1st NLIU- JUSTICE R. K.

TANKHA INTERNATIONAL MOOT, 2016

Team Code: Z
1ST NLIU – JUSTICE R.K TANKHA MEMORIAL INTERNATTIONAL MOOT, 2016

BEFORE THE ld. ARBITRAL TRIBUNAL

Under the contract dated 1.4.2012

UNCITRAL Model Law on International commercial Arbitration, 2012

Convention on International Sale of Goods, 2012

In the Matter of

ABPL.............................................................................................CLAIMANT

v.

Government of Barbaria ……................................................RESPONDENT

MEMORANDUM FOR THE CLAIMANTS

 1ST NLIU- JUSTICE R. K. TANKHA INTERNATIONAL MOOT, 2016

TABLE OF CONTENTS

Table of Contents ....................................................................................................................... i

Index of Authorities ................................................................................................................ iii

Conventions ........................................................................................................................ iii

Case Laws ........................................................................................................................... iii

Books ..................................................................................................................................... v

Other Authorities ................................................................................................................. v

Reports ................................................................................................................................. vi

List of Abbreviations ............................................................................................................... vii

Statement of Jurisdiction ....................................................................................................... viii

Statement of Facts.................................................................................................................... ix

Questions Presented ................................................................................................................. xi

Summary of Arguments ..........................................................................................................xii

Arguments Advanced ................................................................................................................ 1

Issue 1: Whether Freezing Of Assets And Cancellation Of Work Permits Amounts To

Expropriation By Respondent. ........................................................................................... 1
1.1. The Act Of Respondent Amounts To Direct Expropriation. ................................. 1
1.2. The Act Of The Respondent Amounts To Indirect Expropriation. ....................... 1
1.2.1. The Respondent’s Action has Caused an Economic Impact On The
Investment. ..................................................................................................................... 1
1.2.1.1. The Economic Value Of The Investment Has Been Decreased. ............... 2
1.2.1.2. The Claimant Lost Control Over Investment............................................. 2
1.2.1.3. The Duration Of The Measure Was Permanent ......................................... 3
1.2.2. The Expropriation Is Contrary To The Claimant’s Expectations ...................... 3
1.2.3. The Action By The Respondent Was A Disproportionate Measure .................. 3
1.3. THE EXPROPRIATION DONE BY THE RESPONDENT WAS UNLAWFUL4
1.3.1. The Measure Was Not Taken In Genuine Public Interest ................................. 4
1.3.2. The Measure Was Discriminatory Against The Claimant. ................................ 4
1.3.3. The Expropriation Was Not Against Due Process Of Law. .............................. 5

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 1st NLIU- JUSTICE R. K. TANKHA INTERNATIONAL MOOT, 2016

1.3.4. There Was Absence Of Compensation. ............................................................. 5

1.4. The Respondent Is Liable To Pay Damages Due To A Breach Of Contract ......... 5

ISSUE 2: Whether The Respondent Is Liable To Pay Damages Payable By Ocpl To

The Claimant By Way Of Sovereign Indemnity ............................................................... 6
2.2. The Respondent Is Liable For Violation Of International Trade Practices According
To Article 9(2) Of CISG. ................................................................................................... 7
2.3. The Respondent Is Liable For Not Acting According To The Principle Of Good
Faith Provided Under Article 7 Of Cisg. ........................................................................... 9

Issue 3: Whether The Claimant Is Liable For Sovereign Defamation. ......................... 11

3.2.3. The Damages Are Not Forseeable. .................................................................. 14

Prayer ...................................................................................................................................... 15

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 1st NLIU- JUSTICE R. K. TANKHA INTERNATIONAL MOOT, 2016

INDEX OF AUTHORITIES

CONVENTIONS
United Nations, Treaty Series, Vol. 1155 ................................................................................ 10
CASE LAWS
ADC v. Hungary, Award, (2 October 2006) .............................................................................. 4
Azurix Corp. v. Argentine Republic, (8 December 2003) ......................................................... 2
Azurix Corp. v. Argentine Republic, 43 I.L.M. 262 (2004), (8 December 2003) ..................... 3
Biloune v. Ghana, Final Award, (27 October 1989) .................................................................. 2
CLOUT Case No. 270, Bundesgerichtshof, Germany, (25 November 1998) ......................... 10
CLOUT Case No. 429, Oberlandesgericht Frankfurt, Germany, (30 August 2000); CLOUT
Case No. 424, Oberster Gerichtshof, Austria, (9 March 2000) ........................................... 10
CLOUT Case No. 476, Arbitral award No. 406/1998, Tribunal of International Commercial
Arbitration at the Russian Federation Chamber of Commerce and Industry, (6 June 2000),
available at http://cisgw3.law.pace.edu/cases/000606r1.html, (Last accessed on
30/12/2015) ............................................................................................................................ 6
CMS Gas Transmission Company v. Argentine Republic, (17 July 2003) ............................... 2
CMS Gas Transmission Company v. Argentine Republic, 42 I.L.M. 788 (2003), (17 July
2003) ...................................................................................................................................... 2
Continental Casualty Company v. Argentina, ICSID Case No. Arb/03/9, (5 September 2008)
................................................................................................................................................ 6
Delchi Carrier, S.p.A. v. Rotorex Corp.Case No 88-CV-1078, U.S. District Court, Northern
District of New York, (9 September 1994), available at
http://cisgw3.law.pace.edu/cases/940909u1.html, (Last accessed on 4/2/2016) ................. 13
Fruit and Vegetables Case, Handelsgericht (Commercial Court) Aargau, Switzerland, (26
November 2008) .................................................................................................................. 11
Geneva Pharmaceuticals Tech. Corp. v. Barr Labs. Inc., United States of America, Federal
District Court [New York], (21 August 2002) ....................................................................... 8
Glamis Gold Ltd. v. United States, UNCITRAL (NAFTA), (8 June 2009) .............................. 7
Lauder v. Czech Republic, UNCITRAL Ad Hoc Arbitration, (3 September 2001) ................. 1
LG & E Energy Corp and Ors v. Argentina, Decision on Liability, ICSID Case No. ARB
02/1, (3 October 2006) ........................................................................................................... 3
Metaclad Corporation v. The United Mexican States, (30 August 2000) ................................. 1

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 1st NLIU- JUSTICE R. K. TANKHA INTERNATIONAL MOOT, 2016

Middle East Cement Shipping and Handling Co. S.A. v. Arab Republic of Egypt, ICSID Case
No. ARB/99/6 (12 April 2002) .............................................................................................. 1
Mtd. Equity Sdn. Bhd. and Mtd. Chile S.A. v. Chile, ICSID Case. No. Arb/01/7, (25May
2004). ..................................................................................................................................... 7
Mtd. Equity Sdn. Bhd. and Mtd. Chile S.A. v. Chile, ICSID Case. No. Arb/01/7, Award,
(25May 2004)......................................................................................................................... 3
National Controls Corp. v. National Semiconductor Corp., 833 F.2d 491 (3d Cir. 1987) ...... 14
Natraj Studios v. Navrang Studios, AIR 1981 SC 537 (1981). ............................................... 11
ObersterGerichtshof, Austria, (21 March 2000), available at
http://www.cisg.at/10_34499g.htm, (Last accessed on 30/12/2015) ..................................... 6
Ohio Northern University Law Review, Volume 15, Issue 4, (1988) ..................................... 11
Plastic Carpets Case, Case No. S 00/82, Helsinki Court of First Instance (Judgment 28966),
.............................................................................................................................................. 13
Pope & Talbot Inc. v. Canada, Final Merits Award, (10 April 2001) ....................................... 2
Pope & Talbot v. Canada, Interim Award, (26 June 2000) ....................................................... 2
Roundhouse v. Owens-Illinois, Inc., 604 F.2d 990 (6th Cir. 1979)......................................... 13
S.D. Myers Inc. v. Government of Canada, Partial Award, (13 November 2000) .................... 3
Sempra Energy International v. Argentina, (28 September 2007)............................................. 2
Sempra Energy International v. Argentina, ICSID Case No. Arb/02/16, (28 September 2007)
............................................................................................................................................ 2, 7
Soleimany v. Soleimany, (1999) Q.B. 785, 804 (K.B.) ........................................................... 12
Tecmed S.A. v. Mexico, (2003) 43 I.L.M. 133 ......................................................................... 1
TECMED S.A. v. Mexico, (2003) 43 I.L.M. 133 ...................................................................... 2
Tecmed v. Mexico, Award, ICSID Case No. ARB (AF)/00/2, (29 May 2003) ........................ 3
Técnicas Medioambientales Techmed S.A. v. The United Mexican States, ICSID Case No. .. 9
Telenor v. Hungary, Award, (13 September 2006) ................................................................... 2
Tribunal of International Commercial Arbitration at the Russian Federation Chamber of
Commerce and Industry, Award No. 302/1996, accessible at
<http://cisgw3.law.pace.edu/cases/990727r1.html>; CLOUT Case No. 230,
Oberlandesgericht (Court of Appeal) Karlsruhe, Germany, (25 June 1997 ........................ 10
Video Recorders Case, Case No. 10 O 72/00, Landgericht Darmstadt (9 May 2000), available
at http://cisgw3.law.pace.edu/cases/000509g1.html, (Last accessed on 3/2/2016) ............. 13

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 1st NLIU- JUSTICE R. K. TANKHA INTERNATIONAL MOOT, 2016

Video Recorders Case, Case No. 10 O 72/00, Landgericht Darmstadt, (9 May 2000),
available at http://cisgw3.law.pace.edu/cases/000509g1.html, (Last accessed on
14/2/2016) ............................................................................................................................ 14
Wiko v. Swan, 346 U.S. 427 (1953) ........................................................................................ 11
Wine Case, Case No. 12 HKO 5593/01, Landgericht München, (30 August 2001), available
at http://cisgw3.law.pace.edu/cases/020830g1.html, (Last accessed on 9/2/1016) ............. 14
BOOKS
Benjamin, 3rd Edition, 1987, Page 1037–38 ............................................................................ 13
G.C. Christie, What Constitutes A Taking Of Property Under International Law, (1962), Page
307, 338.................................................................................................................................. 4
H.D. Jarass, B. Pieroth, Grundgesetz Fur Die Bundesrepublik Deutschland, 8th Edition,
(2006) ..................................................................................................................................... 4
Marianaee Jennings, Business: Its Legal, Ethical and Global Environment, 9nd Edition,
Chapter 9 .............................................................................................................................. 11
Michele Potestà, Legitimate Expectations in Investment Treaty Law: Understanding the
Roots and the Limits of a Controversial Concept, 28 ICSID Review, (2013) 88-122 .......... 7
Reederei W.Bockstiegel, Public Policy And Arbitrability, Comparative Arbitration Practice
And Public Policy Arbitration: Icca International Arbitration Congress, (1987), Series No.
3............................................................................................................................................ 12
T Wälde and A. Kolo, Environmental Regulation, Investment Protection and Regulatory
Taking In International Law, (2001), Page50 ........................................................................ 4
The World Bank, Firms in 189 Economies a World Bank Group Flagship Report, 12th
Edition, 2015 ........................................................................................................................ 14
The World Bank, Firms in 189 Economies, A World Bank Group Flagship Report, 12th
Edition, 2015 ........................................................................................................................ 14
The World Bank, Firms in 189 Economies, A World Bank Group Flagship Report, 12th
Edition, 2015, Page viii ........................................................................................................ 14
White & Summers, Page 11–7 (3rd Edition. 1988) .................................................................. 13
OTHER AUTHORITIES
Adriana Sánchez Mussi, International Minimum Standard of Treatment, available at
https://asadip.files.wordpress.com/2008/09/mst.pdf, (Last accessed on 23/1/2016) ............. 8
Art Books Case, Case No. 331, Handelsgericht Zürich, (10 February 1999), available at
http://cisgw3.law.pace.edu/cases/990210s1.html, (Last accessed on 3/2/2016) ................. 13

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 1st NLIU- JUSTICE R. K. TANKHA INTERNATIONAL MOOT, 2016

China International Economic and Trade Arbitration Commission, Arbitration, award relating
to 1989 Contract #QFD890011, available at
http://www.cisg.law.pace.edu/cisg/wais/db/cases2/900000c1.html, (Last accessed on
3/2/2016) ................................................................................................................................ 6
Damages Awarded by the Delchi Court, Consequential Damages in the International Sale of
Goods: Analysis of 2 Decisions, (Feb. 3, 2012, 2:30 PM), available at
http://www.cisg.law.pace.edu/cisg/wais/db/Articles/schnedr2.html, (Last accessed on
14/2/2016) ............................................................................................................................ 14
Emmanuel Voyiakis, Estoppel, Oxford Index, accessible at
http:/Dx.Doi.Org/10.1093/Obo/9780199796953-0058, (Last accessed on 20/1/2016) ....... 10
Engines for Hydraulic Presses and Welding Machines Case, M. GER LG Düsseldorf, 31 O
231/94, 23 June 1994. UNILEX D. 1994 (23 June 1994), available at
http://cisgw3.law.pace.edu/cases/940623g1.html, (Last accessed on 18/2/2016) ............... 12
Neer v. United Mexican States, Doc. No. 136, Opinion (Oct. 15, 1926), Reprinted in
Opinions Of The Commissioners Under The Convention Concluded September 8, 1923
Between The United States And Mexico, 71-80 (1927) ......................................................... 8
OECD Publishing, OECD Working Papers on International Investment, Fair and Equitable
Treatment Standard in International Investment Law, 2004, Page 25, available at
http://dx.doi.org/10.1787/675702255435, (Last accessed on 20/1/2016).............................. 9
OECD Working Papers on International Investment, Fair and Equitable Treatment Standard
in International Investment Law, 2004, OECD Publishing, Page 54 .................................... 4
OECD Working Papers on International Investment, Fair and Equitable Treatment Standard
in International Investment Law, 2004, OECD Publishing, Page 8, available at
http://dx.doi.org/10.1787/675702255435, (Last accessed on 20/1/2016).............................. 8
The Economic Times, Only 13 judges for every ten lakh people in India, (9 May 2010),
available at http://Articles.economictimes.indiatimes.com/2013-05-
09/news/39144068_1_judges-high-courts-justice, (Last accessed on 22/12/2015)............... 8
UNGA Resolution on Permanent Sovereignty over Natural Resources, 1803 .......................... 4
REPORTS
UNCTAD Series on Issues in International Investment Agreements II, Fair and Equitable
Treatment, 1999 ..................................................................................................................... 8
UNCTAD Series on Issues in International Investment Agreements II, Fair and Equitable
Treatment: A Sequel, 2012 .................................................................................................... 1

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1st NLIU- JUSTICE R. K. TANKHA INTERNATIONAL MOOT, 2016

LIST OF ABBREVIATIONS

¶ Pilcrow

CISG Convention on International Sale of Goods

Co. Company

Corp. Corporation

International Centre for Settlement of

ICSID
Investment Dispute

Inc. Incorporated

ld. Learned

Ltd. Limited

Organization for Economic Cooperation

OECD
and Development

Ors. Others

Pvt. Private

SCC Stockholm Centre of Commerce

UNCITRAL United Nations Convention on

International Trade Law

United Nations Conference on Trade and

UNCTAD
Development

v. Versus

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 1st NLIU- JUSTICE R. K. TANKHA INTERNATIONAL MOOT, 2016

STATEMENT OF JURISDICTION

In the instant matter, the CLAIMANT has invoked the jurisdiction of the ld. Arbitral Tribunal
based on the contract between the RESPONDENT, CLAIMANT dated 1.4.2012, which was
agreed to be governed by the UNCITRAL Model Law on international commercial
arbitration, the UNCITRAL Rules and CISG.

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 1st NLIU- JUSTICE R. K. TANKHA INTERNATIONAL MOOT, 2016

STATEMENT OF FACTS

1. Ambrister & Bathind Pvt. Ltd. (ABPL) is a company incorporated under the laws of the
Great Dominion of Novelia. Optical Commitments Pvt. Ltd. (OCPL) is a Company
registered under the Barbarian Companies Act. ABPL entered into a technology transfer
contract for the newly discovered muon tomography technique that helped extract coal
more efficiently. The coal extracted using this technology by OCPL was to be sold to
ABPL as given in the main contract of coal transfer. This coal was to be transported by
BAPL (a fully owned subsidiary of ABPL) to ABPL, as given under a separate contract
of affreightment. It is a matter of record that BAPL had acted as a carrier even for the
competitors of ABPL.
2. During contractual negotiations, Mr. Shaw from OCPL insisted upon the introduction of a
special clause in the contract to take the benefit of the “Make in Barbaria” scheme, where
all technology import and resultant export of goods, would be exempted from all taxes
levied by the Government of Barbaria on the payment of a onetime tax (OTT) of 0.01 %
ad valorem on the total turnover. There was also a sovereign indemnity and guarantee
entered into by the Barbarian State in favour of ABPL as permissible under the law
subject to full compliance with all laws of Barbaria as a tripartite contract.
3. For the abovementioned contract, the UNCITRAL Model and the CISG were adopted as
the governing laws for the contract and dispute emanating there from.
4. The contract proved to be profitable. Eventually, by way of a ‘Freedom of Information’
report filed by Mr. Kur Delwal of Barbaria and the raids conducted by enforcement
agencies of Barbaria, it was established that OCPL had been involved in corrupt practices
like under-reporting of coal output to pay lesser royalty to Government, bribing the
officials of State to get extra transport permits and paying no export duties.
5. Due to high media coverage, the ‘Ease of Business’ ranking of Barbaria was reduced by 9
points by November 2012. Consequently, on Dec 1, 2012, the Government of Barbaria
froze all assets of ABPL and BAPL in the State of Barbaria which were in excess of USD
100 billion, declared all their personnel as persona-non grata and cancelled their work
permits with immediate effect. It further issued a notice of International Arbitration on
Dec 2, 2012 to ABPL claiming sovereign defamation due to the activities of ABPL, its
affiliates and corporate subordinates.
6. ABPL not only denied the arbitrability of this dispute raised by the Government of
Barbaria, contending that defamation being a public law issue, is not arbitrable, but also

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 1st NLIU- JUSTICE R. K. TANKHA INTERNATIONAL MOOT, 2016

issued a counter notice to the Government of Barbaria seeking International Arbitration

regarding the freezing of assets as amounting to expropriation and the cancellation of
work permits as hostile and illegal behaviour.
7. Separately, ABPL and BAPL also issued a joint notice seeking Arbitration with OCPL
claiming damages for use of technology without authorization, accounts and profits
earned thereby and loss of image and esteem to ABPL.
8. After the notice was dispatched for OCPL but before it could reach OCPL, an anti-suit
injunction was obtained by OCPL against ABPL claiming that there was no finalized
contract between ABPL and OCPL. This was challenged by ABPL before the superior
court and has been pending for over two years.
9. After the conciliatory mechanism invoked by ABPL under the Joint Nations (JN) Treaty
of Conciliation failed and upon the further suffering of ABPL due to failure of domestic
judicial mechanisms, ABPL claimed that the State of Barbaria was liable to pay damages
payable by OCPL by virtue of it being a sovereign indemnifier under the tripartite
contract. The government, in reply, contended that the right to claim such a relief was
non-arbitrable.
10. The matter is now listed for arguments including arguments based on the principle of
kompetenz kompetenz before the ld. Arbitral Tribunal.

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 1st NLIU- JUSTICE R. K. TANKHA INTERNATIONAL MOOT, 2016

QUESTIONS PRESENTED

ISSUE 1
WHETHER FREEZING OF ASSETS AND CANCELLATION OF WORK PERMITS
AMOUNTS TO EXPROPRIATION.

ISSUE 2
WHETHER THE RESPONDENT IS LIABLE TO PAY DAMAGES PAYABLE BY
OCPL BY WAY OF SOVEREIGN INDEMNITY TO THE CLAIMANT.

ISSUE 3

WHETHER THE CLAIMANT IS LIABLE FOR SOVEREIGN DEFAMATION.

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 1st NLIU- JUSTICE R. K. TANKHA INTERNATIONAL MOOT, 2016

SUMMARY OF ARGUMENTS

ISSUE 1
WHETHER FREEZING OF ASSETS AND CANCELLATION OF WORK PERMITS
AMOUNTS TO EXPROPRIATION BY THE RESPONDENT.
It is contended that freezing of assets and cancellation of work permits amounts to
expropriation. By freezing all of ABPL and BAPL’s assets, the companies cannot use their
assets nor can they dispose of their assets. Hence, the investment has been virtually
annihilated. Furthermore, cancellation of work permits amounts to expulsion of management
which extinguishes the existence of the business. Without the assets and management work
cannot be continued, hence it is not a regulatory measure but an indirect expropriation.
Furthermore, it is contended that the expropriation is unlawful as it does not fulfill the
requirements of a public purpose. Also, it is discriminatory in nature since, no action was
taken against OCPL, which is a Company from Barbaria. There was no due process of law as
the indirect seizure was ‘immediate’ and no prior notice was given and also there was no
payment of compensation.

ISSUE 2
WHETHER THE RESPONDENT IS LIABLE TO PAY DAMAGES PAYABLE BY
OCPL TO THE CLAIMANT BY WAY OF SOVEREIGN INDEMNITY.
The RESPONDENT is liable to pay damages payable by OCPL under Article 74 of CISG as
it is a contractual obligation under the ‘Make in Barbaria’ scheme that made the
RESPONDENT a sovereign indemnifier and guarantor. Due to this scheme, there were
contractual expectations through representations made by the CLAIMANT that the
RESPONDENT needs to fulfill. It is contended that these expectations need to be fulfilled in
accordance to the principle good faith. It is further contended that the judicial system of
Barbaria falls below the international minimum standard and that its ineffectiveness amounts
to denial of justice due to undue delay with respect to the appeal against the anti-suit
injunction that has been pending over two years in its superior courts. Thus, under Article 9
of CISG, which makes the fulfillment of international trade practices mandatory to the parties
of the contract, the RESPONDENT is liable to adhere to these principles of customary
international law and hence, is liable to pay damages payable by OCPL to the CLAIMANT
by way of sovereign indemnity.

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 1st NLIU- JUSTICE R. K. TANKHA INTERNATIONAL MOOT, 2016

ISSUE 3
WHETHER THE CLAIMANT IS LIABLE TO PAY DAMAGES FOR SOVEREIGN
DEFAMATION.
Despite the permissive nature of the principle of kompetenz kompetenz, the Tribunal does not
have jurisdiction to hear the abovementioned matter as the same involves public policy
elements which are non arbitrable. Matters such as defamation or loss of reputation are
covered under tort law and tortious liabilities are beyond the ambit of CISG. Lastly, it is
contended that CLAIMANT is not liable to pay any damages to the RESPONDENT because
the RESPONDENT is neither the buyer nor the seller and hence, is disqualified from
claiming damages as per Article 4 of CISG. Arguendo, even if the RESPONDENT can be a
party under the suit it cannot claim damages for loss of reputation or sovereign defamation as
damage to reputation per say is not compensable under CISG as long as a pecuniary loss is
not shown. Also the same is not foreseeable and since the only provision under which remedy
can be sought is Article 74 of CISG, the RESPONDENT is not entitled to any compensation
or damages whatsoever under the said provision.

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 1ST NLIU- JUSTICE R. K. TANKHA INTERNATIONAL MOOT, 2016

ARGUMENTS ADVANCED

ISSUE 1: WHETHER FREEZING OF ASSETS AND CANCELLATION OF WORK PERMITS

AMOUNTS TO EXPROPRIATION BY RESPONDENT.
The CLAIMANT contends the act of the RESPONDENT of freezing of assets, declaration of
the CLAIMANT’S personnel as persona non grata and cancellation of work permits amounts
to expropriation, both direct [1.1] and indirect [1.2]. Moreover, the expropriation is unlawful
in nature [1.3] for which the CLAIMANT is entitled to damages under Article 74 of CISG
[1.4].
1.1.THE ACT OF RESPONDENT AMOUNTS TO DIRECT EXPROPRIATION.
Direct expropriation means a mandatory legal transfer of the title to the property or its
outright physical seizure.1 In cases of direct expropriation, there is an open, deliberate and
unequivocal intent, as reflected in a formal law or decree or physical act, to deprive the owner
of his or her property through the transfer of title or outright seizure.2 In the present matter,
the freezing of assets of CLAIMANT amounts to direct expropriation depriving them of all
reasonably expected economic benefits of property.
1.2. THE ACT OF THE RESPONDENT AMOUNTS TO INDIRECT EXPROPRIATION.
The CLAIMANT contends that their property has been indirectly and stealthily3
expropriated. Indirect expropriation refers “measures taken by a State the effect of which is to
deprive the investor of the use and benefit of his investment even though he may retain
nominal ownership of the respective rights”.4
There are three elements which assess indirect expropriation: economic impact of the
measure [1.2.1], the extent to which the measure interferes with distinct, reasonable,
investment backed expectations [1.2.2] and the nature, purpose and character of the measure
[1.2.3].
1.2.1. The Respondent’s Action has Caused an Economic Impact On The Investment.
A deprivation occurs whenever a State takes steps “that effectively neutralize the benefit of
the property for the foreign owner”.5 The arbitral tribunal in Telenor v. Hungary6 pointed out

1
Metaclad Corporation v. The United Mexican States, (30 August 2000).
2
UNCTAD Series on Issues in International Investment Agreements II, Fair and Equitable
Treatment: A Sequel, 2012, Page 6, ¶ 2.
3
Tecmed S.A. v. Mexico, (2003) 43 I.L.M. 133.
4
Middle East Cement Shipping and Handling Co. S.A. v. Arab Republic of Egypt, ICSID
Case No. ARB/99/6 (12 April 2002).
5
Lauder v. Czech Republic, UNCITRAL Ad Hoc Arbitration, (3 September 2001).

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that the determinative factors for establishing an expropriation were the decrease in value
[1.2.1.1] and duration [1.2.1.3] of the economic deprivation. Furthermore, the CLAIMANT
contends that it has completely lost control over its investment [1.2.1.2].
1.2.1.1.THE ECONOMIC VALUE OF THE INVESTMENT HAS BEEN DECREASED.
Complete depreciation of the economic value of the investment must be total or almost so.
The interference should be such to support a conclusion that the property has been taken by
the owner.7 The RESPONDENT froze all of the CLAIMANT’s assets including all the assets
of its subsidiary (BAPL). By having their assets frozen, the CLAIMANT can no longer deal
with them. Hence, the property has been indirectly taken by the RESPONDENT.
By declaring all their personnel as persona non grata and cancelling all their work permits,
all work ceases, causing the value of the investment to be virtually annihilated. 8
The effect of an indirect expropriation should be severe enough to result in substantial
deprivation9 of property rights to render them useless,10 or destruction of the commercial
value of the investment11 and effective neutralisation of enjoyment of property.12
Furthermore, the property rights are rendered useless due to freezing of assets and by
declaring all the personnel as persona non grata due to which they are prohibited from
staying in Barbaria and cancelling their work permits. Thus, the enjoyment of the property
has been effectively neutralized.13
1.2.1.2. THE CLAIMANT LOST CONTROL OVER INVESTMENT.

Indirect expropriation requires that the investor is no longer in control of its business
operation by loss of ownership or management.14 A valuable investment would be useless to
the owner if he cannot use, enjoy or dispose off such an investment. 15 Upon freezing of all
the assets of the CLAIMANT and its subsidiary, they are prevented from the use or disposal
of any of the assets and hence, cannot exercise control over their investment. In the present

6
Telenor v. Hungary, Award, (13 September 2006).
7
Pope & Talbot v. Canada, Interim Award, (26 June 2000).
8
Sempra Energy International v. Argentina, (28 September 2007).
9
Pope & Talbot Inc. v. Canada, Final Merits Award, (10 April 2001).
10
TECMED S.A. v. Mexico, (2003) 43 I.L.M. 133.
11
Azurix Corp. v. Argentine Republic, (8 December 2003).
12
CMS Gas Transmission Company v. Argentine Republic, (17 July 2003).
13
Sempra Energy International v. Argentina, ICSID Case No. Arb/02/16, (28 September
2007); CMS Gas Transmission Company v. Argentine Republic, 42 I.L.M. 788 (2003), (17
July 2003).
14
Sempra Energy International v. Argentina, ICSID Case No. Arb/02/16, (28 September
2007)
15
Biloune v. Ghana, Final Award, (27 October 1989).

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 1st NLIU- JUSTICE R. K. TANKHA INTERNATIONAL MOOT, 2016

case, by cancellation of work permits, the CLAIMANT has lost complete control over its
management without which it cannot carry forward any work. Cancellation of work permits
amounts to indirect expulsion as the end result in both the cases is the same, i.e, the investor
is divested of his investment.
1.2.1.3. THE DURATION OF THE MEASURE WAS PERMANENT.

In Tecmed v. Mexico, the Tribunal held that the measures adopted by a Government were de
facto expropriation if they were permanent in nature16. The duration of the measure taken by
the RESPONDENT was permanent in nature. Even if a deprivation is partial or temporary in
nature, provided it amounts to removal of the ability of the owner to make use of his
economic rights, amounts to expropriation.17 The CLAIMANT cannot make use of its
economic rights as, upon freezing of all assets, one can neither utilize nor dispose them.
Hence, the effect of the measure is permanent.
1.2.2. The Expropriation Is Contrary To The Claimant’s Expectations.
Determination of a measure amounting to an indirect expropriation relates to the existence of
expectations on the part of the investor that a certain type of measure will not be taken by the
host State. It also extends to obligations arising out of contracts. 18 Article 9(1) of CISG states
that the parties are bound by any usage to which they have agreed to. Legitimate expectations
need not to be based on specific and explicit undertakings of the host State. Implicit
assurances, coupled with the investor’s assumptions would be sufficient.19 After making such
large investments in Barbaria, the State is under an obligation not to commit an unlawful
expropriation. In the present case, the CLAIMANT had a right to be informed.
1.2.3. The Action By The Respondent Was A Disproportionate Measure.
Arguendo, even if the CLAIMANT has committed sovereign defamation, it is asserted that
the measure was disproportionate in nature. Firstly, as proved above, expropriation is
contrary to the investor’s expectations. Secondly, damage in present case is not merely
ephemeral but one that the investor’s situation is compromised over a long period of time.20

16
Tecmed v. Mexico, Award, ICSID Case No. ARB (AF)/00/2, (29 May 2003).
17
S.D. Myers Inc. v. Government of Canada, Partial Award, (13 November 2000).
18
Mtd. Equity Sdn. Bhd. and Mtd. Chile S.A. v. Chile, ICSID Case. No. Arb/01/7, Award,
(25May 2004).
19
Azurix Corp. v. Argentine Republic, 43 I.L.M. 262 (2004), (8 December 2003).
20
LG & E Energy Corp and Ors v. Argentina, Decision on Liability, ICSID Case No. ARB
02/1, (3 October 2006).

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 1st NLIU- JUSTICE R. K. TANKHA INTERNATIONAL MOOT, 2016

A stable regulatory framework is a crucial condition for investments.21 The RESPONDENT’s

action was without an iota of reasonability22 nor any sort of rigorous risk assessment.23 The
blanket divestiture of all the investment is not proportional to the aims that the Government
wishes to achieve.
1.3. THE EXPROPRIATION DONE BY THE RESPONDENT WAS UNLAWFUL.

The CLAIMANT contends that the expropriation of assets and worker’s permits is unlawful
in nature as it does not satisfy the conditions of public purpose24 [1.3.1], it is discriminatory
in nature25 [1.3.2], not carried out in accordance with due process of law26[1.3.3] and ABPL
was not compensated against such an expropriation27 [1.3.4].
1.3.1. The Measure Was Not Taken In Genuine Public Interest.
Expropriation must be made for a public purpose. The taking of property must be motivated
by the pursuance of a legitimate welfare objective. There should be some genuine public
interest involved.28 In the present case, there is no such genuine public interest. The
RESPONDENT lacks proper evidence which proves that the CLAIMANT and BAPL were
behind the illegal activities of OCPL. Upon raiding the premises of OCPL, the credit note
discovered by them was addressed by an e-mail ID bearing Mr. Haribrook’s name, which was
confirmed fake by forensic investigation. The server where e-mail ID originated could not be
located.29
1.3.2. The Measure Was Discriminatory Against The Claimant.
Expropriation should be taken on a non-discriminatory basis. The broad principle of non-
discrimination is a general percept of non-arbitrariness which is described as a duty to act
reasonably without any precondition of differential treatment.30 Arbitral Tribunals have found
this requirement to have been violated when a State has discriminated against foreign

21
T Wälde and A. Kolo, Environmental Regulation, Investment Protection and Regulatory
Taking In International Law, (2001), Page50.
22
G.C. Christie, What Constitutes A Taking Of Property Under International Law, (1962),
Page 307, 338.
23
OECD Working Papers on International Investment, Fair and Equitable Treatment Standard
in International Investment Law, 2004, OECD Publishing, Page 54.
24
UNGA Resolution on Permanent Sovereignty over Natural Resources, 1803, ¶ 4.
25
UNGA Resolution on Permanent Sovereignty over Natural Resources, 1803, ¶ 4.
26
UNGA Resolution on Permanent Sovereignty over Natural Resources, 1803, ¶ 4.
27
UNGA Resolution on Permanent Sovereignty over Natural Resources, 1803, ¶ 4.
28
ADC v. Hungary, Award, (2 October 2006).
29
Moot Compromis, Page 4, ¶ 3.
30
H.D. Jarass, B. Pieroth, Grundgesetz Fur Die Bundesrepublik Deutschland, 8th Edition,
(2006), Article 3.

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 1st NLIU- JUSTICE R. K. TANKHA INTERNATIONAL MOOT, 2016

nationals on the basis of their nationality.31 The RESPONDENT has frozen all assets of the
CLAIMANT and BAPL, but has not taken any action against OCPL, a Company located in
Barbaria, even though it was OCPL that under-reported the coal output and was involved in
various other illegal activities. This raises speculation about the treatment of the CLAIMANT
and BAPL for being foreign companies.
1.3.3. The Expropriation Was Not Against Due Process Of Law.
Article 7(1) of CISG establishes that the conduct of the parties must conform to the good
faith principle. Abuse of process violates the good faith principle.32 The due-process principle
requires that the expropriation comply with procedures established in domestic legislation
and internationally recognized fundamental rules in this regard.33
Absence of notice before seizure violates the due process requirement. 34 There was no notice
which was sent to CLAIMANT or BAPL before the freezing of its assets. Further, the
cancellation of work permits was ‘immediate,’35 denying a right to be heard or to object by
CLAIMANT and BAPL.
1.3.4. There Was Absence Of Compensation.
Non–payment of compensation renders the expropriation unlawful.36 In Phillips Petroleum
Co. Iran v. Iran, it was held that an obligation to compensate arises even in case of
contractual rights.”37 It is the duty of the State to compensate the CLAIMANT for the loss
suffered by it due to expropriation.
1.4. THE RESPONDENT IS LIABLE TO PAY DAMAGES DUE TO A BREACH OF CONTRACT.

31
UNCTAD Series on Issues in International Investment Agreements II, Fair and Equitable
Treatment: A Sequel, 2012, Page 49, ¶ 3.
32
BRI Production "Bonaventure" v. Pan African Export, CLOUT case No. 154, Cour d’appel
de Grenoble, France, (22 February 1995). available at
http://cisgw3.law.pace.edu/cases/950222f1.html, (Last accessed on 30/12/2015).
33
UNCTAD Series on Issues in International Investment Agreements II, Fair and Equitable
Treatment: A Sequel, 2012, Page 51, ¶ 4.
34
Middle East Cement Shipping and Handling Co. S.A. v. Arab Republic of Egypt, ICSID
Case No. ARB/99/6 (12 April 2002).
35
Moot Compromis, Page 5, ¶ 2.
36
Siemens v. Argentina, Award, ICSID Case No. ARB/02/8, (6 February 2007); Vivendi v.
Argentina II, Award, ICSID Case No. ARB/97/3, (20 August 2007); Charter of Economic
Rights and Duties of States, 1974, Article 2(2).
37
Phillips Petroleum Co. Iran v. Iran, Iran – US claims tribunal, Award No. 425-39-2, (29
June 1989).

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 1st NLIU- JUSTICE R. K. TANKHA INTERNATIONAL MOOT, 2016

It is asserted that there was a contract of sovereign indemnity between the CLAIMANT and
the RESPONDENT.38 The expropriation of the property of the CLAIMANT has resulted in a
contractual breach. By conducting an unlawful expropriation, it has caused a loss of profits39
to the CLAIMANT for which the CLAIMANT is entitled to receive damages under Article
74 of CISG.
ISSUE 2: WHETHER THE RESPONDENT IS LIABLE TO PAY DAMAGES PAYABLE BY OCPL
TO THE CLAIMANT BY WAY OF SOVEREIGN INDEMNITY.
It is contended that the RESPONDENT was under an obligation to ensure that there was an
efficient judicial mechanism for resolution of disputes arising out of foreign investments by
way of a tripartite contract between the CLAIMANT, the RESPONDENT and OCPL, which
contained the ‘Make in Barbaria’ scheme, wherein, the RESPONDENT was a sovereign
indemnifier and guarantor.40 This made the RESPONDENT liable to fulfil contractual
obligations under Article 9(1) of CISG [2.1], to ensure that principles of customary
international law under international trade practices under Article 9(2) of CISG are adhered
to [2.2], and to act according to the principle of good faith as provided by Article 7 of CISG
[2.3]. In addition, the intention of the parties to the tripartite contract has to be taken in
consideration [2.4]. Thus, the RESPONDENT is liable to pay damages payable by OCPL by
way of sovereign indemnity.
2.1. THE RESPONDENT IS LIABLE UNDER ARTICLE 9(1) OF CISG FOR NOT MEETING THE
CONTRACTUAL EXPECTATIONS OF THE CLAIMANT.
Article 9(1) of CISG binds parties to every usage, implicit41 as well as explicit42, to which
they have agreed to. Implied contractual expectations occur when foreign investors enter into
certain contractual commitments with the host State and are placed at a higher stand of
protection.43 Denial of relevant permits by the host State frustrates legitimate expectations of

38
Moot Compromis, Page 5, ¶ 8.
39
CLOUT Case No. 476, Arbitral award No. 406/1998, Tribunal of International Commercial
Arbitration at the Russian Federation Chamber of Commerce and Industry, (6 June 2000),
available at http://cisgw3.law.pace.edu/cases/000606r1.html, (Last accessed on 30/12/2015).
40
Moot Compromis, Page 2, ¶ 8.
41
ObersterGerichtshof, Austria, (21 March 2000), available at
http://www.cisg.at/10_34499g.htm, (Last accessed on 30/12/2015).
42
China International Economic and Trade Arbitration Commission, Arbitration, award
relating to 1989 Contract #QFD890011, available at
http://www.cisg.law.pace.edu/cisg/wais/db/cases2/900000c1.html, (Last accessed on
3/2/2016).
43
Continental Casualty Company v. Argentina, ICSID Case No. Arb/03/9, (5 September
2008).

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 1st NLIU- JUSTICE R. K. TANKHA INTERNATIONAL MOOT, 2016

an investor and has established unfair and inequitable treatment.44 A contract primarily
crystallizes the parties’ expectations.45 Thus, an inference can be drawn regarding the
expectations of the CLAIMANT from the RESPONDENT.
2.1.1. Informal Representations Made By The Respondent
Informal representations are such as made by the host State, on which the investor relied at
the time of making its investment and the disappointment of which caused the investor to
suffer damages.46 These representations made also constitute an important part of legitimate
expectations of the investor.47 The requirement to protect legitimate expectations becomes
more significant when the investment has been attracted and induced by means of assurances
and representations.48
An investor may derive legitimate expectations either from specific commitments addressed
to it personally or through rules which are put in place with a specific aim to induce foreign
investments.49 The ‘Make in Barbaria’ scheme was made with the purpose of attracting
foreign investment and the RESPONDENT made representations that their current
framework is efficient to handle the same.50 However, the CLAIMANT’s appeal against an
anti-suit injunction issued by a local Court has been pending for over two years in the
superior court. It is thus established that the RESPONDENT has not observed the informal
representations it made to attract greater foreign investment.
2.2. THE RESPONDENT IS LIABLE FOR VIOLATION OF INTERNATIONAL TRADE PRACTICES
ACCORDING TO ARTICLE 9(2) OF CISG.
CISG clearly states that the parties are considered, unless otherwise agreed, to have impliedly
made applicable to their contract or its formation a usage of which the parties knew or ought
to have known and which in international trade is widely known to, and regularly observed
by, parties to contracts of the type involved in the particular trade concerned. 51 These usages

44
Mtd. Equity Sdn. Bhd. and Mtd. Chile S.A. v. Chile, ICSID Case. No. Arb/01/7, (25May
2004).
45
Michele Potestà, Legitimate Expectations in Investment Treaty Law: Understanding the
Roots and the Limits of a Controversial Concept, 28 ICSID Review, (2013) 88-122.
46
Michele Potestà, Legitimate Expectations in Investment Treaty Law: Understanding the
Roots and the Limits of a Controversial Concept, 28 ICSID Review, (2013) 88-122.
47
Michele Potestà, Legitimate Expectations in Investment Treaty Law: Understanding the
Roots and the Limits of a Controversial Concept, 28 ICSID Review, (2013) 88-122.
48
Sempra Energy International v. Argentina, ICSID Case No. Arb/02/16, (28 September
2007).
49
Glamis Gold Ltd. v. United States, UNCITRAL (NAFTA), (8 June 2009).
50
Moot Compromis, Page 2, ¶ 8.
51
CISG, Article 9.

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 1st NLIU- JUSTICE R. K. TANKHA INTERNATIONAL MOOT, 2016

are governed by the Convention, unless expressly excluded by the parties. 52 It is contended
that the RESPONDENT is obligated to follow certain principles, such as international
minimum standard of treatment [2.2.1] and denial of justice [2.2.2] under Article 9(2) of
CISG that makes international trade practices binding on the parties to the contract.
2.2.1. The Judicial System of The Republic Of Barbaria Falls Below The International
Minimum Standard.
There exists an international minimum standard according to which States have to accord to
aliens, certain rights, even in case of denying the same treatment to their nationals.53 Failure
to provide such minimum standard shall extend liability against the State.54 Furthermore, a
State is also responsible if it fails to provide the foreign investor remedies for injuries
suffered. In order to constitute such failure, the treatment should amount to an outrage, to bad
faith, to wilful neglect of duty, or to an insufficiency of Governmental action so far short of
international standards that every reasonable and impartial man would readily recognize its
insufficiency.55 This principle is seen as a practice arising out of a sense of legal
obligations.56
It is contended that the RESPONDENT’s actions fall below the minimum requirement when
put to test against international standards. The judicial framework of Barbaria and its
infrastructure does not sustain its activity and its judge to population ratio is 13 judges per
million people, as against 35-40 in other developing nations and 50 in a developed country.57
This is a wilful neglect on the part of the RESPONDENT and the same should be adjudged as
failure to adhere to internationally acceptable standards.
2.2.2. The Respondent Is Liable For Denial Of Justice.

52
Geneva Pharmaceuticals Tech. Corp. v. Barr Labs. Inc., United States of America, Federal
District Court [New York], (21 August 2002).
53
OECD Working Papers on International Investment, Fair and Equitable Treatment Standard
in International Investment Law, 2004, OECD Publishing, Page 8, available at
http://dx.doi.org/10.1787/675702255435, (Last accessed on 20/1/2016).
54
UNCTAD Series on Issues in International Investment Agreements II, Fair and Equitable
Treatment, 1999.
55
Neer v. United Mexican States, Doc. No. 136, Opinion (Oct. 15, 1926), Reprinted in
Opinions Of The Commissioners Under The Convention Concluded September 8, 1923
Between The United States And Mexico, 71-80 (1927).
56
Adriana Sánchez Mussi, International Minimum Standard of Treatment, available at
https://asadip.files.wordpress.com/2008/09/mst.pdf, (Last accessed on 23/1/2016), Page 20,
¶2.
57
The Economic Times, Only 13 judges for every ten lakh people in India, (9 May 2010),
available at http://Articles.economictimes.indiatimes.com/2013-05-
09/news/39144068_1_judges-high-courts-justice, (Last accessed on 22/12/2015).

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A contract of investment usually sets out the obligations of the host State towards the investor
to support and safeguard investments.58 Denial of justice is traditionally defined as any gross
misadministration of justice by domestic courts resulting from the ill-functioning of the
State’s judicial system and includes unreasonable delay in proceedings.59
In the case of Chevron v. Ecuador,60 the Tribunal stated that court congestion cannot be an
absolute defense for the denial of justice. The same reasoning was applied in the case of
White Industries v. India.61
In the present dispute, there was an unreasonable delay of over two years in the appeal made
by the CLAIMANT in the superior courts of the Republic of Barbaria. This resulted in grave
losses that had to be sustained by the CLAIMANT due to the ineffective judicial mechanism
present that has failed to provide an effective local remedy for settlement of disputes.
Thus, by virtue of Article 9(2) of CISG, the RESPONDENT is obligated to follow these
principles implied in the contract. The same is made implicit in the contract through the
‘Make in Barbaria’ scheme.62 All the parties concerned ought to have been aware of these
commonly observed principles involved in this particular kind of trade.
2.3. THE RESPONDENT IS LIABLE FOR NOT ACTING ACCORDING TO THE PRINCIPLE OF
GOOD FAITH PROVIDED UNDER ARTICLE 7 OF CISG.
The good faith principle acts as a combination of elements, consisting of respecting basic
expectations, transparency and lack of arbitrariness. It owes its authoritative status to
Customary International Law and to its explicit encapsulation in Article 31(1) of the Vienna
Convention.63 It requires the Contracting Parties to be provided with treatment that does not
affect the basic expectations that were taken into account by the foreign investor to make the
investment.64

58
Norbert Horn, Stefan Michael röll and Norbert Horn, Arbitration and the Protection of
Foreign Investment: Concepts and Means in Arbitrating Foreign Investment Disputes:
Procedural and Substantive Legal Aspects, Studies in Transnational Economic Law, Vol. 19.
59
UNCTAD Series on Issues in International Investment Agreements II, Fair and Equitable
Treatment: A Sequel, 2012, Page 80, ¶ 2.
60
Chevron Corporation (USA) and Texaco Petroleum Company (USA) v. The Republic of
Ecuador, PCA Case No. 2007-2, (30 March 2010).
61
White Industries Australia Limited v. The Republic of India, Final Award, (30 November
2011).
62
Moot Compromis Page 2 ¶ 8.
63
OECD Publishing, OECD Working Papers on International Investment, Fair and Equitable
Treatment Standard in International Investment Law, 2004, Page 25, available at
http://dx.doi.org/10.1787/675702255435, (Last accessed on 20/1/2016).
64
Técnicas Medioambientales Techmed S.A. v. The United Mexican States, ICSID Case No.

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 1st NLIU- JUSTICE R. K. TANKHA INTERNATIONAL MOOT, 2016

This principle is also a general principle upon which the CISG Convention is based. Article 7
(1) requires that the Convention be interpreted in a manner that promotes the observance of
good faith in international trade.65 It is found in the Vienna Convention on the Law of
Treaties, as well.66
In the current dispute, the RESPONDENT is required to fulfil all obligations of the contract
in good faith, which includes ensuring that general expectations arising out of the contract are
met.
It is also important to note that estoppel is one of the general principles upon which the CISG
Convention is based. More specifically, it is a manifestation of the principle of good faith.67
Estoppel is a rule of international law that bars a party from going back on its previous
representations when those representations have induced reliance or some detriment on the
part of others.68With regards to the current dispute, the CLAIMANT considered the ‘Make in
Barbaria’ scheme while negotiating the terms of the contract and thus, the RESPONDENT is
now estopped from avoiding the representations made that induced reliance.
2.4. THE INTENTION OF THE RESPONDENT CAN BE DEDUCED THROUGH ‘THE MAKE IN
BARBARIA SCHEME’.
CISG states that statements and other conduct of a party are to be interpreted according to his
intent where the other party knew or could have been aware of the intent.69 This has been
used while interpreting conduct relating to the formation of contract,70 as well as its
performance.71 Article 8 (3) also states that in determining the actual intent of the party or the
understanding a reasonable person would have had, the parties interests, the purpose of the

Arb(Af)/00/2, (29 May 2003).

65
CISG, Article 7(1); CLOUT case No. 802, Tribunal Supremo, Spain, (17 January 2008).
66
United Nations, Treaty Series, Vol. 1155, Page 331.
67
Tribunal of International Commercial Arbitration at the Russian Federation Chamber of
Commerce and Industry, Award No. 302/1996, accessible at
<http://cisgw3.law.pace.edu/cases/990727r1.html>; CLOUT Case No. 230,
Oberlandesgericht (Court of Appeal) Karlsruhe, Germany, (25 June 1997).
68
Emmanuel Voyiakis, Estoppel, Oxford Index, accessible at
http:/Dx.Doi.Org/10.1093/Obo/9780199796953-0058, (Last accessed on 20/1/2016).
69
CISG, Article 8(1).
70
CLOUT Case No. 429, Oberlandesgericht Frankfurt, Germany, (30 August 2000); CLOUT
Case No. 424, Oberster Gerichtshof, Austria, (9 March 2000).
71
CLOUT Case No. 270, Bundesgerichtshof, Germany, (25 November 1998).

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 1st NLIU- JUSTICE R. K. TANKHA INTERNATIONAL MOOT, 2016

contract and the objective circumstances at the time of the conclusion of the contract must be
considered.72
It is to be noted that the intention of the RESPONDENT can be deduced from the ‘Make in
Barbaria’ scheme that made the same a sovereign indemnifier and guarantor.73 The purpose
of the scheme was to attract greater foreign investment and safeguard investments by
providing sovereign indemnity and guarantee. The above mentioned circumstance is
testamentary to the intention of the RESPONDENT. Since the intention of a party can be
construed on the basis of the words chosen and its systematic context,74 the RESPONDENT
had the intention to cover all losses sustained by the CLAIMANT and thus, is liable to pay
damages payable by OCPL by way of sovereign indemnity.
ISSUE 3: WHETHER THE CLAIMANT IS LIABLE FOR SOVEREIGN DEFAMATION.
In the present matter, the RESPONDENT had issued a notice of international arbitration on
December 2, 2012 to the CLAIMANT for sovereign defamation arising out of activities of
the CLAIMANT, its affiliates and corporate subordinates in Barbaria. 75 It is contended that
the Arbitral Tribunal does not have jurisdiction to hear the matter [3.1] and the CLAIMANT
is not liable to pay any damages to the RESPONDENT [3.2].
3.1. THE ARBITRAL TRIBUNAL DOES NOT HAVE JURISDICTION DECIDE UPON THE
MATTER OF SOVEREIGN DEFAMATION.
Defamation is a part of tort law76 and the Convention (CISG) does not deal with tort claims.77
Therefore, it is contended that since CISG does not govern tortuous claims by itself. It is
improper to bring the suit regarding the same before the Arbitral Tribunal. Even if tortuous
liabilities are governed by the convention, the Tribunal does not have jurisdiction to hear the
aforementioned matter as the matter involves public policy elements which are non-
arbitrable.78
The same was upheld in Wiko v. Swan,79 and Soleimany v. Soleimany (C.A.).80 The
contention has further been reaffirmed by eminent legal authors.81

72
Fruit and Vegetables Case, Handelsgericht (Commercial Court) Aargau, Switzerland, (26
November 2008).
73
Moot Compromis, Page 2, ¶ 8.
74
Moot Compromis, Page 2, ¶ 8.
75
Moot Compromis, Page 5, ¶ 14.
76
Ohio Northern University Law Review, Volume 15, Issue 4, (1988), Page 796-798.
77
Marianaee Jennings, Business: Its Legal, Ethical and Global Environment, 9nd Edition,
Chapter 9, Page 288 (2012).
78
Natraj Studios v. Navrang Studios, AIR 1981 SC 537 (1981).
79
Wiko v. Swan, 346 U.S. 427 (1953).

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3.2. THE CLAIMANT IS NOT LIABLE TO PAY ANY DAMAGES TO THE RESPONDENT.
Arguendo, even if the issue is arbitrable, it is humbly contended that ABPL is not liable to
pay any damages to the RESPONDENT because the same is neither the buyer nor the seller
and hence, is disqualified from claiming damages as per Article 4 of CISG [3.2.1]. Arguendo,
if RESPONDENT can be a party to the suit, it cannot claim damages for loss of reputation or
for sovereign defamation as damage to reputation can not be compensated under CISG as
long as a pecuniary loss is not shown as a result of it [3.2.2]. Furthermore, the same was not
foreseeable [3.2.3]. Since the only provision under which remedy can be sought is Article 74
of CISG (and since the damages claimed do not suffice its criteria) the RESPONDENT is not
entitled to any compensation or damages whatsoever under any laws of this provision.
3.2.1. The Respondent Is Neither Buyer Nor Seller And Hence Is Disqualified From
Claiming Damages As Per Article 4 Of CISG.
Article 4 of the Convention governs only the formation of the contract of sale and the rights
and obligations of the seller and the buyer arising from such a contract.82 The same has been
explained in a case, 83 where a buyer sued a manufacturer for defects in a machine purchased
from the seller. The buyer’s suit was dismissed because the buyer had not contracted with
manufacturer for sale.
Manufacturers may provide dealers with a written "guarantee" or "warranty" and instruct
dealers to give the buyers, the manufacturer’s "guarantee" in connection with the sale. Such a
"guarantee" by the manufacturer to the buyer clearly creates a contract between these parties
in connection with the sale of goods. The question as to whether the manufacturer is a
"seller", within the language of Article 4, has been answered in the negative.84
Even when the guarantor had participated in the delivery of a "guarantee" through a local
dealer and was part of a larger setting in which the manufacturer played a dominant role, by

80
Soleimany v. Soleimany, (1999) Q.B. 785, 804 (K.B.).
81
Reederei W.Bockstiegel, Public Policy And Arbitrability, Comparative Arbitration Practice
And Public Policy Arbitration: Icca International Arbitration Congress, (1987), Series No. 3,
Page 179.
82
Engines for Hydraulic Presses and Welding Machines Case, M. GER LG Düsseldorf, 31 O
231/94, 23 June 1994. UNILEX D. 1994 (23 June 1994), available at
http://cisgw3.law.pace.edu/cases/940623g1.html, (Last accessed on 18/2/2016).
83
Engines for Hydraulic Presses and Welding Machines Case, M. GER LG Düsseldorf, 31 O
231/94, 23 June 1994. UNILEX D. 1994 (23 June 1994), available at
http://cisgw3.law.pace.edu/cases/940623g1.html, (Last accessed on 18/2/2016).
84
Engines for Hydraulic Presses and Welding Machines Case, M. GER LG Düsseldorf, 31 O
231/94, 23 June 1994. UNILEX D. 1994 (23 June 1994), available at
http://cisgw3.law.pace.edu/cases/940623g1.html, (Last accessed on 18/2/2016).

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 1st NLIU- JUSTICE R. K. TANKHA INTERNATIONAL MOOT, 2016

franchise agreements controlling aspects of the dealer’s performance and by mass media
advertising addressed to prospective buyers, these facts alone do not make the manufacturer a
"seller." A contract of sale depends on the buyer’s completing a transaction with a dealer.85
The RESPONDENT is neither a buyer nor a seller according to the law. Hence, it cannot
claim damages for any loss whatsoever under this convention.
3.2.2. Arguendo, Respondent Cannot Claim Damages For Loss Of Reputation Or
Sovereign Defamation Under CISG.
Arguendo, the RESPONDENT can bring a suit against the CLAIMANT even though it is
neither a seller nor a buyer. It cannot claim damages under Article 74 of CISG as a damaged
reputation is completely insignificant as long as it does not lead to a loss of turnover and
consequently lost profits86 and “as long as a seller has the necessary turnover, he can be
completely indifferent towards his image".87 In the present matter, there has not been loss of
profits that makes the CLAIMANT liable for compensation.
It is humbly contended that the “good will-damage” can be compensated under the CISG, but
it must be established concretely.88 The loss of reputation can lead to pecuniary loss in the
form of loss of profit. To recover a claim for lost profit under CISG, a party must provide the
finder of fact with sufficient evidence to estimate the amount of damages with reasonable
certainty.89
In the present matter, there has been no pecuniary loss or loss of turnover suffered and neither
has it been substantiated by any evidence. Fall of ‘Ease of Business’ ranking shows fall of
business reputation, but it does not in itself manifest any quantifiable loss suffered with
certainty nor does it show any indication of a future loss as “there are economies that do

85
Benjamin, 3rd Edition, 1987, Page 1037–38; White & Summers, Page 11–7 (3rd Edition.
1988).
86
Plastic Carpets Case, Case No. S 00/82, Helsinki Court of First Instance (Judgment 28966),
(26 October 2000), available at http://cisgw3.law.pace.edu/cases/001026f5.html, (Last
accessed on 3/2/2016).
87
Video Recorders Case, Case No. 10 O 72/00, Landgericht Darmstadt (9 May 2000),
available at http://cisgw3.law.pace.edu/cases/000509g1.html, (Last accessed on 3/2/2016).
88
Art Books Case, Case No. 331, Handelsgericht Zürich, (10 February 1999), available at
http://cisgw3.law.pace.edu/cases/990210s1.html, (Last accessed on 3/2/2016).
89
Roundhouse v. Owens-Illinois, Inc., 604 F.2d 990 (6th Cir. 1979); Delchi Carrier, S.p.A. v.
Rotorex Corp.Case No 88-CV-1078, U.S. District Court, Northern District of New York, (9
September 1994), available at http://cisgw3.law.pace.edu/cases/940909u1.html, (Last
accessed on 4/2/2016).

MEMORIAL ON BEHALF OF THE CLAIMANTS || 13 ||

 1st NLIU- JUSTICE R. K. TANKHA INTERNATIONAL MOOT, 2016

poorly on the doing business indicators but that nevertheless get a lot of foreign direct
investment (FDI) from global corporations.”90
It is contended that the alleged loss has not been substantiated or concretely established by
the RESPONDENT. Thus, it is not liable to receive damages. Since the courts have
repeatedly dismissed cases where loss of reputation leading to pecuniary loss91 has not been
substantiated,92 the matter submitted before the tribunal should be dismissed.
3.2.3. The Damages Are Not Forseeable.
CISG mentions only the recovery of consequential damages which, 93 under Article 74 must
be "foreseeable" to be recoverable.94
The ‘Ease of Business’ ranking does not include matters like “security, prevalence of bribery
corruption, and macroeconomic stability.”95 It is therefore stated that any contention that the
alleged corrupt practices of CLAIMANT caused, consequent fall in the ‘Ease of Business’
ranking, stands defeated.
Damages for lost goodwill or lost profits based upon the future are not awarded because the
damages are unforeseeable, not proximately caused by the breach, or without proof with
reasonable certainty.96
The ‘Ease of Business’ ranking is not, inherently, an indication of any present or future loss,
with certainty or with concrete claim.97 The contention that it will eventually lead to
pecuniary losses is farfetched and not permitted under Article 74 and negated on the
principles of forseeability.98

90
The World Bank, Firms in 189 Economies, A World Bank Group Flagship Report, 12th
Edition, 2015, Page viii, ¶ 2.
91
Wine Case, Case No. 12 HKO 5593/01, Landgericht München, (30 August 2001), available
at http://cisgw3.law.pace.edu/cases/020830g1.html, (Last accessed on 9/2/1016).
92
Video Recorders Case, Case No. 10 O 72/00, Landgericht Darmstadt, (9 May 2000),
available at http://cisgw3.law.pace.edu/cases/000509g1.html, (Last accessed on 14/2/2016).
93
CISG, Article 74; Eric C. Schneider, Chapter 2.2., Damages Awarded by the Delchi Court,
Consequential Damages in the International Sale of Goods: Analysis of 2 Decisions, (Feb. 3,
2012, 2:30 PM), available at
http://www.cisg.law.pace.edu/cisg/wais/db/Articles/schnedr2.html, (Last accessed on
14/2/2016).
94
CISG, Article 74.
95
The World Bank, Firms in 189 Economies a World Bank Group Flagship Report, 12th
Edition, 2015, Page17 ¶ 8.
96
National Controls Corp. v. National Semiconductor Corp., 833 F.2d 491 (3d Cir. 1987).
97
The World Bank, Firms in 189 Economies, A World Bank Group Flagship Report, 12th
Edition, 2015, Page viii, ¶ 2.
98
CISG, Article 74.

MEMORIAL ON BEHALF OF THE CLAIMANTS || 14 ||

 1ST NLIU- JUSTICE R. K. TANKHA INTERNATIONAL MOOT, 2016

PRAYER

In light of the facts of the case, issues raised and arguments advanced, the Counsel for
CLAIMANT respectfully requests the Tribunal to:
1. Declare that the act of the RESPONDENT amounts to unlawful expropriation and that
the RESPONDENT is liable to pay damages for the same;
2. Declare that the RESPONDENT is liable to pay damages payable by OCPL to the
CLAIMANT under Article 74 of CISG by way of sovereign indemnity;
3. Declare that the ld. Arbitral tribunal does not have jurisdiction to hear the dispute
regarding sovereign defamation against the CLAIMANT; alternatively, declare that
the CLAIMANT is not liable for sovereign defamation and is not liable to pay
damages under Article 74 of CISG for the same.

All of which is respectfully affirmed and submitted.

Date: _________, 2016

COUNSEL ON BEHALF OF THE CLAIMANTS

MEMORIAL ON BEHALF OF THE CLAIMANTS || 15 ||