international law standards. This has the benefit of "adherence" to established
international and institutional norms and can enhance the legitimacy of investment arbitration. Ibid.
63
Ibid.
64
See Alvarez & Park
60

11

Memorial on Behalf of the Respondents Team IFIM Law College.

3. The stabilization clause in the BIT is valid under international law.
A. The stabilization clause in the present case does not per se prevent the Respondent from
exercising its regulatory powers.
Under international investment law, stabilization clauses are standard provisions in investment
contracts that accommodate the risk of regulatory changes for investors65. Their main objective is
to guard the investor against abuse of sovereignty by the host State through sudden and
unwarranted changes in the domestic legal regime to the detriment of the foreign investor. In
LETCO v. Liberia, the ICSID tribunal expressly recognized that the main purpose of
stabilization clauses was to protect against arbitrary actions of the contracting government and
could not totally impair the sovereign power of states66.
It is emphasized that stabilization clauses (even in the nature of freezing clauses) do not exclude
a host governments exercise of power in the public interest67. Where the government of the host
State violates a stabilization clause, this does not hinder change in law but turns it illegal and
triggers compensation for unlawful acts68.
Therefore, the obligation that rests on the host State is to act in good faith and where this
obligation is breached, it gives rise to an obligation to compensate69.
B. Breach of the stabilization clause violates the Fair and Equitable Standard under the
Crail-Byzantia BIT.
One of the foremost protections guaranteed to investors under modern investment law is the
guarantee of Fair and Equitable Treatment (FET) by the host State. Further, protection of
investors legitimate expectations has been repeatedly identified by arbitral tribunals as a
dominant element of the FET standard70.

65

Audley Sheppard & Anthony Crockett, Are Stabilization Clauses a threat to Sustainable Development, in MarieClaire Cordonier Segger, Markus W. Gehring, Andrew Paul Newcombe (eds.), Sustainable Development in World
Investment Law, 1st ed. 2011, p. 334.
66
26 ILM 666-7; Maniruzzaman, op. cit., p. 140.
67
Maniruzzaman, op. cit., p. 126.
68
Wlde, T.W. (1994), op. cit., p. 38.
69
Maniruzzaman, op. cit., p. 141.
70
Saluka Award; Bayindir v. Pakistan Award.

12

Memorial on Behalf of the Respondents Team IFIM Law College.

The arbitral tribunal in Suez v. Argentina stated it is the aggregate of the existence of
expectations created in a foreign investor by host countrys laws, coupled with the act of
investing capital in reliance on them and a subsequent, sudden change in that legislative
framework that constitutes a violation of the FET standard.71
It has been recognized under modern investment law that in order to be protected, the investors
expectations must be reasonable, must arise from the conditions that the State offered the
investor at the time of making the investment and the investor must have relied on them while
deciding to invest72. In Parkerings v. Lithuania, the ICSID tribunal acknowledged that the
investors expectations are legitimate if the host state has made an explicit promise or an implicit
promise which was taken into account by the investor when making the investment:
It is each States undeniable right and privilege to exercise its sovereign legislative
power. A State has the right to enact, modify or cancel a law at its own discretion.
Save for the existence of an agreement, in the form of a stabilisation clause or
otherwise, there is nothing objectionable about the amendment brought to the
regulatory framework existing at the time an investor made its investment. As a
matter of fact, any businessman or investor knows that laws will evolve over time.
What is prohibited however is for a State to act unfairly, unreasonably or inequitably
in the exercise of its legislative power73. (emphasis added)
In the present case, the SGG Clause was an explicit promise made to the Claimant that it shall be
entitled to a stable legal framework with respect to its investment, which it relied upon at the
time of making its investment in the State of Byzantia.
Therefore, by breaching the stabilization clause due to the amendments to mining and company
laws, the State of Byzantia frustrated the legitimate expectations of the claimant and has violated
the standard of fair and equitable treatment explicitly guaranteed under the BIT.
C. The stabilization clause is not in conflict with the obligations of the State of Byzantia
under the UN Charter.

71

Suez v. Argentina Award.

Duke v. Ecuador Award; LG & E v. Argentina Award.
73
Parkerings-Compagniet AS v. Lithuania, para. 332
72

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Memorial on Behalf of the Respondents Team IFIM Law College.

Article 55 of the UN Charter states:
With a view to the creation of conditions of stability and well-being which are
necessary for peaceful and friendly relations among nations based on respect for the
principle of equal rights and self-determination of peoples, the United Nations shall
promote:
a. higher standards of living, full employment, and conditions of economic and social
progress and development;
b. solutions of international economic, social, health, and related problems; and
international cultural and educational cooperation; and
c. universal respect for, and observance of, human rights and fundamental freedoms
for all without distinction as to race, sex, language, or religion. (emphasis added)
In accordance with Article 31 of the Vienna Convention on the Law of Treaties, the language of
this provision the United Nations shall promote clearly shows that this provision does not
seek to create any specific binding obligations for the Member States. These goals are
aspirational in nature and read with Article 56, it only requires that States must cooperate with
the UN in the achievement of these goals.
Since there is no obligation being imposed on the State of Byzantia under Article 55 read with
Article 56, there is no possibility of conflict between the Crail-Byzantia BIT and the UN Charter
that may require the application of Article 103 of the Charter.
In conclusion, it is submitted that the stabilization clause in the present case is legally valid.

14

PRAYER FOR RELIEF

Crail respectfully requests this Honorable Court to adjudge and declare that:

a) The International Court of Justice is not competent to render an advisory opinion as

requested by the UK General Assembly.
b) The Investment Arbitration is a wholesome process with requisite remedies and one need
not refer to the age old UN charter principles to resolve investment disputes.
c) The Stabilisation cause provides balanced safeguards to parties in investment agreements
and does not have any effect restricting a states obligations and sovereign and is
therefore valid.

Respectfully submitted,

(Agents for Crail)

xiii