TEAM 6 TRIANI HANA SOFIA

INTERNAL SELECTION FOR FOREIGN DIRECT INVESTMENT

INTERNATIONAL ARBITRATION MOOT

INTERNATIONAL CENTRE FOR SETTLEMENT OF INVESTMENT

DISPUTE ARBITRATION

Between

VENMA HOLDINGS INC.

(CLAIMANT)

v.

THE FEDERAL REPUBLIC OF MEKAR

(RESPONDENT)

MEMORIAL ON BEHALF OF RESPONDENT

February 4, 2021
 TABLE OF CONTENT

TABLE OF CONTENTS..............................................................................................................2
INDEX OF AUTHORITIES.........................................................................................................3
TABLE OF ABBREVIATIONS...................................................................................................4
STATEMENT OF FACTS............................................................................................................5
ARGUMENTS.................................................................................................................................
I. Respondent did not Violate Article 9.9 of the CEPTA and Practices fair and equitable
treatment towards Claimant.................................................................................................
A. Respondent’s Measure Do Not Amount to an Unfair and Unequitable Treatment
towards Claimant’s Investment...................................................................................
i. Fair and Equitable Treatment: The Legal Standard.......................................7
ii. Respondent’s measure was taken in good faith without violating the
Claimant’s fair and equitable treatment to ensure competitive market.........8
iii. Respondent’s did not do denial of justice on Claimant’s criminal, civil or
administrative proceedings during its Investment in Mekar.......................12
iv. Respondent’s measure was not arbitrary or discriminatory........................14
B. Even if the Respondent’s measure amount to an unfair and unequitable treatment,
it was Lawful.............................................................................................................
i. Respondent’s measure was necessary to protect its devaluating currency,
alleviating economic crisis and ensure compliance with its domestic law.....
.....................................................................................................................18
ii. Respondent’s action was the only way to safeguard its interest......................

PRAYER FOR RELIEF...........................................................................................

INDEX OF AUTHORITIES

MEMORIAL FOR RESPONDENT

2
 Arbitral Decision
Abbreviation Citation
Neer L. F. H. Neer and Pauline Neer v. United Mexican States,
Opinion, 15 October 1926
Glamis Gold Glamis Gold, Ltd. v. The United States of America,
UNCITRAL, Award, 8 June 2009
Frontier Frontier Petroleum v Czezh Republic, Final Award
Azinian Azinian v Mexico, Award, 1 November 1999
Jan De Nul Jan de Nul v Egypt, awards, 6 November 2008
Toto Toto supra note 352, 11 September 2009
Frontier v Czech Frontier Petroleum c Czech Republic, Final Award, 12 November
2010
Lauder Lauder v Czech Republic, Award, 3 September 2001
AES AES v Hungary, Award, 23 September 2010
Generation Generation Ukraine Inc v Ukraine (ICSID) Case No. ARB/00/9),
Award, 16 September 2003
GAMI GAMI v Mexico, Award, 16 September 2003

Legal Sources
Abbreviation Citation
VCLT Vienna Convention on the Law of Treaties, adopted May
23,1969,1155 UN.TS 331

TABLE OF ABBREVIATIONS

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3
Term Abbreviation
Section §
Paragraph/Paragraphs ¶
Article Art.
Fair and Equitable Treatment FET
International Centre for Settlement of Investment Disputes ICSID
Republic of Mekar Mekar
Commonwealth of Bonoor Boonoru
Executive Decree 9-2018 the Decree
Vienna Convention on the Law of Treaties Vienna Treaties
The 1958 New York Convention on the Recognition and Enforcement of
Foreign Arbitral Award New York Convention New York Convention
Monopoly and Restrictive Trade Practice Act, as Amended 2009 MRTP
Bonooru-Mekar BIT BIT
Comprehensive Economic Partnership and Trade Agreement Between
the Commonwealth of Bonooru and The Federal Republic of Mekar CEPTA CEPTA

STATEMENT OF FACTS

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4
1. The Claimant, Venma Holdings Inc. (“Venma”), is an airline holding company
incorporated under the the laws of the Commonwealth of Bonooru (“Bonooru”), which
has invested in Republic of Mekar by Acquiring Caeli Airways JSC (“Caeli Airways” or
“Caeli”).
2. Respondent is the Republic of Mekar, located approximately 1.600 km to Bonooru’s
South and witnessed prolonged political instability affected by the Pevensian Empire’s
Decline. Mekar’s Civil aviation Industry consisted of Aer Caeli and Caeli Airways and
in 2003 The Managing Director of Caeli Airways Mr. Yengchen Su merge them into
Caeli Airways.
3. On January 5, 2011, Venma tendered 800 million USD and acquired 85% stake in
Caeli Airways, while Mekar maintained 15% ownership through Mekar Airservices Ltd.
Simultaneously, Vemma and Mekar Airservices Ltd. entered into a Shareholders’
Agreement
4. On March 5, 2011 the CCM approved Venma’s acquisition and sought an undertaking
from Caeli would not engage in high-level co-operation with the Moon Alliance
members.
5. On October 28, 2011 Venma received subsidy under Horizon 2020 Scheme.
6. From August 2011 to December 2013, Caeli Airways was making profits. In this
period, it was able to refinance its inherited debt liability from BPB at more favorable
rates than available on the market.
7. On October 15, 2014, Mekar and Bonooru signed the Comprehensive Economic
Partnership and Trade Agreement (CEPTA) and agreed to terminate the pre-existing
BIT.
8. On 9 September 2016, The Competition Commission of Mekar (“CCM”) initiated an
investigation against Caeli Airways in violation of Mekari law and CEPTA, under the
Monopoly and Restrictive Trade Practice Act, as amended in 2009. As part of the
investigation, the CCM placed airfare caps in Caeli Airways, which was recognized by
Venma as it deemed reasonable
9. In December 2016, The CCM launched another investigation focusing specifically on
price undercutting in certain routes to and from Phenac International.

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10. On March 2017 a currency crisis ensued in Mekar as MON continued to devalue. In
July 2017 Caeli requested to denominate its airfare in USD instead of MON till the
crisis abated and on October 2017 Mekari authorities approved the denomination of
airfare in USD for all airlines operating in Mekar.
11. On 30 January 2018, Mekar passed a decree to all companies operating in the country
to offers goods denominated exclusively in MON.
12. On August 2018, The CCM concluded its First Investigation and found that Caeli have
been doing predatory pricing. The subsidy from Horizon 2020 scheme would make this
possible
13. On 25 September 2018, the President passed Executive Order 9-2018, Caeli Airways
anad Larry didn’t receive subsidy, because it was the only two airlines owned by foreign
government operating in Mekar.
14. On 1 January 2019, The CCM completed its second Investigation into Caeli and
concluded that Caeli had engaged in anti-competitive behavior. The CCM fined Caeli for
200 Million MON and continues its airfare caps until Caeli’s market share with its
fellow Moon Alliance factored on fall below 40%.
15. On January 2019, the representative of Caeli appealed both orders of the CCM in the
Mekari Court. The Registrar denied this request saying that in Mekari law, any fines
connot be enforced pending court review, making it a hardly immediate concern.
16. In October 2019, Caeli’s market share dropped below 40%. The CCM lifted the
applicable airfare caps.
17. In November 2019, Venma secured an offer from Hawthorne Group. In accordance
with the Shareholder’s Agreement Venma had to offer Caeli Airways to Mekar
Airservice at the same rate, but Mekar Airservice rejected the offer deeming the price
inflated because it’s not an arm-length commercial price.

MERITS

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I. Respondent did not Violate Article 9.9 of the CEPTA and Practices fair and equitable
treatment towards Claimant
18. On 8 October 2020 Claimant alleges Respondent has breached Article 9.9 of the Mekar-
Bonooru Comprehensive Economic Partnership and Trade Agreement.
19. Article 9 paragraph 1 and 2 of the CEPTA proscribed “each party shall accord in its
territory to covered investments of the other party and to investors with respect to their
covered investments fair and equitable treatment and full protection and security in:
a) denial of justice in criminal, civil, or administrative proceedings.
b) fundamental breach of process, including a fundamental breach of transparency, in
judicial and administrative proceedings.
c) arbitrary or discriminatory conduct.
d) abusive treatment of investors, such as coercion, duress, and harassment.
e) a breach of any further elements of the fair and equitable treatment obligation
adopted by the parties in accordance with Article 9.22 of the CEPTA.”
20. In the present case, the Respondent’s measures do not amount to an Unfair and
Unequitable Treatment to Claimant’s Investment on Caeli Airways. Even if the
Respondent’s measures amount to Unfair and Unequitable Treatment, it was Lawful.
A. Respondent’s Measure Do Not Amount to an Unfair and Unequitable Treatment
towards Claimant’s Investment
i. Fair and Equitable Treatment: The Legal Standard
21. This Tribunal must apply the Minimum Standard of Treatment (“MST”) when applying
the Fair and Equitable Treatment set for in Article 9.9 of the Mekar-Bonooru CEPTA.
When interpreting the language of any clause of the BIT, The Tribunal must search the
meaning of the treaty language in order to not deviate from intention of the parties when
signing it, as provided in article 31 of the VCLT.1
22. In Article 2 of the CEPTA it was proscribed the meaning of Fair and Equitable
Treatment. However, it has not proscribed the minimum standard of treatment therefore
the FET clause provided in the CEPTA refers to minimum standard of treatment under
general international law.

1
Part III- Observance, Application and Interpretation of Treaties Section 3 Article 31 General rule of Interpretation,
Vienna Convention on the Law of Treaties 1969

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 23. In addition, the CEPTA was signed on 15 October 2015. FET Clauses of treaties signed
at that time reflected the minimum standard of treatment. Therefore, the Tribunal should
use the FET clause in the US-Estonia BIT of 1994 as reference to minimum treatment
standard of customary international law.
24. Therefore, when assessing the FET standard, the tribunal should use the minimum
standard of treatment as a tool for determining if there was a denial FET in the case. As
established in Neer, the states conduct need to amount to “an outrage, to bad faith, to
willfull neglect of duty”.2
25. The arbitral tribunal have evolved the MST since Neer, for example In Glamis, the
tribunal defined FET as a violation of the customary international law MST and
requiring “an act that is sufficiently egregious and shocking”: such as “gross denial of
justice, manifest arbitrariness, blatant unfairness, a complete lack of due process” 3 and
thereon.
26. Following to the statement above, all of the alleged actions claimed by Claimant should
meet the MST, which is a quite high threshold. In the next paragraph, none of the claims
on denial of FET are to be accepted.

ii. Respondent’s measure was taken in good faith without violating the Claimant’s fair and
equitable treatment to ensure competitive market.
27. The Republic of Mekar was under a prolonged political instability making its Economy
and currency “MON” fluctuates, Mekar’s civil aviation industry Caeli Airways took
damaged in the instability as well. In order to recover it Mekar’s new cabinet enacted the
Emergency Act 2009 on which authorize the privatization of State-Owned Enterprise
and rescinding bailout proposals for MekarTeleSystem (“MTS”), the State-owned
railway, Mekar Lines, and Caeli Airways.
28. In Addition, the new legislature also renewed Mekar’s Monopoly and Restrictive Trade
Practice Act in 2009 to inspire investor confidence. This Amendment envisage the
creation of Competition Commission of Mekar (“CCM”) as an autonomous body

2
L. F. H. Neer and Pauline Neer v. United Mexican States, Opinion, 15 October 1926, 4 RIAA (1926) 60 , para 61-
62
3
Glamis Gold, Ltd. v. The United States of America, UNCITRAL, Award, 8 June 2009, para. 627

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 independent of government influence with Mr. Moira Rose as the President of the
agency.
29. In examining the case, the issue began when Venma acquired Caeli Airways as part of
the privatization program. Then, Venma began to extravagantly invest in Caeli and
began to sell low-fare flights which led the CCM suspicion that it has been doing
predatory pricing to drive out competition. Caeli was advantaged as it receives a lot of
benefits from the reclining oil price and the strategic location of its base in Phenac
International. In addition, it was receiving aids from Bonooru under the Horizon 2020
Scheme. Subsequently, Caeli was more than capable to do predatory pricing to drive out
competitors.
30. In Frontier Petroleum v Czezh Republic, the tribunal gave the following description of
violation of the good faith principle: “Bad faith action by the host state include the use of
legal instrument for purposes other than those for which they were created. It also
includes a conspiracy by said state organs to inflict damage upon or to defeat the
investment, the termination of the investment for reasons other than the one put forth by
the government, and expulsion of an investment based on local favoritism. Reliance by a
government on its internal structures to excuse noncompliance with contractual
obligation would also be contrary to good faith.”4
31. Under the Monopoly and Restrictive Trade Practice Act, as amended 2009 (“MRTP”)
Chapter III: Tribunal Investigation (1) the CCM has competence to initiate an
investigation concerning potentially anti-competitive behavior, if (a)A corporation
obtains a market share greater than 50%, (b) the corporation poses a unique threat to the
competition in particular market, and (c) there is evidence that corporation’s action has,
or are likely in the near future, push competitors out of the market.5
32. At the time of investigation Caeli’s market share was 43% and exceeded 54% when
conjoined with its Moon Alliance partner, The Royal Narnian. 6 Further, Caeli was only
cutting flights fare on specific routes which confirm the CCM’s suspicion on Caeli
posing unique threat to competition in particular market to drive out competitors. 7 In
4
Frontier Petroleum v Czezh Republic, Final Award, 12 November, para 300. Footnotes omitted.
5
Art.1 and 2(a)(b)(c) Chapter III: The Tribunal Investigation, Monopoly and Restrictive Trade Practice Act, as
Amended 2009
6
Venma v. The Republic of Mekar, Appendix Statement of Uncontested Facts. Para 1150
7
At paras. 1170

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 addition, Caeli has two programs to consolidate its consumer base, the frequent-flyer
program that allow flyers to exchange flyers point for free or enhanced flight, or even
benefits at supermarkets and gas stations and corporate discount scheme for small and
mid-sized enterprises.8 These statement fulfilled the MRTP Art.2(a)(b)(c), therefore
CCM’s investigation was a legitimate exercise of its policy.
33. During interim of the first investigation, The CCM placed reasonable airfare caps and set
rationally above the rates Caeli Airways charged on the set routes to prevent it from
earning supra-competitive profits in the future. Further, there is no evidence the caps
hurt is profitability in 2016.9
34. According to the MRTP Art.4(d) “the Tribunal have the power to impose any interim
and final remedy it deems just under Mekari Law, including fines…or other measures to
bring a corporation in line with this Act. It may impose any behavioral or structural
remedies to bring the infringement effectively to an end….”
35. In placing the airfare caps CCM’s intention was to prevent Caeli from earning supra-
competitive profits and disrupt the market for being anti-competitive. In the MRTP
Art.4(d) it was stated that the CCM has the power to do, therefore the CCM’s placing
airfare caps was a legitimate exercise of its policy.
36. In December 2016, a consortium of small regional airline in Greater Narnia complained
that Caeli launch flights on specific routes with the sole purpose of pushing its
competitors off these routes, capitalizing on its undercutting policies and privileges at
Phenac International. In Addition, they stated Caeli made it impossible for them to
penetrate the market linked to Phenac International.10
37. Subsequently, the CCM launched another investigation under Art.3 MRTP to prove
potential anti-competitve behaviour of a corporation where: “(a) a complaint it brought
to the CCM by a direct competitor in the market; and (b) the corporation has at least a
10% market share, (c) The CCM must consider whether sufficient evidence is brought
by the direct competitor before exposing a corporation to a costly investigation”
38. As mentioned previously, several complaints have been brought by a consortium of
small regional airline in the Greater Narnia towards Caeli. These consortiums of small

8
At Paras. 1140
9
At Paras. 1165
10
At Paras. 1170

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 regional airline must have at least 10% market share and provided the CCM evidence to
support the complaints made.
39. The CCM launched another investigation ("The Second Investigation”) into Caeli’s
business activities specifically on price undercutting on certain routes to and from
Phenac International.
40. By August 2018, CCM concluded its First Investigation and issued a voluminous report
on the investigation, on which CCM found that Caeli breach of Mekar’s antitrust
legislation in form of predatory pricing from low airfares and loyalty programs. It also
noted that the subsidy from the Horizon 2020 scheme helped Caeli drastically reduce its
airfare, the CCM imposed a total penalty of MON 150 Million on Caeli.
41. By January 2019, The Second Investigation was concluded and found that Caeli had
engaged in anti-competitive behavior in conducting its business, it was abusing its
dominant position to extract significant additional privileges in terms of airport services
fees, which allowed it to undercut ticket fares and eventually push other competitors off
the marker consisting to and from Phenac International. Subsequently, Caeli was doing
Abuse of Dominant Position stated on Chapter IV: Offences part (i) of the MRPT.
42. In addition, the excessive low prices strategies that Caeli applied only on routes to and
from Phenac, would only drive competitors out of market it will not help Caeli gain new
customers or increase revenues. Subsequently, the CCM impose a total penalty of MON
200 Million on Caeli Airways and continued the airfare caps until Caeli Airways market
share, with its fellow Moon Alliance member factored in, were to fall below 40%.
43. In addition, the CCM lifted the applicable airfare caps when Caeli’s market share in
Mekar dropped below 40% on October 2019.11
44. Based on MRTP Art.4(d) both of this measure (imposing fine on Caeli) was a measure
of respondent’s right to regulate as it served competitive market purposes to alleviate
economic crisis.
iii. Respondent’s did not do denial of justice on Claimant’s criminal, civil or administrative
proceedings during its Investment in Mekar.
45. Furthermore, Caeli request to remove the CCM’S interim airfare caps in September
2016, which was declined by the CCM, reasoning that the interim could not be removed

11
At paras. 1335

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 until its investigation was complete and that interference with inflation with rates was
beyond its competence. Caeli then requested the Central Bank to revise the inflation
rates, which was responded to the Bank long-standing policies of not responding to
individual requests.
46. Caeli then registered claim against the CCM on 27 March 2018, a hearing on the interim
measures was scheduled in April 2019 due to high volume of cases stemming from the
economic crisis.
47. In addition, on 20 January 2019, Caeli appealed for both orders of the CCM in the
Mekari Court, and for it to be conjoined on the April 2019 hearing. The Registrar denied
this request, reasoning that the CCM has requested time to respond to Caeli’s notice,
which must be granted to protect its due process rights as required under Mekari Law,
besides any fines cannot be enforced pending Court review. Therefore, this is hardly an
immediate concern. Subsequently the April 2019 hearings remain solely concerned with
the airfare caps. As for the competition Authority’s fines was scheduled in May 2020.
48. On 15 June 2019, Justice Van Duzer released his interim decision on the airfare caps,
declining to remove them, reasoning the decision reached by the Comission was within
range of potentially reasonable conclusions.
49. Following to the delay of the hearing, Caeli alleged Mekar for doing denial of justice.
50. On the definition of denial of justice Respondent would refers to Azinian, a denial of
justice could be pleased if the relevant courts refuse to entertain a suit, if they subject it
undue delay, or if they administer justice in a seriously inadequate way. Subsequently,
the fourth type of denial of justice, namely the clear and malicious misapplication of the
law. This type of wrong doubtless overlaps with the notion “pretence of form” to mask a
violation of international law.12 There is no evidence, or even argument, that any such
defects can be ascribed to the Mekar proceedings in this case.
51. Despite being overwhelmed by cases, Mekari courts have given the Claimant every
opportunity to voice its grievances. To prove this statement, the Mekari Court have
scheduled Claimant’s hearing on both orders.

12
Azinian v Mexico, Award, 1 November 1999, paras 102, 103.

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 52. On the context of delay on due process, In Frontier it is stated that “… while the
Regional court was responsible in for a total delay of 39 months, the Tribunal is not
satisfied that such delay constitutes a breach of the fair and equitable treatment standard
of the BIT. As discussed above, in Jan de Nul13 and Toto14 delays in court proceeding of
10 years and six years respectively did not amount to a violation of the fair and equitable
treatment standard. Even if this tribunal were to conclude that the entire delay was
attributed to the respondent, it does not find that a delay of over just three years amounts
to a breach of the fair and equitable treatment standard of the BIT in the present
circumstances… .”.15
53. In comparison to prior cases mentioned, the Mekari court delay only lasted for 13
months in regards of the April 2019 hearings for removing CCM interim airfare caps and
16 months in regards of the May 2020 hearings for the Authority’s fine. In addition, the
conjoined times of each delay was still far-fetched from 6-10 years delay as occurred on
other case, and even it surpassed that time it will still not amount to a violation of the fair
and equitable treatment.
54. In addition, despite being overwhelmed by cases Mekari court managed to dispense
justice speedily, as compared to the time Mekari court usually take to render decision on
Commercial Matters which usually takes about approximately 27 months.
55. In Toto, legitimate expectations are more than investor’s subjective expectation. Their
recognition is the result of balancing operation of the different interest at stake, taking
into account all circumstances, including the political and social economic condition
prevailing the host State.16
56. The Tribunal should consider that The Republic of Mekar judicial system was incapable
to expand at the same rate as Mekar’s population. Therefore, it prioritized criminal cases
to avoid prolonged detention for the accused. In addition, it has gone through a prologed
political instability.
iv. Respondent’s measure was not arbitrary or discriminatory

13
Jan de Nul v Egypt, awards, 6 November 2008, paras 202-204.
14
Toto supra note 352, 11 September 2009, paras 165.
15
Frontier Petroleum c Czech Republic, Final Award, 12 November 2010, paras, 334.
16
Toto v Lebanon, Decision on Jurisdiction, 11 September 2009, para 165.

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 57. On 25 September 2018, the President passed Executive Order 9-2018, granting
subisidies to airlines for each Mekari Citizen travelling on board. The Order vested
discretion with respect to grant of subsidies to the Secretary of Civil Aviation. Caeli
Airways application was declined by the Secretary.
58. At that time, Caeli Airways was one of the only two airlines owned in any significant
part by foreign government operating in Mekar at the time, the latter being fully
government-owned Larry Air. Neither received subsidies under the Executive Order 9-
2018. Subsequently, Venma alleged Mekar for making an arbitrary and discriminatory
decision. Although, respondent measure on exercising Decree Executive Order 9-2018
was not arbitrary or discriminatory.
59. According to Black’s Law legal dictionaries, which was implemented on Lauder v Czezh
Republic, the arbitrary means ‘depending on individual discretion’ or refers to action
‘founded on prejudice or preference rather than on reason of fact.’17
60. Another approach is to contrast the notion of “arbitrary action’ with the rule of Law, for
example the Tribunal in AES v Hungary found that reasonableness had to be an allies
with the help of two elements, being the existence of an rational policy and the
reasonableness of the act in question: “They are two elements that require to be analyzed
to determine whether a state’s act was unreasonable: the existence of a rational policy;
space and a reasonableness of the act of the state in relation to the policy. A rational
policy is taken by a state following a logical (good sense) explanation and with the aim
of addressing a public interest matter. Nevertheless, a rational of policy is not enough to
justify all the measures taken by state and its name. A challenged measure must also be
reasonable. That is, there’s need to be an appropriate correlation between the state’s
public policy objective and the measure adopted to achieve it. This has to do with the
nature of the measure and the way it is implemented.18
61. On the Chapter 31 §3101 of the Executive Order 9-2018 19 it was implied that “(a) IN
GENERAL.— Notwithstanding any other provision of law, to provide liquidity to
eligible businesses related to losses incurred as a direct result of the 2017 crisis, the
Secretary a Civil Aviation is authorized to make or guarantee loans to eligible businesses

17
Lauder v Czech Republic, Award, 3 September 2001, para 221, cited with approval in Occidental.
18
AES v Hungary, Award, 23 September 2010, para 10.3.7-10.3.9.
19
Chapter 31 §3101 Emergency Relief Through Loans and Loan Guarantees, the Executive Order 9-2018.

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 that do not, in the aggregate, exceed MON 230,000,000,000 and provide the subsidy
amount necessary for such loans and loan guarantees in accordance with the provisions
of the Credit Reform Act of 2004.
(c) Loans and Loan Guarantees. –
(1) IN GENERAL. — the secretary shall review and decide on applications for loans
and loan guarantees under the section and may enter into agreement to make or
guarantee to one or more obligors if the Secretary determines, and the Secretary’s
discretion that—
(A) the obligor is eligible Business for which necessary credit is not reasonably
available at the time of the transaction.
(B) the intended obligation would not skew market conditions in favor of one or
more enterprises.
(C) the intended obligation by the obligor is prudentially incurred.
(D) the loan is sufficiently secured.
62. In AES, the first element to determine whether or not the state’s act was unreasonable “A
rational policy is taken by a state following a logical (good sense) explanation and with
the aim of addressing a public interest matter…”20. Based on the Chapter 31 §3101(a) of
the Executive Order 9-2018, it was made to “… provide liquidity related to losses
incurred as a direct result of the 2017 crisis….”. Therefore, the clause fulfilled the first
element to determine whether or not the state’s act was unreasonable. Since, the
Executive Order was created to provide aid (a rational policy), to the losses incurred as a
direct result of the 2017 (a logical explanation) for the welfare of the general public,
which in this case the air carriers that provide services for passenger or cargo in Mekar,
fulfilling its aim of addressing a public matter interest.
63. As for the discriminatory intent, in LG&E the Tribunal stated, “In the context of
investment treaties, and the obligation thereunder not to discriminate against foreign
investors, a measure is considered discriminatory if the intent of the measure is to
discriminate or if the measure has a discriminatory effect”.21
64. The second element to determine whether or not the state’s act was unreasonable is
“there’s need to be an appropriate correlation between the state’s public policy objective
20
AES v Hungary, Award, 23 September 2010, para 10.3.7-10.3.9.
21
LG&E v Argentina, Decision on Liability, 3 October 2006, para 146. Footnote omitted.

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 and the measure adopted to achieve it. This has to do with the nature of the measure and
the way it is implemented…”. On the Chapter 31 §3101(c) of the Executive Order 9-
2018, it was elaborated to whom the Executive Order eligible to “(1) IN GENERAL. —
the secretary shall review and decide on applications for loans and loan guarantees under
this section and may enter into agreement to make or guarantee to one or more obligors
if the Secretary determines, and the Secretary’s discretion that—
(A) the obligor is eligible Business for which necessary credit is not reasonably
available at the time of the transaction.
(B) the intended obligation would not skew market conditions in favor of one
or more enterprises.
(C) the intended obligation by the obligor is prudentially incurred.
(D) the loan is sufficiently secured.”
65. The object of the Executive Orders is to provide aid to losses incurred resulting from the
2017 crisis and the measure to implement it, includes the Secretary reviewing and
deciding whether or not the application for loans or loans guarantee and entering
agreement to make or guarantee loans to obligors, while considering Chapter 31
§3101(c)(1). Therefore, it satisfies the correlation between state’s policy and the measure
adopted element.
66. On the case, the Secretary declined Venma’s Application, since it was not eligible for the
the Executive Orders, as it does not satisfy the requirement on Chapter 31 §3101(c)(1).
Reasoning, Caeli’s subsidization would skew market conditions breaching the second
requirement on Chapter 31 §3101(c)(1)(B). In running its business Caeli has lot of
advantages from its strategic base at Phenac International, subsidies from the Horizon
2020 Scheme, among other things, which allows Caeli to do predatory pricing that
would drive other competitors off the market and further skew market condition.22
67. Subsequently, Caeli is known for expanding excessively without considering its debt
liability or the volatility of demand in Mekar. 23 This action is the opposite to what is
rendered as “the intended obligation by the obligor is prudentially incurred”. Mekar
cannot easily grant taxpayers money to a company that has history of car eless spending.
In Addition, Caeli has not paid its debt to BPB, even when the rates were more favorable
22
Venma v. The Republic of Mekar, Appendix Statement of Uncontested Facts. Para 1240
23
At paras 1090

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 than the market,24 resulting Mekar distrust for Venma, if it was granted the loan, to fulfill
the obligation.
68. The Respondent decision on declining Venma application under Chapter 31 Executive
Order 9-2018 was not discriminatory, because for an action to be considered
discriminatory it has to be intended to discriminate or has a discriminatory effect. 25 The
decline was not discriminatory, as The Secretary also declined state-owned Larry Air
application26 because it was deemed to have unique advantages that enable them to
outcompete privately-owned firms.27
69. The tribunal should consider advantages that Venma had, such as contracts with Phenac
Internationals that gives Caeli discounted airport services, landing and navigation fees,
twelve A340 aircrafts, and subsidies from the Horizon 2020 scheme.28
70. Based on prior statements, the Respondent’s decision on declining Venma application
should not be considered arbitrary nor discriminatory.

A. Even if the Respondent’s measure amount to an unfair and unequitable treatment, it

was Lawful.
i. Respondent’s measure was necessary to protect its devaluating currency, alleviating
economic crisis and ensure compliance with its domestic laws.
71. On March 2017, currency crisis ensued in Mekar and during this crisis Caeli requested a
meeting with Mekar’s Secretary of Civil Aviation to denominate its airfare in US Dollars
instead of MON until the crisis abated. Having received similar request. Mekari
authorities approved the denomination of airfare in US dollars for all airlines operating
in its territory in October 2017. The IMF into emphasize “the need to establish
credibility in the (local) currency to avoid a debilitating economic situation.”
72. On 30 January 2018, Mekar’s government passed a decree requiring all companies
operating in the country to offers goods and services denominated exclusively in MON.
Venma then voiced disagreement towards the Decree stating that it will damage the
viability not just Caeli, but all airlines.
24
At paras 1100
25
LG&E v Argentina, Decision on Liability, 3 October 2006, para 146. Footnote omitted.
26
Venma v. The Republic of Mekar, Appendix Statement of Uncontested Facts. Para 1265
27
At paras 1260
28
At paras 1065

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 73. While examining the application of Domestic Law and Legitimate Expectations under
the FET Standard it needs to consider that there have not been found any determinative
link between domestic legality and compliance with FET as whole, instead as a
contributory factor.29
74. In addition, As Alvarez conclude, the statement above, it could mean by which
compliance with domestic law might be more directly incorporated in the FET standard
via the doctrine of legitimate expectations. This doctrine has become the key element of
the FET standard in investment law.30
75. Furthermore, In Generation Ukraine, the tribunals have rejected the investor’s claim of
BIT breach, stating that, despite suffering ‘bureaucratic incompetence and recalcitrance
in various forms’, the investor must ‘consider the vicissitudes of the economy of the
state’ and was aware of ‘both prospects and potential pitfalls’ of investing in the
particular host state.31
76. Based on the previous statement, the argument that investors can legitimately expect
states to comply with their domestic law might apply only in relation to state with clear
records of good governance and adherence to the rule of law. Investors operating in
countries blighted by war or poverty, on the other hand, could not expect perfect legal
compliance by barely functioning state authorities.32
77. Relating to the case, the tribunal should consider that Mekar witnessed a prolonged
political instability, characterized by mass migration from the country as well as
exploitation of resource deposits by intermediate occupying powers. High regulatory
intervention and late economic reform also affected its post-independent growth, as
result of Pevensian Empire’s decline.
78. In addition, the tribunal has to consider the fact that the republic of Mekar has
encountered several economy crises in the past few years, from the 2008 financial crisis,

29
Section 2.3 Domestic Law and Legitimate Expectations under the FET Standard, Domestic Law in International
Arbitration, Oxford University, page. 26.
30
Ibid. see M. Potesa, ‘Legitimate Expectations in Investment Treaty Law: Understanding the Roots and the Limits
of a Controversial Concept’ (2013) 28 ICSID Rev 88; M Paparinskis, The International Minimum Standard and Fair
Equitable Treatment (OUP 2013) 251 and sources the cited.
31
Generation Ukraine Inc v Ukraine (ICSID) Case No. ARB/00/9), Award, 16 September 2003 para 20.37. The
relevant claim was for expropriation rather than FET breach, but the tribunal nevertheless commented on the
investor’s legitimate expectations.
32
McLachlan, Shore, and Weiniger (n 20) 236-37; Dolzer and Schreur (n 1) 148-9; cf GAMI v Mexico (n17) para.
94.

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 the 2016 MON devaluation, and the 2017 currency crisis. Moreover, the LPM was
elected back in December and it passed the decree in hope to stabilize its currency.
79. Based on Generation Ukraine, the investors must ‘consider the vicissitudes of the
economy of the state’ and was aware of ‘both prospects and potential pitfalls’ of
investing.33 Which means, during Venma’s investation in Mekar it has to be aware of the
state’s economic condition, bureaucratic incompetence, and recalcitrance as well as its
investment potential pitfalls.
80. Moreover, In GAMI, it is stated that Investors must conduct their own due diligence
before investing in a country and must take host state law as they find it. In addition, the
Claimant can legitimately expect states to comply with their domestic law might apply
only in relation to state with clear records of good governance and adherence to the rule
of law. Investors operating in countries blighted by war or poverty, on the other hand,
could not expect perfect legal compliance by barely functioning state authorities.
81. The Claimant should realize that the state its investing on has a suffered a long period of
political instability, therefore legitimately expecting a perfect legal compliance by the
state to its own domestic law could not be done.
82. Moreover, the volatility of Mekar’s economy forced its government to take measure in
order to stabilize its currency. the IMF recommended the state “to establish credibility in
the [local] currency to avoid a debilitating economic situation.” 34 Meaning, the decree
was a measure taken by Mekar’s government to establish MON credibility, so it could
avoid a debilitating economic situation.
83. On December 2017, Mekar economic was in dire situation, its Macroeconomic was
deteriorating, allowing investors to continue using USD to denominate its services and
goods, would lessen MON credibility and further hurts Mekar economy. In conclusion to
the prior statements, Mekar’s measure was necessary to protect its devaluating currency,
alleviating economic crisis and ensure compliance with its domestic laws.

ii. Respondent’s action was the only way to safeguard its interest

33
GAMI v Mexico, Award, 16 September 2003, para. 94.
34
Venma v. The Republic of Mekar, Appendix Statement of Uncontested Facts. Para. 1185.

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 84. Seeing there is no other alternative to establish MON credibility to alleviate the economy
than changing the regulation which instruct denomination in MON, it is concluded that
the measure taken was the only way to safeguard its interest.

PRAYER FOR RELIEF

In light of the submissions made above, the Respondent respectfully request this Tribunal to
recognize that:

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1) Mekar did not violate Article 9.9 of CEPTA
2) In case the Tribunal finds Mekar did violate the Article 9.9, then the tribunal should
conclude Mekar has already purchased the Claimant’s investment at “market value” and
award the Claimant no compensation; in the alternative, the tribunal should reduce any
compensation awarded considering the Claimant’s contributory fault and the ongoing
economic crisis in Mekar.

Respecfully submitted on February 15, 2021

By:
Team 6 Triani Hana Sofia
On Behalf of the Respondent
Republic of Mekar

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