MEMORIAL FOR RESPONDENTS

TEAM CODE- TC 4

BEFORE THE INTERNATIONAL CENTRE FOR SETTLEMENT OF INVESTMENT

DISPUTE

IN THE MATTER OF:-

ARBITRATION CASE NO. 1/ICSID/BIT/2021

CROSSLINK NORTH WEALTHNET INTELLI VENTURES

RESPONDENT

VERSUS

THE REPUBLIC OF TERRA DO BRASIL

APPLICANT

0
INDEX.

1
2
 INDEX OF AUTHORITIES

CASE LAW

Abbreviation citations

CMS V. Argentina CMS Gas, ICSID Case No. ARB/01/8,

Award, ¶ 274

Enron Creditors Recovery Corp. v. Arg. Enron Creditors Recovery Corp. v. Arg.
Republic Republic, ICSID Case No. ARB/01/2, Award,
¶¶ 259-283 (May 22, 2007)

Occidental Expl. & Prod. Co. v. Republic of Occidental Expl. & Prod. Co. v. Republic of
Ecuador Ecuador, LCIA Case No. 3467, Final Award,
¶¶ 183-186 (July 1, 2004), 12 ICSID Rep. 101
(2007)

COSTRUTTORI S.P.A AND ITALSTRADE COSTRUTTORI S.P.A AND ITALSTRADE

S.P.A V. KINGDOM OF MOROCCO S.P.A V. KINGDOM OF MOROCCO. ICSID
Case No. ARB/00/4, DECISION ON
JURISDICTION, [July 23, 2001] 42 ILM 609
(2003).

Joy Mining v. Egypt Joy Mining v. Egypt, ICSID Case No.

ARB/03/11,(6 AUG 2004), 19 ICSID Rev-
FILJ 486 (2004)

Quiborax v. Bolivia Quiborax v. Bolivia, ICSID Case No.

ARB/06/2 (16 SEP 2015)

Phoenix Action v. The Czech Republic Phoenix Action v. The Czech Republic,
ICSID Case No. ARB/06/5 (15 APR 2009)

Metalclad Corporation v. The United Mexican Metalclad Corporation v. The United Mexican
States States. ICSID Case No. ARB(AF)/97/1, para
108(30 AUG 2000)

Ronald S.Lauder v. The Czech Republic Ronald S.Lauder v. The Czech Republic,
award,3 September 2001,para 200

3
Petrobart Limited v. The Kyrgyz Republic
Técnicas Medioambientales Tecmed, S.A. v.
The United Mexican States
Consortium RFCC v. Royaume du Maroc
Tokios Tokelés v. Ukraine
Siemens v. Argentina
Meririll & Ring v. Canada
National Grid v Argentina
Loewen Group, Inc. and Raymond L. Loewen
v. United States of America
Ioan Micula, Viorel Micula, S.C. European
Food S.A, S.C. Starmill S.R.L. and S.C.
Multipack S.R.L. v. Romania
ARTICLES AND BOOKS
Dolzer & Christoph Schreuer
4
Petrobart Limited v. The Kyrgyz Republic,
SCC Case No. 126/2003,(29 MAR 2005)
Técnicas Medioambientales Tecmed, S.A. v.
The United Mexican States ICSID Case No.
ARB (AF)/00/2 para. 149 & 116)(29 May
2003)
Consortium RFCC v. Royaume du Maroc,
ICSID Case No. ARB/00/6 (22 DEC 2003)
Tokios Tokelés v. Ukraine. ICSID Case No.
ARB/02/18 para 120 (26 JUL 2007)
Siemens v. Argentina. ICSID Case No.
ARB/02/8(17 JAN 2007)
Merrill & Ring v. Canada. ICSID Case No.
UNCT/07/1(31 MAR 2010)
National Grid v Argentina. Case 1:09-cv-
00248-RBW, IIC 361 (2008), 3rd November
2008, Ad Hoc Tribunal (UNCITRAL)
Loewen Group, Inc. and Raymond L. Loewen
v. United States of America. ICSID Case No.
ARB(AF)/98/3,(26 June 2003)
Ioan Micula, Viorel Micula, S.C. European
Food S.A, S.C. Starmill S.R.L. and S.C.
Multipack S.R.L. v. Romania [I], ICSID Case
No. ARB/05/20 (CL-080), ¶ 1265 ).
Rudolf Dolzer & Christoph Schreuer
Principles of international investment law ,pp
112 – 115 Oxford University Press, edition 2,
number 9780199651801
 BOOK

Fortier & Drymer L Yves Fortier (CC, QC) & Stephen L

Drymer (2005) Indirect Expropriation
in the Law of International
Investment: I Know It When I See It,
or Caveat Investor, Asia Pacific Law
Review, 13:1, 79-110, DOI:
10.1080/18758444.2005.11788142

Appellate Body Report Appellate Body Report, United States—

Import Prohibition of Certain Shrimp and
Shrimp Products, ¶ 12, WTO Doc.
WT/DS58/AB/R (adopted Oct. 12, 1998).
treaties

LIST OF LEGAL RESOURCES

ILC Articles J. Crawford, The International Law

Commission's Articles on State
Responsibility, Introduction, Text and
Commentaries

ECT Energy Charter Treaty

ICSID International Centre for Settlement of

Investment Disputes, convention and rules

India- Brazil BIT Investment Cooperation And Facilitation

Treaty, Brazil-India, January 25, 2020

5
 STATEMENT OF JURISDICTION

CASE CONCERNING INVESTMENT OF THE INVESTOR,EXPROPRIATION AND

REASONABLE EXPECTATION

CROSSLINK NORTH WEALTHNET INTELLI VENTURES

RESPONDENT
V.
THE REPUBLIC OF TERRA DO BRASIL
APPLICANT

The claimant has approached the tribunal,in the matter of Crosslink North Wealthnet Intelli
Ventures v. The Republic of Terra Do Brasil under Article 25(1) of the ICSID Convention.
ARTICLE 25(1) OF THE ICSID CONVENTION:

“The jurisdiction of the Centre shall extend to any legal dispute arising directly out of an
investment, between a Contracting State (or any constituent subdivision or agency of a
Contracting State designated to the Centre by that State) and a national of another Contracting
State, which the parties to the dispute consent in writing to submit to the Centre. When the
parties have given their consent, no party may withdraw its consent unilaterally.’’

SYNOPSIS OF FACTS

6
1. In Crosslink North Wealthnet Intelli Ventures Vs Republic of Terra Do Brasil where
CNWIV is 90% indirect shareholder of IWNCTDB having an investment of Rs
40,00,00,000 i.e. 27,151,200 BRL In 2021 SERFB commenced the audit of IWNCTDB
and it was done with the company's cooperation. The audit was routine in nature.
2. As a result of the SERFB audit it was concluded that IWNCTDB books did not
adequately reflect the values for raw material because of which SERFB imposed the
taxes and fines on the company. After the audit SERFB imposed the interim measures
which had the effect of attaching the limited assets Imposing of interim measures on
IWNCTDB constitute an unjustified indirect expropriation. SERFB also instructed the
Brazilian bank to retain any funds passing through them in connection with IWNCTDB’s
transactions.
3. These steps of SERFB has also affected the profit and the growth of IWNCTDB.These
action of SERFB against IWNCTDB was not justified. IWNCTDB used administrative
and judicial processes authorized under Brazilian law to contest both SERFB's audit
conclusions and its imposition of interim measures.
4. IWNCTDB initiated an administrative procedure to seek that SERFB lift the interim
measures, claiming that SERFB had not sufficiently justified them. SERFB denied
IWNCTDB's application but decreased the amount of unpaid taxes calculated.
IWNCTDB also took SERFB's judgments to the Fiscal Tribunal, which upheld the
interim measures but decreased the amount of unpaid taxes.
5. IWNCTDB's revenues dropped drastically as a result, and in May 2021, IWNCTDB
initiated a debt restructuring action, which had the consequence of suspending the interim
measures and allowing IWNCTDB to continue functioning.
6. Following that, Respondent CNWIV filed an ICSID arbitration action, claiming that
SERFB's audit conclusions and interim remedies constituted an unlawful indirect
expropriation of its investment in breach of the BIT.
ISSUE RAISED

7
 Issue No. 1

Lifting of the provisional stay of enforcement of the award dated 15th August 2021.

Issue No. 2

Annulment of Award

Issue No. 3

Relief(s) sought.

8
 Summary of Arguments

Issue 1 Lifting of the provisional stay of enforcement of the award dated 15th August 2021

Respondents Summit that the provisional stay of enforcement of award dated 15th August 2021
should be removed as Republic of Terra Do Brasil has ( 1.1 ) Violated the scope of ICFT (1.2)
CNWIV Is an investor and is doing investment through the company IWNCTDB and so should
be provided with favorable conditions (1.3 ) Lack of administrative justice on the part of
Republic of Terra Do Brasil (1.4) Wrongful application of interim measures (1.5) Wrongful
application of article 54 of provision of international centre for settlement of investment dispute
convention (1.6) Continuous change in orders (1.7 ) Applicant expropriated Respondents
investment ( 1.8) Applicant has violated its obligation to provide fair and equitable treatment to
Respondents Investment

Issue No. 2 – Annulment.

Issue No. 3 - Relief(s) sought.

Respondent is entitled to receive compensation for moral  damages as unjustified restrictions has
resulted in loss of business opportunities, loss of reputation, loss of solvency with suppliers and
banks. Respondent is entitled to receive interest on the award and the interest must be awarded
under the full reparation standard. Respondent is entitled to both compounded pre-award interest
from the valuation date until the date of the Tribunal’s award and compounded post-award
interest on any amount of damages awarded by the Tribunal, until the date in which payment of
such an award is made. Applicant is responsible for all the costs and expenses of the arbitration.

9
 Arguments Advanced

Issue 1 Lifting of the provisional stay of enforcement of the award dated 15th August 2021

Respondents Summit that the provisional stay of enforcement of award dated 15th August 2021
should be removed as Republic of Terra Do Brazil has ( 1.1 ) Violated the preamble & scope of
ICFT (1.2) CNWIV Is an investor and is doing investment through the company IWNCTDB
(1.3) Lack of administrative justice on the part of Republic of Terra Do Brazil (1.4) Wrongful
application of interim measures (1.5) Wrongful application of article 54 of provision of
international center for settlement of investment dispute convention (1.6) Continuous change in
orders (1.7 ) Applicant expropriated Respondents investment ( 1.8) Applicant has violated its
obligation to provide fair and equitable treatment to Respondents Investment

[1.1] Violation of the preamble & scope of ICFT1

The stay of enforcement of the award is a violation of the scope of ICFT and reduces cooperation
and facilitation thereby violating Art 12 and 3.23 of the ICFT.
The objective of ICFT states that it is to promote cooperation between the parties in order to
facilitate and encourage bilateral investment, thought in the present case imposition of wrongful
interim measure as they were removed later on, retaining of funds with the bank, incomplete
investigation, lack of administrative justice, seizure of limited assets indicate to the fact that
facilitation and encouragement was not provided to the investor does it violates Art 1 and 3.2 of
the treaty.

The scope of the treaty is also violated as no dispute prevention mechanism was used and
immediately interim measures were adopted. Moreover this act also violated the preamble of
1 Investment Cooperation And Facilitation Treaty, Brazil-India, January 25, 2020 [ hereinafter ICFT ]
2 ICFT,supra note 1, Art1
3 ICFT, supra note 1, Art 3, Clause 2
10
ICFT as it mentions that the treaty wishes to encourage and strengthen contract between
investors and the Government of the parties and seeks to create and maintain favorable
conditions for investment of investors of a party in the territory of another party. Thus keeping
this in mind stopping fund transfer from banks violated the favorable condition clause and also
went against creation of a strong contract between investors and the government leading to a
clear violation of the preamble of ICFT.
It is form the past judgments of ICSID that it can be seen that great weight is given to a treaty’s
preamble while employing object-and-purpose analysis. See, e.g., CMS Gas case4, Enron
Creditors Recovery Corp. v. Arg. Republic5, Occidental Expl. & Prod. Co. v. Republic of
Ecuador6. Other than these cases the decision of the WTO’s Appellate Body in the U.S.
Shrimp–Turtle7 dispute of the 1990s serves as a clear example of an international tribunal giving
great weight to a treaty’s preamble while employing object-and-purpose analysis. The opinion is
notable first because it uses the preamble to justify an expansive reading of a subsequent treaty
term, conferring on the preamble a positive legal power.

The acts of the SERFB are also in violation of article 4.18 of the ICFT investment treaty.
This article prohibits parties from subjecting investments made by the investors of the other party
to fundamental breach of due procedure and denial of justice in administrative proceedings. In
the present case we notice that there is a breach of due process along with denial of justice in

4 CMS Gas, ICSID Case No. ARB/01/8, Award, ¶ 274 (declaring with certainty that the BIT preamble “makes
clear” and leaves “no doubt . . . that a stable legal and business environment is an essential element of fair and
equitable treatment”)
5 Enron Creditors Recovery Corp. v. Arg. Republic, ICSID Case No. ARB/01/2, Award, ¶¶ 259-283 (May 22,
2007), http://www.italaw.com/ sites/default/files/case-documents/ita0293.pdf [http://perma.cc/7ZKZ-G8KG]
(holding that “a key element of fair and equitable treatment is the requirement of a stable framework for the
investment,” after “giv[ing] weight to the text of the Treaty’s Preamble, which links the standard to the goal of legal
stability”);

6 Occidental Expl. & Prod. Co. v. Republic of Ecuador, LCIA Case No. 3467, Final Award, ¶¶ 183-186 (July 1,
2004), 12 ICSID Rep. 101 (2007) (holding, based on language in the preamble mentioning stability and FET, that
the “stability of the legal and business framework is thus an essential element of fair and equitable treatment,” that
“such requirements were not met by Ecuador,” and that “this is an objective requirement that does not depend on
whether the Respondent has proceeded in good faith or not”).
7 Appellate Body Report, United States—Import Prohibition of Certain Shrimp and Shrimp Products, ¶ 12, WTO
Doc. WT/DS58/AB/R (adopted Oct. 12, 1998).
8 ICFT, supra note 1, Art 4.1
11
administrative proceedings as no additional information was asked from the auditor before
imposing the measures, thus there is violating article 4.1 of ICFT.

[1.2] CNWIV is an investor and is doing investment through the company IWNCTDB

In the present case, it can be observed that CNWIV is an investor through the ICFT clause 2.59
as it clearly states that "Investor" means
a. Any natural person of a party that makes an investment in the territory of the other party
OR
b. Any enterprise constituted and organized in accordance with the law of a Party, other
than a branch, that has substantial business activities in the territory of that Party and that
makes an investment in the territory of the other Party.

CNWIV has invested in the IWNCTDB and through that in brazil. So CNWIV has satisfied
clause 2.5 of the BIT. CNWIV is the 90% indirect shareholder in the IWNCTDB company.
According to the 2.5 clause of ICFT10 the investment of CNWIV should be taken into
consideration and the company should be entitled to the protection, flexibility of law and
encouragement that is due to a major investor.

According to the case of Salini v. Morocco11 the principle of Shalini test was established. The
Shalini test confers that alleged investment satisfies four criteria to be considered an
“investment''. Under Article 25(1) of the ICSID Convention12, the four criteria are :
1. a contribution;
2. a certain duration

9 ICFT, supra note 1, Art 2, Clause 5

10 ICFT, supra note 1, Art 2, Clause 5
11.COSTRUTTORI S.P.A AND ITALSTRADE S.P.A V. KINGDOM OF MOROCCO. ICSID Case No.
ARB/00/4, DECISION ON JURISDICTION, [July 23, 2001] 42 ILM 609 (2003).
12 The International Centre for Settlement of Investment Disputes Convention, Date in force October 14, 1966,
Art 25(1) [ hereinafter ICSID]
12
 3. a risk; and
4. a contribution to the economic development of the host State.

In this present case, CNWIV investment satisfies the criteria which were laid down in the Shalini
test. One of the criteria i.e. ‘Contribution’ is satisfied in this case as CNWIV is a 90% indirect
shareholder of IWNCTDB, having an investment of Rs. 40, 00, 00,000. As CNWIV has invested
in IWNCTDB then it is clear it has to face the risk. If the investment is made the risk is obvious.
CNWIV has invested in the IWNCTDB, which means the financial resources of that country
have also been augmented. So CNWIV has a contribution to the economic development of
Brazil.

It specifies that this Shalini test can be applied in a modified way also in particular by modifying,
removing, and/or adding one or more criteria. For example, in the case of Joy Mining v. Egypt13,
the tribunal modified the criterion of contribution to the economic development of the host State
such that the contribution must be “significant. As another example, in Quiborax v. Bolivia14, the
tribunal removed the criterion that the investment must contribute to the economic development
of the host State. And as a final example, in Phoenix Action v. the Czech Republic 15. The
tribunal added the criteria that the assets must be invested in accordance with the laws of the host
State and that the assets must be invested bona fide. These are some examples of the cases which
show that criteria which are laid by the Shalini test for investment need not satisfy all the four
criteria. These can be applied in modified ways also. So it can be concluded that CNWIV is the
investor in Brazil and is also doing investment in IWNCTDB.

For the purpose of removing the stay, past and similar judgment can be used which is in
accordance with 2.7.1(b) article of ICFT16. All the judgments are according to ICSID rules as
they are the past judgment of ICSID. In the present case, it is arbitrated by the same group i.e.
ICSID thus, we can refer to past Judgment that will act as a precedent to the present case .
13 Joy Mining v. Egypt, ICSID Case No. ARB/03/11,(6 AUG 2004), 19 ICSID Rev-FILJ 486 (2004)
14 Quiborax v. Bolivia, ICSID Case No. ARB/06/2 (16 SEP 2015)
15 Phoenix Action v. The Czech Republic, ICSID Case No. ARB/06/5 (15 APR 2009)
16 ICFT, supra note 1, Art 2, clause 7, sub clause 1(b)
13
Article 2.7.1(b) mentions that judgments can be used for supporting arguments. All These cases
are of ICSID thus they have a persuasive value and because of this nature of them we can use
them in order to strengthen the stands taken by the claimant.

[1.3] Lack of administrative justice

The Respondents Summit that there is a lack of Administrative justice in the work proceedings
of SERFB as [A] Use of presumed bases is in accordance with the Brazil tax code, still fines
were imposed. [B] SERFB’s executing division in charge of imposing interim measures did not
make any requests for additional information before imposing the requested measures.

A. Under the presumed profit method taxable income is calculated on a quarterly basis and
corresponds to a deemed profit margin applied over gross revenue adjusted as determined
by tax law. As in the Brazilian tax code this form of presumed method is allowed; it was
only in accordance with this rule that the company had paid its taxes. Also as it mentions
that gross revenue is adjusted according to tax law, IWNCTDB Made changes which
were pursuant to the Brazilian tax code stated in the moot proposition. Even though all
these methods are prescribed in the tax code and were correctly followed by the company
there was a wrongful imposition of back taxes and fines totaling approximately Rs.
50000000/- i.e. 3,395,053.74 BRL. It is from this that we can conclude that there was a
lack of administrative justice as even though presumed bases are allowed they were not
considered and a foreign investor was barred from making profit.

B. In order to highlight lack of Administrative justice it is also important to consider that

SERFB’s executing division in charge of imposing interim measures did not make any
requests for additional information before imposing the requested measures. both the
reports submitted by the auditor did not give any specific information on irregular
behavior Still no extra information was asked also no event to prove irregularity was
stated in the report. This act of the executive division can also be termed as violation of
fair and equitable treatment as these are reasonable expectations which investors invest in
a country with. This act leads to violation of due procedure as investigation against the
company was not according to the procedure laid down and orders were passed on
14
 incomplete information this argument is further strengthened as we notice that later on
interim measures were removed and fine was reduced in amount. Administrative justice
was absent also as without the presence of exceptional circumstances interim measures
were imposed.

[1.4] wrongful application of interim measures

The Respondents Summit that there has been wrongful application of interim measures as [A]
Exceptional circumstances for imposition of interim measure were not present, which are
required for their application [B] Violation of Art 6.1(a)17 of Investment Cooperation and
Facilitation Treaty between The Federation Republic Of Brazil And The Republic Of India [C]
though the company corporate in the process still without dispute resolution method interim
measures were imposed [D] No adequate justification was provided to prove irregular behavior,
neither did the reports provided support to the conclusion of the auditor as mentioned in the moot
preposition.

A. Shortly after the audit, SERFB also imposed interim measures. SERFB is permitted under
Brazilian law to impose interim measures to ensure the payment of tax debts in
“exceptional circumstances”, namely when the debtor has been uncooperative (by for
example, failing to disclose material information) or when efforts to obtain payment of
the tax debt would otherwise be unsuccessful.

In the present case we find that none of the above conditions have been fulfilled. The
audit was done with the cooperation of IWNCTDB Company and also all the information
was readily provided and was not denied. All the documents and records of the company
were presented and disclosed. By referring to the proposition it is also clear that
immediately after the audit interim measures were imposed and no other method for
obtaining payment for debt was taken. Moreover no dispute prevention mechanism was
employed. It is from this that it is evident that the requirement of exceptional

17 ICFT,supra note 1, Art 6, Clause 1(a)

15
 circumstances was not being met and as these requirements are not fulfilled interim
measures cannot be imposed by SERFB. So it can be rightly said that interim measures
were unlawfully applied.

B. Brazil's taxing authority, the Secretária Especial da Receita Federal do Brasil that is a part
of Republic of Terra Do Brasil has Violated Art 6.1(a) of Investment Cooperation And
Facilitation Treaty between The Federation Republic Of Brazil And The Republic Of
India.
Limited assets of IWNCTDB were seized and were taken under the SERFB control. This
has led to expropriation and as it is not for public good it thus violates Article 6.1 (a) Of
the ICFT.

C. By referring to the moot proposition It can be seen that the company cooperated in the
process of Investigation and audit and also shared their Tax details with SERFB. Even
after showing cooperation no relaxations were given and thus it can be said that no
encouragement to foreign investors was provided and differential treatment from the
ordinary course of action can be inferred. Moreover, interim measures were directly
imposed without even using dispute prevention mechanisms which form a base of the
investment treaty.

D. No clarification or reasoning was provided for proving the irregular behavior of the
company. The company had been regularly paying taxes using the presumed bases
allowed in the Brazil taxation code; accounts of regular payments were disclosed to
taxation authorities. Still the only reason for imposing interim measures was stated as
irregular behavior. Additional information for satisfying this allegation of irregular
behavior was also not provided. In the second report submitted by the auditor changes
were made in sections which symbolize that they were false sections which had to be
made-up and interpreted in ways to suit the need of imposing the interim measures. No
reasoning for imposition was provided in the report; barely articles and sections were laid
down without any reference to incidents.
16
[1.5] Wrongful application of Art 5418 of Provision of International Center for Settlement
of Investment Dispute Convention

The respondent Summit that article 54 of provision of international center for settlement of
investment dispute convention has been wrongly applied as clause 2 of Article 54 of the ICSID19
which mentions that if an application for the revision or annulment of an award contains a
request for a stay of its enforcement, the Secretary-General shall, together with the notice of
registration, inform both parties of the provisional stay of the award. As soon as the Tribunal or
Committee is constituted it shall, if either party requests, rule within 30 days on Arbitration
Rules 127 whether such stay should be continued; unless it decides to continue the stay, it shall
automatically be terminated.

In the present case on 1st September 2021, enforcement of the award was provincially stayed.
On 3rd September 2021 Crosslink North Wealthnet Intelli Ventures requested the lifting of the
provisional stay of enforcement of the award but in the present case, there was no application for
the request of the stay of enforcement on the award then also the stay was imposed on the award.

This action of the secretary-general is against Article 54 of the International Center for
Settlement Of Investment Dispute Convention. As no application was filed, the secretary general
does not hold any authority to impose the stay because referring to the moot proposition no
information pertaining to the application was provided, thus it is reasonable to say that the stay
has been wrongly imposed.

[1.6]: Change in orders

In this case, SERFB audits the accounts of the IWNCTDB. After the audit, SERFB also imposed
the interim measures which had the effect of attaching certain limited assets of IWNCTDB. The

18 ICSID,supra note 8, Art 54

19 ICSID,supra note 8, Art 54, clause 2
17
orders were changed very frequently as when IWNCTDB challenged both SERDB’s audit and
its imposition of interim measures via administrative and judicial proceedings. IWNCTDB
commenced an administrative procedure requesting SERFB to lift the interim measures on the
basis that SERFB had not adequately justified the measures. But SERFB reduced its calculation
of back taxes. In May 2021 the interim measures were also suspended. These actions of SERFB
show that there were flaws in their calculations. SERFB was not sure about the interim measures.
They even don’t have a valid reason to impose the interim measures as the IWNCTDB does not
fall under exceptional circumstances due to this reason only SERFB change their orders.

[1.7] Applicant indirectly expropriated Respondents investment

Applicant undertook actions that accounted for indirect expropriation and an infringement of
Applicant international obligations. The object and purpose of a BIT can be found in the
preamble stressing on economic cooperation and the “encouragement and protection” of
investments. Above all the content of the preamble elucidates a determination from both states to
not only vitalize investments but also to continually protect those investments.
Due to the imposition of unjustified Interim measures respondent was indirectly expropriated of
the enjoyment of its investment in IWNCTDB. Although art.6 of India- Brazil BIT does not
stipulate activity incorporating indirect expropriation, this Tribunal should refer to the existing
case laws and jurisprudence that compose plausible authority, even if it is not binding
precedents20

[A] Applicant expropriated Respondent’s investment

Concerning the circumstances of Indirect Expropriation the ECT21 clearly mentions both
direct and indirect forms of expropriation. Article13 (1) ECT22 provides investments of
investors with protection from both direct & indirect expropriation, with the “effect” of
20 Metalclad Corporation v. The United Mexican States. ICSID Case No. ARB(AF)/97/1, para 108(30 AUG 2000)
21 The Energy Charter Treaty, Date of signature December 17, 1994, Date of entry into force April 16,
1998[ hereafter ECT]
22 ECT, supra note 17, Art 18
18
 the latter defined as “equivalent to nationalization or expropriation” 23. Investments are
only to be expropriated if the established process is satisfied, it needs to be in public
interest, non-discriminatory, carried out under due process of law & accompanied by
payment of prompt, adequate & effective compensation. Respondent relinquishes that
there was no direct expropriation because it maintains ownership of the investment.
Nonetheless, claimant’s harmful acts ensued in an indirect expropriation of Respondent’s
investment, which is unfounded.

In Lauder v. The Czech Republic 24 the tribunal stated:

"Indirect expropriation or nationalization is a measure that does not involve an

overtaking, that effectively neutralizes enjoyment of the property. It is generally accepted
that a wide variety of measures are susceptible to indirect expropriation, and each case
is therefore to be decided on the basis of its attending circumstances."(para 200).

Definite activity can add up to expropriation regardless if there is no clear cut proceeds of
property and an investor holds onto the formal title to its investment or its full standard. It
is well acknowledged that although an indirect expropriation leaves the investor’s title
untouched it deprives him of the chance of using the investments along with its economic
benefit and value as stated in the Metalclad case25.

Respondent alleges that Applicant have indirectly expropriated investment as due to the
imposition of interim measures by SERFB, IWNCTDB was unable to utilize Brazilian
banks for transactions which ultimately led to the downfall of its sales volume. In
Petrobart v. Kyrgyz Republic26, the tribunal expressed in regards with Article 1327 of
the ECT that it provided protection not only in respect of expropriation, but also in regard
to actions that had an effect equivalent to expropriation. Clearly this measure of the
Applicant results in severe loss for the Investors.

23 ECT, Expropriation Regime, Pg. 10

24 Ronald S.Lauder v. The Czech Republic, award,3 September 2001,para 200
25 Metalclad Corporation v. The United Mexican States. ICSID Case No. ARB(AF)/97/1(30 AUG 2000)
26 Petrobart Limited v. The Kyrgyz Republic, SCC Case No. 126/2003,(29 MAR 2005)
27 ECT,supra note 17, Art 13
19
[B] That Applicant violated Article 9.4(a)

Respondents contend that Applicant have violated article 9 of the India-Brazil BIT in
regards to the transfers. Article 9.4(a) that states “Nothing in this treaty shall prevent a
party from conditioning or preventing a transfer through application of its law, including
actions relating to: (a) bankruptcy, insolvency or the protection of the rights of the
creditors. Actions of the Applicant have significantly affected Respondents investment in
IWNCTDB and those measures undertaken violates article 9.4(a) of the BIT. The
imposition of unwarranted Interim measures had considerably affected the sales volume
of IWNCTDB to an extent where IWNCTDB had to commence debt restructuring
proceedings. The actions undertaken by SERFB administering all Brazilian banks to
retain any funds passing through them in connection with IWNCTDB’s transactions led
to a downfall in its sales volume as IWNCTDB was unable to utilize Brazilian banks for
its conducting which eventually led IWNCTDB to commence a debt restructuring
proceedings, as the company was not able to pay back its creditors which are violative of
the treaty. Respondent in the end holds that these actions undertaken by the Applicant
violate article 9.4(c) as they are responsible for the debt conditions of IWNCTDB.

[C] That SERFB's audit determination and Interim measures initiated an unwarrantable
indirect expropriation.
Respondent argues that the interim measures charged by SERFB are unjustified. The
account formulated by IWNCTIWB’s SERFB auditor assisting in appeal for interim
measures Premised the plea on IWNCTDB'S irregular behaviour however the one and
only behaviour that was mentioned is that IWNCTDB failed to accurately reflect the
company's sales volume. Respondent asserts that the sales analysis reported were
examined on the basis of presumed basis, pursuant to Brazilian tax code. Even after
following the lawful means for analysing sales volume, IWNTDB was charged with back
taxes and were also imposed with interim measures Which clearly indicates SERFB'S
interim measures were wrongful and unreasonable.

20
C.1. Audit determination and Interim measures has a disproportionate effect on
respondent

When assessing expropriation significance must be given to the actual effect, not
intention of a state as mentioned in the book Principles of International Investment Law28.

Even in the Tecmed tribunal, the panel stated that what mattered for an indirect
expropriation was the effect of the measures taken, and not the intention to expropriate. 29
Imposition of Interim measures by SERFB had a disproportionate effect on the
respondent’s investment. Various occurrences have concentrated on the effect of the
owner as the principal factor in selecting a regulation from a taking.

The Iran-United States Tribunal, in the Tippetts case30, stated:

“The intent of the government is less important than the effects of the measures on the
owner, and the form of the measures of control or interference is less important than the
reality of their impact”.

Several tribunals have used an effects-based test, under this test, “the effect … of a
governmental measure is all that is required to distinguish regulatory from indirect
expropriatory conduct.”31.

In the current case the harmful effects caused by charging interim measures constituted
an indirect expropriation of Respondent’s investment, ( I ) Applicant have deprived
respondent of its investment and the deprivation was expropriator since it was substantial.
(II) The devastating effects of imposing interim measures initiated creeping expropriation
of Respondent’s investment.
28 Rudolf Dolzer & Christoph Schreuer Principles of international investment law ,pp 112 – 115 Oxford
University Press, edition 2, number 9780199651801
29 Técnicas Medioambientales Tecmed, S.A. v. The United Mexican States ICSID Case No. ARB (AF)/00/2 para.
149 & 116)(29 May 2003)
30 Iran-US Claims Tribunal, Tippetts, Abbett, McCarthy, Stratton v. TAMS-AFFA, 6 IRAN-U.S. C.T.R., at 219 et
seq.
31 Fortier & Drymer at 93.
21
 I Applicants have deprived Respondents of its investment and the deprivation was
expropriator since it was substantial.

In the Tecmed tribunal it was mentioned that an investor can be deprived of the use or
enjoyment of its investment without being deprived of its possession of the investment 32.
Actions need not be taken for the benefit of the host state in order to constitute an
expropriation33.The imposition of Interim measures constituted a deprivation of
Respondent’s investment through its severe actions of directing all Brazilian banks to
retain any funds passing through them in IWNCTDB transactions which disables
IWNCTDB as it cannot utilize Brazilian banks for its undertakings which affects the
Respondents investment as the sales drop dramatically.

Actions that generally institutes deprivation of economic use and enjoyment of

investment are only if : “it has substantial effect of an intensity that reduces and removes
the legitimate benefits related with the use of the rights targeted by the measure to the
extent that they render their further possession useless”34.

In Tokios Tokelès tribunal stated that ‘One can reasonably infer that a diminution of 5%
of the investment’s value will not be enough for a finding of expropriation, while a
diminution of 95% would likely be sufficient.’35. It is rational for the panel to scrutinize a
totality of circumstances as there is no exact doorstep at which point a regulation
becomes an expropriation. Respondent was deprived of the economic benefits of its sales
because of the situation of unjustified interim measures.

II The devastating effects of imposing interim measures initiated creeping

expropriation of Respondent’s investment.

32 Técnicas Medioambientales Tecmed, S.A. v. The United Mexican States. ICSID Case No. ARB (AF)/00/2 (29
May 2003)
33 METALCLAD CORPORATION V. MEXICO. ICSID Case No. ARB(AF)/97/1 at para 103 (30 AUG 2000)
34 Consortium RFCC v. Royaume du Maroc, ICSID Case No. ARB/00/6 (22 DEC 2003)
35 Tokios Tokelés v. Ukraine. ICSID Case No. ARB/02/18 para 120 (26 JUL 2007)
22
 In Tecmed v. Mexico36, the tribunal in regards to creeping expropriation stated:

“This type of expropriation does not necessarily take place gradually or stealthily —the
term “creeping” refers only to a type of indirect expropriation—and may be carried out
through a single action, through a series of actions in a short period of time or through
simultaneous actions. therefore, a difference should be made between creeping
expropriation and de facto expropriation, although they are usually included within the
broader concept of “indirect expropriation” and although both expropriation methods
may take place by means of a broad number of actions that have to be examined on a
case-by-case basis to conclude if one of such expropriation methods has taken place.”

Combined effects of imposing back taxes and imposing interim measures which had the
effect of attaching certain limited assets of IWNCTDB along with the SERFB's direction
to Brazilian banks to retain any funds passing through then in connection with
IWNCTDB undertakings were analogous to a creeping expropriation.

In Siemens v. Argentina37 the tribunal pointed that:

“The last step in a creeping expropriation that tilts the balance is similar to the straw
that breaks the camel's back. The preceding straws may not have had a perceptible effect
but are part of the process that led to the break”.( Siemens).

Creeping expropriation involves “a slow and incremental encroachment on one or more

of the ownership rights of a foreign investor that diminishes the value of its investment” 38
In conclusion, the consequences of the measures taken by Applicant constituted an
indirect, creeping expropriation of Respondent’s investment as the acts substantially
deprived Respondent of its legitimate expectations.

36 Tecnicas Medioambientales Tecmed S. A. v. The United Mexican States, Award, (29 May 2003), 43 ILM
133(2004) at para 114

37 Siemens v. Argentina. ICSID Case No. ARB/02/8(17 JAN 2007)

38 UNCTAD Series I at 11-12
23
[1.8] Applicant has violated its obligation to provide fair and equitable treatment to
Respondents investment

Respondent argues that unjustified indirect expropriation of its investment acts in contrary to the
principles of FET39.

In the Merrill & Ring v. Canada40 the tribunal in regards to FET concluded that:

“A requirement that aliens be treated fairly and equitably in relation to business, trade and
investment […] has become sufficiently part of widespread and consistent practice so as to
demonstrate that it is reflected today in customary international law as opinio juris. In the end,
the name assigned to the standard does not really matter. What matters is that the standard
protects against all such acts or behavior that might infringe a sense of fairness, equity and
reasonableness. Of course, the concepts of fairness, equitableness and reasonableness cannot be
defined precisely: they require to be applied to the facts of each case. In fact, the concept of fair
and equitable treatment has emerged to make possible the consideration of inappropriate
behavior of a sort, which while difficult to define, may still be regarded as unfair, inequitable or
unreasonable.41” (para. 210)

Applicants have violated Fair and Equitable Treatment standard through its judiciary conduct in
relation to enforcement proceeding of the Award. In relation to breaching of FET, Applicant has
responsibility through legitimate expectations and denial of justice

[1.8.1] Audit determination and Interim measures have interfered with respondent’s
legitimate expectations.

Fair and Equitable Treatment has been elucidated as the action that does not affect the basic
expectations that were taken into consideration by the foreign investor to make the investment
(Técnicas Medioambientales S.A. v. United Mexican States42.

39 Fair and Equitable Treatment, [hereafter FET]

40 Meririll & Ring v. Canada. ICSID Case No. UNCT/07/1(31 MAR 2010)
41 Meririll & Ring v. Canada. ICSID Case No. UNCT/07/1 (Para. 210)(31 MAR 2010)
42 Técnicas Medioambientales S.A. v. United Mexican States. ICSID Case No. ARB (AF)/00/2) (29 MAY 2003)
24
Applicant actions have Violated Respondent’s Legitimate Expectations. In National Grid v
Argentina43, the tribunal said:

“This standard protects the reasonable expectations of the investor at the time it made the
investment and which were based on representations, commitments or specific conditions offered
by the State concerned. Thus, treatment by the State should ‘not affect the basic expectations
that were taken into account by the foreign investor to make the investment.” Para. 17344

Respondent contends that, in the case at hand, Imposing of unwarranted interim measures that
led to indirect expropriation of respondent’s investment has interfered with respondent’s
legitimate expectations. Respondent being a 90% indirect shareholder of IWNCTDB with
approximately having an investment of Rs 40, 00, 00,000 was affected when IWNCTDB was
charged with SERFB's unjustified interim measures which had the effect of attaching certain
limited assets of IWNCTDB. Intently connected to the aspects of responsibility to safeguard the
legitimate expectations is the duty to lay out a stable business environment. As it was decided in
the CMS v. Argentina45and Tecmed v. Mexico46 that in order to protect investor's right to FET,
host states must sustain the business environment in which their investments were made. It was
in the Tecmed panel that advanced on a foreign investor‘s legitimate expectations, voicing that a
host State must maintain consistency, stability, and predictability in its legal and business
framework which the Applicant clearly failed to sustain.

It was stressed in the Siemens v. Argentina47 and in the Tecmed tribunal that what mattered for
an indirect expropriation was the effect of the measures taken, and not the intention to
expropriate, Tecmed para. 149 & 116. Here the effect of measures taken had a drastic impact on
respondent’s investment. Interim measures and the SERFB's order that directed all the Brazilian
banks to retain any funds passing through them in connection with IWNCTDB transactions
which ultimately led to decline in the sales.
43 National Grid v Argentina. Case 1:09-cv-00248-RBW, IIC 361 (2008), 3rd November 2008, Ad Hoc Tribunal
(UNCITRAL)
44National Grid v Argentina. Case 1:09-cv-00248-RBW, IIC 361 (2008), 3rd November 2008, Ad Hoc Tribunal
(UNCITRAL)
45 CMS Gas Transmission Company v. The Argentine Republic, ICSID Case No. ARB/01/8, Decision on
Jurisdiction, (17 Jul. 2003), 7 ICSID Rep. 494)
46 Tecmed v. Mexico,ICSID Case No. ARB (AF)/00/2,(29 May 2003)
47 Siemens A.G. v. The Argentine Republic, ICSID Case No. ARB/02/8,(17 January 2007)
25
[1.8.2] Denial of justice

Contemplating to the applicability between the fair and equitable treatment and denial of justice,
In Loewen Group Inc. v USA48 tribunal decided that :

“It has long been recognized that a denial of justice may give rise to a breach of the FET
requirement.”49 Para. 137

Respondent contends that the Applicant denied the justice by an undue delay in enforcement of
an award. In conclusion, Inordinate and unreasonable delay would be established, consequently
the Applicant denied the justice leading to a breach of the FET requirement in international law.

Issue No. 2 – Annulment.

The Respondents strongly are against annulment of award as all the requirements for an
enforceable and binding award were met.

The Tribunal was properly formed and there was no ambiguity in the selection of the arbitrators
The Tribune was formed according to the mutually agreed method mentioned in the bilateral
treaty. The Tribunal has not exceeded its powers as it under consideration all the relevant rules
and laws applicable and only after deliberation over the contentions final decisions have been
laid down. It is in accordance with the bilateral treaty that for expropriation the respondent is to
be compensated thus The award has supported The Stand of the claimant. As reasonable
expectation of the investor and favorable conditions form essential Guiding principle of the
bilateral treaty it was in accordance to them that the award was given. As the Preamble also Lays
down guiding principles which favor the investor it was keeping them in mind that the award
was given. Thus the award is binding and should not be annulled.

enforceable and binding award thus, the Tribunal was a free and fair Tribunal and so, its
decisions are binding. Also with reasonable certainty it can be said that there was no departure
from the fundamental rule of procedure; all the rules and regulations regarding the formation of

48 Loewen Group, Inc. and Raymond L. Loewen v. United States of America. ICSID Case No. ARB(AF)/98/3,(26
June 2003)
49 Loewen Group, Inc. and Raymond L. Loewen v. United States of America. ICSID Case No. ARB(AF)/98/3,
para. 137,(26 June 2003)

26
the Tribunal, the working and the declaration of final award, were done according to the
procedure.

There is no need to annul the award as the reasons are already cleared. As Brazil had violated the
BIT due to this only tribunal order to pay a certain amount to CNWIV as compensation. CNWIV
had also suffered the loss due to the action of SERFB. It is because of the expropriation done by
Brazil that the company has been compensated there have been damages to reasonable
expectation of the investor and all the reasons for the award have been stated clearly the amount
of compensation, the reason for compensation that is expropriation, the date from which the
compensation and interest would be calculated All have been very clearly mentioned in the
award given
And from this it can be concluded that none of the conditions in article 5250 of the ICSID
convention have been fulfilled supporting that annulment should not be granted.

Issue No. 3 - Relief(s) sought.

3.1 Respondent is entitled to receive moral damages

As directed in the ILC Articles, '''injury' includes any material or moral damage" and that the
expression is pre conceived as "inclusive, covering both material and moral damage broadly
understood51."
The Respondent asserts that the actions of Applicant has led to reputational damage, which had
an impact on IWNCTDB'S creditworthiness, as shown on one hand by its increasing troubles in
obtaining finance for its operations and investments, and on the other hand by the debts incurred
due to unjustified actions carried by SERFB.

Actions of Applicant were also in violation of the India- Brazil BIT and have disrupted the

50 ICSID,supra note 8, Art 52

51 J. Crawford, The International Law Commission's Articles on State Responsibility, Introduction, Text and
Commentaries (CUP, 2002), pp. 9\-92.
27
activities of the company and therefore the respondent submits that Applicant are responsible for
loss of business opportunities, loss of reputation, loss of solvency with suppliers and banks and
other losses endured by the respondent as a consequence of the Applicant breaches.

3.2 The Tribunal Should Award Compound Interest to the Respondent

Interest must be granted Under the Full Reparation Standard: Payment of interest is an
essential in reinstalling an injured party to the position it would have been in had there been no
breach. Because the commitment to compensate arises straight away after the harm occurs,
interest provides compensation for the cost of money until payment of the award. Ioan Micula v.
Romania52 The “full reparation” standard pre requires the award of compound interest, pursuant
to Art.38 ILC ASR.53

Both pre- and post-award interest contribute to the achievement of the “full reparation” standard
of compensation required under international law.( See, e.g., Ioan Micula v. Romania54). In this
case, and to accomplish that intent, Respondent is entitled to both (a) compounded pre-award
interest from the valuation date until the date of the Tribunal’s award, (b) compounded post-
award interest on any amount of damages awarded by the Tribunal, until the date in which
payment of such an award is made. Pre-award interest is inevitable to compensate Respondent’s
for the lost opportunity of investing the profits it would have obtained but for Applicant unlawful
actions. Post-award interest is needed to safeguard respondent from any hindrance by Applicant
in payment of the award and is clearly in International law. “Interest runs from the date when the
principal sum should have been paid until the date the obligation to pay is fulfilled55.”

52Ioan Micula, Viorel Micula, S.C. European Food S.A, S.C. Starmill S.R.L. and S.C. Multipack S.R.L. v.
Romania [I], ICSID Case No. ARB/05/20 (CL-080), ¶ 1265 ).
53 Crystallex, ¶¶930, 932
54 Ioan Micula, Viorel Micula, S.C. European Food S.A, S.C. Starmill S.R.L. and S.C. Multipack S.R.L. v.
Romania [I], ICSID Case No. ARB/05/20 (CL-080), ¶ 1265 ).
55 ILC Articles, Part 2, Ch. 1, Art. 38(2) (CL-072)
28
3.3 Costs

Respondent submits that Applicant are responsible to pay all of the costs, attorneys’ fees, and
expenses of this arbitration, including the fees and expenses of any experts appointed by the
Tribunal, Respondent’s legal and expert fees, the fees and expenses of the Tribunal, and
additional other ICSID’s costs.

29
 PRAYER

Wherefore in the light of arguments advanced, authorities cited and facts mentioned, the
respondent humbly prays that:

1. Stay of enforcement of award should be lifted

2. Annulment of award should not be enforced
3. Relief sought should be granted.
4. To pass such other orders and further orders as may be deemed necessary on the facts and
in the circumstances of the case.

And for this act of kindness, the counsel for the Respondents shall duty bound forever pray.

All of which is respectfully submitted.

Counsel for the Respondents

30