TEAM GOLUNSKY

ARBITRATION PURSUANT TO THE ARBITRATION RULES OF THE

PERMANENT COURT OF ARBITRATION

ATTON BORO, LIMITED

(Claimant)

THE REPUBLIC OF MERCURIA

(Respondent)

SKELETON BRIEF FOR THE RESPONDENT

(31 JULY 2017)

 I. JURISDICTION AND ADMISSIBILITY
1. This Honorable Tribunal lacks jurisdiction to hear and decide Claimant’s case
because:
a. The Bilateral Investment Treaty (“BIT”) between the Republic of
Mercuria (“Mercuria”) and the Republic of Basheera (“Basheera”) is
inapplicable;
b. The World Trade Organization (“WTO”) Dispute Settlement has
jurisdiction over the claim; and
c. The claim is inadmissible by virtue of Denial of Benefits Clause.
A. The BIT is inapplicable.
i. The Long-Term Agreement (“LTA”) is a purely commercial contract
between the Claimant and Mercuria’s National Health Authority
(“NHA”).
2. Contracts should be construed in accordance with the intention of the parties,
characterized through the words used in the contract. Under the LTA, NHA would
only periodically place purchase orders of Sanior under a stipulation for a minimum
guaranteed annual-order value. Considering all the attributes of the transactions
deemed to be undertaken, the LTA is a mere commercial contract for the sale of
goods, and not an investment that is cognizable by the BIT.1
ii The Arbitral Award granted in favor of the Claimant arising from a
commercial contract does not qualify as an investment.
3. The Award does not fall within the scope of the BIT, since it involved neither
contribution to nor any relevant economic activity within Mercuria. Even if the
Award arises out of an investment, the same is not equivalent to investment itself. The
two remain analytically distinct.2
iii Even if the claim is not based on the Award, the nature of the terms
of LTA did not constitute an investment.
4. The contract did not involve any sort risks on the part of the Claimant for it is assured
of immediate corresponding returns for every placement of orders made by Mercuria.
5. Even assuming that there is an element of risk, it is not different from that involved in
any commercial contract, including the possibility of the termination of the contract.3

1
Nova Scotia v. Venezuela.
2
GEA GroupAktiengesellschaft v. Ukraine.
3
Joy Mining v. Egypt.

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 B. The WTO Dispute Settlement has jurisdiction over Claimant’s case.
i. Claims of breaches of obligations under the WTO Agreement by
member-states must be brought before the WTO Dispute Settlement.
6. The aim of the Dispute Settlement Body is to clarify the existing provisions of the
agreements in order to provide security and predictability to the multilateral trading
system.4 Thus, any claims arising from the covered agreements must be brought only
before the WTO Tribunals, in keeping with the obligation of states to comply in good
faith.
C. Even if the BIT is applicable, the claim is inadmissible pursuant to the Denial
of Benefit Clause.
i Claimant’s activities within Basheera are not substantial.
7. Claimant is a Regional Operating Headquarters of Atton Boro Group in South
America and African countries. It is only an administrative branch, which principally
serves as a supervision, communication, and coordination center for Atton Boro
Group affiliates. These activities do not illustrate the character of distinctiveness and
substantiality.
ii. Even if the Claimant’s activities are deemed substantial, the Denial
of Benefits clause should apply by reason of the control exercised by
Atton Boro Group over the business of the Claimant.
8. Claimant, being a mere mailbox company, is no more than an investment vehicle
controlled by the Atton Boro Group, a corporation organized under the laws of the
People’s Republic of Reef (“Reef”). It does not operate on its own, and its existence is
largely dependent on the Atton Boro Group.

4
Understanding on Rules and Procedures Governing the Settlement of Disputes, Art. 3(2).

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 II. SUBSTANTIVE ISSUES
9. Assuming without conceding that the claimant made an investment, there was no
violation of the Fair and Equitable Treatment (“FET”) Standard and the Umbrella
Clause of the BIT because:
a. The termination of the LTA is justified under the prevailing circumstances;
b. The enactment of Law 8458/09 is a legitimate measure in the exercise of
police power; and
c. The delay in enforcement proceedings does not amount to a denial of
justice.
A. The termination of the LTA does not amount to a violation of the Umbrella
Clause.
i. International responsibility cannot be attributed to Mercuria.
10. To attribute international responsibility to Mercuria, the activity must relate to the
exercise of governmental authority and not to commercial activities in which the
entity may engage in.5 However, in this case, the contract was entered into by NHA
in its commercial capacity. This is bolstered by the fact that the agreement provided
for a dispute resolution in case of disagreement. As such, Mercuria could not have
violated the BIT’s Umbrella Clause by virtue of the rescission.
ii. Even if responsibility may be attributed to Mercuria, it is justified in
terminating the contract.
11. The sudden increase in the number of Greyscale cases left the NHA unable to pay for
the agreed-upon contract price. The offer made by Claimant of an additional 10%
discount was still insufficient to purchase the necessary number of Sanior to meet this
increasing demand. Claimant’s inability to understand the pressing situation was a
manifestation of its “unsatisfactory performance”, which is a valid ground for the
termination of the agreement.
B. There was no violation of the Claimant’s substantial rights according to the
FET Standard.
i. The enactment of Law 8458/09 is in compliance with the Agreement
on the Trade-Related Aspects of Intellectual Property Rights
(“TRIPS Agreement”).

5
Bosh International v. Ukraine.

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 12. Investments made in a territory of the Contracting Party are subject to its laws.6 The
TRIPS Agreement provides that the government may grant a compulsory license to a
third party without need for the authorization of the right holder when there is a public
health crisis.7 Law 8458/09 is a legitimate measure taken by Mercuria, in the exercise
of its police powers, precisely to address the inevitable escalation of the Greyscale
epidemia for the ultimate purpose of protecting the public interest. Therefore, the
measure undertaken by Mercuria cannot be considered as unreasonable and
discriminatory, such that it constitutes a violation of the BIT.
ii. The grant of license to HG Pharma does not amount to a breach of
the FET.
13. In the face of a looming national crisis, Mercuria was left with no choice but to grant
its application through a fast-tracked process to address the situation, at least until
Greyscale ceases to be a threat to public health.
iii. In any event, any frustration of Claimant’s legitimate expectations
was justified.
14. In order to determine whether the frustration of the foreign investor’s expectations
was justified and reasonable, the host State’s legitimate right to regulate domestic
matters in the public interest must be taken into consideration.8 The ever-increasing
incidence of Greyscale in Mercuria could spiral into a national crisis within a decade.
Thus, the seemingly aggressive measures undertaken by Mercuria were in order,
considering the dire circumstances.
15. Considering the cost-effective alternative in the form of generic drugs introduced by
HG Pharma, Mercuria was able to save 1.2 billion USD annually. Hence, Mercuria
had all the good reasons to enact Law 8458/09.
C. The conduct of Mercuria’s judiciary in relation to the enforcement
proceedings does not amount to a breach of the FET.
16. The high standard required for establishing this claim in international law dictates that
it is not enough to have an erroneous decision or an incompetent judicial procedure,
as arbitral tribunals are not courts of appeal.9 Without clear and convincing evidence
of deliberate disregard of due process, the conduct of Mercuria’s court cannot be
deemed unfair and inequitable under international law.

6
BIT, Art.3(1).
7
TRIPS Agreement, Art.31(b).
8
Saluka v. Czech Republic.
9
Id.

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 17. Furthermore, Claimant is estopped from claiming denial of justice for the parties
sought to amicably settle the matter by taking the case out of court. The claimant
confirmed this attempt in an open court. This opportunity, thus, tempered the alleged
injustices suffered by Claimant.
18. A State may decline enforcement of an arbitral award on the ground that the same is
contrary to public policy.10 In its ordinary meaning, public policy dictates that injury
to the public good is a basis for denying the legality of a contract or other transaction.
III. REMEDIES
A. Mercuria is not liable to pay damages.
19. Due to the absence of any breach committed by Mercuria under the BIT, Claimant
cannot, therefore, be entitled to damages in any form.

10
New York Convention, Art.V, Sec 2(b).

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