TEAM ALIAS: POCAR

___________________________________________________________________________

I NTERNATIONAL C ENTRE FOR

S ETTLEMENT OF I NVESTMENT D ISPUTES
___________________________________________________________________________

ICSID CASE NO. ARB/18/155

FRIENDSLOOK PLC
SPEAKUP MEDIA INC.
and WHISTLER INC. Claimants

v.

REPUBLIC OF TYREA Respondent

M EMORANDUM FOR C LAIMANTS

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 TABLE OF CONTENTS

List of Authorities ................................................................................................................... iv

Summary of Facts .................................................................................................................... x

Arguments on Provisional Measures ..................................................................................... 1

I. The Tribunal Should not Grant the Provisional Measures .......................................... 1

Arguments on Jurisdiction ...................................................................................................... 2

II. The Tribunal has Jurisdiction over the dispute despite the denunciation of ICSID
Convention by Tyrea ........................................................................................................... 2
2.1 Tyrea’s consent to ICSID arbitration in Article 9(1) of the BITs remains in effect .... 2
2.2 Under Article 71 Tyrea remained a Contracting State at the time of the Claimant’s
filing ................................................................................................................................... 2
2.3 Article 72 of the ICSID Convention permits an investor to accept a host State’s
unilateral offer of ICSID arbitration after denunciation of the Convention ...................... 2
III. The Tribunal has jurisdiction over the multi-party arbitration claim brought
against the Respondent ........................................................................................................ 3

Arguments on Merits ............................................................................................................... 3

IV. The blocking of the Claimants’ platforms is in violation of Articles 3(1) and 6 of
the Tyrea-Novanda BIT and Articles 3(1) and 6 of the Tyrea-Kitoa BIT. ..................... 3
4.1 That the Respondent State failed to accord the Claimants fair and equitable
treatment. ........................................................................................................................... 4
4.1.1. Republic of Tyrea failed to protect the Claimants’ legitimate expectations. ....... 4
4.1.2. Republic of Tyrea acted arbitrarily or subjected the Claimants to discriminatory
treatment. ....................................................................................................................... 5
4.2. The Respondent State violated Article 6 of both the Tyrea-Kitoa BIT and the Tyrea-
Novanda BIT. ..................................................................................................................... 6
4.2.1. Republic of Tyrea expropriated the Claimants’ investments in Tyrea. ............... 6
4.2.2. Republic of Tyrea’s conduct also amounts to indirect expropriation. ................. 6

Arguments On Remedies ......................................................................................................... 7

V. The compensation requested by the Claimants is not speculative and DCF Method
is the appropriate method for quantification of damages. ............................................... 7
5.1. The revenue projections for 2018 are not based on numerous assumptions............... 8

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5.2. DCF Method is an appropriate method for quantification of damages. ................... 10
5.2.1. DCF method would not lead to an artificially inflated result dependent on
selective assumptions, uncertainties and contingencies............................................... 10
5.2.2. The 5% discount rate proposed by Mr. Alozo is appropriate and not unfounded.
...................................................................................................................................... 11

iii
 LIST OF AUTHORITIES

Abaclat Abaclat and Others v. The Argentine Republic, ICSID Case No.
ARB/07/5,Decision on Jurisdiction and Admissibility (4 August 2011).

AdT Aguas del Tunari SA v. Republic of Bolivia, ICSID Case No.

ARB/02/3, Decision on Respondent’s Objections to Jurisdiction (21
October 2005).

AES Summit AES Summit Generation Limited and AES-Tisza Eromu Kft. v. Republic
of Hungary, ICSID Case No. ARB/07/22, Award (23 September 2010).

Alemanni Giovanni Alemanni and Others v. The Argentine Republic, ICSID Case
No. ARB/07/8, Decision on Jurisdiction and Admissibility (17 November
2014).

Alex Genin Alex Genin, Eastern Credit Ltd Inc. and A.S Bailtoil v. The Republic of
Estonia, ICSID Case No. ARB/99/2, Award (25 June 2001).

Ambiente Ambiente Ufficio S.p.A. and Others v. The Argentine Republic, ICSID
Case No. ARB/08/9, Decision on Jurisdiction and Admissibility (8
February 2013).

Amco Amco Asia Corporation and Others v. Republic of Indonesia, ICSID

Case No. ARB/81/1, Decision on Jurisdiction (25 September 1983).

AMTO Limited Liability Company AMTO v. Ukraine, SCC Case No. 080/2005,
Final Award (26 March 2008).

Autopista Autopista Concesionada de Venezuela, C.A. v. Bolivarian Republic of

Venezuela, ICSID Case No. ARB/00/5, Decision on Jurisdiction (27
September 2001).

Azurix Azurix Corp. v. The Argentine Republic, ICSID Case No. ARB/01/12,
Award (14 July 2006).

iv
 Azurix Azurix Corp. v. The Argentine Republic, ICSID Case No. ARB/01/12,
(Decision on Jurisdiction (8 December 2003).

Bear Creek Bear Creek Mining Corporation v. Republic of Peru, ICSID Case No.
Mining ARB/14/21, Award (30 November 2017).

BG Group BG Group Plc v. The Argentine Republic, UNCITRAL, Final Award

(24 December 2007).

Biwater Gauff Biwater Gauff Ltd. v. United Republic of Tanzania, ICSID Case
No. ARB/05/22, Award (24 July 2008).
Burlington Burlington Resources Inc. v. Republic of Ecuador, ICSID Case
No. ARB/08/5, Decision on Jurisdiction (2 June 2010).

Caratube Caratube International Oil Company LLP v. The Republic of

Kazakhstan, ICSID Case No. ARB/08/12, Award (5 June 2012).

Chemtura Chemtura Corporation v. Government of Canada, UNCITRAL, Award

(2 August 2010).

CMS Gas CMS Gas Transmission Company v. The Republic of Argentina, ICSID
Case No. ARB/01/8, Award (12 May 2005).

CMS Gas CMS Gas Transmission Company v. The Republic of Argentina, ICSID
Case (Jurisdiction) No. ARB/01/8, Decision of Tribunal on Objections to Jurisdiction
(17 July 2003).

Continental Continental Casualty Company v. The Argentine Republic, ICSID Case No.

Casualty ARB/03/9, Award (5 September 2008).

El Paso El Paso International Co. v. The Argentine Republic, ICSID Case No.

ARB/03/15, Award (31 October 2011).

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 EnCana EnCana Corporation v. Republic of Ecuador, LCIA Case No. UN3481,
UNCITRAL, Award (3 February 2006).

Enron Enron Corporation and Ponderosa Assets, L.P. v. The Argentine

Republic, ICSID Case No. ARB/01/3, Decision on Jurisdiction (14
January 2004).

Gami Gami Investments v. The Government of the United Mexican

States,

Investments UNCITRAL, Final Award (15 November 2004).

H&H H&H Enterprises Investments Inc. v. Arab Republic of Egypt, ICSID

Case

Enterprises No. ARB/09/15, Excerpts of Award (6 May 2014).

Hamester Gustav F W Hamester GmbH & Co KG v. Republic of Ghana, ICSID

Case No. ARB/07/24, Award (18 June 2010).

Hesham Talaat Hesham Talaat M. Al- Warraq v. The Republic of Indonesia,

UNCITRAL, Final Award (15 December 2014).

Hulley Hulley Enterprises Ltd. (Cyprus) v. The Russian Federation,

UNCITRAL,

Enterprises PCA Case No. AA 226, Interim Award on Jurisdiction and

Admissibility (30 November 2009).

İçkale İçkale İnşaat Limited Şirketi v. Turkmenistan, ICSID Case No.

ARB/10/24, Award (8 March 2016).

Joy Mining Joy Mining Machinery Ltd. v. The Arab Republic of Egypt, ICSID Case No.

ARB/03/11, Award on Jurisdiction (6 August 2004).

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 Klöckner Klöckner Industrie-Anlagen GmbH and Others v. United Republic of
Cameroon and Société Camerounaise des Engrais, ICSID Case No.
ARB/81/2, Award (21 October 1983).

LG&E Energy LG&E Energy Corp., LG&E Capital Corp. and LG&E International
Inc. v. The Argentine Republic, ICSID Case No. ARB/02/1, Decision
on Liability (3 October 2006).

Marco Gavazzi Marco Gavazzi and Stefano Gavazzi v. Romania, ICSID Case No.
ARB/12/25, Decision on Jurisdiction, Admissibility and Liability (21
April 2015).

Marvin Marvin Feldman v. United Mexican States, ICSID Case No. ARB(AF)/99/1,

Feldman Award (16 December 2002).

Metalclad Metalclad Corporation v. United Mexican States, ICSID Case

No.

ARB(AF)/97/1, Award (30 August 2000).

Metal-Tech Metal-Tech Ltd. v. The Republic of Uzbekistan, ICSID Case No.

ARB/10/3, Award (4 October 2013).

Methanex Methanex Corporation v. United States of America, UNCITRAL, Final

Award on Jurisdiction and Merits (3 August 2005).

Middle East Middle East Cement Shipping and Handling Company SA v. Arab Republic

Cement of Egypt, UNCITRAL, Award (12 April 2002).

MTD MTD Equity Sdn. Bhd. and MTD Chile S.A. v. Republic of Chile, ICSID
Case No. ARB/01/7, Award (25 May 2004).

Murphy I Murphy Exploration and Production Company International v.

Republic of Ecuador, ICSID Case No. ARB/08/4, Award on
Jurisdiction (15 December 2010).

vii
 Murphy II Murphy Exploration and Production Company International v.
Republic of Ecuador, PCA Case No. 2012-16 (formerly AA 434),
Partial Award on Jurisdiction (13 November 2013).

Nova Scotia Nova Scotia Power Incorporated (Canada) v. Bolivarian Republic of

Venezuela, ICSID Case No. ARB(AF)/11/1, Excerpts of Award (30
April 2014).

Occidental Occidental Exploration and Production Company v. The Republic of

Ecuador, LCIA Case No. UN 3467, Final Award (1 July 2004).

Oxus Gold Oxus Gold v. The Republic of Uzbekistan, UNCITRAL, Final Award (17
December 2015).
Rusoro Mining Rusoro Mining Ltd. v. The Bolivarian Republic of Venezuela, ICSID
Case No. ARB(AF)/12/5, Award (22 August 2016).

S.D. Myers S.D. Myers v. Government of Canada, UNCITRAL, Partial Award (13
November 2000).

Salini Salini Construtorris S.P.A. v. Kingdom of Morocco, ICSID Case

No.

ARB/00/4, Decision on Jurisdiction (23 July 2001).

Saluka Saluka Investments B.V. v. The Czech Republic, UNCITRAL, Partial

Award (17 March 2006).

Tokios Tekeles Tokios Tokeles v. Ukraine, ICSID Case No. ARB/02/18, Award (26 July
2007).

Total S.A. Total S.A. v. The Argentine Republic, ICSID Case No. ARB/04/01, Decision
on Liability (27 December 2010).

Toto Toto Construzione Generali S.P.A v. The Republic of Lebanon, ICSID Case
No. ARB/07/12, Decision on Jurisdiction (11 September 2009).

TSA Spectrum TSA Spectrum De Argentina S.A. v. Argentine Republic, ICSID Case No.

viii
 ARB/05/5, Award (19 December 2008).

Vacuum Salt Vacuum Salts Products Ltd. v. Government of the Republic of Ghana, ICSID
Case No. ARB/92/1, Award (16 February 1994).

Vivendi Compania de Aguas del Aconquija S.A. and Vivendi Universal S.A. v.

(Annulment) Argentine Republic, ICSID Case Number ARB/97/3, Decision on

Annulment (3 July 2002).

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 SUMMARY OF FACTS

1. The Republic of Tyrea (“Respondent”) is a state that emerged from a civil war in
2012. In January 2013, the country transitioned from a military dictatorship to a
democracy. The civil war was caused by the conflict between the two major
ethnicities inhabiting Tyrea, the Minyar and the Tatyar. Although hostilities are over
and a compromise between the two ethnicities seems to have been reached, the
tension still remains. These two ethnicities also form part of the population in Alcadia
and Larnacia, two countries bordering Tyrea.

2. Respondent signed a BIT with the Federation of Novanda (“Novanda”) on 28 March

2000 (the “Tyrea-Novanda BIT”) and a BIT with the Union of Kitoa on 20 January
2001 (the “Tyrea-Kitoa BIT”). The Tyrea-Novanda BIT and the Tyrea-Kitoa BIT
were ratified on 10 September 2000 and 25 May 2001, respectively. Respondent also
acceded to the ICSID Convention on 15 December 2000.

3. Respondent has a population of 120 million and was regarded by major international
social networks as a strategic new market after it passed the new Law on Media and
Information No. 1125-L on Media Information dated 10 September 2013 (the “Media
Law”) liberalising the Internet and loosening its control over the media and the press.
On the day of the publication of the Media Law, Mr. Anderson, the spokesperson for
the Tyrean parliament, in his official statement for the press, mentioned that “it has
become known that major international social networks such FriendsLook, SpeakUp,
Whistler, and others, are considering Tyrea as a new market, and that some of them
have even approached Tyrean ambassadors in Novanda and Kitoa to better
understand theinvestment climate in Tyrea” and that “by the new Media Law Tyrea
expects to lay down the ground for the advent of such prominent international players
and for fruitful collaboration with them in the future”.

4. Three international social networks (FriendsLook, Whistler and SpeakUp) regarded

Tyrea as the key target market after the adoption of the Media Law. FriendsLook, the
biggest and most popular of the three, after making substantial contributions in
advertising and localising the website, created a local branch in Tyrea and launched
the Tyrean version of its website in January 2015. Whistler and SpeakUp followed
suit in June 2015 employing the same model of operation in Tyrea.

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5. FriendsLook is a global network incorporated in, and in accordance with, the laws of
Novanda. Whistler and SpeakUp are global social networks, constituted in
accordance with the laws of Kitoa. Within months of their launch in 2015,
FriendsLook, Whistler and SpeakUp became a tremendous success in Tyrea, with a
constant increase in the user base.

6. Soon after the establishment of the social media platforms in the country, Tyrean
political and social activists realised the potential of these new platforms for
broadcasting information to millions of local users and started using the social
networks to create online communities (“groups”) or start threads.

7. Starting from sporadic posts at the end of 2016, national extremist groups in Tyrea
commenced their campaign on social networks, using these platforms to spread
misrepresentative and sometimes false information. FriendsLook, Whistler and
SpeakUp were not the only platforms used by the radicalists. For instance, Wink, a
local messenger application, widely popular before the advent of the three global
networks but now waning due to its lack of interactivity, was swamped with messages
automatically delivered to the users and containing links to radicalist posts. Another
one was TruthSeeker, which was created by the Respondent in February 2014, in the
early days of the Media Law, to incentivise free speech and promote social awareness
among the citizens.

8. In the beginning of January 2018, over the course of New Year celebrations in Tyrea,
ethnic violence resulted in hundreds of casualties, with the subsequent incidents of
between Minyar and Tatyar groups being reported increasingly frequently.

9. On 12 January 2018, the Respondent passed Law 0808-L Amending the Law on
Media and Communications (“Law 0808-L”), which required all social networks to
introduce a filtering algorithm preventing the dissemination of hate speech, request
Personal ID card details from both new and existing Tyrean users, and provide to the
competent authorities of Tyrea access to such Personal ID card details and
correspondence among users. The decree introducing the new law (the
“Promulgation Decree”) provided for a 60-day deadline for compliance with the new
requirements, including for the algorithm to be developed and implemented and
existing users identified.

10. Claimants immediately set to work on establishing tailored mechanisms for

xi
 combating the spread of hate speech among Tyrean language users. The Claimants
initially believed the term of 60 days to be a feasible time frame for the task. The need
to provide to Respondent’s authorities access to Tyrean users’ Personal ID card
details and correspondence between users, however, was controversial. SpeakUp in
particular owing to its ethos strongly objected to the new requirement. Whereas
FriendsLook and Whistler implemented the required identification and message
storing, SpeakUp delayed the development of that capability and engaged in
communication with the Tyrean parliament’s members and Tyrean government
hoping to negotiate that the requirement either be eliminated or restricted to a limited
list of particular circumstances when access had to be provided.

11. Tensions and violence in Tyrea escalated and 30 days into the term for compliance
Respondent decided it had to act without delay. The President’s new decree dated 11
February 2018 reduced the deadline for compliance with the new requirements to 45
days, setting the deadline for compliance to 28 February 2018. The timeline reduction
left Claimants with only 10 more days to deploy the filtering algorithm (including its
development and testing). Claimants complied with the deadline, but the algorithms
implemented turned out to be not entirely effective. Among the reasons for failure of
the algorithms to achieve the goal, the experts cited by the media listed specific
features of Tyrean language and the lack of testing. It soon became apparent that the
Claimants’ algorithm could not succeed in curbing the spread of misinformation.
Further, compliance measures with respect to the ID card details were never
implemented.

12. Citing failure of the algorithm, violent incidents spinning out of control, and a
resultant fear of slipping back into civil war as the reasons behind its actions, the
Respondent decided to block FriendsLook, Whistler and SpeakUp entirely. On 28
February, 1 March and 2 March 2018, the TCA, after investigating the matter, issued
the ordinance blocking the Claimants’ websites for non-compliance with the new
legal requirements for social networks.

13. Other platforms used by radicalists were, however, not blocked. The TCA explained
this by stating that the other social networks being less popular and convenient for
spreading hate speech were therefore, less dangerous. In the case of Wink,
Respondent’s authorities held that the network was not at fault for the algorithm’s
inefficiency, as “spam” messages only contained short links and were consequently

xii
 outof the filter’s reach. Respondent never explained why TruthSeeker was not
blocked, but speculations vary, ranging from the obvious lack of popularity of the
network (nearly five times fewer users than incase of FriendsLook) to, in the words of
one Tyrean digital daily newspaper, “the Government being reluctant to terminate its
own creation”.

14. Considering the unprecedented nature of their claims and the similarity of their
positions, Claimants decided to join forces and submit a joint claim. On 29 June 2018,
the Claimants submitted their request for arbitration to the ICSID Secretariat.

15. In parallel to the arbitral proceedings, Claimants engaged a public relations firm and
resorted to unofficial measures to gain publicity.

16. As the affair attracted increased publicity, Respondent, aware of the potential
implications to its international image and to its bid to host a World Expo, filed its
request for provisional measures to stop Claimants from publicising and aggravating
the dispute.

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 ARGUMENTS ON PROVISIONAL MEASURES

I. THE TRIBUNAL SHOULD NOT GRANT THE PROVISIONAL MEASURES

17. The respondent requested the Tribunal to order claimants to refrain from taking any steps
which might aggravate this dispute or exacerbate Tyrea’s position in it. However, this request
does not satisfy the requirements for granting provisional measures.

18. The publication of propaganda does not affect any procedural rights of the respondent
which might have any impact on the underlying dispute.1

19. Necessity is a high threshold which requires the existence of a risk of serious and
irreparable harm.2 The respondent offers no evidence that the Request for Arbitration will be
misused by the media or that this presents a risk of serious and irreparable harm. The
respondent must provide evidence as to the severe damage that the claimant’s alleged
activities have supposedly caused to the prospects of objective media coverage.

20. The respondent also fails in the issue of proportionality, which requires balancing the
inconvenience in the imposition of the measures upon the parties.3 In order to give proper
consideration to this balance of inconvenience, the Tribunal must take into account the
“countervailing interest in favour of transparency” as well as the potentially substantial
damage that Claimants would suffer should the provisional measures be granted.

1
Quiborax v. Bolivia, Decision on Provisional Measures, ICSID Case No. ARB/06/2.
2
CEMEX Caracas Investments B.V. and CEMEX Caracas II Investments B.V. v. Bolivarian
Republic of Venezuela, Decision on the Claimant's Request for Provisional Measures, ICSID.
ARB/08/15 [56].
3
Gary Born, International Commercial Arbitration (2nd Edition), p. 21.

1
 ARGUMENTS ON JURISDICTION

II. THE TRIBUNAL HAS JURISDICTION OVER THE DISPUTE DESPITE THE DENUNCIATION OF

ICSID CONVENTION BY TYREA

2.1 Tyrea’s consent to ICSID arbitration in Article 9(1) of the BITs remains in effect

21. The BITs, including Tyrea’s unconditional consent to ICSID arbitration, remains in
effect4 and Tyrea’s notice of denunciation of the ICSID Convention on 5 January 2018 does
not nullify its consent to this arbitration.

2.2 Under Article 71 Tyrea remained a Contracting State at the time of the Claimant’s
filing

22. The Claimant contends that Tyrea’s consent to this arbitration follows from the
application of Article 71 of the ICSID Convention. Article 71 provides that a Contracting
State may denounce the Convention by providing written notice and that “[t]he denunciation
shall take effect six months after receipt of such notice.” Under Article 71, Tyrea’s
denunciation of the Convention did not take effect until 6 July 2018, six months after notice
of denunciation was provided on 5 January 2018.5

23. Tyrea remained a Contracting State to the ICSID Convention during this period because it
is only after the denunciation becomes effective [that] a signatory will cease to be a
Contracting State.6

2.3 Article 72 of the ICSID Convention permits an investor to accept a host State’s
unilateral offer of ICSID arbitration after denunciation of the Convention

24. Pursuant to Article 72, a State’s notice of withdrawal from the ICSID Convention does
not affect its obligations under the Convention in a case in which it has given consent to the

4
Blue Bank International & Trust (Barbados) Ltd. v. Bolivarian Republic of Venezuela, ICSID Case
No. ARB/12/20.
5
L. 717, Problem.
6
Blue Bank International & Trust (Barbados) Ltd. The Claimant v. Bolivarian Republic of Venezuela
The Respondent ICSID Case No. ARB/12/20.

2
jurisdiction of the Centre before its notice of denunciation is received by ICSID.7 It is the
unilateral consent of the State to ICSID jurisdiction – in this case by means of the BIT ‒ that
is relevant under Article 72.

III. THE TRIBUNAL HAS JURISDICTION OVER THE MULTI-PARTY ARBITRATION CLAIM

BROUGHT AGAINST THE RESPONDENT

25. The tribunal has jurisdiction over the multi-party claim as there is sufficient nexus8
between the claims of multiple claimants in the proceedings, and the conditions considered
by tribunals in similar cases9 are fulfilled.

26. First, the challenged measures are the same. All claimants are aggrieved by the blocking
of their respective social media platforms by the Respondent state.10

27. Second, the investors are affiliated by way of common shareholding11 and thus, the
effects of impugned action of Tyrea are detrimental to all Claimants alike.

28. Third, the remedies sought by the Claimants are aligned as all of them allege breach of
Fair and Equitable Treatment standard by Tyrea12 and seek compensation for the loss of
investments

ARGUMENTS ON MERITS

IV. THE BLOCKING OF THE CLAIMANTS’ PLATFORMS IS IN VIOLATION OF ARTICLES 3(1)

AND 6 OF THE TYREA-NOVANDA BIT AND ARTICLES 3(1) AND 6 OF THE TYREA-KITOA BIT.

29. Under the garb of security interests, the Respondent State has completely decimated the
business of the Claimants and has rendered their investments meaningless. The respondent
state’s conduct violates the fair and euitable treatment clause [4.1] and amounts to an
expropriatory measure [4.2].

7
E. Gaillard, The Denunciation of the ICSID Convention, NYLJ, Vol. 237, No. 122 (26 June 2007),
Exhibit CLA-096.
8
Noble Energy and Machala Power v. Ecuador and Conelec, ICSID Case No. (ARB/05/12).
9
Goetz and others v. Burundi, ICSID Case No. (ARB/01/2).
10
L. 150, Problem.
11
L. 1950, Problem.
12
L. 189, Problem.

3
4.1 That the Respondent State failed to accord the Claimants fair and equitable
treatment.

30. Among the principles most often relied upon by tribunals when applying the fair and
equitable standard is whether the host state has: (1) failed to protect the investor’s legitimate
expectations13 and; (2) acted arbitrarily or subjected the investor to discriminatory
treatment.14 Article 3(1) of the BIT is worded in a similar manner, and provides that the host
state shall ensure fair and equitable treatment to the investments of the Claimants, and that
the State shall not impair by unreasonable or discriminatory measures, the operation,
managements, maintenance, use, enjoyment, disposal thereof by those nationals.15

4.1.1. Republic of Tyrea failed to protect the Claimants’ legitimate expectations.

31. The legitimate expectations of the Claimants have been frustrated. States have been held
to be in breach of the FET standard in situations where the State frustrated the legitimate
expectations of the investor by acting contrary to specific representations made.16 In such
scenarios, the tribunals consider the existence of the representation, the actual reliance upon it
by the investor and the reasonableness of the reliance.17 In the present situation, various
representatives of the Tyrean government had made representations about how they were
looking forward to a fruitful collaboration with the Claimants, and these representations were
in fact relied upon by the Claimants when they set up their business in Tyrea.

32. It was reasonable for the Claimant to rely upon such representations because the Tyrean
Government was committed to change, and had passed the new Media Law in 2013 to
encourage the advent of social networking giants such as the Claimants.18 Then, when the
timeline was reduced, despite acknowledging the need for the correct timeline, the
Respondent clearly did not act in a manner that promoted fruitful collaboration. Further, as
was held in Tecmed19 and MTD20, the host State has to act in a consistent manner and as in

13
MTD Equity Sdn. Bhd. and MTD Chile S.A. v. Republic of Chile, ICSID Case No. ARB/01/7.
14
Pope & Talbot Inc. v. Canada, UNCITRAL, 41 ILM 1347 (2002).
15
Art. 3(1), BIT.
16
Waste Management Inc. v. United Mexican States (“Number 2”), Award, ICSID Case No.
ARB(AF)/00/3 (April 30, 2004) [98].
17
Ioan Micula, Viorel Micula, S.C. European Food S.A, S.C. Starmill S.R.L. and S.C. Multipack
S.R.L. v. Romania, Award, ICSID Case No. ARB/05/20 (December 11, 2013) [668].
18
Statement of Uncontested Facts [3].
19
Técnicas Medioambientales Tecmed, S.A. v. The United Mexican States, ICSID Case No. ARB
(AF)/00/2 (May 29, 2003).

4
Metalclad, the host has to be act in a transparent manner. Both of these were not met in the
present case, the timeline was reduced without any consultation.

33. On the day of the publication of the Media Law, Mr. Anderson, the spokesperson for the
Tyrean parliament, in his official statement for the press, expressed the Tyrean legislative
body’s intention to keep in line with the liberalisation trend in Tyrea. More specifically, Mr.
Anderson mentioned that “it has become known that major international social networks
such as FriendsLook, SpeakUp, Whistler, and others, are considering Tyrea as a new market,
and that some of them have even approached Tyrean ambassadors in Novanda and Kitoa to
better understand the investment climate in Tyrea” and that “by the new Media Law Tyrea
expects to lay down the ground for the advent of such prominent international players and for
fruitful collaboration with them in the future”.21 The Tyrean government declared, with
absolute certainty, that a new internet era has begun for Tyrea and that we will do our
absolute best to facilitate the establishment and use of new internet possibilities for the people
of Tyrea.22 Moreover, the Minister for Telecommunications, 1595 Information Technology
and Mass Media of Tyrea admitted importance of allowing sufficient time for testing the
algorithm.23

4.1.2. Republic of Tyrea acted arbitrarily or subjected the Claimants to discriminatory

treatment.

34. A test was adopted in Saluka24 in the context of the fair and equitable treatment standard.
State conduct is discriminatory, if: (i) similar cases are (ii) treated differently (iii) and without
reasonable justification. The measure was discriminatory as the local platforms were exempt
from it.25 In the present case, the Respondent State has given no explanation as to why it did
not block TruthSeeker, and considering the fact that it is owned by the Tyrean Government, it
is clear that it is trying to show preference to its own creation.26

20
MTD Equity Sdn. Bhd. and MTD Chile S.A. v. Republic of Chile, ICSID Case No. ARB/01/7.
21
Statement of Uncontested Facts [3].
22
Statement of Uncontested Facts [5].
23
Statement of Uncontested Facts [18].
24
Saluka Investments B.V. v. The Czech Republic, Decision on Jurisdiction over the Czech
Republic’s Counterclaim, UNCITRAL (May 7, 2004).
25
Saluka Investments B.V. v. The Czech Republic, Decision on Jurisdiction over the Czech
Republic’s Counterclaim, UNCITRAL (May 7, 2004) [408-416].
26
Statement of Uncontested Facts [22].

5
4.2. The Respondent State violated Article 6 of both the Tyrea-Kitoa BIT and the
Tyrea-Novanda BIT.

4.2.1. Republic of Tyrea expropriated the Claimants’ investments in Tyrea.

35. The advertising contracts and pro-subscription features are assets within the terms of the
treaties. Applying the test laid down in Malaysian Salvors,27 the term investment
encompasses any activity which involves the commitment of money, a certain duration and
an element of risk. The Claimants had invested money into their Tyrean operations, they
planned on continuing operations for a long time and had borne a risk when they chose to
invest. The measures were not a legitimate exercise of Tyrea’s police powers. The measures
led to a discriminatory effect28 as the local platforms such as Wink and Truthseeker were not
blocked for their non-compliance with the law. They were in a similar situation and were
treated differently.29 Furthermore, there is no legal process to contest it.30

4.2.2. Republic of Tyrea’s conduct also amounts to indirect expropriation.

36. An indirect expropriation occurs if the state deprives the investor of the ability to use its
investment in any meaningful way,31 such that even if the title is in the investor’s hands, the
exercise of his property rights is no longer possible.32 In Metalclad Corp. v. Mexico,33 the
tribunal found that Mexico had unlawfully expropriated the claimant’s investment in a
hazardous waste landfill site through the Municipality’s denial of a construction permit
without any basis. The tribunal defined expropriation in broad terms to include measures with
the effect of depriving the owner in whole or in significant part, of the use or reasonably-to-

27
Malaysian Historical Salvors Sdn Bhd v. Malaysia (Decision on Annulment) ICSID Case No
ARB/05/10, IIC 372 (2009, Schwebel P, Shahabuddeen & Tomka) [57].
28
LG&E Energy Corporation, LG&E Capital Corporation, and LG&E International Inc. v. Argentine
Republic, Decision on Liability, ICSID Case No. ARB/02/1 (October 3, 2006) [146].
29
Saluka Investments B.V. v. The Czech Republic, Decision on Jurisdiction over the Czech
Republic’s Counterclaim, UNCITRAL (May 7, 2004).
30
ADC Affiliate Limited and ADC & ADMC Management Limited v. The Republic of Hungary,
Award, ICSID Case No. ARB/03/16 (October 2, 2006) [hereinafter “ADC v. Hungary”].
31
Gemplus, S.A., SLP, S.A. & Gemplus Industrial, S.A. de C.V. v. United Mexican States, ICSID
Case No. ARB(AF)/04/3 & ARB(AF)/04/4, Award (June 16, 2010) [581].
32
Compañíá de Aguas del Aconquija S.A. and Vivendi Universal v. Argentine Republic, ICSID Case
No. ARB/97/3, Award (Aug. 20, 2007).
33
Metalclad Corporation v. The United Mexican States, Award, ICSID Case No. ARB(AF)/97/1
(August 30, 2000).

6
be-expected economic benefit of property even if not necessarily to the obvious benefit of the
host State. In another case,34 the tribunal observed that:

“the required level of interference with rights for a finding of expropriation has been
variously described as ‘unreasonable’; ‘an interference that renders (p. 176) rights so
useless that they must be deemed to have been expropriated’; ‘an interference that
deprives the investor of fundamental rights of ownership’; ‘an interference that makes
rights practically useless’; ‘an interference sufficiently restrictive to warrant a
conclusion that the property has been “taken”’; ‘an interference that makes any form
of exploitation of the property disappear’; ‘an interference such that the property can
no longer be put to reasonable use’.”

37. In the present case, the Claimants cannot utilize their investments in any meaningful
manner after the blocking of their platforms, making out a clear case of indirect
expropriation. Consequently, the Respondent State’s actions amount to unlawful
expropriation.

ARGUMENTS ON REMEDIES

V. THE COMPENSATION REQUESTED BY THE CLAIMANTS IS NOT SPECULATIVE AND DCF

METHOD IS THE APPROPRIATE METHOD FOR QUANTIFICATION OF DAMAGES.

38. Under international investment arbitration, responsibility of a state arises from a lawful or
unlawful government conduct that causes harm to a foreign investor or their investments. 35 In
the case of an unlawful government conduct, the breach of an engagement involves an
obligation to make reparation.36 This obligation, according to landmark cases and authors,
arises from customary international law and not from the Hull formula contained in treaties
for lawful expropriations.37 The Hull formula, applicable to lawful expropriations, considers
the fair market value of the asset being valuated immediately before the taking of the

34
Deutsche Bank AG v. Democratic Socialist Republic of Sri Lanka, ICSID Case No. ARB/09/2
(October 31, 2012).
35
Borzu Sabahi, COMPENSATION AND RESTITUTION IN INVESTOR-STATE ARBITRATION, OXFORD
UNIVERSITY PRESS, p. 95 (2011) [hereinafter “Sabahi”].
36
Factory at Chorzow (Germany v. Poland), Claim for Indemnity & Merits, P.C.I.J. Series A., No. 17
(1928), p. 47 [hereinafter “Chorzow Factory”].
37
Irmgard Marboe, CALCULATION OF COMPENSATION AND DAMAGES IN INTERNATIONAL
INVESTMENT LAW, Oxford University Press, ¶ 2.72 (2009); Chorzow Factory, p. 47; ADC v. Hungary
[479-499].

7
property.38 On the other hand, the Chorzow formula seeks to put the victim of the unlawful
act at the hypothetical position it would have been at the date of the award.39 The Chorzow
formula arises from the following principle:

“The essential principle contained in the actual notion of an illegal act—a principle
which seems to be established by international practice and in particular by decisions
of arbitral tribunals—is that reparation must, as far as possible, wipe out all the
consequences of the illegal act and re-establish the situation which would, in all
probability, have existed if that act had not been committed.”40

39. Additionally, the date of the award should be used to calculate full value of the
expropriated investment. This is necessary to put the Claimants in the same position as if the
expropriation had not been committed.41 This kind of approach is not without support. The
PCIJ in the Chorzów Factory case stated that damages are “not necessarily limited to the
value of the undertaking at the moment of dispossession.”42 The unlawfulness of such a
dispossession inevitably affects the criteria to be used for determining the reparation owed by
the respondent State, since the pecuniary consequences of a lawful expropriation cannot be
assimilated to those of an unlawful dispossession.43

40. In the present case, the Respondent State’s conduct amounts to unlawful expropriation,
and therefore, the Tribunal should calculate damages under the Chorzow formula and grant
full reparation. It is submitted that, first, the revenue projections for 2018 are not based on
numerous assumptions [5.1] and; second, DCF Method is an appropriate method for
quantification of damages [5.2].

5.1. The revenue projections for 2018 are not based on numerous assumptions.

41. Tyrea must compensate the claimants for profits from the sales foregone (advertising
space, promotional content, personalized content) which the claimants would have obtained
absent the expropriation, as valued on the date of the award. The claimants’ report on
damages by Alonzo call these head of damages “Lost Profits: Claimants’ revenue streams”.

38
Sabahi, p. 99.
39
Sabahi, p. 99.
40
Chorzów Factory, p. 47.
41
ADC v. Hungary.
42
Chorzów Factory.
43
ADC v. Hungary.

8
In Burlington Resources v. Republic of Equadior,44 the tribunal considers that Burlington’s
lost profits claim from the date of expropriation onwards is a compensable loss. Tyrea, in
their Response to the Request for Arbitration allege that claimants’ reliance on lost profits is
heavily based on numerous assumptions and the most favourable future business operation
scenario.

42. In CME v. Czech Republic,45 the tribunal heavily relied on market share to calculate
future cash flows. The claimants invested in a broadcasting service which earned revenues
through advertising. The tribunal accepted the claimant’s argument, the main drivers for
valuation were the large audience share. In another case CMS Gas Transmission Co. v
Argentina,46 the respondent took measures in 2002 due to which a number of gas
transportation and distribution companies were affected. The tribunal relied on the
consumption patterns as the main drivers of value of the companies’ success. The tribunal
referred to the demand for gas, the tariff adjustments, and the operations and maintenance
expenditures.

43. Hence, the popularity is an important factor. The tribunal, in the present case, should take
into account that he number of users of the claimantss’ platforms are exponentially
increasing,47 and and they are ideal for sharing info. Even users realized the potential.48 On
the other hand, there has been no increase in popularity of other platforms despite efforts.49
Moreover, pro features were going to be launched in the Tyrean market.50 The high revenue
projections can be attributed to the popularity and new features. As per Alonzo’s report,
Revenue for 2017 is also almost double compared to 2016. Some components are even more
than double. Therefore, revenue projections are not based on most favourable future business
scenario.

44
Burlington Resources Inc. v. Republic of Ecuador, Decision on Liability, ICSID Case No.
ARB/08/5 (December 14, 2012).
45
CME Czech Republic B.V. v. The Czech Republic, UNCITRAL, Final award and separate opinion,
(2006) 9 ICSID Rep 264,
46
CMS Gas Transmission Company v. The Republic of Argentina, Award, ICSID Case No.
ARB/01/8 (May 12, 2005).
47
Statement of Uncontested Facts [10].
48
Statement of Uncontested Facts [12].
49
Procedural Order No. 2 [16].
50
Statement of Uncontested Facts [11].

9
44. Hence, the unlawful conduct of Tyrea deprived claimants of the possibility of obtaining
future revenues from operating assets in Tyrea from date of expropriation onwards. And the
revenue projections are not speculative and not based on assumptions.

5.2. DCF Method is an appropriate method for quantification of damages.

45. DCF Method is an appropriate method for quantification of damages because first, DCF
method would not lead to an artificially inflated result dependent on selective assumptions,
uncertainties and contingencies [5.2.1] and; second, the 5% discount rate proposed by Mr.
Alozo is appropriate and not unfounded [5.2.2].

5.2.1. DCF method would not lead to an artificially inflated result dependent on selective
assumptions, uncertainties and contingencies.

46. The principle of full reparation requires that tribunals “[examine] the investor’s actual
financial situation and [compare] it with ‘the one that would have prevailed had the act not
been committed’. In other words, the comparison is made with the situation which would
have hypothetically prevailed using a ‘but for’ scenario. In this respect, the DCF valuation
method is used to calculate loss of future profits, where the future cash flow is reasonably
ascertainable and not purely speculative even if the investment has not yet been operational.
For these reasons, the claimants contend that the Tribunal should award them compensation
based on the calculation of lost profits.51 Tyrea’s unlawful conduct deprived the claimants of
the opportunity to expand its social media operations to neighboring countries i.e. Alcadia
and Larnacia. Tyrea already had negotiations and started planning their expansion incurring
relevant costs.52

47. In the ‘but for’ world, the claimants would have finished their negotiations and that the
claimants would ‘in all probability’ have started operations in the neighboring countries.
Tribunals in various cases have recognized that the loss of a business opportunity (or “loss of
a chance”) may give rise to compensation.

51
Gold Reserve Inc. v. Bolivarian Republic of Venezuela, Award, ICSID Case No. ARB(AF)/09/1
(September 22, 2014) [403, 416, 680]; Bear Creek Mining Corporation v. Republic of Peru, Award,
ICSID Case No. ARB/14/21 (November 30, 2017).
52
Request for Arbitration [15].

10
48. The tribunal in Rusoro53 summarized the criteria for for DCF method which includes,
reliable projections of future cash flows, ideally in the form of a detailed business plan
adopted at a time prior to the event giving rise to the claim, and prices at which the enterprise
will be able to sell its products or services can be determined with reasonable certainty. All
the claimants, in the present case, had business plans for expansion by 2022.54

49. In Eiser Infrastructure Limited v. the Kingdom of Spain,55 the Tribunal awarded
compensation for lost future profits even if the power plants did not have a long history of
operations. The tribunal considered that power stations have a relatively “simple business
model” which is based on readily available data. Unlike other ICSID cases which involve
heavy infrastructure projects, there is no such requirement for social media companies. In a
nutshell, such companies develop algorithms, establish local office and servers, and launch a
local website.56 For Alcadia and Larnacia, the claimants just required staff and a local office.

50. Additionally, regarding expertise and record of profitability in similar circumstances,

there is data showing that the Claimants’ previous expansion to new foreign markets was
successful.57 The markets and potential user bases of Alcadia and Larnacia are similar to
those of Tyrea,58 Therefore, in light of these points, DCF method would not lead to an
artificially inflated result dependent on selective assumptions, uncertainties and
contingencies.

5.2.2. The 5% discount rate proposed by Mr. Alozo is appropriate and not unfounded.

51. The respondent alleged in their damages report that discount rate is unfounded because of
the adverse effects of political, economic and financial risks of operating in
Tyrea. In Flughafen Zürich v. Venezuela, 59the tribunal decided that the measures adopted by
Venezuela constituted a “direct expropriation, more concretely, a nationalization of the
investment”. As regards the discount rate and the country risk premium, the tribunal agreed
with the discount rate as proposed by the claimant. It found that a country could not benefit

53
Rusoro v. Venezuela [759].
54
Procedural Order No. 2 [2].
55
Eiser Infrastructure Limited and Energía Solar Luxembourg S.à r.l. v. Kingdom of Spain, Final
Award, ICSID Case No. ARB/13/36 (May 4, 2017).
56
Request for Arbitration [4-6].
57
Procedural Order No. 2 [3].
58
Request for Arbitration [15].
59
Flughafen Zürich A.G. and Gestión e Ingenería IDC S.A. v. Bolivarian Republic of
Venezuela, Award, ICSID Case No. ARB/10/19 (November 18, 2014).

11
from a wrongful act attributable to it to increase country risk. Therefore, the tribunal should
not interfere with the proposed discount rate.

12