Professional Documents
Culture Documents
MOOT PROBLEM
1. ZIDOM is a country located in the coastal regions of the Indian Ocean, about 30 nautical
miles off the east coast of peninsular India. Zidom is a constitutional country with a
democratic and parliamentary system of government. Ever since its independence in
1950, Zidom has taken various steps to provide impetus to its economy and
infrastructure development. The laws of Zidom are in pari materia to the laws of India.
2. Zidom, with its mixed market capitalist economy and a large welfare state, ranks as
having the world’s highest level of income equality with a high Gross Domestic Product
(“GDP”). Zidom has been rated as having the best investment opportunities and laws in
the world. However, Transparency International ranked Zidom as the 15th most corrupt
country in the world.
3. The Federal Roadway Authority of Zidom (“FRAZ”) was constituted by an Act of the
Parliament of Zidom namely, the Federal Roadway Authority of Zidom Act, 1970. The
main object for constituting FRAZ was to promote building, maintenance and
management of the Federal Roadways, as entrusted to it.
4. FRAZ adopted a Public Private Partnership (“PPP”) model for building of Federal
Roadways and provided financial assistance in the shape of debt, equity, venture capital,
development of infrastructure and assisting private initiative in Roadways building,
provision of specialized financial, consultancy and construction, and such other activities
as required to promote building of world class and modern roadways in Zidom directly or
through special purpose vehicles, joint ventures, assisted companies, etc.
5. Arguse and Korinth are two states within Zidom, adjoining each other. They are
connected by Federal Roadway No. 20 that connects busy towns in both states. Over a
period of time and owing to rapid population and industrial growth of both cities, a need
was felt for constructing a new 4-lane expressway between Arguse and Korinth.
6. Accordingly, with a view to construct the new 4-lane expressway between Arguse and
Korinth, FRAZ floated an international bid/tender for building, operating and maintaining
new expressway between the two cities (the “Project”) through PPP and on a Design,
Build, Finance, Operate and Transfer (the “DBFOT”) basis. FRAZ decided to carry out the
bidding process for selection of a private entity as the preferred bidder to whom the
Project would be awarded. Brief particulars of the Project are as follows:
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7. It was stated under the bid documents that the selected bidder, which is either a
company incorporated under the laws of Zidom, or undertakes to incorporate itself as
such prior to execution of the concession agreement (the “Concessionaire”), would be
responsible for designing, engineering, financing, procurement, construction, operation
and maintenance of the Project, in accordance with the provisions of the concession
agreement (the “Concession Agreement”) to be entered into between such
Concessionaire and FRAZ in the form provided by FRAZ.
8. It was further stated under the bid documents that the bids were invited for the Project
on basis of the lowest financial grant (the “Grant”) or viability-gap funding, required by a
bidder for implementing the Project. It was clarified that the Grant amount would
constitute the sole criteria for evaluation of bids and that the Project will be awarded to
the bidder seeking the lowest Grant.
9. The bid contemplated that FRAZ would invest USD 100 million towards its equity share
capital contribution in the Concessionaire at par or at such discounted price at which
equity shares are issued to any other shareholder. A provision to this effect shall be
made in the shareholders’ agreement.
10. Kayyemm Pty Ltd (“KPL”) is a company incorporated in the sovereign republic of Amzee.
KPL is a leading company in construction of modern roadways, highways and
expressways in various parts of the world. The Government of Amzee holds 51% of the
equity share capital in KPL.
11. Pursuant to a ‘Notice Inviting Bid’ issued by Government of Zidom, KPL submitted its
offer dated February 17, 2005 in the prescribed form, as provided under the Bid
Documents.
12. One of the important basis for KPL for bidding for the Millennium Expressway was the
following stipulation under the Concession Agreement:
“Federal Roadway No. 20 between Arguse and Korinth shall be closed for vehicular
and commercial traffic and no new federal roadway shall be constructed between
Arguse and Korinth during the concession period.”
13. KPL was selected as the preferred bidder based on the reason that KPL had not sought
any Grant or a viability-gap funding from FRAZ. In terms of the bid document
requirements, KPL incorporated a subsidiary in Zidom with the name of ‘Roadie
Construction Private Limited (“Roadie”). FRAZ acquired 15% equity in Roadie by way of
subscription of shares.
14. On March 10, 2007, a formal written contract under the name and style of ‘Concession
Agreement’ was executed between FRAZ, Roadie and KPL for recording the terms of
Agreement arrived at between the parties [attached as Annexure-1 hereto].
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“In consideration of the cost of the Project amounting to USD 2500 million, as
submitted by the Concessionaire, FRAZ grants and permits the Concessionaire to
collect and retain toll charges as an agent of FRAZ, during the concession period of
10 years”.
16. In order to finance the construction of the Millennium Expressway, Roadie availed of
several debt facilities from various banks and international financial institutions. In
addition, Roadie sought and secured finance from Amzee Sovereign Fund (“ASF”),
owned and controlled by the Government of Amzee, for constructing the Millennium
Expressway.
17. The construction of Millennium Expressway was completed by Roadie, and on May 02,
2010, the Governor of Arguse declared open the Millennium Expressway to the general
public at large amid much media glare and in the presence of the dignitaries of State of
Amzee.
18. In the meanwhile, on June 20, 2010, the Government of Zidom issued a notification
under Zidom Vehicles (Levy of Tolls) Act, 1990, authorizing Roadie to demand, collect
and retain tolls from the toll facility of Millennium Expressway constructed between
Arguse and Korinth, and issued a closure notice in respect of Federal Roadway No. 20.
The necessary gazette notification under Zidom Vehicles Act, 1998 was also issued for
the closure of the Federal Roadway No. 20 between Arguse and Korinth.
19. Pursuant to the closure notification of Federal Roadway No. 20, the Federal Court of
Arguse was approached by the local counsellor (who happened to be the arch rival of the
ruling Governor of State of Arguse) on behalf of the residents and business houses
having their homes, business and establishments adjoining Federal Roadway No. 20
against the closure of Federal Roadway No. 20 and sought a restraint order against
closing Federal Roadway No. 20.
20. On August 20, 2010, vide its interim order, the Federal Court of Arguse restrained the
Government of Zidom from closing Federal Roadway No. 20 until further orders.
21. As a result of the re-opening of the Federal Expressway No. 20 at the instance of the
orders of the Federal Court of Arguse, the vehicular movement shifted from Millennium
Expressway to Federal Roadway No. 20 and the collection of toll on Millennium
Expressway drastically reduced by 10% on a weekly basis.
22. With the re-opening of Federal Roadway No. 20, it became impossible for Roadie to
continue maintenance and operations of Millennium Expressway in terms of the
Concession Agreement.
23. Roadie argued that with the re-opening of the Federal Roadway No. 20, it became
evident that FRAZ would not be able to discharge its fundamental obligation of keeping
the Federal Roadway No. 20 closed to traffic, and thus the contract arrived at between
the parties, whereby FRAZ had undertaken a financial obligation in absolute terms to
keep the Federal Roadway closed to traffic as the consideration for fulfillment of
reciprocal promises by Roadie, was rendered void.
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24. However, FRAZ in a public release, stated that it had caused issuance of the closure
notification of Federal Roadway No. 20 under appropriate laws in terms of its promise
under the Concession Agreement and that owing to the passing of the order by the
Federal Court of Arguse, it cannot be faulted for non-performance of its obligations
under the Concession Agreement.
25. Due to the extremely low levels of toll collection, Roadie was unable to carry out its
promise of paying periodic installments towards servicing the loan. The collections being
inadequate, Roadie defaulted in the servicing of its loan obligation towards banks and
financial institutions.
26. In the meantime, KPL initiated talks with Sigma Roadways Private Limited (“Sigma”) for
selling and divesting its equity stake in Roadie and to exit the project. On October 31,
2010, a non-exclusive and non-binding Indication of Interest (“IOI”) was entered into
between KPL and Sigma for commencing due diligence and other financial discussions
between KPL and Sigma to facilitate the sale of KPL’s stake to Sigma. Sigma happened
to be one of the bidders for the Millennium Expressway Project, whose bid was rejected
by FRAZ for having indulged in corrupt practices at the stage of bidding for the Project.
27. On coming to know of the execution of the IOI between KPL and Sigma for the sale of
the stake of KPL in Roadie, FRAZ communicated to KPL that the execution of the IOI was
in breach of the bid terms and further in violation of the express terms under the
Concession Agreement.
28. In a high level meeting convened by the Ministry of Surface Transport and FRAZ, it was
decided that since the Millennium Expressway was a project of immense public interest
and accordingly, KPL was communicated that the execution of the IOI was in breach of
the Concession Agreement and that KPL had to sell its entire stake in Roadie to FRAZ at
the share valuation prevailing as on the date of the execution of the Concession
Agreement.
29. In its letter dated November 10, 2010, the Chief Engineer of FRAZ communicated to KPL
that FRAZ has already invoked the relevant clause/s of the Concession Agreement for
taking over the facility and the Project from Roadie. In addition, KPL was called upon by
the Engineer-in-Chief to hold discussions to evolve an interim arrangement for taking
over the Project after resolving the dispute between the parties.
30. KPL in a corporate announcement stated that the decision taken by Ministry of Surface
Transport and FRAZ to take over the Project and the facility from Roadie amounted to
expropriation of the investment made by KPL in the Millennium Expressway Project, and
that same was against the bilateral investment treaty signed between the State of
Zidom and State of Amzee.
31. KPL and Amzee are signatory to the Treaty for the Promotion of Trade and Protection of
Investment of 2006, as executed and ratified by both countries [attached as Annexure-
2 hereto].
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32. On December 1, 2010, the Secretariat of the Singapore International Arbitration Centre
(“SIAC”) received from KPL and Roadie, a ‘Notice of Arbitration’ of even date requesting
for arbitration against FRAZ. [Attached as Annexure-3 hereto]. The SIAC
acknowledged receipt of the request and transmitted a copy of the ‘Notice of Arbitration’
to FRAZ.
33. On December 16, 2010, FRAZ filed its ‘Response’ to the Notice of Arbitration [attached
as Annexure-4 hereto]. In its response, FRAZ challenged the jurisdiction of the SIAC to
administer the arbitration on following grounds:
a. The arbitration clause relied upon by KPL cannot be invoked by KPL for
recovering its investment made in the Millennium Expressway Project, and that
the arbitration under the Concession Agreement can be resorted to only in
respect of the dispute arising out of the obligations under the Concession
Agreement.
b. The Respondent has further challenged the decision of KPL and Roadie to refer
the matter to arbitration at the SIAC on the ground that under the Federal
Roadway Authority of Zidom Act, 1970, all adjudication of disputes arising out of,
or in connection with the construction of Federal Roadways projects and
associated projects could only be done by the Roadways Appellate Authority or by
the arbitrators appointed by it.
34. The Claimants and the Respondents (without prejudice to their jurisdictional objections)
nominated their respective arbitrators. Unable to agree on a common name as the
presiding arbitrator, the Chairman of SIAC appointed the presiding arbitrator and further
confirmed the appointment of the two party nominated arbitrators. All three arbitrators
having accepted their respective briefs, SIAC informed the parties of the commencement
of the arbitration.
35. The arbitration has been posted for hearing in New Delhi on 03-04 September, 2011.
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ANNEXURE-1
CONCESSION AGREEMENT
This Agreement is entered into on this the 10th day of March, 2007 BETWEEN:
AND
AND
3. KAYYEMM PTY LTD, a company incorporated under the laws of Amzee and having its
registered office at 7, Ho Fle Street, Amzee (hereinafter referred to as the “Bidder” or
“KPL” which expression shall unless repugnant to the context or meaning thereof include
its successors and permitted substitutes) of the Other Part.
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(ii) Upon completion of the Millennium Expressway and during the Operations
Period to manage, operate and maintain the Millennium Expressway and
regulate the use thereof by third parties;
(iii) Levy, demand, collect and appropriate the Fees from vehicles and persons
liable to payment of Fees for using the Millennium Expressway or any part
thereof and refuse entry of any vehicle to the Millennium Expressway if the
due Fee is not paid;
(iv) Perform and fulfill all of the Concessionaire’s obligations under this
Agreement;
(v) Bear and pay all expenses, costs and charges incurred in the fulfillment of
all the Concessionaire’s obligations under this Agreement; and
(vi) Not assign or create any lien or Encumbrance on the Concession hereby
granted or on the whole or any part of the Millennium Expressway nor
transfer, lease or part possession therewith save and except as expressly
permitted by this Agreement or the Substitution Agreement.
4. The Concession Period shall commence on the Appointed Date and shall end on
the Termination Date.
7. The Concession Fee shall be paid in advance within 90 (ninety) days of the
commencement of the year for which it is due and payable.
8. The Concessionaire shall have to make his own arrangement for financing the
project. The Project Cost shall be reimbursed to the Concessionaire who will be
permitted to recover the investment by levy of toll charges within specified period
as per the notification to be issued for certain agreed period after which the
facility will revert to the Government of Zidom.
9. A notification under Zidom Vehicles (Levy of Tolls) Act, 1990, shall be issued
authorizing the Concessionaire to demand, collect and retain tolls from the toll
facility of Millennium Expressway. The necessary gazette notification under Zidom
Vehicles Act, 1998 will also be issued for closure of the Federal Roadway No. 20
between Arguse and Korinth.
10. Federal Roadway No. 20 between Arguse and Korinth will be closed for vehicular
and commercial traffic and no new federal roadway will be constructed between
Arguse and Korinth during the Concession Period.
11. It is clearly understood that the ownership of the Project continues to vest with
the FRAZ and the Concessionaire shall not be entitled to any revenue except toll
on user vehicles as approved by the FRAZ from time to time, or to impose any
restrictions whatsoever on the user with a view to generate revenue.
12. After the concession period is over, the toll booth and offices with all equipment,
accessories, furniture and fixtures shall be handed over to FRAZ by the
Concessionaire free of cost. FRAZ may continue to collect the toll thereafter to
recover all the expenditure made by the department on the projects including
survey, feasibility and acquisition, shifting of services, etc. with interest thereon.
13. Force Majeure Event: As used in this Agreement, a Force Majeure Event shall
mean occurrence of any or all of Non-Political Event, Indirect Political Event which
prevent the Party claiming Force Majeure (the “Affected Party”) from performing
its obligations under this Agreement and which act or event is: (i) beyond the
reasonable control and not arising out of the fault of the Affected Party, (ii) the
Affected Party has been unable to overcome such act or event by the exercise of
due diligence and reasonable efforts, skill and care, including through
expenditure of reasonable sums of money; and, (iii) has a Material Adverse Effect
on the Project.
14. Non-Political Force Majeure Events: Non-Political Events shall mean and include
but not be restricted to:
a. Acts of God or events beyond the reasonable control of the Affected Party
which could not reasonably have been expected to occur, exceptionally
adverse weather conditions, lightning, earthquake, cyclone, flood, volcanic
eruption or fire (to the extent originating from a source external to the site or
beyond design specifications for the Construction Works) or landslide;
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16. Upon the occurrence of any breach or default by the Concessionaire or FRAZ
under this Agreement, either party shall be entitled to terminate this Agreement
by a communication in writing (the “Termination Notice”) to the other party, if
such other party has failed to cure such breach.
17. Upon Termination of this Agreement for any reason whatsoever, FRAZ shall:
18. This Agreement shall not be assigned by the Concessionaire save and except with
prior consent in writing of FRAZ, which consent FRAZ shall be entitled to decline
without assigning any reason whatsoever.
19. The Parties agree that they shall attempt to resolve through good faith
consultation, all and any issue, dispute, difference of controversy of whatever
nature howsoever arising under or out of or in relation to this Agreement
(including its interpretation) between the Parties, and so notified in writing by
either Party to the other Party (“Dispute”), and such consultation shall begin
promptly after a Party has delivered to the other Party a written request for such
consultation. Provided that if such good faith consultations have not resulted in a
resolution of the dispute within 60 (sixty) days of such consultations having
commenced, the provisions of Clause 20 shall apply.
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20. Any Dispute, which is not resolved amicably, shall be decided finally by reference
to arbitration to a board of arbitrators comprising one nominee of each Party to
the dispute, and where the number of such nominees is an even number, the
nominees shall elect another person to such Board. Such arbitration shall be held
in accordance with the rules of Singapore International Arbitration Centre (“SIAC”). The
arbitrators shall issue a reasoned award and such award shall be final and binding on the
Parties. The venue of arbitration shall be New Delhi, India and the language of arbitration
shall be English.
21. This Agreement and rights and obligations of the Parties shall remain in full force
and effect pending the Award in any arbitration proceeding hereunder.
_____________ (Signature)
CONCESSIONAIRE by:
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_____________ (Signature)
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ANNEXURE‐2
BILATERAL INVESTMENT TREATY
TREATY BETWEEN
THE GOVERNMENT OF ZIDOM
AND THE GOVERNMENT OF AMZEE
CONCERNING THE ENCOURAGEMENT
AND RECIPROCAL PROTECTION OF INVESTMENT
The Government of the Zidom and the Government of Amzee (hereinafter the “Parties”);
Desiring to promote greater economic cooperation between them with respect to investment
by nationals and enterprises of one Party in the territory of the other Party;
Recognizing that agreement on the treatment to be accorded such investment will stimulate
the flow of private capital and the economic development of the Parties;
Agreeing that a stable framework for investment will maximize effective utilization of
economic resources and improve living standards;
Recognizing the importance of providing effective means of asserting claims and enforcing
rights with respect to investment under national law as well as through international
arbitration;
Desiring to achieve these objectives in a manner consistent with the protection of health,
safety, and the environment, and the promotion of internationally recognized labor rights;
SECTION A
Article 1: Definitions
For purposes of this Treaty:
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“Claimant” means an investor of a Party that is a party to an investment dispute with the
other Party.
“Enterprise” means any entity constituted or organized under applicable law, whether or
not for profit, and whether privately or governmentally owned or controlled, including a
corporation, trust, partnership, sole proprietorship, joint venture, association, or similar
organization; and a branch of an enterprise.
“Existing” means in effect on the date of entry into force of this Treaty.
“GATS” means the General Agreement on Trade in Services, contained in Annex 1B to the
WTO Agreement.
“Government procurement” means the process by which a government obtains the use
of or acquires goods or services, or any combination thereof, for governmental purposes
and not with a view to commercial sale or resale, or use in the production or supply of
goods or services for commercial sale or resale.
“Investment” means every asset that an investor owns or controls, directly or indirectly,
that has the characteristics of an investment, including such characteristics as the
commitment of capital or other resources, the expectation of gain or profit, or the
assumption of risk. Forms that an investment may take include:
(a) An enterprise;
(b) Shares, stock, and other forms of equity participation in an enterprise;
(c) Bonds, debentures, other debt instruments, and loans;
(d) Futures, options, and other derivatives;
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(e) Turnkey, construction, management, production, concession, revenue-sharing, and
other similar contracts;
(f) Intellectual property rights;
(g) Licenses, authorizations, permits, and similar rights conferred pursuant to domestic law;
and
(h) Other tangible or intangible, movable or immovable property, and related property
rights, such as leases, mortgages, liens, and pledges.
“Non-disputing Party” means the Party that is not a party to an investment dispute.
2. Each Party shall accord to covered investments treatment no less favorable than that it
accords, in like circumstances, to investments in its territory of investors of any non-Party
with respect to the establishment, acquisition, expansion, management, conduct, operation,
and sale or other disposition of investments.
2. For greater certainty, paragraph 1 prescribes the customary international law minimum
standard of treatment of aliens as the minimum standard of treatment to be afforded to
covered investments. The concepts of “fair and equitable treatment” and “full protection and
security” do not require treatment in addition to or beyond that which is required by that
standard, and do not create additional substantive rights.
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(b) not reflect any change in value occurring because the intended expropriation had
become known earlier; and
(c) be fully realizable and freely transferable.
3. If the fair market value is denominated in a freely usable currency, the compensation
referred to in paragraph 1(c) shall be no less than the fair market value on the date of
expropriation, plus interest at a commercially reasonable rate for that currency, accrued
from the date of expropriation until the date of payment.
4. If the fair market value is denominated in a currency that is not freely usable, the
compensation referred to in paragraph 1(c) – converted into the currency of payment at the
market rate of exchange prevailing on the date of payment – shall be no less than:
(a) the fair market value on the date of expropriation, converted into a freely usable
currency at the market rate of exchange prevailing on that date, plus
(b) interest, at a commercially reasonable rate for that freely usable currency, accrued from
the date of expropriation until the date of payment.
Article 7: Transfers
1. Each Party shall permit all transfers relating to a covered investment to be made freely
and without delay into and out of its territory. Such transfers include:
2. Each Party shall permit transfers relating to a covered investment to be made in a freely
usable currency at the market rate of exchange prevailing at the time of transfer.
3. Each Party shall permit returns in kind relating to a covered investment to be made as
authorized or specified in a written agreement between the Party and a covered investment
or an investor of the other Party.
STATE OF ZIDOM
By
______________ (Signature)
______________ (Signature)
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ANNEXURE-3
NOTICE OF ARBITRATION
(EXTRACTS)
ON BEHALF OF
AND
(CLAIMANTS)
VERSUS
(RESPONDENT)
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1. The Claimant No. 1 Kayyemm Pty Ltd (“KPL”) is a company incorporated and
existing under the provisions of the (Amzee) Companies Act, 1955, with its
principal office situated at 7, Ho Fle Street, Amzee.
4. The dispute between the parties herein arises out of the Concession Agreement
executed between the parties on March 10, 2007, between KPL, Roadie and FRAZ
(the “Concession Agreement”).
7. The Claimant hereby nominates, Mr. Arbitrator (Partner, Infra Legal, 18 Slock
Street, Zidom) as its arbitrator.
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f. An award for damages in favor of the Claimants for the following:
i. Damages for the present Claimants lost profits for the term of
the Concession Agreement, plus interest at the market rate;
ii. Amount as the fair value of Claimants assets contributed to the
Concession;
iii. Damages for the breach of the Concession Agreement;
g. Post award interest at the highest rate permitted under the applicable
law;
h. Claimants costs and expenses, including legal fees, incurred in
connection with this arbitration, plus interest at the rate prescribed
under law;
i. Such further and other reliefs as the Tribunal may in its discretion
deem appropriate.
9. The Claimant reserves its right to amend or add to this Notice of Arbitration.
____________________
(CLAIMANT NO. 1)
_________________
(CLAIMANT NO. 2)
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ANNEXURE-4
RESPONSE TO THE NOTICE OF ARBITRATION
(EXTRACTS)
ON BEHALF OF
(CLAIMANTS)
VERSUS
(RESPONDENT)
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11. The Court order providing for opening of Federal Roadway No.
20 had not attained finality, since the Respondent was hopeful
of getting Federal Roadway No. 20 closed by applying to the
Federal Court for reconsideration of its decision citing financial
implications of keeping Federal Roadway No. 20.
13. The Respondent reserves its right to raise further issues when
its submits its statement of defense.
____________________
(RESPONDENT)
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