TEAM: FLEISCHHAUER

INTERNATIONAL CENTRE FOR SETTLEMENT OF INVESTMENT DISPUTES

In the arbitration proceeding between

FRIENDSLOOK PLC., SPEAKUP MEDIA INC., AND WHISTLER INC.

(Claimants)

vs.

REPUBLIC OF TYREA

(Respondent)

ICSID Case No. ARB/18/155

SKELETON BRIEF ON BEHALF OF THE RESPONDENT

29 July, 2019
 ARGUMENTS

PART-1: PROVISIONAL MEASURES

I. GRANT OF PROVISIONAL MEASURES.

A. Four conditions of provisional measures:
1. Prima Facie jurisdiction: The Tribunal has jurisdiction to grant such measures unless
otherwise agreed. (Article 47, ICSID Convention; Rule 39 [1], Arbitration Rules).
2. Prima Facie rights: Right to preservation of status quo and non-aggravation of disputes
are pre-existing rights capable of protection (Burlington Resources vs. Ecuador, ¶
60). Parties are under duty to ensure the procedural integrity of proceedings (Churchill
Mining vs. Indonesia, ¶ 46).
3. Urgency: Request of non-aggravation of dispute as a provisional measure fulfils the
urgency requirement by definition (Quiborax vs. Bolivia, ¶ 153). The measures
requested cannot be delayed for the final award as there is damage to the reputation of
Tyrea in the world economy (Statement of Uncontested Facts, ¶ 26).
4. Necessity: There exists a ‘threat or possibility of irreparable harm to the rights invoked’
(Tokios Tokelės vs. Ukraine, ¶ 8). Serious and substantial harm has been done to
the economic and political situation of Tyrea which cannot be compensated monetarily
(Request for Provisional Measures, ¶ 8-9).
B. Breach of duty of Confidentiality: The ICSID Convention (“Convention”) imposes a
duty of good faith on the parties to not publish material related to the case that may
exacerbate or present a misleading picture of the dispute (Biwater Gauff vs. Tanzania,
¶ 136). A ‘large press campaign’ will adversely affect Tyrean economy which lacks foreign
capital (Amco Asia vs. Indonesia, ¶ 411).
PART-2: JURISDICTION

II. LACK OF JURISDICTION DUE TO DENUNCIATION.

A. Claimants perfected the consent after the Notice of Denunciation:
1. ‘Consent’ used in Article 72 is perfected consent: For invoking rights and obligations
under the ICSID Convention, consent must be obtained from both (or all) parties (C.
Schreuer, Denunciation of the ICSID Convention and Consent to Arbitration,
pg. 4).
2. Consent must be perfected before the Notice of Denunciation: As per Article 72 of
the Convention, ‘consent’ is perfected if given prior to the receipt of Notice of
Denunciation by the depository (Fábrica De vs. Venezuela, ¶ 271). Claimants failed

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 to do so as they perfected it after the notice of denunciation by the Respondent.
(Respondent’s Exhibit-1, pg. 27).
B. Tyrea was not a contracting state at the time of institution of proceedings: The
critical date for the status of contracting state is the time of institution of proceedings (C.
Schreuer, The ICSID Convention: A Commentary by Christoph H. Schreuer). A
proceeding under the Convention shall be deemed to have been instituted on the date of
the registration of the request (Rule 6(2), Institution Rules). The Respondent was not a
contracting state when the request was registered (Notice of Registration, pg. 21;
Respondent Exhibit-1, pg. 27).
III. TRIBUNAL LACKS JURISDICTION OVER MULTI-PARTY ARBITRATION.
A. Silence of ICSID Convention and Arbitration rules: The Convention and Arbitration
Rules do not expressly provide the procedure and requirements to deal with multi-party
arbitration (Ambiente Ufficio vs. Argentina, ¶ 126). A contrary interpretation of such
law will be invalid according to international law (Abaclat vs. Argentina, ¶ 166).
B. Absence of Rationae Voluntatis: ‘Party Consent’ is the cornerstone of the jurisdiction
to the ICSID Centre. Lack of secondary consent is an obstacle which cannot be removed
through interpretation and rhetoric rules as Tribunals lack legislative jurisdiction (Mass
claims under ICSID: Katarzyna Sarbara Szczudlik). Article 9(1) of the BITs gives
jurisdiction to ICSID Tribunals only over bi-party claims which constitutes a norm in
arbitration.
C. Different nationalities and BITs: A dispute may have more than one claimant provided
the claims of all parties on one side are identical in all aspects (Alemanni vs. Argentina,
¶ 292). The disputes emanate from distinct nationals and distinct BITs, without any
contractual link (Statement of Uncontested Facts, ¶ 2), and are therefore inadmissible.
PART-3: MERITS

IV. FAIR AND EQUITABLE TREATMENT TO INVESTORS

A. Temporary banning does not violate FET standard.
1. No violation of FET standard: FET standard comprises of 3 elements: legitimate
protection; due process; and, substantive unfairness (Waste Management vs.
Mexico (II), ¶ 98). The social media bans were imposed as a consequence of the civil
unrest in Tyrea, were duly intimated and transparent and were non-discriminatory in
nature and therefore, not violative of the FET standard (Statement of Uncontested
Facts, ¶ 15-22).

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 2. Proportionate measure: There exists an element of proportionality and reasonableness
in the context of the FET standard which depends on suitability, necessity and
proportionate stricto sensu. (Tecmed vs. Mexico, ¶ 122 & 133). Law No. 0808-L was
suitable and a result of dire necessity due to the rising ethnic tensions in Tyrea and was
therefore proportionate in nature.
3. Investor’s misconduct: In cases of losses accrued to the foreign investor due to his
own misconduct or contribution, there can be no or proportionate violation of FET
standard (Phoenix Action vs. Czech Republic, ¶ 100). The failure of the Claimants
to take necessary action against malcontents using their social media websites and
implementing the required algorithm, ultimately led to their banning.
B. Alternatively, the ban is a sovereign measure of necessity: To interpret any term in
BIT, rules of interpretation under Article 31 of VCLT, 1969 apply. (Saluka vs. Czech
Republic, ¶ 296). States may take appropriate measures against grave threat after
exhaustion of other feasible options (Article 25, ILC Draft Articles). Therefore, rising
ethnic tensions in Tyrea and threat to the public and national security of the country
allowed Tyrea to take the required measures under necessity.
V. EXPROPRIATION.
A. Websites are not ‘investment’: Definition of ‘investment’ includes four conditions:
contribution of money; definite time-period; risk factor; and, contribution to host state’s
economy (Salini et al vs. Morocco, ¶ 52). However, the Claimants’ websites are
intangible assets and a product of their investment and therefore cannot be called an
‘investment’.
B. In any case, no expropriation has taken place.
1. No ‘direct expropriation’: Expropriation is the deprivation of the foreign investor’s
legal property and assets (Feldman vs. Mexico, ¶ 100). Deprivation of intangible
properties does not amount to expropriation. The websites of the Claimants are
intangible properties of the Claimants and a product of their investment and business.
Therefore, its deprivation cannot equate to expropriation.
2. No ‘indirect expropriation’: In case a measure permanently and substantially affects the
legitimate benefits associated with an investment, thus rendering it useless, indirect
expropriation takes place (RFCC vs. Royaume du Maroc, ¶ 391). However, due to
the temporary nature of the ban on Claimants’ websites, no indirect expropriation can
take place (Claimants’ Exhibit-4, TCA Ordinances).

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 C. Alternatively, legitimate right to expropriate: Lawful expropriation requires fulfillment
of four criteria: protection of public interest; due process; non-discriminatory; and,
adequate compensation (Waguih Siag and Clorinda Vecchi vs. Egypt, ¶ 428). The
Claimant’s websites were banned in public interest, through a transparent, non-
discriminatory measure in the form of penal punishment and this does not amount to
expropriation.
PART-4: DAMAGES

VI. NO COMPENSATION AS DAMAGES TO BE PAID TO THE CLAIMANTS.

A. Speculative Compensation:
1. Chorzow formula not to be applied: The standard of full reparation arises only in cases
of unlawful expropriation (Amco International Finance vs. Iran, ¶ 193). Here, the
applicable standard is the treaty standard of just compensation representing genuine value as
there was no/lawful expropriation. The purport of this is the value of the property
taken at the time of expropriation, which is less than full reparation (Irmgard Marboe,
Calculation of Compensation and Damages in International Investment Law
(2nd Edition, 2017), ¶ 2.47).
2. Claimants’ estimation suffers from speculation and double counting:
a. Double Counting in claiming Direct Damages: Recovery of sunken
investment costs, combined with valuation of lost profits leads to double counting
(Mark Kantor, Valuation for Arbitration, International Arbitration Law
Library, Volume 17, pg. 198-199).
b. Flawed calculation of Lost Profits: Claimants have failed to provide sufficient
evidence to support their heightened speculation of future revenues (Autopista
Concesionada vs. Venezuela, ¶ 353-355). Albeit the revenues have been taken
care of for the entirity of 2018, costs have been restricted till February, 2018.
c. Lack of causation with respect to lost market opportunities: It is the
Claimants’ incompetence in Tyrea and not the conduct of Tyrean Government
which prompted the other states to stall the prospective deal, thus, there is no
causation (Article 31(1), ILC Draft Articles).
B. Cost Based Approach:
1. Reasons for application: The Claimants have been operating barely for three years and
some of its features were yet to be launched, thus the cost-based approach is
appropriate. (Siemens vs. Argentina, ¶ 355).

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 2. DCF Method must be rejected: The investments are not considered going concerns as
they have not operated for long enough (Southern Pacific Properties vs. Egypt, ¶
188); and operations have not even begun in neighbouring countries (Metalclad
Corporation vs. Mexico, ¶ 121). Some of the features are yet to be launched in Tyrea.
C. Interest:
1. Interest and lost profits cannot be claimed simultaneously: Interest should start
accruing from January 2019 as Lost Profits and interest cannot be awarded
simultaneously, since the same capital cannot yield interest and profit concurrently (J
Crawford, The International Law Commission’s Articles on State
Responsibility, Introduction, Text and Commentaries, pg. 239).
2. Interest amount not to be capitalised: To claim compound interest, Claimants must
prove that they paid compound interest on borrowed substitute funds, or would earn
compound interest, had they made investments (Meerapfel vs. Central African
Republic, ¶ 405).