brought under the dominican republic - central america - ita

4.74. It will be recalled that the first condition in CAFTA Article 10.20.2 addresses “substantial
business activities in the territory” of the USA. In the Tribunal‟s view, the
Claimant cannot here attribute geographical activities to the Claimant “in the territory”
of the USA when those same activities (including their location) are not materially
different from its earlier insubstantial activities as a company in the Cayman
Islands. Moreover, the Claimant‟s activities, both in the Cayman Islands and the
USA, were principally to hold the shares of its subsidiaries in El Salvador. The position
might arguably be different if it was acting as a traditional holding company
owning shares in subsidiaries doing business in the USA; but that is not this case.
The Claimant‟s activities as a holding company were not directed at its subsidiaries‟
business activities in the USA, but in El Salvador.
4.75. In short, as regards business activities in the territory of the USA, the Tribunal concludes
that the Claimant was and is not a traditional holding company actively holding
shares in subsidiaries but more akin to a shell company with no geographical location
for its nominal, passive, limited and insubstantial activities.
4.76. It is not necessary for the purpose of this first condition for the Tribunal to deal in
detail with the source of the capital expended in El Salvador as regards the investments
held by the Claimant and its subsidiaries or Enterprises. It is clear to the Tribunal
from the evidence adduced in these arbitration proceedings that these activities
did not originate as part of the Claimant‟s own activities in the USA but were associated
with Pacific Rim (its Canadian parent), as Mr Shrake testified. 139 Accordingly,
such capital expenditure does not assist the Claimant‟s case under CAFTA.
4.77. In the Tribunal‟s view, here as elsewhere, Mr Shrake was a candid and honest witness;
his oral testimony is consistent with other evidence (including the written testimony
of Ms McLeod-Selzer); and the Tribunal unhesitatingly accepts his evidence
on all these points.
139
Hearing D2.488-489xx.
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