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4.7. In summary, 131 the Respondent contends that the Claimant has never had “substantial business activities” in the USA (as a CAFTA Party) and that it is and has been owned and controlled always by persons of a non-CAFTA Party. Whereas the Respondent submits that the ownership/control part of this test under CAFTA Article 10.12.2 is disjunctive, requiring either ownership or control by “persons of a non- Party”, the Respondent asserts in this case that the Claimant is both owned and controlled by Pacific Rim, a Canadian company and a legal person of a non-CAFTA Party, which has at all relevant times wholly owned the Claimant. The Respondent contends that these facts, effectively admitted by the Claimant during these arbitration proceedings, suffice to justify the Respondent‟s denial of benefits under CAFTA Article 10.12.2, validly made in a timely manner on 3 August 2010. 4.8. (i) Substantial Business Activities: The Respondent relies on Mr Shrake‟s evidence as factual confirmation that the Claimant had no relevant business activities in the USA: it submits that Mr Shrake testified that the Claimant does nothing other than hold shares; that it has no employees; that it leases no office space; that it has no bank account [D2.445xx]; that it has no board of directors; that it pays no taxes in the USA; that it owns no tangible property or makes anything in the USA; and that it performs by itself no exploration activities from the USA [D2.493xxff]. The Respondent submits that Mr Shrake also testified that all contributions towards the alleged investments in El Salvador were made not by the Claimant but by the Claimant‟s parent company and another company related to the Claimant‟s parent company [D5.511xx]. The Respondent contends, again based on Mr Shrake‟s evidence, that the Claimant had and has no physical existence whatsoever other than its name on certain documentation; and, thus, that it cannot possibly have (or have had) substantial business activities in the USA. 4.9. The Respondent contends that if the mere holding of shares by a claimant acting only as a nominal holding company was a sufficient activity to defeat a denial of benefits under CAFTA (as argued by the Claimant), then the entire purpose of CAFTA Article 10.12.2 would be effectively eviscerated. According to the Respondent, the Claimant‟s case would ensure that all enterprises passively holding shares 131 This summary is largely prepared from the Respondent‟s oral submissions at the Hearing and its Post- Hearing Submissions. Part 4 - Page 3
would qualify for treaty protections under CAFTA, thereby making CAFTA Article 10.12.2 redundant. The Respondent submits that this absurd result cannot be the correct interpretation of the relevant treaty language in CAFTA under international law. 4.10. In regard to the Claimant‟s alleged investments made in El Salvador, the Respondent refers to wire transfers coming not from the Claimant but from its Canadian parent company (either Pacific Rim or its predecessor); Mr Shrake‟s confirmation to such effect in a press release of 3 July 2008, as also explained by Mr Shrake during his oral testimony [D2.488xx]; and the Claimant's slender reliance upon a fragmentary page from an unconsolidated and apparently unaudited balance sheet purporting to show the Claimant carrying an investment in El Salvador as an “asset”. As to the latter, the Respondent submits that this entry proves nothing as to whether the Claimant itself actually made that investment in the first place (as opposed to its Canadian parent company); and that all it could show, at most, is that at some unidentified time this asset was ostensibly placed on the Claimant‟s books. In any event, the Respondent submits that this “thinly documented indication” of apparent ownership of an asset located in El Salvador cannot constitute substantial business activities by the Claimant in the USA for the purposes of CAFTA Article 10.12.2. 4.11. (ii) Ownership/Control: The Respondent contends that the Claimant was both owned and controlled by persons of a non-CAFTA Party. As to the twin contrary arguments advanced by the Claimant, the Respondent contends that neither can succeed in defeating this straightforward conclusion under CAFTA, as a matter of treaty interpretation and as a matter of undisputed or indisputable fact. 4.12. First, so the Respondent submits, the Claimant wrongly applies the plain language of CAFTA to argue not the ownership of the Claimant, but the different ownership of the Claimant's Canadian parent company (Pacific Rim); and second, the Claimant wrongly asserts that because the majority of the shares in the Canadian parent are allegedly held by persons with postal addresses in the USA, then it must follow that the Canadian parent company is owned by persons of a CAFTA Party (namely the USA) and thus the Claimant, as the Canadian parent‟s subsidiary, is indirectly also owned by persons of that same CAFTA Party (the USA). Part 4 - Page 4
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IN THE MATTER OF AN ARBITRATION BEF
Page 3 and 4:
One-Time Acts .....................
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Glossary of Defined Terms “CAFTA
Page 7 and 8:
African Holding Company of America,
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Waste Management, Inc. v. United Me
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1.4. Prior to 2 March 2012, the Cla
Page 13 and 14:
C: The Tribunal’s Decision of 2 A
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1.23. The Respondent: The Responden
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under cover of a letter also dated
Page 19 and 20:
G: The Parties’ Claims for Relief
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c. Piercing the corporate veil (Mem
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H: The Jurisdictional Issues 1.46.
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(02) CAFTA 1.4. CAFTA Article 10.1:
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2. At least 90 days before submitti
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measure alleged to constitute a bre
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(03) The ICSID Convention 1.13. ICS
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(5) ILC Articles on State Responsib
Page 35 and 36: proof or the Claimant‟s allegatio
Page 37 and 38: 2.11. Burden of Proof: As far as th
Page 39 and 40: 2.19. In presenting this main objec
Page 41 and 42: precedented regulatory obstacles de
Page 43 and 44: 2.32. In its Post-Hearing Submissio
Page 45 and 46: SID Convention, nor relates to a
Page 47 and 48: But on the other side, an internati
Page 49 and 50: for such disputes would constitute,
Page 51 and 52: scribed in its early pleadings form
Page 53 and 54: 2.65. The Tribunal considers that t
Page 55 and 56: vestment (which by themselves are n
Page 57 and 58: minated; nothing more could have be
Page 59 and 60: to arbitrarily change or add new re
Page 61 and 62: 2.86. Accordingly, treating the rel
Page 63 and 64: 2.93. The Tribunal notes that this
Page 65 and 66: ability and not merely as a possibl
Page 67 and 68: 2.105. Having reached these several
Page 69 and 70: Tribunal‟s jurisdiction to determ
Page 71 and 72: 3.5. The Respondent also submits th
Page 73 and 74: cause there was only one applicatio
Page 75 and 76: leged de facto ban on mining was no
Page 77 and 78: Claimant, it came to light only in
Page 79 and 80: that led to the revocation should b
Page 81 and 82: for the purpose of deciding the Rat
Page 83 and 84: distinction made in the Commerce Gr
Page 85: EMELEC v. Ecuador (under the USA-Ec
Page 89 and 90: 4.17. (iii) Timeliness: The Respond
Page 91 and 92: the Respondent submits, to require
Page 93 and 94: ditiously resolved” (paragraph l)
Page 95 and 96: provided the Respondent with its No
Page 97 and 98: 4.44. The Claimant contends further
Page 99 and 100: lomatic protection within the meani
Page 101 and 102: Party [i.e. as the host State] whic
Page 103 and 104: there were and are certain activiti
Page 105 and 106: 4.74. It will be recalled that the
Page 107 and 108: der different arbitration rules, th
Page 109 and 110: 4.91. It follows that this third co
Page 111 and 112: Convention. 145 In the Respondent
Page 113 and 114: further express requirement of havi
Page 115 and 116: Legislativa was fully aware that th
Page 117 and 118: made before and after the Claimant
Page 119 and 120: 5.33. As established by the Interna
Page 121 and 122: 5.40. As also summarized above, the
Page 123 and 124: Government had always treated the C
Page 125 and 126: PART 6: ISSUE E - LEGAL AND ARBITRA
Page 127 and 128: 6.10. The Claimant submits that, un
Page 129 and 130: tion ratione temporis (i.e. the con
Page 131 and 132: Party to also put in a witness stat
Page 133 and 134: ture arbitration proceedings. Indee
Page 135 and 136: this arbitration with the least exp
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abused the Tribunal's indulgence in
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avoided; but, instead, the Responde
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“a U.S. investor organized under
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The Respondent acknowledges, of cou
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Claimant submits that under the cir
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ment in the communications with the
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6.76. The Claimant submits that the
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PART 7: THE OPERATIVE PART 7.1. For
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