1 1 INTERNATIONAL CENTRE FOR 2 SETTLEMENT OF INVESTMENT DISPUTES 3 ICSID Case No. ARB/09/17 4 5 COMMERCE GROUP CORP. 6 and SAN SEBASTIAN GOLD MINES, 7 Claimant, 8 v. 9 REPUBLIC OF EL SALVADOR, 10 Respondent. 11 ------------------------------------------------ 12 Hearing on Preliminary Objections 13 Monday, November 15, 2010 14 15 TRANSCRIPT of the stenographic notes 16 of the proceedings in the above-entitled matter, 17 as taken by and before TAB PREWETT, a Registered 18 Professional Reporter, a Certified Shorthand 19 Reporter, a Certified LiveNote Reporter, and 20 Notary Public, held at the World Bank, 1818 H 21 Street NW, Washington DC, 20005, on Monday, 22 November 15, 2010, commencing at 9:40 a.m. 2 1 A P P E A R A N C E S: 2 3 MEMBERS OF THE TRIBUNAL 4 5 Prof. Albert Jan van den Berg, 6 President of the Arbitral Panel 7 8 Dr. Horacio A. Grigera Naón, 9 Co-Arbitrator 10 11 Mr. J. Christopher Thomas QC, 12 Co-Arbitrator 13 14 15 ICSID Secretariat 16 Mr. Marco T. Montanés-Rumayor, 17 Secretary of the Tribunal 18 19 20 21 22 3 1 COUNSEL APPEARING: 2 3 FOR CLAIMANTS 4 5 MACHULAK, ROBERTSON & SODOS, S.C. 6 BY: JOHN E. MACHULAK, ESQ. 7 JAMES E. MACHULAK, ESQ. 8 EUGENE BYKHOVSKY, ESQ. 9 Counsel for Claimant 10 11 ANDREW E. NEWCOMBE, ESQ. 12 University of Victoria Law 13 14 15 16 17 18 19 20 21 22 4 1 FOR THE RESPONDENT 2 3 DEWEY & LeBOEUF LLP 4 BY: DEREK SMITH, ESQ. 5 LUIS PARADA, ESQ. 6 TOMÁS SOLIS, ESQ. 7 ERIN ARGUETA, ESQ. 8 MARY LEWIS, ESQ. 9 ERIC STANCULESCU, ESQ. 10 BRIAN VOHRER, ESQ. 11 RYAN TYNDALL, ESQ. 12 CHRISTOPHER DOLAN, ESQ. 13 Counsel for Respondent 14 15 16 17 18 19 20 21 22 5 1 OFFICE OF THE ATTORNEY GENERAL OF EL SALVADOR 2 BY: DR. BENJAMIN PLEITÉS, ESQ. 3 Counsel for Respondent 4 5 EMBASSY OF EL SALVADOR IN WASHINGTON, D.C. 6 BY: ENILSON SOLANO, ESQ. 7 Counsel for Respondent 8 9 DOAR CONSULTING 10 BY: STEPHANIE McDONNELL 11 MIMI LE 12 13 14 15 16 17 18 19 20 21 22 6 1 CAFTA-DR NON-DISPUTING PARTIES 2 3 ON BEHALF OF THE REPUBLIC OF COSTA RICA 4 MS. MÓNICA C. FERNÁNDEZ-FONSECA 5 Ministerio de Comercio Exterio (COMEX) 6 7 ON BEHALF OF THE REPUBLIC OF 8 THE DOMINICAN REPUBLIC 9 MS. YAHAIRA SOSA MACHADO 10 Ministerio de Industria y Comercio 11 12 ON BEHALF OF THE UNITED STATES OF AMERICA 13 Jeff Kovar, State Department, L/CID 14 Lisa Grosh, State Department, L/CID 15 Mark Feldman, State Department, L/CID 16 Patrick Pearsall, State Department, L/CID 17 Karen Kizer, State Department, L/EB 18 Kimberley Claman, USTR 19 Daniel Bahar, USTR 20 Gary Sampliner, Department of Treasury 21 22 7 1 ALSO PRESENT: 2 3 Court Reporters: 4 5 Mr. Dante Rinaldi, 6 Spanish Language Reporter 7 8 Mr. William I. Prewett, 9 English Language Reporter 10 11 Interpreters: 12 13 Silvia Colla, Spanish-English 14 Charles Roberts, Spanish-English 15 Daniel Giglio, Spanish-English 16 17 18 19 20 21 22 8 1 P R O C E E D I N G S 2 MR. Van den BERG: Good morning, 3 Ladies and Gentlemen. I open here the hearing 4 on preliminary objections in the case of 5 Commerce Group Corporation and San Sebastian 6 Gold Mines, claimants, versus the Republic of 7 El Salvador, respondents, in ICSID case number 8 ARB/09/17. 9 I may first introduce the tribunal. 10 On my right-hand side is Dr. Horacio A. Grigera 11 Naon. And on my left is Christopher Thomas; and 12 the secretary of tribunal, Mr. Montanes-Rumayor. 13 As good custom, the parties also 14 introduce their team. And I would like to 15 invite the claimants group just to introduce 16 their team. 17 MR. MACHULAK: Thank you very much, 18 sir. My name is John Machulak. I am 19 representing Commerce Group and San Sebastian 20 Gold Mines, Inc. 21 To my immediate right is Professor 22 Andrew Newcombe, of the Victoria University. 9 1 Next to him on the right is Eugene Bykhovsky of 2 our law firm, Machulak Robertson & Sodos. And 3 to the far right is my son, James Machulak, who 4 is our unofficial translator. 5 MR. Van den BERG: Thank you. 6 MR. MACHULAK: Thank you. 7 MR. Van den BERG: On the 8 respondents side, Mr. Smith, please proceed. 9 MR. SMITH: Yes, I am Derek Smith 10 from the law firm of Dewey & LeBoeuf 11 representing the Republic of El Salvador. From 12 the Government of El Salvador, we have 13 Dr. Benjamin Pleites, secretary general of the 14 Office of the Attorney General of El Salvador. 15 From our law firm, Dewey & LeBoeuf, we have Luis 16 Parada, immediately to my left, and Tomas Solis 17 and Erin Argueta. 18 MR. Van den BERG: Thank you. 19 According to the notes of the first session and 20 under section 2.2 and under B of the count, the 21 point of -- the main point of contact for the 22 respondents is Mr. Luis Parada. I understand, 10 1 Mr. Smith, that you are the hearing 2 spokesperson. 3 MR. SMITH: I am the spokesperson 4 at the hearing. 5 MR. Van den BERG: The main 6 spokesperson would be more correct. 7 Mr. Machulak, you are also the main 8 spokesperson for the claimants. 9 MR. MACHULAK: I will be giving 10 some opening remarks, and then Professor 11 Newcombe will be carrying the bulk of the legal 12 argument. 13 MR. Van den BERG: Before we get 14 there, we have some more preliminary matters. 15 One is that we have an agenda, and the tribunal 16 is grateful to the parties for having agreed, to 17 a large extent, to the agenda for this evening 18 and today, but we had a small disagreement about 19 the lengths of time. And the tribunal has 20 decided in favor of the longer periods, so that 21 the parties have a full opportunity to present 22 their case; and we did not want to cut off 11 1 unduly parties presenting their case today. 2 The agenda, therefore, is as you 3 have it being distributed here. We have -- let 4 me tell you, the first from 9:45 to 11:15, 5 respondent's argument, or so-called initial 6 presentation. Then we have a break from 11:15 7 to 11:30. We have then the -- after claimants' 8 argument or initial presentation, from 11:30 to 9 1 o'clock. And at 1 o'clock to 2:30 we have a 10 lunch break. 11 Then there was time reserved from 12 2:30 to 3 o'clock for the non-disputing parties 13 for presentations. However, we have been 14 informed that those parties, non-disputing 15 parties that have made submissions pursuant to 16 Article 10.22, will not be present here to make 17 the oral submissions. They have made 18 submissions -- I'm talking about Costa Rica and 19 Nicaragua. 20 So the time reserved for the 21 non-disputing parties will not be used because 22 the understanding is that we have also received 12 1 a letter from the United States that they do not 2 wish to make comments at this stage; and, 3 perhaps, the United States can confirm that they 4 have observer status only. 5 Mr. Kovar, I see you are nodding. 6 Nodding is not enough for the transcript. Can I 7 say "yes" on your behalf? 8 MR. KOVAR: Yes. 9 MR. Van den BERG: Thank you. The 10 United States being observers only, that means 11 that we can speed up the agenda in the sense 12 that, at 2:30, we can start with the 13 respondents' response, rebuttal; and that will 14 be then to 3:30. Then we have a coffee break or 15 tea break for 15 minutes. And then we have 16 claimants' rebuttal at 3:45 until 4:45. Yes. 17 That's correct. 18 And then after 4:45 until 5:15, we 19 have the final matters and the conclusion of the 20 hearing. 21 Now, that being the agenda, as 22 usual in an arbitration, just prior to the 13 1 hearing, you get an increase of correspondence 2 from the parties, and this case was no 3 exception. 4 The tribunal, first of all, is of 5 course, liable itself for the increase of 6 correspondence because we asked you to do it. 7 We asked you a question last week about the 8 procedure and the discontinuance of Supreme 9 Court proceedings in El Salvador. And that was 10 by E-Mail of 9 November 2010. 11 We received, as requested, on 12 Friday, last Friday, a response from the 13 respondent; and added to that were a day later 14 the two documents referred to in footnote two of 15 the submission, the response. And there was a 16 small question whether they're admitted into the 17 record. So those documents are admitted into 18 the record and -- because they are referred to 19 in the footnote and should actually be a full 20 part of that submission. 21 We have also received a letter from 22 the claimants which I may quote on 12 November 14 1 which says: 2 "On November 9, 2010, 3 Mr. Montanés-Rumayor related to us that the 4 tribunal invited the parties to answer questions 5 regarding El Salvador Supreme Court procedure. 6 At this time I am writing to advise that, 7 although we have been addressing these 8 questions, we are at this time unable to furnish 9 the tribunal with our answer. I am sending this 10 letter so that the tribunal is aware of our 11 efforts and the status of this matter." 12 Mr. Machulak, would you like to 13 expound on this? 14 MR. MACHULAK: Yes. I apologize, 15 the lead contact, though I am not Spanish 16 speaking myself, but the -- our counsel in 17 El Salvador -- I was in a jury trial until 18 Thursday which preoccupied my time. I know the 19 people helping me were working on this Tuesday, 20 Wednesday, Thursday, until I completed my other 21 trial. 22 We have been in touch with counsel 15 1 for El Salvador to try to ferret out an answer 2 to these questions. I don't think that we 3 disagree that the rule quoted by the respondent 4 is the appropriate rule for dismissal of where a 5 proceeding can be dismissed. 6 Where we were having difficulty is 7 getting the nuance to the application of the 8 rule. When -- our experience in the courts in 9 El Salvador is nothing happens sometimes as 10 exactly -- the experience may be different than 11 the rules -- where our counsel had been telling 12 us that, "Yes, you can make an application to 13 the Court; you don't know whether that's going 14 to happen in a month, in a year or what 15 happens." 16 I can tell you today we still do 17 not have -- as recently as yesterday I was in 18 communication with our liaison -- I don't have a 19 definitive answer for you today. 20 I think that the rule that they 21 cite is the appropriate rule. I don't have 22 enough experience myself, having difficulty in 16 1 communicating how that translates as the 2 practical experience in El Salvador. 3 MR. Van den BERG: Let's put it 4 this way. Do the claimants disagree with what 5 the respondents have submitted in writing on the 6 12 of November? 7 MR. MACHULAK: No. 8 MR. Van den BERG: So that's -- 9 MR. MACHULAK: The rule is the -- 10 they have identified the rule. And I -- I don't 11 question that the Attorney General of 12 El Salvador would mis-cite an opinion or 13 something. I just don't think that would 14 happen. 15 MR. Van den BERG: So there may be 16 a difference of opinion about the application of 17 the rule; but perhaps we will hear some more 18 about this today. 19 Mr. Smith, you would like to 20 comment on this? 21 MR. SMITH: Simply that the 22 research that El Salvador has done and obviously 17 1 the accompanying opinion of the Attorney General 2 of El Salvador is very clear that a claimant may 3 request termination of the proceedings during 4 the deliberation phase in the cases we cited in 5 our submission, and that the time period for a 6 decision between the request of termination and 7 the actual termination has been about three 8 months. 9 MR. Van den BERG: Thank you. Then 10 we have no further questions or observations 11 regarding the procedure. The only thing we 12 would like to mention to you is, since you 13 have -- both sides have extensively written on 14 the issue before us, the tribunal would like to 15 ask you questions during the presentation if you 16 -- unless you have an objection to that. 17 MR. MACHULAK: No. 18 MR. Van den BERG: Because -- of 19 course, we would let you finish the first 20 sentence. 21 MR. SMITH: No objection from 22 El Salvador. I would like to make a request. 18 1 MR. Van den BERG: Sure. 2 MR. SMITH: Which is that, if the 3 time limits are slightly exceeded in the 4 morning, that the parties be permitted to -- to 5 exceed slightly the time limits and subtract 6 that time from their time limits in the 7 afternoon. 8 MR. Van den BERG: We will apply a 9 reasonable flexibility. The same applies to 10 your side, Mr. Machulak. 11 Then are there any questions of a 12 procedural or an administrative nature we would 13 like to address now or raise now? 14 Mr. Machulak, your side. 15 MR. MACHULAK: No. 16 MR. SMITH: Just one point of 17 clarification. Also, since the submission of 18 the recent written documents, claimants filed 19 Claimants' Exhibits 14 and 15, and just to 20 confirm that those have been entered officially 21 into the record. 22 MR. Van den BERG: Yes. They have 19 1 been entered. 2 Before you start, Mr. Machulak, I 3 don't see the secretary of the tribunal again. 4 (There was a discussion off the 5 record.) 6 MR. Van den BERG: Off the record. 7 There is -- not on the record now. 8 (There was a discussion off the 9 record.) 10 (A break is taken.) 11 MR. Van den BERG: What the 12 tribunal suggests is the following: That we 13 proceed because, otherwise, we have to wait 14 probably for eternity before we get proper 15 connection, but that we have the recorders on 16 the video coverage, VCR or whatever or video, 17 and, if it's available online later on the ICSID 18 web site -- if that's an acceptable solution. 19 MR. SMITH: El Salvador accepts 20 that solution. 21 MR. MACHULAK: That would be fine 22 for the claimants. 20 1 MR. Van den BERG: Then hopefully 2 we have also satisfied the transparency 3 requirements. That's the only thing the 4 tribunal is worrying about. 5 MR. SMITH: El Salvador certainly 6 would believe that that satisfies the 7 transparency requirements in this circumstance. 8 MR. Van den BERG: What we will do 9 then is we will post this simply on the web site 10 of ICSID as a record of this hearing. 11 MR. SMITH: Perhaps it would be 12 helpful if ICSID would post a message on their 13 web site now indicating that there are technical 14 difficulties and that's why it's not streaming. 15 MR. Van den BERG: My understanding 16 is that the streaming will be in the next 10 17 point minutes, but that's not the same -- the 18 experience as the late aircraft at the 19 airport -- "only ten minutes more, sir," and two 20 hours later, you still there. So that is the 21 point. 22 As soon as the secretary is back, 21 1 we will ask that it be posted on the web site. 2 All right, Mr. Machulak, I 3 apologize for this technical delay. Please 4 proceed with your opening. 5 MR. MACHULAK: I think the 6 respondents -- sorry -- you will give me a heart 7 attack. 8 MR. Van den BERG: Okay. 9 Mr. Smith, please start. Please proceed. 10 RESPONDENT'S ARGUMENT BY MR. SMITH: 11 MR. SMITH: Thank you. 12 Mr. President, we have one further 13 technical delay. We need to get the visual 14 working. I'm not sure what the problem is. 15 Okay. Thank you. 16 Thank you, Mr. President and 17 members of the tribunal. Before beginning I 18 would just like to introduce one more member of 19 the delegation of El Salvador who has arrived 20 since the introduction. He is Enilson Solano, 21 who is minister/counselor of the Embassy of 22 El Salvador in Washington, D.C. 22 1 Okay. Mr. President, members of 2 the tribunal, members of the team of the 3 claimants, members of the team of El Salvador, 4 as you know, we are here today in the matter of 5 Commerce Group Corp. and San Sebastian Gold 6 Mines, Inc., versus the Republic of El Salvador. 7 Before beginning, I would just like 8 to welcome the presidents of -- the 9 representatives of the Government of the 10 United States of America. The presence of 11 representatives of the United States at this 12 hearing is particularly relevant for two 13 reasons. One is that the United States is the 14 state party to CAFTA of which the claimants are 15 nationals. 16 The second reason is that the 17 United States is the state party to CAFTA that 18 is most knowledgeable about the meaning of the 19 waiver requirement in CAFTA Article 10.18.2. 20 The waiver requirement in CAFTA 21 10.18 has the exact same text as Article 26 of 22 the 2004 United States model bilateral 23 1 investment treaty, and it tracks very closely 2 the text of the corresponding provision in the 3 North American Free Trade Agreement, to which 4 the United States is also a party. 5 So when the other CAFTA parties, 6 namely, the Dominican Republic, Guatemala, 7 Honduras, Nicaragua, Costa Rica, and El Salvador 8 signed CAFTA with regard to Chapter 10, they 9 are, in essence, agreeing to a proposal by the 10 United States. 11 Again, before setting forth the 12 details of our argument today, I would like to 13 outline clearly the principal issues to be 14 decided by the tribunal in this preliminary 15 objection. 16 In broad terms, the tribunal is 17 being asked to interpret Article 10.18 of the 18 Dominican Republic, Central America, 19 United States Free Trade Agreement. 20 The relevant portions of Article 21 10.18 are as follows: No claim may be 22 submitted -- submitted to arbitration unless the 24 1 notice of arbitration is accompanied by the 2 claimant's written waiver of any right to 3 initiate or continue before any administrative 4 tribunal or court under the law of any party or 5 other dispute settlement procedure, any 6 proceeding with respect to any measure alleged 7 to constitute a breach referred to in Article 8 10.16. 9 It is a very clear, very broad 10 waiver of any right to initiate any proceedings 11 or continue any proceedings other than CAFTA 12 proceedings. 13 Because the written pleadings have 14 served to narrow considerably the differences in 15 the legal positions of the parties, the primary 16 issues to be decided are well defined. The 17 parties are in agreement on the relevant facts 18 and most of the key points of interpretation. 19 The parties agree that claimants 20 were required to comply with the waiver 21 requirement of CAFTA Article 10.18.2. The 22 parties agree that CAFTA Article 10.18.2 25 1 required the claimants to waive their right to 2 initiate or continue any proceeding before any 3 court, tribunal, or other administrative body 4 related to the same measures that claimant 5 alleges are breaches of CAFTA. 6 The parties agree that the waiver 7 requirement is a condition to consent and is, 8 therefore, a jurisdictional requirement. And by 9 implication, they must agree that failure to 10 comply with the waiver requirement results in a 11 lack of jurisdiction. 12 The parties also agree that the 13 waiver requirement applies to the legal 14 proceedings initiated by claimants before the 15 Supreme Court of El Salvador with respect to the 16 revocation of the environmental permits of 17 Commerce Group Corp. and San Sebastian Gold 18 Mines, Inc., because the revocations of the 19 environmental permits are the same measures 20 complained of in claimants' notice of 21 arbitration. 22 The parties also agree that the 26 1 proceedings before the Supreme Court of 2 El Salvador were continued at the time claimants 3 submitted its waiver and filed the notice of 4 arbitration and for the full time required for 5 those proceedings to be completed. 6 The parties agree that El Salvador 7 sent letters at the outset of this arbitration 8 to ICSID, which were transmitted to claimants, 9 pointing out the jurisdictional issues raised by 10 claimants' simultaneous filing of the waiver and 11 material noncompliance with its terms. 12 And, finally, the parties agree 13 that claimants took no steps to discontinue 14 local proceedings. 15 Thus, the questions for the 16 tribunal are clear. There are only two 17 differences between the parties at this point. 18 The questions are: 19 Was it a violation of the waiver 20 requirement in CAFTA 10.18.2 for claimants to 21 initiate CAFTA arbitration without terminating 22 the domestic judicial proceedings in El 27 1 Salvador? And the second issue is, what are the 2 consequences of such violation? 3 El Salvador will show that CAFTA 4 Article 10.18.2 required the claimants 5 materially comply with their waivers by 6 terminating the local court proceedings and that 7 the failure of claimants in this case to comply 8 with the waiver results in a lack of 9 jurisdiction because the waiver is specifically 10 made a condition of consent to arbitration. 11 Without valid waivers, there is no consent, and 12 without consent there is no jurisdiction. 13 Therefore, this arbitration must be dismissed in 14 its entirety for lack of jurisdiction. 15 El Salvador's position is 16 affirmatively supported by six of the seven 17 states that drafted and signed CAFTA. The 18 seventh state, Honduras, simply has not yet made 19 a public statement on this issue. 20 The unanimous decision of the one 21 arbitration tribunal under CAFTA that has 22 addressed the question reached -- that has 28 1 addressed this question, reached the same 2 conclusion as El Salvador and the other CAFTA 3 parties regarding the requirement to materially 4 comply with the waiver, regarding the 5 requirement to terminate local proceedings prior 6 to filing a CAFTA arbitration. 7 El Salvador's position is also 8 supported by the three states who are parties to 9 NAFTA which has a waiver requirement that is 10 almost identical to the requirement in CAFTA, as 11 well as by the jurisprudence of NAFTA tribunals 12 addressing the issues. 13 Of course, here I'm double-counting 14 the United States because the United States is a 15 party to both treaties. 16 While the United States did not 17 make a submission in this proceeding, its 18 position is very clear from its pleadings in 19 NAFTA cases. And there is no indication to 20 suggest that its position has changed or is 21 different with respect to CAFTA. 22 El Salvador presumes that the 29 1 United States has chosen to remain silent in 2 part because they trust that this tribunal will 3 not depart from the expressed views of the state 4 parties of CAFTA and NAFTA and the established 5 jurisprudence. 6 Of course, El Salvador cannot speak 7 for the United States, but its representatives 8 are present and can inform the tribunal if the 9 United States has changed its interpretation of 10 the waiver requirement of NAFTA, or if that 11 interpretation is different with regard to 12 CAFTA. 13 In contrast to El Salvador's 14 position, claimants' position is supported only 15 by the dissenting opinion of a single 16 party-appointed arbitrator in a NAFTA 17 arbitration in which the majority affirmed the 18 requirement of effective compliance with the 19 waiver, the requirement to terminate local 20 proceedings. 21 Today, El Salvador will demonstrate 22 that the reason the state parties to CAFTA and 30 1 to NAFTA and the arbitral authority support its 2 position is because this is the correct 3 interpretation of CAFTA. 4 Before we begin to discuss the main 5 issues in El Salvador's preliminary objection, 6 we would like to take just a moment to consider 7 how the state of El Salvador and two companies 8 from the United States of America have come to 9 be before this tribunal today. As the members 10 of the tribunal are aware, under international 11 law there is no mandatory international dispute 12 resolution jurisdiction available to private 13 parties against states. 14 In fact, when claimants started 15 working in El Salvador, they had no possible 16 recourse to international arbitration. It was 17 the entry into force of CAFTA in March of 2006 18 that provided claimants with an avenue to access 19 international arbitration. Claimants have been 20 able to initiate this arbitration because 21 El Salvador and other states have concluded 22 that -- the ICSID convention and CAFTA as 31 1 exceptions to the general rule that private 2 parties cannot bring international legal 3 proceedings against a state. 4 When the states drafted and signed 5 CAFTA, they expressly placed some conditions on 6 the consent, and these concessions must be met 7 before a foreign investor can access 8 international arbitration. 9 Among those conditions is the one 10 established in Article 10.18.2, that condition 11 states that no claim may be submitted to 12 arbitration under CAFTA unless the claimant 13 waives the right to initiate or continue any 14 proceeding before any court, tribunal, or 15 administrative body related to the same measures 16 that the claimant alleges are a breach of CAFTA. 17 We are at this hearing on 18 El Salvador's preliminary objection because 19 claimants failed to meet this condition. 20 Claimants filed their notice of 21 arbitration in July of 2009, without complying 22 with the CAFTA waiver requirement. Claimants 32 1 did file two pieces of paper saying that they 2 waived their right to initiate or continue any 3 proceeding relating to the same measures as they 4 allege as breaches of CAFTA. But claimants 5 violated those waivers at the very moment they 6 initiated the CAFTA arbitration by not 7 terminating, that is to say, by choosing to 8 continue two domestic judicial proceedings 9 before the Supreme Court of El Salvador related 10 to the same measures claimants allege also 11 violate CAFTA. 12 So claimants violated the waivers 13 at the time they filed their waivers and at the 14 time they filed their notice of arbitration. 15 Their waivers were ineffective and therefore did 16 not meet the requirements of CAFTA Article 17 10.18.2. 18 This violation of the waivers was 19 manifest on the face of the notice of 20 arbitration. Paragraph 22 of the notice of 21 arbitration now on the screen, stated 22 specifically that there were pending judicial 33 1 proceedings in El Salvador related to the very 2 same measures that claimants were alleging were 3 a violation of CAFTA. So there is absolutely no 4 doubt that the proceedings were continued on the 5 date of filing of the notice of arbitration, and 6 this is recognized in the notice itself. 7 Now, let us turn to the specific 8 arguments that El Salvador has made in its 9 written pleadings on this preliminary objection. 10 As I've indicated, the tribunal is 11 asked to decide two narrow and well-defined 12 questions. Was it a violation of the waiver 13 requirement in CAFTA 10.18.2 for claimants to 14 initiate CAFTA arbitration without terminating 15 the domestic judicial proceedings? 16 And second: There is a collateral 17 disagreement between the parties regarding the 18 consequences of violating the waiver on this -- 19 in this arbitration proceeding. 20 Does the lack of jurisdiction 21 created by the failure to meet the conditions 22 for consent result in the dismissal of the 34 1 entire arbitration? Or does it merely result in 2 the dismissal of claims based on the measures 3 challenged in the local court proceedings? 4 As stated, El Salvador maintains 5 that CAFTA makes the waiver requirement a 6 condition to consent, and that the waiver 7 requirement includes the requirement for a CAFTA 8 claimant to take action to terminate any 9 proceeding with respect to the same measures 10 alleged to be a breach of CAFTA. 11 As a result, claimants' violation 12 of those waivers is at the same time the waivers 13 were filed. There is no consent to this 14 arbitration. And because there is no consent, 15 there is no jurisdiction. Because there is no 16 jurisdiction, this arbitration must be 17 terminated in its entirety, not just a dismissal 18 of selected claims. 19 Initially, there was a disagreement 20 between the parties as to whether or not the 21 Article 10.18.2 was, in fact, a condition of 22 consent and was, in fact, a jurisdictional 35 1 matter. Claimants initially rested their entire 2 case essentially on their argument that, in 3 spite of the fact that CAFTA Article 10.18 is 4 titled, "Conditions and Limitations on Consent 5 of Each Party," the waiver requirement was not a 6 condition to consent. And thus, it was not a 7 jurisdictional issue. 8 The other arguments in their 9 response to El Salvador's preliminary objection 10 were based on this unsustainable premise. 11 Claimants, however, have changed 12 their position. Claimants have admitted in the 13 rejoinder that they agree with the respondents; 14 they now agree with the respondents that the 15 requirements set out in CAFTA Article 10.18 16 should be treated as jurisdictional. Although 17 the claimants argued in their response that the 18 text of CAFTA Article 10.18 establishes 19 procedural requirements for the submission of 20 claims, the claimants now accept that the 21 submission of a waiver under CAFTA Article 10.18 22 is a condition and limitation on consent and 36 1 thus, a jurisdictional requirement. That is a 2 quote from the claimants' rejoinder. 3 They therefore have reversed their 4 position on the issue that was the foundation of 5 their arguments. And they agree that compliance 6 with CAFTA Article 10.18.2 is a matter of 7 jurisdiction. However, they have not been 8 willing to accept the consequences of this 9 change of position as regards the outcome of 10 this proceeding. 11 But El Salvador believes the 12 consequences are self-evident. If the waiver 13 requirement is a jurisdictional requirement, 14 claimants' failure to comply with the waiver 15 must result in a lack of jurisdiction and in the 16 dismissal of this arbitration because, if there 17 is no jurisdiction, there can be no arbitration. 18 The contradiction in claimants' 19 current position is apparent. They admit that 20 the waivers apply to the domestic proceedings. 21 They admit that the waivers are a jurisdictional 22 requirement, and they admit, as they must, that 37 1 the domestic proceedings continued at the time 2 of and after the initiation of the CAFTA 3 arbitration. 4 Nonetheless, in their rejoinder, 5 claimants continue to pursue the other arguments 6 that were based on their flawed initial position 7 that the waiver requirement was not 8 jurisdictional. 9 Although claimants accept that the 10 waiver requirement is a condition to consent, 11 and thus a failure to comply affects the 12 tribunal's jurisdiction, they insist on arguing 13 that non-compliance with the waiver only affects 14 admissibility. This position is 15 self-contradictory. 16 The power to decide on the 17 admissibility of claims is limited to tribunals 18 which otherwise have jurisdiction. But it is 19 not possible in this case where a condition to 20 consent is missing and thus there is no consent 21 to arbitration. Because the waiver requirement, 22 as claimants admit, is jurisdictional, 38 1 non-compliance with the waiver requirements 2 simply means that there is no jurisdiction to 3 hear the case and the case must be dismissed. 4 There is no room for consideration of issues of 5 admissibility because there is no room for this 6 arbitration to continue. 7 MR. Van den BERG: Mr. Smith. 8 MR. SMITH: Yes. 9 MR. Van den BERG: That raises the 10 question, in the submission of El Salvador, when 11 the waiver should have been made effective. If 12 I understand your position correctly, the waiver 13 should have been made effective, at the latest, 14 on the moment you filed the notice of 15 arbitration. 16 MR. SMITH: The waiver should have 17 been made effective at the latest at the moment 18 that the claimants filed the notice of 19 arbitration which is the moment when they made 20 the waivers. Because if it is not made 21 effective at that moment, they are immediately 22 in violation of the waivers and the waivers 39 1 become ineffective. 2 MR. Van den BERG: To be more 3 precise, if you have a pending proceeding, it 4 would mean, in your submission, that you have 5 discontinued the proceedings. 6 MR. SMITH: That's correct. 7 MR. Van den BERG: To discontinue 8 proceedings. 9 MR. SMITH: Yes, it is a logical 10 consequence and a necessary practical 11 consequence of the requirement to comply with 12 the waiver when it is filed, that a proceeding 13 would have to be discontinued before you file. 14 You can't simultaneously discontinue. 15 It is the fact that the proceeding 16 exists on the date of filing that violates the 17 waiver. But to avoid that violation, you must 18 discontinue the proceeding prior to filing the 19 proceeding, if you understand. 20 MR. Van den BERG: Yes. Because 21 another way of looking at it might be -- and I 22 am not suggesting the case is this -- you file 40 1 the waiver exactly as it says of 10.18.2 under 2 B, and then say, "I waive the right to initiate 3 or to continue." And then the next thing is 4 what is then -- now, I have to implement that I 5 filed that waiver. This is the text. So I do 6 X. If after X, then the next step is you waive. 7 As I understand the claimants' 8 position to be in this position is, look, the 9 filing of the waiver itself, that's a 10 jurisdictional requirement for consent. But 11 then the next step to be taken to implement the 12 waiver, that is something to be policed by the 13 tribunal, if I paraphrase properly their 14 position. If I am wrong, I will be corrected 15 later on. 16 And that is what they call then an 17 admissibility matter. I don't know whether it's 18 correct as a matter of law, but that's the way I 19 understand the arguments to be. 20 MR. SMITH: I understand that that 21 is their argument. The position of El Salvador 22 is that the waiver must be made effective in the 41 1 moment that it is filed because that is the 2 moment in which jurisdiction is determined. And 3 an ineffective waiver is not a validly filed 4 waiver. It is not a valid waiver at the moment 5 that it is filed, and it is not a question of 6 taking post-filing acts to then comply with the 7 waiver. 8 It is our position that the 9 claimant must be in compliance with its waiver 10 in good faith and have the intention of 11 complying with its waiver at the time it is 12 filed in order for the waiver to be valid upon 13 filing. 14 MR. Van den BERG: We may come back 15 on that one later. Let me ask you one further 16 question, if I may. 17 MR. SMITH: Yes. 18 MR. Van den BERG: We just have 19 seen that, according to your submission, the 20 submission of El Salvador, to discontinue 21 Supreme Court proceedings it takes three months 22 between filing the request for discontinuance 42 1 and telling them -- the statement of the Supreme 2 Court telling them that indeed your case has 3 been discontinued. 4 Would then your submission be the 5 case that, if they had to file for arbitration 6 in this case, they have to wait for three months 7 and get the statement of the Supreme Court that 8 the case indeed had been discontinued, or would 9 it have been sufficient that they had filed the 10 application with the Supreme Court? 11 MR. SMITH: Our position is that it 12 would have been sufficient to file the 13 application with the Supreme Court because, 14 under Salvadoran law, discontinuance is 15 automatic when the claimant in an administrative 16 case, such as this, requests discontinuance. 17 So they would have done everything 18 they needed to do to discontinue the case at 19 that time. And they would have acted as much as 20 they could to be in compliance with the waiver. 21 MR. Van den BERG: Because the act 22 of filing discontinuance itself means that 43 1 legally the case is discontinued, or is it that 2 the statement by the Supreme Court that the case 3 had been discontinued applies retroactively to 4 the date of filing? 5 MR. SMITH: No, it means that 6 the -- that the discontinuance will definitely 7 occur. It's not retroactive. 8 Again, my understanding, I would 9 have to -- I don't know off the top of my head 10 exactly what the date of discontinuance is. I 11 don't think it's retroactive. 12 MR. Van den BERG: My question is 13 here is -- legally, the effect. 14 MR. SMITH: The effect of the 15 discontinuance would be at the date of the order 16 of the Supreme Court of El Salvador to 17 discontinue the case. 18 MR. Van den BERG: That might cause 19 an additional window of three months to file the 20 arbitration although you just said the filing 21 itself is sufficient. But you have not yet 22 legally discontinued your case because the 44 1 Supreme Court has not issued its decision on 2 this discontinuance, but you just said there is 3 no retroactivity. 4 MR. SMITH: Right. But the 5 claimant would have taken all steps within the 6 claimant's power to have the case discontinued 7 and, therefore, would be acting consistently 8 with their waivers. 9 MR. THOMAS: Just to follow up 10 on -- 11 MR. SMITH: Additionally, just to 12 further respond, the respondents, of course -- I 13 mean, the claimants must file a notice of intent 14 also at least 90 days before they file their 15 notice of arbitration. And that creates an 16 additional window in which -- for local 17 procedures to operate for the discontinuance of 18 the case as a matter of law. 19 MR. THOMAS: So I just want to make 20 sure I understood your position. Let me give 21 you the hypothetical. 22 On the date of the filing of the 45 1 notice of arbitration, the claimant says 2 enclosed is a copy of a request for the 3 dismissal or discontinuance of a local 4 proceeding, and proffers that with the waiver 5 and with the request for arbitration. Is that 6 -- did I take -- was I correct to understand 7 that your position was that at that point the 8 claimant had complied with the requirements many 9 of the waiver, notwithstanding the fact that the 10 local court would have to subsequently accede to 11 the request for the discontinuance? 12 MR. SMITH: That's correct. 13 MR. NAÓN: I have a question that 14 is not exactly on all fours with the issues that 15 have been raised by my colleagues, but it has 16 some connection with this part of your 17 presentation. And it is, which are the legal 18 effects under Salvadorean law of the withdrawal 19 of the claims before the Supreme Court? Is it 20 just a withdrawal of the proceedings, or does it 21 also kill, quote-unquote, the cause of action 22 and the underlying the claim on the merits? 46 1 Let me tell you, quite frankly, why 2 I am asking this question. If you go to the 3 statute that has been referred to as 4 the [speaking Spanish] -- you can read the text 5 maybe. I am going to refer -- 6 MR. SMITH: Actually -- okay. 7 MR. NAÓN: Article 53. 8 MR. SMITH: Perhaps I don't have 9 the full text here. 10 MR. NAÓN: I may read it to you. I 11 will make an attempt at an unofficial 12 translation into English if you want. 13 MR. SMITH: I understand the 14 Spanish quite well. 15 MR. NAÓN: Article 53, indicates 16 that there is a cross reference to the Code of 17 Civil Procedure of El Salvador. 18 Now, I was reading Article 467 of 19 the code. I don't know if you have it there. I 20 can provide an unofficial translation if I am 21 allowed, which indicates that the party 22 withdrawing the complaint cannot reintroduce it 47 1 against the same person or against those who 2 legally represented that person. 3 When I read this on its face, the 4 idea that I get is that it is not just the 5 practical consequence of when you withdraw a 6 claim. It's not waiving the proceedings. You 7 are really waiving the cause of action. You are 8 really waiving the underlying claim on the 9 merits. But, of course, this is my reading. 10 And I would like to know what the position of 11 El Salvador is in this matter. 12 MR. SMITH: I would not at this 13 point want to respond to that as a matter of 14 interpretation of El Salvadoran law, which I 15 have not had a chance to review or consult with 16 local counsel. We would be happy to provide an 17 answer to that after the hearing. 18 MR. NAÓN: Thank you very much. 19 MR. Van den BERG: The question is, 20 when you discontinue, did you discontinue with 21 prejudice or without prejudice, if I may use 22 your lingo. 48 1 MR. SMITH: Yes, thank you. 2 MR. Van den BERG: Please proceed. 3 MR. SMITH: As I said, claimants 4 have argued that they have no obligation to -- 5 they had no obligation to terminate the local 6 proceedings. 7 Claimants have presented no legal 8 authority for the position that the issue of the 9 effect of the waiver is one of admissibility, 10 rather than one of jurisdiction. 11 To the contrary, there is -- the 12 existing legal authority supports El Salvador's 13 position and -- rather than the claimants, 14 particularly, the Waste Management decision 15 which states the following: 16 "Any waiver implies a formal and 17 material act on the part of a person tendering 18 the same. To this end, this tribunal will 19 therefore have to ascertain whether Waste 20 Management did indeed submit the waiver in 21 accordance with the formalities envisioned under 22 CAFTA and whether it has respected the terms of 49 1 the same through the material act of either 2 dropping or desisting from initiating parallel 3 proceedings before other tribunals." 4 And I further quote: 5 "The act of the waiver involves a 6 declaration of intent by the issuing party which 7 logically entails a certain conduct in line with 8 the statement issued. Indeed, such a 9 declaration of intent must assume concrete form 10 in the intention or resolve whereby something is 11 said or done. Hence, in order for said intent 12 to assume legal significance, it does not 13 suffice for it to exist internally." 14 It is clear that the Waste 15 Management tribunal has come to the conclusion 16 that pending proceedings must be terminated in 17 order for the waiver to be complied with. 18 In RDC versus Guatemala, the 19 tribunal was also clear. It said that: 20 "It is the fact that the two 21 domestic arbitration proceedings exist and 22 overlap with this arbitration as determined by 50 1 the tribunal that triggers the defect in the 2 waiver." 3 Again, as we have been indicating, 4 the failure to terminate the proceedings 5 triggers the defect in the waiver. The 6 jurisprudence could not be clearer. 7 The positions of the state parties 8 to CAFTA are equally clear. In addition to 9 El Salvador, two CAFTA parties, Costa Rica and 10 Nicaragua, have submitted non-disputing 11 positions expressing their interpretation of the 12 waiver requirement as a condition to 13 jurisdiction requiring not only a formal 14 submission of the waiver on paper, but actual 15 compliance in the form of termination of any 16 existing proceedings before initiating CAFTA 17 arbitration. 18 Costa Rica said that the submission 19 must be accompanied by the effective waiver, 20 withdrawal, or discontinuance as appropriate, of 21 any and all proceedings, either court or 22 administrative proceedings, pending when the 51 1 arbitration is commenced and whose procedural 2 drive lies with the claimant. 3 Again, Costa Rica takes the same 4 position as El Salvador. 5 Similarly, Nicaragua, in its 6 statement, indicated that, if an investor 7 submits the waiver referred to in Article 8 10.18.2b1 and 2, and then does not comply with 9 such waiver in the field of law, this would 10 constitute deception and, according to the 11 provisions of CAFTA, would constitute a breach 12 of the requirements. 13 The Dominican Republic has taken 14 the same position in its pleadings in CAFTA 15 arbitration cases. Claimant's post-waiver 16 conduct -- now, the Dominican Republic was faced 17 with a slightly different situation. They were 18 faced with both pending local proceedings and 19 local proceedings that were filed after the 20 initiation of the arbitration. 21 The Dominican Republic stated 22 claimant's post-waiver conduct runs afoul of the 52 1 material requirements of Article 10.18.2 of 2 CAFTA-DR. In particular, claimants and their 3 affiliates have failed to take the formal and 4 material act of either dropping or desisting 5 from initiating parallel proceedings before 6 other courts or tribunals. 7 MR. Van den BERG: Mr. Smith, would 8 you please go back to slide 25. 9 MR. SMITH: Sure. 10 MR. Van den BERG: There you quote 11 part of the submission by Costa Rica. 12 MR. SMITH: Yes. 13 MR. Van den BERG: Do you see that? 14 MR. SMITH: Yes. 15 MR. Van den BERG: What you did not 16 highlight is the last sentence of the first 17 paragraph -- "high bright," I should say. And 18 this says: 19 "Otherwise, this provision would be 20 denied the effectiveness or effet utile." 21 I assume you are aware the effet 22 utile that has been the subject of the recent 53 1 decision in the BIT context, Mobile versus 2 Venezuela. 3 MR. SMITH: Right. 4 MR. Van den BERG: I did not see, 5 in your submissions, any submission -- help me 6 if I am wrong -- which relies on this 7 international law principle. Perhaps you could 8 expound on it in your rebuttal this afternoon, 9 unless you disagree with what Costa Rica is 10 writing here. 11 MR. SMITH: I can address this in 12 the rebuttal this afternoon. 13 Similarly, Guatemala, another CAFTA 14 state party, has stated that, for a claimant to 15 waive effectively its claims, it is not enough 16 for the claimant to simply state in writing that 17 it is waiving its claims before the tribunal. 18 It must actually act in accordance with that 19 waiver. 20 And, finally, the United States has 21 expressed its position very clearly in its 22 pleadings in the NAFTA arbitration. The 54 1 United States has said: 2 "Compliance with the NAFTA waiver 3 requirement requires that the claimant not only 4 provide a written waiver, but that it act 5 consistently with that waiver by abstaining from 6 initiating or continuing proceedings with 7 respect to the same measures in another forum." 8 All three NAFTA parties have 9 confirmed in submissions to the NAFTA tribunal 10 that a claimant's failure to terminate parallel 11 claims invalidates any purported waiver under 12 Article 11.21. 13 MR. Van den BERG: It may also be a 14 matter of international law or international 15 customary law, depending where we are. The -- 16 is it your submission that, because the states 17 to CAFTA have made these submissions in the 18 various cases, that this is subsequent state 19 practice which is the meaning of Article 31 of 20 the Vienna Convention of Law Treaties. 21 Perhaps you would like to address 22 that as well in your rebuttal because I 55 1 understand that the claimants are saying at the 2 moment there is nothing that amounts to such 3 subsequent state practice, if I understand their 4 position correctly, that they made objections to 5 your submissions in writing on this respect. 6 MR. SMITH: We will certainly 7 address that. Thank you. 8 So it is clear that the state 9 parties to CAFTA who are the drafters of CAFTA 10 and perhaps -- and certainly the entities that 11 are the authentic interpreters of CAFTA agree 12 with the position of El Salvador with regard to 13 the requirement to make the waiver effective by 14 terminating local proceedings prior to 15 initiating arbitration under CAFTA. 16 In addition, claimants' alternative 17 view of the purpose of 10.18.2 as a waiver that 18 is put into the hands of respondent states that 19 can then be used to go out and defeat other 20 proceedings, wherever they might be, is 21 impracticable, and it's shown to be 22 impracticable in this case. 56 1 They maintain that the only purpose 2 of the waiver is for it to be used by states to 3 seek dismissal of judicial proceedings initiated 4 or continued in violation of the waiver and that 5 the claimants themselves have no obligation to 6 comply with the waiver by seeking dismissal of 7 those proceedings or dismissing those 8 proceedings themselves. 9 Claimants allege that El Salvador 10 could have taken claimants' waiver to the 11 Supreme Court of El Salvador and the Supreme 12 Court would have terminated the pending 13 proceedings. 14 Claimants have made this statement 15 without adequate knowledge of the procedures 16 before the Supreme Court of El Salvador. The 17 Salvadorean legal provision relevant to the 18 termination of a case has now been presented to 19 this tribunal with the letter submitted by 20 El Salvador in response to your question which 21 is Article 40 of the law of administrative 22 litigation jurisdiction. 57 1 This provision lists the only ways 2 to terminate a pending case. None of those 3 provisions include a submission by the 4 respondent of a waiver submitted by the claimant 5 to a different tribunal. 6 Under Article 40 of the Salvadorean 7 Administrative Litigation Procedures law, only 8 claimants are authorized to request termination 9 of a case of this type pending before the 10 Supreme Court of El Salvador. The respondent, 11 which in this case is always the government -- 12 these are proceedings that are by individuals or 13 companies against the government -- the 14 respondent is always the government, and it is 15 not authorized to seek termination. 16 So assuming for a moment that 17 El Salvador had attempted to test the claimants' 18 reinterpretation of the CAFTA waiver, the 19 Supreme Court of El Salvador would not have 20 terminated the proceedings on the government's 21 request. Rather, it would have indicated that 22 the request was not being submitted by a duly 58 1 authorized representative of the claimant which 2 is a requirement of a request for termination, 3 and that the original waiver by the claimants 4 had been submitted to a different tribunal, not 5 to the Supreme Court, and thus it could not be 6 recognized. 7 Only the claimants could have ended 8 the proceedings in El Salvador. The 9 respondents -- the Government of El Salvador 10 does not have the legal authority to do so under 11 Salvadorean law. 12 MR. NAÓN: If I understand you 13 correctly, it is not only that, under 14 Salvadorean administrative law, only a claimant 15 may waive, but the respondent, being the state, 16 it's prevented from agreeing on the waiver? 17 MR. SMITH: No, if the claimant -- 18 if the claimant seeks termination of the 19 proceedings in El Salvador, there is no 20 requirement that the government agree; that will 21 automatically result in termination. It is 22 simply that the government, in these 59 1 proceedings, has no role in the termination of 2 proceedings. The proceedings are either 3 terminated by a final decision or by withdrawal 4 on the part of the claimant. 5 MR. NAÓN: Thank you. 6 MR. Van den BERG: But, 7 theoretically, can the government refuse to 8 oppose the discontinuance? 9 MR. SMITH: No. It is my 10 understanding it is not, but I would make -- 11 confirm that that is the case with local 12 counsel. But my understanding is that the 13 government cannot prevent the discontinuance. 14 That the request for termination of 15 a pending case must be submitted in writing to a 16 duly authorized representative of the claimant 17 directly to the Supreme Court is exemplified in 18 one of the Supreme Court decisions quoted by 19 El Salvador in its response to the tribunal's 20 question last week, a copy of which has now been 21 provided to the tribunal. 22 In that case, the Supreme Court 60 1 rejected the attempt of the respondent -- again, 2 they're the Government of El Salvador -- to 3 invoke the provisions of Article 40(b) of the 4 law of administrative litigation jurisdiction. 5 The Supreme Court declared that only the 6 claimant can invoke the provision on termination 7 of the law and that the request must be made by 8 the claimant in writing to the Supreme Court, 9 just as the case had been initiated by the 10 claimant in writing to the Supreme Court. 11 So even setting aside for one 12 minute the other arguments of why it was the 13 claimants and not El Salvador that had the 14 obligation to take action to make their waiver 15 effective by terminating the existing judicial 16 proceedings, the alternative reinterpretation of 17 CAFTA offered by claimants would not result in 18 the effective application of the waivers in 19 El Salvador. 20 Only the claimants could have 21 requested termination directly to the Supreme 22 Court and claimants chose not to do so. 61 1 Despite all of the above-cited 2 facts and precedents, claimants refused to 3 concede that they have violated the terms of 4 their waiver. Claimants first argue that there 5 were never parallel proceedings in this case as 6 the CAFTA proceedings did not actually begin 7 until the tribunal was constituted on July 1, 8 2010. This argument is inconsistent with the 9 rest of their pleadings and fails even under the 10 authority that they cite. It is also 11 inconsistent with the ICSID convention and with 12 CAFTA. 13 As noted, claimants have 14 consistently argued that July 2, 2009, is the 15 only relevant date for the termination of the 16 tribunal's -- for the determination of the 17 tribunal's jurisdiction. Claimants argue in 18 paragraph 40 of their response, that, in 19 accordance with CAFTA Article 10.16.4(a): "A 20 claim is deemed submitted to arbitration upon 21 receipt by the secretary general." 22 Thus, the date for determining the 62 1 jurisdiction of the tribunal is 2 July 2009. It 2 is well established that events occurring after 3 that date are irrelevant to the tribunal's 4 jurisdiction. 5 They then quote the following from 6 the Vivendi versus Argentina: 7 "It is an accepted principle of 8 international adjudication that jurisdiction 9 will be determined in light of the situation as 10 it existed at the date the proceedings were 11 instituted. Events that take place before that 12 date may affect jurisdiction. Events that take 13 place after do not." 14 The proceedings are instituted on 15 the date of the filing of the notice of 16 arbitration, not on the date of the constitution 17 of the tribunal. 18 Furthermore, the cases cited by the 19 claimants clearly establish that the relevant 20 date for purposes of determining the tribunal's 21 jurisdiction is the date of institution of the 22 proceedings, which is the date of the filing of 63 1 the request of arbitration. 2 This is established in both ICSID 3 and CAFTA. It is an ICSID Convention Article 4 361, and CAFTA Article 10.16.4. 5 Thus, the relevant time to measure 6 compliance or lack of compliance with the 7 jurisdictional requirement of the waiver is the 8 date on which the notice of arbitration was 9 received by the secretary general of ICSID. 10 This was in July of 2009, and at that time 11 claimants were in violation of their waivers. 12 It is thus clear that, on the date 13 of the filing of the notice of arbitration, an 14 effective waiver is required as a condition to 15 the state's consent to CAFTA. Therefore, an 16 ineffective waiver, that is, a waiver the 17 waiving party does not comply with, results in 18 their not being consent. Without consent, there 19 is no jurisdiction, as we have said, and without 20 jurisdiction, there can be no arbitration. 21 There is one waiver per claimant 22 for the entire arbitration. The waivers are not 64 1 directed to individual measures. A violation of 2 the waivers therefore affects consent for the 3 entire arbitration. Without the waivers, there 4 is no right to submit any claims to CAFTA 5 arbitration because there is no jurisdiction. 6 I would like to address briefly the 7 decision in RDC versus Guatemala. As stated in 8 El Salvador's preliminary objections, 9 El Salvador respectfully believes that the RDC 10 versus Guatemala tribunal came to the incorrect 11 conclusion about the consequences of a defective 12 waiver. 13 As the tribunal in Waste Management 14 One concluded, the overlap of one measure as 15 between the domestic proceedings and the 16 international arbitration results in lack of 17 jurisdiction and a dismissal of the entire 18 arbitration. 19 In Waste Management, there were 20 measures that overlapped and other measures that 21 did not overlap, but the entire case was 22 dismissed because of the defective waiver. 65 1 The RDC versus Guatemala tribunal 2 overlooked this basic point and focused on the 3 meaning of the word "claim" in paragraphs 1 and 4 4 of Article 10.18. And they concluded that in 5 those paragraphs the word "claim" refers to 6 individual claims and not the arbitration as a 7 whole, and that that same interpretation must be 8 given to the word "claim" in paragraph 2 of 9 Article 10.18. 10 The RDC versus Guatemala tribunal 11 may have been correct that the word "claim" has 12 the same meaning in all three paragraphs, but 13 the analysis of the tribunal was not complete. 14 The tribunal did not analyze the meaning of 15 paragraph 2 in light of its conclusion of the 16 meaning on "claim." If this further 17 interpretive step is taken, it becomes clear 18 that the tribunal in Waste Management reached 19 the correct conclusion and that that conclusion 20 is equally applicable to CAFTA. 21 Unlike paragraphs 1 and 4 of 22 Article 10.18 which relate to requirements 66 1 applicable to individual breaches, paragraph 2 2 sets out two requirements for jurisdiction over 3 the entire arbitration that must be met or there 4 is no jurisdiction at all. This is absolutely 5 indisputable, for paragraph 2(a) which requires 6 claimants to consent in writing to arbitration. 7 Claimants do not consent to 8 arbitration for each individual claim. They 9 consent to arbitration for the entire CAFTA case 10 presented in the notice of arbitration. If they 11 do not provide consent in writing, there is no 12 jurisdiction over any claim presented in the 13 notice of arbitration. 14 So when paragraph 2(a) says, "No 15 claim may be submitted to arbitration unless the 16 claimant consents to writing..." -- no claim may 17 be submitted to arbitration means there is no 18 jurisdiction if the condition is not met. 19 10.18.2, paragraph 2(b) creates the 20 same type of requirement. It requires a valid 21 waiver of any right to initiate or continue any 22 proceeding if there is no -- not a valid waiver, 67 1 there is no consent to arbitration, and there is 2 no jurisdiction to the same extent that, if 3 there is not a written submission of consent to 4 arbitration, there is no jurisdiction to the 5 entire case. That is -- no claim may be 6 submitted to arbitration if there is not a valid 7 waiver. 8 MR. Van den BERG: Sorry. 9 MR. SMITH: Yes, sir. 10 MR. Van den BERG: Again, may I ask 11 you a question. It's not entirely related to 12 the RD -- the Guatemala case. RDC, sorry. But 13 it concerns the text of paragraph 2 of Article 14 10.18. 15 MR. SMITH: Right. 16 MR. Van den BERG: What you are 17 saying earlier is that, on the moment of filing 18 the request for arbitration, the claimant should 19 have discontinued any pending proceedings 20 concerning the measures that are now being 21 submitted to arbitration; is that correct? 22 MR. SMITH: That's correct. 68 1 MR. Van den BERG: Let's look at 2 what the text asks a party to do, a claimant to 3 do. It asks, at the moment of filing, your 4 notice of arbitration, you have to submit 5 together with it accompanied a written waiver of 6 -- and written in the text -- of any right to 7 initiate or continue, right. 8 Now, if I follow your argument, 9 your argument you say, "Look, you should have 10 already discontinued," why would this text not 11 have the words "or continue"? 12 MR. SMITH: Because the waiver sets 13 up the requirements on the claimants and the 14 waiver must be made effective. The waiver has 15 both a formal aspect and a material aspect. It 16 is -- it is the form in which the parties 17 determine to express the requirement on the 18 parties. They could have expressed the 19 requirement, as claimants indicate, by saying 20 you must discontinue. 21 But they decided to express it in 22 terms of a waiver, but the waiver implies -- the 69 1 existence of a waiver means that the waiver must 2 be effective. It also implies a material aspect 3 to the waiver which is compliance with the 4 waiver, and it is the waiver that is invalidated 5 by the continuance of the proceedings. 6 It is just -- it is a drafting 7 technique that reaches the result which is 8 different from the drafting technique that 9 claimants say that the drafters could have used, 10 but this is equally effective for reaching the 11 result. 12 MR. Van den BERG: Under Article 31 13 of the Vienna Convention, I have to read this 14 according to ordinary meaning in the context in 15 good faith. But if I follow your argument, 16 would it not be more logical to state 17 that, "Well, they provide a written statement 18 certifying that any pending litigation or 19 proceedings have been discontinued"? 20 MR. SMITH: They could have drafted 21 it that way, but that does not mean that the 22 current draft does not reach the same effect by 70 1 creating a waiver requirement and expecting that 2 that waiver to be effectively applied. 3 Remember the Waste Management 4 decision was settled jurisprudence with regard 5 to NAFTA when the CAFTA parties adopted this 6 text. And that decision had interpreted the 7 waiver requirement as having a material 8 requirement. So in the context in which this 9 was drafted, it was a logical way to draft it to 10 reach the result of creating a requirement for 11 the claimants to terminate proceedings prior to 12 filing the waiver. 13 MR. Van den BERG: My question is 14 only exploratory in the sense that I don't want 15 to prejudge anything. But could it also not be 16 that -- that it says, "Well, look, you have to 17 file a waiver, and then subsequently you have to 18 act in accordance with the waiver"? And 19 basically what it is, this is a question about 20 timing. 21 Your point is you have, on the 22 moment of the filing of the notice of 71 1 arbitration, you have discontinued all 2 proceedings before the local courts in relation 3 to the measures. 4 MR. SMITH: That's correct. 5 MR. Van den BERG: Maybe another 6 reading may be if you follow this say, "Look, I 7 have waived my rights to continue those 8 proceedings; I filed my request for arbitration; 9 the next step I have to take is I need to 10 discontinue, if that is a requirement as an 11 active step in the local proceedings." 12 MR. SMITH: But the waiver is a 13 jurisdictional requirement and the requirement, 14 as understood by El Salvador, is to file an 15 effective waiver. And filing an ineffective 16 waiver and a waiver that the party has no 17 intention of complying with, is the same as 18 having filed no waiver at all. 19 MR. Van den BERG: How do I know 20 that the party has no intention it comply with? 21 MR. SMITH: Because they had within 22 their full power the ability to comply and have 72 1 not. 2 MR. Van den BERG: Yes, but there 3 is a time requirement interpretation. Maybe I 4 will come to the same result, if you don't do 5 anything that you -- then you indeed you do not 6 comply. Your position is very strict, if I may 7 say so. You say: 8 "Well, look at the moment of 9 filing; you should have discontinued your 10 proceedings." 11 MR. SMITH: Because the claimant is 12 in a position to discontinue, is in a position 13 to comply with its waiver when it files the 14 waiver, it should do so. It is a matter of good 15 faith to comply with the waiver and not to say, 16 "I filed my waiver and some day I will 17 discontinue." It's a matter of good faith 18 compliance with the waiver. 19 MR. Van den BERG: My question goes 20 to timing, not to compliance. 21 MR. SMITH: Certainly, I would not 22 take the position that, post filing; lack of 73 1 compliance would not be evidence of an initial 2 intent not to comply and, therefore, also 3 invalidates the waiver. The waiver has to be 4 valid when filed, but maybe actions that a 5 claimant takes after filing, that would also 6 result in a conclusion that the waiver itself 7 was invalid when filed because that action 8 clearly signifies that they had no intent to 9 comply on the date of filing. 10 MR. Van den BERG: Thank you. 11 Sorry, I interrupted, actually, your RDC versus 12 Guatemala critique. Please continue. 13 MR. SMITH: Yes, there are -- I am 14 sort of running a little bit short of time, and 15 I don't want to abuse the tribunal's willingness 16 to allow extra time; so I am going to summarize 17 the rest of what I had to say about RDC v. 18 Guatemala so that I may move on. 19 There are two -- there are two 20 aspects of that case that are not really legal 21 aspects, but they are important, I think, to 22 understand as to why maybe that tribunal reached 74 1 what El Salvador thinks is the wrong legal 2 result, by reaching the conclusion that only 3 those claims before local -- the local 4 arbitration had to be dismissed from the CAFTA 5 arbitration. 6 Our position is, if there is 7 overlap, the waiver is ineffective, and the 8 entire case must be dismissed. 9 In the RDC versus Guatemala case, 10 in the first instance, Guatemala essentially 11 consented to the continuation of the rest of the 12 case. Towards the end of the case -- I mean, 13 that was the conclusion the tribunal. And 14 towards the end of the case, they withdrew that 15 consent, but, essentially, they had already 16 signaled to the tribunal -- it seems to me -- 17 that they would be willing to accept the 18 continuance of the case with regard to the 19 measures that did not overlap and that possibly 20 has affected the view of the tribunal. 21 The other issue is that, in the RDC 22 versus Guatemala case, the claims that were a 75 1 part of the local arbitrations were very, very 2 minor claims as compared to the main claims in 3 the CAFTA arbitration. And I think that it 4 would be the natural instinct of a tribunal not 5 to want to dismiss an entire case based on some 6 minor claims. 7 The situation here is very 8 different. The claims that were brought before 9 the Supreme Court of El Salvador, which is the 10 revocation of the environmental permits, are the 11 core measures of the CAFTA claim. And if we 12 look at the two cases, for instance, the 13 requests for damages before the Supreme Court of 14 El Salvador was $110 million, the request for 15 damages in this CAFTA arbitration is 16 $100 million or more. They reserve their 17 rights. So we can see that there is a great 18 deal of identity. 19 So dismissing -- so it is the main 20 claims that are the overlap. Dismissing the 21 entire arbitration makes sense from an 22 efficiency point of view, in that regard. 76 1 Perhaps it would be helpful to just 2 get an idea from the tribunal just how much 3 extra time I might be able to use so I -- 4 MR. Van den BERG: You may -- 5 obviously, of course, the time intervals are 6 active. Also, all of those questions go to the 7 claimants, who will also have the possible time 8 to respond to them. 9 What I may suggest to you is you 10 can skip, unless you really would like to 11 present it, 44 to 48. We have the state 12 parties. We can read -- we know what they have 13 said and actually have noted that we have 14 specifically read it. 15 MR. SMITH: Okay. 16 MR. Van den BERG: So that's not a 17 problem. And I would suggest that you go onto 18 at paragraph -- slide 49. 19 You have, basically -- because we 20 started at -- look at the secretary -- at 10 -- 21 we started late, so we still have -- 22 MR. SMITH: I think we started at 77 1 10:15. 2 MR. Van den BERG: So you still 3 have almost 30 minutes, 25 minutes. So if you 4 are done in 20 minutes, it's okay. But don't 5 rush. 6 MR. SMITH: I will be as efficient 7 as possible. Thank you. I accept the 8 president's suggestion not to put up the slides 9 regarding the state parties position. 10 I would like -- of course, like to 11 emphasize that, again, the seven CAFTA state 12 parties who have provided an opinion on the 13 issue agree with El Salvador that the 14 consequences of a violation of the waiver are 15 the dismissal of the entire arbitration. 16 It's clear from the foregoing that 17 there is no jurisdiction for the CAFTA claims. 18 And, in fact, there are no surviving claims in 19 this arbitration because the claimants did not 20 submit any claims under the investment law of 21 El Salvador in their notice of arbitration. 22 There are no investment law claims before this 78 1 tribunal. 2 In their notice of arbitration 3 specifying their CAFTA claims, claimants mention 4 the investment law of El Salvador briefly in 5 only two paragraphs. Claimants did not allege 6 any breaches damages or claims under the 7 investment law. Claimants state in their 8 rejoinder that they confirm -- they confirm that 9 they have submitted a claim for breach of the 10 foreign investment law. But, in reality, 11 claimants are not confirming anything. They are 12 attempting to amend the notice of arbitration 13 and calling that amendment a confirmation. 14 The rejoinder cites paragraphs 1 15 and 37 of the notice of arbitration as clearly 16 -- as clear references to submission of claims 17 under investment under the investment law. 18 Claimants do not mention the 19 investment law of El Salvador -- excuse me. 20 Claimants do mention the investment 21 law of El Salvador in those two paragraphs, but 22 claimants do not submit or assert any claim 79 1 under the investment law in those paragraphs or 2 anywhere else in the notice of arbitration as 3 these are the only two paragraphs that mention 4 the investment law. 5 In fact, it's very clear that the 6 notice of arbitration addresses only CAFTA 7 claims. Claimants allege only breaches of 8 CAFTA. Claimants consent only to CAFTA 9 arbitration. And claimants request damages only 10 for alleged breaches of CAFTA. 11 The notice of arbitration contains 12 no reference to obligations or breaches of such 13 obligations under the investment law. It does 14 not contain the claimants' consent to 15 arbitration under the investment law, and it 16 does not request relief under the investment 17 law. 18 As a part of their attempt to gloss 19 over the fact that they are trying to add 20 investment law claims now, claimants assert that 21 they complied with ICSID Rule 21(e). Claimants 22 misinterpret this rule. 80 1 Institution rule 21(e) provides 2 that: 3 "The request shall contain 4 information concerning the issues in dispute 5 indicating that there is between the parties a 6 legal dispute arising directly out of an 7 investment." 8 That the dispute must be a legal 9 dispute is a jurisdictional requirement pursuant 10 to Article 25 of the ICSID convention. The 11 reference to a legal dispute in the institution 12 rules requires the investing party to provide 13 not only the factual base for the alleged 14 dispute, but also an indication of the legal 15 provisions alleged to have been breached, so 16 that a dispute of a legal nature can plausibly 17 be established. 18 The report of the executive 19 directors of the convention explains that the 20 reference to a legal dispute in Article 25 of 21 the convention must concern the existence or 22 scope of legal right or obligation or the nature 81 1 or extent of the reparation to be made for 2 breach of a legal obligation. 3 The tribunals in Continental versus 4 Argentina and Suez versus Argentina have made 5 reference to the requirement in the ICSID 6 Convention that a dispute be of a legal nature 7 as one that has to be based on legal rights. 8 Professor Schreuer notes in 9 reference to Continental and Suez that: 10 "It follows from the practice of 11 the tribunals that the legal nature of a dispute 12 is determined by the way the claimant presents 13 its claim." 14 In the present case, the claimants 15 have utterly failed to present any claims based 16 on any alleged rights granted to them in the 17 investment law. 18 By not invoking any provisions of 19 the investment law, they have -- which they have 20 allegedly breached, claimants have failed to 21 indicate, let alone establish that there is 22 between the parties a dispute of a legal nature 82 1 for purposes of the investment law. 2 It is, in any case, abundantly 3 clear that claimants did not submit investment 4 law claims in the notice of arbitration. It is 5 now too late for them to make those claims. 6 Claimants also invoke ICSID Rule -- 7 ICSID arbitration Rule 40 in their late effort 8 to add investment law claims. Rule 40 allows an 9 incidental or additional claim arising directly 10 out of the subject matter of a dispute, provided 11 that such ancillary claim is within the scope of 12 the consent of the parties and is otherwise 13 within the jurisdiction of the center. 14 Claimants here attempt to bring new 15 claims under ICSID Rule 40, but that rule covers 16 only ancillary claims; that is, claims ancillary 17 to claims already made and not new claims. It 18 is axiomatic wherever the ancillary claims can 19 only be brought if there are valid principal 20 claims which they be associated. 21 In the present case, because there 22 is no jurisdiction with respect to CAFTA claims 83 1 and because there were no investment claims 2 made, there are no principal claims before this 3 tribunal and no claims to which ancillary claims 4 might be attached. 5 Moreover, even if there were CAFTA 6 jurisdiction and the investment law claims could 7 be considered ancillary, claimants could not add 8 investment law claims to this arbitration 9 through arbitration Rule 40 because they are not 10 within the scope of the consent of the parties. 11 I want to be clear here about the 12 issue we are presenting. While the lack of 13 consent to jurisdiction under the investment law 14 is an independent ground for objecting to 15 jurisdiction, El Salvador is not objecting to 16 jurisdiction right now based on a lack of 17 consent under the investment law. We are simply 18 pointing out that arbitration Rule 40 is 19 inapplicable, and I will explain. 20 Claimants have made consent 21 relevant to the question at hand in the limited 22 context of arbitration Rule 40. It is in this 84 1 context that the investment law claims are 2 outside of the scope of consent of the parties. 3 In their notice of arbitration, 4 claimants only consented to arbitration under 5 CAFTA. They did not separately consent to 6 arbitration under the investment law; and, thus, 7 investment law claims are outside the scope of 8 the consent of the parties for purposes of 9 arbitration Rule 40. 10 Note F of the institution Rule 2, 11 provides: 12 "Consent must exist when the center 13 receives the dispute, and information concerning 14 the consent by both parties must be given in the 15 request. The mere fact that a request is made 16 is not adequate information concerning consent." 17 There must be a specific statement 18 of consent. 19 Claimants did not record their 20 consent to arbitration under the investment law 21 in their request for arbitration. Their only 22 statement of consent was in paragraph 34 of the 85 1 notice of arbitration. The claimants consent to 2 submit the present dispute to arbitration under 3 the auspices of ICSID in accordance with the 4 procedures set out in CAFTA. This notice of 5 arbitration signifies the claimants' consent 6 pursuant to Article 10.18.2(a) of CAFTA. 7 There simply was no statement of 8 consent to arbitration under the investment law. 9 And, therefore, in accordance with arbitration 10 Rule 40, any investment law claims that would be 11 brought in as ancillary claims fall outside the 12 scope of the consent of the parties. And so 13 these claims cannot be brought in under Article 14 40 -- or rule, Arbitration Rule 40. 15 Now, claimants having admitted that 16 the waiver requirement in CAFTA Article 10.18.2 17 is jurisdictional, and faced with the fact that 18 they failed to terminate the proceedings before 19 the Supreme Court of El Salvador, as required by 20 the waiver, claimants have developed a new 21 argument that one of them was not a party to the 22 proceedings before the Supreme Court. But this 86 1 argument cannot be sustained. 2 As El Salvador stated in its reply, 3 the petitions to the Supreme Court of 4 El Salvador challenging the revocation of the 5 environmental permits was filed on behalf of 6 Commerce Group Corporation and San Sebastian 7 Gold Mines. Claimants tried to deny this fact 8 by stating at paragraph 78 of their rejoinder 9 that: 10 "Although Commerce Group's attorney 11 indicated in the petition that he represented 12 Sanseb, that statement was made for the purpose 13 of fully disclosing to the Court the 14 relationship between Commerce Group and Sanseb 15 in the context of the mining operation." 16 This, however, clearly is a post 17 hoc justification to fit claimants' new argument 18 regarding the waivers. There is no indication 19 in the petitions that the reference to San 20 Sebastian Gold Mines was for informational 21 purposes only. It is clear from the text of the 22 petition that the attorney for Commerce Group 87 1 and San Sebastian Gold Mines was filing the 2 petition on behalf of both parties. 3 There is, however, clearly an 4 anomaly in the fact that, after the filing of 5 the petition, the Supreme Court of El Salvador 6 refers only to Commerce Group. But this does 7 not mean that San Sebastian Gold Mines was not a 8 party to the proceedings. There is a logical 9 explanation for the court's actions. 10 Respondent's Exhibit 22 contains 11 the documents that authorize Commerce Group and 12 San Sebastian Gold Mines to do business in 13 El Salvador. Such authorization requires a 14 two-step process. First, the Ministry of 15 Economy must issue a resolution authorizing a 16 company to do business in El Salvador. 17 Resolution 206 of the Ministry of Economy 18 provides this authorization for Commerce Group 19 and San Sebastian Gold Mines. 20 And it states that: 21 "It was decided to authorize 22 Commerce Group and San Sebastian Gold Mines 88 1 Incorporated to conduct commercial activities in 2 the Republic through a branch that can be called 3 Commerce Sanseb Joint Venture. This ministry 4 resolves to authorize the corporation Commerce 5 Group and San Sebastian Gold Mines to conduct 6 commercial activities in the country through a 7 branch that would be focused primarily on 8 exploitation within the mining industry, and 9 resolves to register in the commercial registry 10 the authorization granted by this resolution." 11 Commerce Group and San Sebastian 12 Gold Mines were thus authorized to do business 13 in El Salvador only as a joint venture, not as 14 separate entities. They registered as such, 15 because they had already established a joint 16 venture for this purpose in 1987, in an 17 agreement that authorized Commerce Group to act 18 on their behalf of the joint venture. 19 When Commerce Group and San 20 Sebastian Gold Mines took the next step in the 21 process of conducting business in El Salvador, 22 which is to register the branch with the 89 1 commercial registry, based on Resolution 206 of 2 the Ministry of the Economy, they registered 3 under the name Commerce Group rather than the 4 actual name of the branch Commerce Sanseb Joint 5 Venture. 6 On the screen is the resolution 7 which makes reference -- I mean, the registry 8 which makes reference to the prior Resolution 9 206, but shows that they were actually 10 registered under the name Commerce Group rather 11 than under the name Commerce Sanseb Joint 12 Venture as the resolution had indicated. 13 So you can see that there is some 14 confusion within the system over naming. But it 15 seems clear that here what is being done is the 16 registration of the joint venture, even though 17 it is with the wrong name, the name of Commerce 18 Group. 19 From this point forward, all of the 20 acts of the Government of El Salvador affecting 21 the two companies in El Salvador were taken 22 under the name Commerce Group Corp. The 90 1 environmental permits were issued to Commerce in 2 the name Commerce Group Corp.; the exploitation 3 concession was issued in the name Commerce Group 4 Corp.; the exploration licenses referred to in 5 the notice of arbitration were issued in the 6 name of Commerce Group Corp.; and the revocation 7 of the environmental permits were issued in the 8 name of Commerce Group Corp. 9 This is why the documents in the 10 case before the Supreme Court were issued in the 11 name of Commerce Group Corp. 12 In the present context, it is 13 logical to conclude that this reference was, in 14 fact, to Commerce Sanseb Joint Ventures and 15 implies -- and implicated both companies. 16 Up to the time that they faced El 17 Salvador's preliminary objections based on the 18 defects in their waivers, claimants clearly 19 shared this conclusion. First, in paragraph 7 20 of their notice of arbitration, claimants 21 clearly identified the Commerce Sanseb Joint 22 Venture as the corporate form used to make their 91 1 investment in El Salvador. And they also 2 indicate that the joint venture agreement 3 authorized Commerce to execute agreements on 4 behalf of Commerce Sanseb Joint Ventures, and it 5 is essentially authorizes Commerce Group to act 6 on behalf of the joint venture. 7 Additionally, in the notice of 8 arbitration, claimants refer to every one of the 9 administrative acts of the Salvadorean 10 government as acts directed towards Commerce 11 Sanseb, the joint venture to which both parties 12 are a part. 13 And finally and most importantly, 14 statements -- claimants stated in their notice 15 of arbitration that the petitions before the 16 Supreme Court of El Salvador were filed by 17 Commerce Sanseb's legal counsel. 18 However, when they were faced with 19 the consequences of their decision to continue 20 the proceedings before the Supreme Court, 21 claimants have suddenly adopted an entirely new 22 position regarding the relationship between 92 1 Commerce Group Corp., San Sebastian Gold Mines, 2 and the Commerce Sanseb Joint Venture. They now 3 take the position that the reference to Commerce 4 Group Corp. are not references to Commerce 5 Sanseb and have nothing whatsoever to do with 6 San Sebastian Gold Mines, Inc. Claimants want 7 to completely change the way they represent 8 themselves for the sole purpose of keeping their 9 arbitration alive for one of the claimants. 10 Now, let's take a look at the 11 specific examples of their change of position. 12 In their notice of arbitration, 13 they said Commerce Sanseb applied for and 14 received the environmental permits. Now, they 15 say Commerce was the holder of the environmental 16 permits. In the notice of arbitration, they 17 indicate that the Ministry of the Environment 18 delivered Commerce Sanseb Salvador -- excuse me, 19 to Commerce Sanseb's Salvadorean legal counsel 20 its revocation of the environmental permits. 21 Now, they are saying on 13 22 September 2006, the Ministry of the Environment 93 1 issued notices suspending Commerce's permits for 2 the San Sebastian Gold Mines and San Cristobal 3 Mill. 4 And, finally, in the notice of 5 arbitration, they stated that on December 6, 6 2006, Commerce Sanseb's legal counsel filed with 7 the Salvadorean court of administrative 8 litigation of the Supreme Court of Justice two 9 complaints relating to this matter. 10 Now, they are saying that the 11 petitions were filed on behalf of Commerce, the 12 party with standing to contest the termination 13 of the permits. 14 Claimants' attempt to change its 15 position must be rejected as improper and 16 inconsistent with the facts regarding the legal 17 personality of the companies in El Salvador and 18 the proceedings in El Salvador. 19 It should be noted, nevertheless, 20 that, were the tribunal to accept claimants' new 21 position on the legal personality acting in 22 El Salvador, the entire factual basis of 94 1 claimants' case would become inapplicable to San 2 Sebastian, leaving it with no claims. 3 Indeed, San Sebastian is not 4 authorized to conduct commercial activities in 5 El Salvador as an independent legal entity. 6 Thus, if the licenses, environmental permits, 7 and the very concession that are the core of the 8 present dispute were granted only to Commerce 9 Group, then San Sebastian has no claims. 10 But claimants cannot have it both 11 ways. On the one hand, claimants want to file 12 arbitration claims on behalf of both claimants 13 implying that both claimants had rights and made 14 investments in El Salvador. But on the other 15 hand, when convenient, they allege that, when 16 they say Commerce Sanseb, they really mean 17 Commerce Group. 18 And when their attorney identifies 19 himself as acting on behalf of the two 20 corporations, he really means just Commerce 21 Group. 22 But, in truth, San Sebastian is 95 1 either a part of Commerce Group's activities in 2 El Salvador, and, therefore, a party to the 3 legal proceedings before the Supreme Court or it 4 is not. If the facts are as presented in the 5 claimants' notice of arbitration, then San 6 Sebastian was a party to the Supreme Court 7 proceedings, and it, like Commerce Group, failed 8 to meet the waiver requirement under CAFTA 9 10.18.2. 10 If the facts are as presented by 11 claimants under their new theory of the case, 12 then San Sebastian is not an investor in 13 El Salvador, held none of the alleged rights set 14 out in the notice of arbitration and suffered 15 none of the alleged harms. In sum, it has no 16 claims. 17 Now, I come to our conclusion in 18 this matter, and I see that I actually am within 19 the time limits. 20 Claimants failed to submit valid 21 and effective waivers as required by CAFTA 22 Article 10.18.2. As a result, claimants did not 96 1 fulfill a condition to El Salvador's consent to 2 arbitration. There can be no jurisdiction 3 without El Salvador's consent. And without 4 jurisdiction, the entire arbitration must be 5 dismissed. The defects in the waivers affect 6 San Sebastian as well as Commerce Group because 7 the domestic proceedings were initiated on 8 behalf of both claimants; and neither claimant 9 took any action to make its waiver of its rights 10 to continue the domestic proceedings effective 11 by terminating the domestic judicial proceedings 12 before initiating the CAFTA arbitration. 13 There were no investment law claims 14 submitted in the notice of arbitration, and none 15 can be added now. Therefore, the dismissal of 16 the CAFTA arbitration due to the lack of 17 El Salvador's consent is the dismissal of the 18 entire arbitration initiated by claimants' 19 notice of arbitration. 20 In short, because of claimants' 21 failure to comply with the waiver requirement of 22 CAFTA 10.18.2, this entire arbitration must be 97 1 dismissed. 2 Before finishing, I wanted to 3 briefly address the issue of respondent's 4 request for costs in this matter. From 5 El Salvador's point of view, we should never 6 have gotten to this point. El Salvador should 7 never have had to undergo the expense of filing 8 this preliminary objection and the expense of 9 this proceeding. Claimants ignored early on the 10 opportunity to end this arbitration in July and 11 August of 2009 and avoid the costs of this 12 proceeding. Their disregard of the conditions 13 in the treaty when filing their notice of 14 arbitration was compounded by their decision to 15 ignore the letter El Salvador sent to the ICSID 16 secretary general opposing registration of the 17 case. 18 El Salvador pointed out to ICSID in 19 a letter sent to claimants the problems with 20 claimants' waiver, the existence of the domestic 21 judicial proceedings that dealt with the same 22 measures that are the central claims in the 98 1 CAFTA arbitration. The claimants also ignore a 2 second letter that El Salvador sent immediately 3 after registration telling the claimants exactly 4 what they had done wrong and pointing out the 5 precedent in NAFTA and CAFTA indicating that the 6 waiver requirement includes conduct in 7 conformity with the waiver. 8 In that letter, El Salvador invited 9 the claimants to terminate the ICSID arbitration 10 and provided its unilateral consent to the 11 termination of this case if claimants requested 12 it before the constitution of the tribunal. 13 It is important to recall that at 14 the time claimants filed their notice of 15 arbitration, the Waste Management decision 16 regarding the requirement to materially comply 17 with the waiver by terminating domestic court 18 proceedings had been settled precedent with 19 respect to the NAFTA waiver for nine years. And 20 the RDC versus Guatemala decision, reaching the 21 same conclusion under CAFTA, had been issued and 22 had been available to the public. 99 1 Claimants had the opportunity to 2 terminate this arbitration, request the 3 termination of proceedings before the Supreme 4 Court, and file a new notice of arbitration. 5 Claimants, however, despite being 6 put on express notice, decided to ignore the 7 provisions of the treaty upon which they base 8 jurisdiction and thus have forced El Salvador to 9 suffer the expense of bringing this preliminary 10 objection before the tribunal. 11 Claimants chose to wait for a 12 favorable resolution of the two cases pending 13 before the Supreme Court of El Salvador. And 14 when those two cases were decided, the claimants 15 then proceeded to request constitution of this 16 tribunal, ignoring the warnings of El Salvador. 17 El Salvador respectfully requests 18 that this tribunal send a strong message, not 19 only to these claimants, but to other claimants 20 that are only too ready to disregard the will of 21 states expressed in the very same international 22 treaties that the claimants purport to benefit 100 1 from. 2 The only way to send this clear 3 message is with an award not only dismissing 4 this case, but awarding El Salvador its legal 5 costs for having had to defend such a frivolous 6 action filed and continued by these claimants. 7 Thank you very much. 8 MR. Van den BERG: Thank you, 9 Mr. Smith, for presenting the initial arguments 10 for the respondent. 11 I suggest a break of 15 minutes. 12 Is that okay? 13 MR. MACHULAK: Yes, that would be 14 fine. 15 MR. Van den BERG: Okay. Recess 16 for 15 minutes until 12 o'clock. 17 (A break is taken.) 18 MR. Van den BERG: All right. 19 Mr. Machulak, please proceed on behalf of the 20 claimants. 21 CLAIMANTS' ARGUMENT BY MR. MACHULAK: 22 MR. MACHULAK: Thank you very much, 101 1 sir. 2 Mr. President, members of the 3 tribunal, again, my name is John Machulak, and I 4 will be speaking right at the beginning to give 5 you some background to what has happened and 6 leave the legal -- and I will -- 7 Professor Newcombe will be addressing you with 8 the more legal portion of the argument. 9 First, let me say this: We do 10 represent two claimants, Commerce Group Corp. 11 and San Sebastian Gold Mines Inc. They are 12 separate companies, and our duties lie to two 13 clients. They are very close, in terms of the 14 number of shareholders, but there are different 15 sets of shareholders to the two of them. 16 Let me say, first, that Commerce 17 Group Corporation is a Delaware corporation 18 incorporated in 1962. It's now been converted 19 into a Wisconsin corporation along the way. San 20 Sebastian Gold Mines Inc. was founded as a 21 Nevada company in 1968. Combined, there's about 22 3,300 shareholders to the two corporations. 102 1 Now, you have been presented some 2 facts to joint venture agreement. Let me give 3 you a little bit of background on that. 4 This project in El Salvador where 5 the two have been mining and processing gold 6 started in 1968 with an investment on the part 7 of San Sebastian Gold Mines Inc. 8 Commerce became a shareholder of 9 San Sebastian between 1968 and 1978. It had 10 that status. San Sebastian was kind of a lead. 11 The civil war broke out in 1978, 12 and -- or at least was at a stage where he 13 couldn't mine anymore in El Salvador, and worked 14 under dis -- discontinued in 1985 when the two 15 companies came back to El Salvador. The whole 16 operation, the mill and plant that had been 17 there at the time at the San Sebastian Gold 18 Mines were destroyed. They were just missing 19 members starting from ground zero at that point. 20 So at that point in time, San -- 21 Commerce began to give a more heavy investment 22 in San Sebastian Gold Mines Inc., and eventually 103 1 they were supporting a rekindling of the 2 operation in El Salvador. 3 In 1987, if you recall from the 4 materials, is, when President Duarte awarded us 5 a new concession for -- for exploitation at the 6 San Sebastian gold mine, and Commerce was more 7 involved in -- in getting the financing to get 8 that going. 9 At that point in time, the parties 10 entered into a joint venture agreement. And the 11 big contribution that San Sebastian had at that 12 time is they had the lease rights to the mining 13 site down in El Salvador; and, basically, I'm 14 reciting to you the very same background that 15 you'll see in the joint venture agreement 16 itself. 17 Now, after the -- after the new -- 18 after the 1987 concession was granted, the 19 company acquired a new mill about 15 miles away 20 from the original San Sebastian site, rather 21 than attempting to rebuild on site, because 22 there had been a Canadian Javalon [phonetic] 104 1 mill that was available. That became the 2 San Cristobal mill, and from -- that took a 3 considerable amount of refurbishing. 4 But from 1995 through 2000, the 5 companies were producing gold at the 22,700-odd 6 ounces of bullion at the -- at the 7 San Cristobal. The ore was taken from San 8 Sebastian and carted over there. And eventually 9 the -- after about five years of production, 10 successful production, the company was going to 11 expand the -- the mill site. 12 In between 2000 and all the way 13 through 2004, the -- and in -- earlier, the 14 company had a remarkably good relationship, we 15 thought, with the country of El Salvador. There 16 is mention in the materials about us getting a 17 new concession, which happened in 2002. 18 The company adopted a new mining 19 law. We adapted. We took our concession. We 20 got -- we worked with the government to get a 21 long -- not only a long-term concession for the 22 San Sebastian gold mines, but we got two other 105 1 exploration sites at that time that consisted of 2 another 86 kilometers in the vicinity of the 3 mine site. 4 And last but not least, if -- all 5 the way through this long history with 6 El Salvador, the company has had a mining 7 presence. It's invested in local 8 infrastructure, built a church there, roads, 9 bridges, created hundreds of jobs there, and it 10 contributed. This was not an operation that -- 11 that just took without giving back. 12 Now, what happens -- what led, 13 then, to the CAFTA filing? 14 Well, at the point in time, the -- 15 all -- everything started to come to a head in 16 2006, or the start of the problem. At that 17 point in time, the company had a concession 18 through 2034 for the mining site. It had 19 86 square kilometers in its exploration 20 concession. It had a substantial investment 21 that went all the way back to its first 22 involvement in the gold mine. 106 1 What happened in -- in 2006? Not 2 only was the revocation of the environmental 3 permits that we talked about, but the 4 exploration was denied. The exploration was not 5 renewed. And the important thing is that, in 6 2006, there was a de facto moratorium on mining. 7 I mean, it -- it -- and it's clear. 8 We've given you information in the materials 9 about just a glimpse of some of the newspaper 10 articles. 11 In mid 2006, in July 2006, there 12 was a de facto -- there was an announced de 13 facto ban on mining. In fact, the article that 14 we put to you shows that it wasn't that -- 15 something we -- the minister said. It's not 16 something that we did. It's something that 17 generally the company -- the country is going to 18 go through, is not going to issue mining permits 19 for anyone. And this was 2006. 20 This was just ahead of the 21 government taking action against us to tell us 22 we could mine or explore no more. That 107 1 continued -- 2 MR. Van den BERG: Would you please 3 speak in the microphone, unless you want -- 4 MR. MACHULAK: Oh excuse me. 5 Sorry. 6 MR. Van den BERG: Otherwise -- 7 otherwise, you are not being taped properly. 8 Otherwise, you can be provided the roving mic if 9 you want to have that. 10 MR. MACHULAK: I'll -- I'll try to 11 be good. 12 MR. Van den BERG: No, I know. 13 When you to go to trial presentation, if you 14 would like to have one, maybe we can provide you 15 one. 16 MR. MACHULAK: If you have one, 17 that would be great. 18 MR. Van den BERG: Okay. 19 MR. MACHULAK: I'll -- I'll try to 20 stay right here until you're -- until you're 21 ready for that. 22 But in -- yes, you know, there -- 108 1 we'll -- we'll come to that. But we did start 2 in a proceeding, a challenge in administrative 3 courts of El Salvador in 2006. In 2007, we 4 asked for an injunctive relief to continue 5 mining during the case that was denied to us by 6 the El Salvadorean court. 7 There is a lot of discussion in the 8 materials about how everybody is waiting on the 9 ruling of the court, quite frankly. There -- 10 there really -- at the point in time we got to 11 the CAFTA proceedings, there wasn't really a lot 12 of hope in the outcome for the court there, 13 although we thought we had a strong case. 14 In -- in 2000 -- all the way along 15 the way, 2008, 2009 and 2010, the -- the 16 Government of El Salvador continually told 17 everyone there -- there would no longer be 18 permits issued for mining. 19 In 2000 -- and what led to the 20 CAFTA proceeding specifically? First, in 2008, 21 Pacific Rim, another mining company that perhaps 22 you are familiar with, has a similar dispute 109 1 with El Salvador, announced its intent to file 2 for arbitration. 3 We, as a team -- this is a 4 different team -- went down to El Salvador in 5 February of 2009, and said, "Can we work with 6 you? Is there some way we could work this out?" 7 And we were very interested in 8 doing so because we had an investor from the 9 previous year who was having trouble with 10 working with the El Salvadorean government to be 11 able to kind of take over the operation and -- 12 and -- and get it going. 13 There is a missing fact here. In 14 -- in 2007, my dad, who was like the spearhead 15 of the whole thing all the way along the way, 16 passed away; and we were looking at outside 17 investors to come in and assist us with the 18 mining. We then in a very dramatic way found 19 out that the government was not going to give us 20 any mining permits, because it didn't matter how 21 much money we would invest, what you would do at 22 the site. There would be no mining in 110 1 El Salvador. I found that out myself. 2 (There was a discussion off the 3 record.) 4 MR. MACHULAK: I found that out 5 myself at meetings with the Ministry of 6 Environment, the Council for the Ministry of 7 Environment, where he announced that is what is 8 going to be coming. But in March of -- then, 9 finally, in March of 2009, we gave our notice of 10 intent to file for a proceeding under CAFTA. 11 One of the things that was 12 paramount in our mind was a lot of this action 13 took place in 2006. So it was kind of time to 14 fish or cut bait in early 2009, when we finally 15 put out our notice of intent. 16 Now, the -- the thought -- the 17 thought being projected by the respondents is 18 that in 2006 we commenced this litigation, and 19 2009 the Supreme Court began its deliberations. 20 We did not know that at the time. 21 If you look at the documents being 22 submitted to you, we understood that this was a 111 1 proceeding that was out there somewhere in the 2 distance, but it was out there. Obviously, we 3 referenced it in our arbitration proceedings. 4 When we started our arbitration 5 proceedings, which was pretty close to 90 days 6 after our notice of intent, I -- I have a 7 timetable here in -- it -- it would be helpful, 8 the thing. But here -- here -- let me just 9 walk, you if I may, through the documents. 10 On March 16, 2009, we gave our 11 notice of intent. On July 2, 2009, we submitted 12 our notice of arbitration. With our notice of 13 arbitration, we submitted two waivers. One was 14 a waiver by Commerce Group Corp., which you have 15 as an exhibit, and one is a waiver by San 16 Sebastian Gold Mines Inc. These are both dated 17 the same day, signed by my brother, who is now 18 president of both companies. 19 Next -- well, I -- well, I will say 20 this, but there is -- there is a talk about us 21 purposely delaying the CAFTA proceedings. When 22 we found these two waivers, we thought -- we -- 112 1 we figured -- we thought we had done every -- we 2 read the treaty, and we thought we had done 3 everything that complied with the -- with the 4 treaty, because we -- I mean, we filed it 5 religiously in -- in framing the waivers. And 6 we did not understand and did not agree, or just 7 didn't understand at this point in time that you 8 had to do anything else but give the waiver. 9 And to us a waiver means you're in -- the other 10 side can do with it whatever they want to, but 11 you have no right to claim $100 million, 12 $111 million. You're done with whatever you 13 want to claim later. 14 And what started to delay things, 15 you can see right in -- in our petition and 16 count this as our inexperience at two pages of 17 the -- of the -- the last two pages of our arbit 18 -- notice of arbitration. 19 We, my brother and I, when we 20 started things, we went through the list 21 provided by ICSID, and we didn't -- we thought 22 -- we had picked Professor Greenwood out of the 113 1 list as an arbitrator, and we had not talked to 2 him, we had not spoken with him. 3 We -- we just understood the 4 proceeding; you go through the list and pick 5 one, which is what we did. We did not know that 6 he was unavailable, or -- or you go through this 7 process of finding out whether people are 8 available before doing it. But this is what we 9 did on July 2nd. We picked Professor Greenwood. 10 Then after we filed, we got a 11 letter back from ICSID asking us the questions 12 about our filing. This was -- and we responded 13 to that on August 19th, which is in the exhibits 14 furnished by the respondent. But here what the 15 respondent says is this, is that on August 14, 16 2009, the Attorney General for El Salvador by 17 rights in -- and we didn't so much as respond to 18 it. 19 Well, truthfully, we weren't sent 20 the letter. This letter was filed ex parte with 21 ICSID, and the way we found out about it was a 22 little bit later. I think that by E-Mails with 114 1 the -- with the ICSID will confirm that. But I 2 -- what -- what happened was -- is that when 3 Mr. Smith wrote to us on August 24th, he 4 referenced a letter to the Attorney General, but 5 it was not -- it -- it was not -- it was not a 6 letter that was addressed or -- or we -- we 7 weren't copied. 8 Now, the -- if I -- when -- when we 9 studied -- the exhibits I have for you has some 10 yellow highlighting, which is not exactly coming 11 up on the -- on the overhead screen. 12 But here is how we interpreted the 13 letter from the Attorney General when we got it. 14 We asked for it, and we got it. 15 In the second paragraph, here, 16 where -- where I've got the highlighting in your 17 thing, the Attorney General said: 18 "Even if claimants were to withdraw 19 the legal proceedings still pending in 20 El Salvador, Claimants' failure to honor their 21 waivers before submitting their requests for 22 arbitration to ICSID cannot be remedied once the 115 1 request for arbitration has been filed." 2 So we're looking at this from our 3 practical standpoint. Here we are in August of 4 2009. We certainly don't want to get into a 5 statute of limitations question. This is three 6 years after. And what they are saying is, you 7 have to dismiss your CAFTA proceedings, and then 8 go through the some process in El Salvador 9 before you could even -- an unknown time frame 10 before you can start it. 11 I mean, this -- this was telling -- 12 this is something that -- the position that they 13 took at the time. It wasn't: 14 "Let's continue this -- let's 15 continue this now." 16 It says: 17 "You have to dismiss the CAFTA 18 proceeding before you do anything else." 19 If you go to the very last line of 20 this page, it picks up on the next page, it goes 21 on to say there: 22 "The defects on the request for 116 1 arbitration are not of the nature that can be 2 cured once the request for arbitration has been 3 filed." 4 So it isn't asking us to -- to do 5 anything now. It's saying, you're basically -- 6 there's nothing you can do right now. There was 7 never any request to do something vis-à-vis the 8 -- the domestic proceedings. It's basically 9 saying: 10 "Dismiss the CAFTA. Otherwise, you 11 will forever have this jurisdictional defect." 12 So what was happening at the same 13 time for us? In -- in the next exhibit, you see 14 we got -- we -- we had a letter, and -- and this 15 was referenced from -- from doing Dewey & 16 LeBoeuf from Mr. Derek Smith. 17 But this letter basically 18 reiterates the same thing. If you go to the -- 19 you know, it told us the same thing. And it -- 20 and it said that -- yeah, the -- yeah, the 21 second paragraph, that we -- claimants have been 22 made fully aware during the registration process 117 1 through the letter of the Attorney General to 2 the Secretary General -- through the letter of 3 the Attorney General to the Secretary General, 4 together with Claimants' knowledge about the 5 nature of the proceedings, that they did not 6 comply with the jurisdictional requirements. 7 We read this, and it -- it really 8 doesn't say who we got -- again, it doesn't say 9 we got this letter. But we read this. Did we 10 comply with the jurisdictional requirements? We 11 go back to look at the treaty, and -- and -- and 12 in our -- in our estimation, we -- we have. 13 And the -- and you look in the very 14 next paragraph, it's still: 15 "We have" -- you know, the -- the 16 second middle line there: 17 "We still have the choice to dis" 18 -- "request discontinuance of the arbitration. 19 That was the drive at that point in time, that 20 we were jurisdictionally defective from the 21 beginning, that there is nothing we could do to 22 fix it." 118 1 Now -- and in the second page, they 2 reiterate the same point. So it's not to 3 short-change Mr. -- Professor Newcombe. Let me 4 just say this. It took some time, and you have 5 the exhibits there to sort through for us the -- 6 to get a replacement arbitrator appointed after 7 Professor Greenwood. 8 We wrote him, and he said he's not 9 available to do it. So, you know, that delayed 10 some proceedings on our part. Never on our part 11 did we -- did we -- this whole fiction of 12 waiting for El Salvador is so outside of what 13 was going on that it's incredible to me. 14 But if you look through the 15 proceedings, here you will see that there was a 16 lot of things happening vis-à-vis for us versus 17 ICSID, and we were trying to do what we could to 18 advance the proceeding for it. 19 A couple of other exhibits I want 20 to mention: One is that El Salvador submits a 21 -- a -- kind of a status report from their 22 Attorney General. And -- and what the status 119 1 report says, working with the translation, is 2 that at some point -- and this was right around 3 when the Attorney General wrote ICSID, he asked 4 for a status report of the local proceedings. 5 And the clerk -- this -- this is 6 just a request for a status report. And the 7 turnaround is not a day or two. I mean, it's -- 8 just to get a status report from the court takes 9 a considerable turnaround in time, and this is 10 nothing of -- a procedural nature happening in 11 the El Salvador case. 12 The other thing I wish to point out 13 from their exhibits is that they -- they submit 14 a letter and translation from Pedro Valle, one 15 of our attorneys in El Salvador, who is not the 16 one who is involved in the local proceedings. 17 But he -- he -- you know, contrary 18 to being hopeful about something happening in 19 El Salvador at the time, his letter shows that 20 in -- to after we filed our CAFTA proceedings, 21 we started to disassemble the mill and plant. 22 And we were certainly not -- the 120 1 letter does not -- speaks of a wonderful 2 expectation of something that is going to happen 3 in a month or two. 4 I mean, we were -- we were closing 5 up shop down there, and it -- more to the point, 6 he says we are complying with whatever they want 7 in the resolution, in the -- in the government 8 action that we were challenging in 2006. I 9 highlighted -- highlighted the section there. 10 And I know you do not have a full 11 translation of what things will discontinue in 12 an administrative proceeding before you; but I 13 understand that, in addition to 40B, which says 14 that claimant can submit a withdrawal, there is 15 a subsection C there that says, if you start to 16 act in conformity with the -- with the -- with 17 the government action you are challenging, that 18 is another ground for dismissal. 19 How things all play out 20 procedurally, I couldn't tell. I do not have 21 the type of expertise, I am sure, that the 22 Attorney General of El Salvador has. But I -- I 121 1 know that -- that none of this is directed to 2 somehow perpetrating, you know, or prolonging 3 the CAFTA proceeding. 4 So without further adieu, I'll -- 5 I'll give you Professor Newcombe. 6 MR. Van den BERG: Thank you. 7 Professor Newcombe, please proceed. 8 CLAIMANTS' ARGUMENT 9 BY PROFESSOR NEWCOMBE: 10 MR. NEWCOMBE: Mr. President, 11 members of the tribunal, representatives of 12 El Salvador, representatives of the CAFTA 13 parties, Mr. Machulak has outlined the context 14 of the dispute and the proceedings to date. My 15 presentation will focus on the overview of the 16 claimants' submissions with respect to the 17 preliminary objection. 18 I will be making six principal 19 submissions in response to the respondent's 20 preliminary objection. 21 First, the claimants have fully 22 satisfied the jurisdictional requirement under 122 1 CAFTA Article 10.18.2 with respect to the 2 submission of waivers. In light of the parties' 3 agreement that the parties -- that the 4 claimants' waiver satisfies all formal 5 requirements, the -- the narrow issue for 6 determination is -- is this -- this question of 7 whether a CAFTA claimant is required to request 8 termination of a domestic proceeding as a 9 jurisdictional precondition prior to a claim 10 being submitted to arbitration under CAFTA. 11 The claimants' answer is a clear 12 no. CAFTA Article 10.18.2 imposes no such 13 requirement. And to interpret Article 10.18.2 14 in such a way would be to -- would be to read in 15 a restrictive jurisdictional precondition that 16 is not present in the plain text of the treaty. 17 My second submission is that the 18 claimants submit that the continuation of the -- 19 of the domestic proceedings after the -- after 20 the submission of the notice of arbitration is a 21 question of admissibility of claims, not 22 jurisdiction. 123 1 Although the -- the claimants 2 affirm that this tribunal has the power to find 3 that claims are inadmissible where there are 4 concurrent proceedings, we submit that there is 5 no impediment to the admissibility of claims in 6 this case because there never were concurrent 7 proceedings. Further, there are no ongoing 8 current proceedings that could serve as an 9 impediment to the claimants' claims. 10 My third submission is that, since 11 July 2, 2009, the -- the date of the submission 12 of the notice of arbitration, the claimants have 13 acted consistently with the waivers and in good 14 faith. 15 Fourth, if this tribunal were to 16 find that the continuation of the domestic 17 proceedings with respect to the revocation of 18 the environmental permits affects in some way 19 the tribunal's jurisdiction, the claimants' 20 submission is that any impediment exists only to 21 the extent of the overlap of the measures 22 between this proceeding and the domestic 124 1 proceeding, in particular the measures -- the 2 measure in question in the domestic proceeding, 3 the revocation of the environmental permits. 4 Claimants' other claims in this 5 proceeding with respect to other measures, 6 including that respondents treatment of the 7 expiration licenses, and the respondent's de 8 facto moratorium on mining, which continues to 9 this day, are unaffected as these measures -- 10 measures were not the subject of the domestic 11 proceedings. 12 Fifth, any jurisdictional 13 impediment that may exist applies only to the 14 Commerce Group and not to San Sebastian. 15 Sixth and, finally, the preliminary 16 objection does not apply to the claimants' 17 independent claims for breach of the foreign 18 investment law. Even if it's accepted in its 19 entirety, the preliminary objection does not 20 apply. Actually, it does not even raise the 21 issue of El Salvador's consent under the foreign 22 investment law. 125 1 Now, I understand this -- this 2 morning the respondent has -- has raised the 3 issue of the respondents' consent under the 4 foreign investment law, and also the claimants' 5 consent. I would suggest that this -- this -- 6 this issue has not been briefed. The -- the 7 preliminary objection is that -- was a 8 preliminary objection to -- whether there was 9 consent under CAFTA. 10 So there's a question of whether, 11 if the tribunal's decision that arises out of 12 this preliminary objection, whether the foreign 13 investment law -- to what extent the foreign 14 investment law issue really is before the -- the 15 tribunal in this preliminary objection. 16 To the extent I can, I will try to 17 be responsive to the claimants. I will try to 18 be responsive to the respondent's arguments this 19 morning, although many of the points I will have 20 to elaborate on this afternoon. 21 MR. Van den BERG: Sure. But 22 perhaps you may also consider the -- the 126 1 following question in -- in -- related to the 2 invocation of the investment law, which is the 3 -- the text of the waiver itself. The text of 4 the waiver refers to any right to initiate or 5 continue before any administrative tribunal or 6 court under the law of any party or dispute 7 settlement procedures, any proceeding with 8 respect to measures. 9 This investment law, does the 10 arbitration contemplated by the investment law 11 fall under this waiver provision? 12 MR. NEWCOMBE: No, it doesn't, 13 Mr. President. As in the Pac Rim case, which 14 decided this particular -- this particular 15 issue, the waiver -- this proceeding, this -- 16 this arbitration is not another -- another -- I 17 don't have the provision in front of me now, the 18 10.18.2, the -- the point which I'll -- 19 MR. Van den BERG: Would you like 20 to take it -- 21 MR. NEWCOMBE: -- I'll return to it 22 this afternoon, is that it -- it's not 127 1 applicable. 2 MR. Van den BERG: No, would you 3 like to take the text in front of you? 4 MR. NEWCOMBE: Thank you, 5 Mr. President. 6 The waiver provision requires a 7 waiver with respect to -- or other dispute 8 settlement procedures and any proceeding. Our 9 submission is that this -- that there are -- 10 that there is one arbitration and one 11 proceeding. There is -- there are claims that 12 are submitted under CAFTA, under the consent of 13 CAFTA and under the consent of the foreign 14 investment law, and that this tribunal is not an 15 -- or other dispute settlement procedure. 16 MR. Van den BERG: You have the two 17 -- one or two in one? What do we have here? 18 MR. NEWCOMBE: We have -- we have 19 claims arising from two different instruments. 20 MR. Van den BERG: Yes. 21 MR. NEWCOMBE: One -- one treaty, 22 one foreign investment law, with two separate 128 1 consents to arbitration in one proceeding, in 2 one arbitration. And as -- as determined, we 3 would submit that the -- that the preliminary 4 decision in the Pac Rim case, which decided this 5 particular point, as we -- we submitted in 6 our -- in our -- in our pleadings decided that 7 the waiver did not exclude the tribunal's -- 8 does -- does not apply where claims are brought 9 into one proceeding. 10 MR. Van den BERG: Thank you. 11 MR. NEWCOMBE: Turning to my first 12 submission, Commerce and San Sebastian submitted 13 written waivers as required by CAFTA Article 14 10.18.2 of their notice of arbitration. 15 Mr. Smith has indicated this 16 morning a number of areas of agreement between 17 the -- the parties. I won't go into those in 18 detail, other than to note that the respondent 19 has not raised any objections based on the form 20 of waivers submitted by the claimants. 21 In its pleadings, the respondent 22 has not disputed that the waivers were effective 129 1 to waive the claimants' right in -- in the 2 domestic proceedings. In the respondents' 3 preliminary objection at paragraph 21, the 4 claimants -- the -- the respondents say: 5 "Claimants therefore knowingly and 6 willingly waived any right to initiate or 7 continue any proceeding." 8 The respondent's reply -- the 9 respondent's reply at paragraph three states 10 that: 11 "The parties agree on several 12 points pursuant to the waiver." 13 Then I quote: 14 "They, the claimants, waive the 15 right to continue the domestic judicial 16 proceedings. Although the respondent argues 17 that the claimants were required to take 18 additional steps when it was submitting the 19 claims, in particular, to request discontinuance 20 of the domestic proceedings as a precondition, 21 respondent has not contested that the waivers 22 were, in fact, effective to waive the claimants' 130 1 rights to continue the domestic proceedings." 2 Claimants say that the waiver was 3 defective for purposes of CAFTA jurisdiction 4 because of a failure to request the 5 discontinuance because they read in this -- this 6 jurisdictional precondition. 7 They have not contested that 8 claimants' submission of the waivers had a legal 9 effect. The waivers waived real legal rights. 10 And the respondent was the beneficiary of those 11 waivers. The respondent simply ignores this 12 fact and argues that the treaty required more, a 13 submission, as I will -- I will -- that is 14 without legal merit. 15 Fourth, the parties agree -- my 16 next point is, the parties agree that the 17 jurisdiction of this tribunal is determined as 18 of the day of the notice of arbitration, the 19 date that it's received by the secretary 20 general, and that events after that date do not 21 affect jurisdiction. 22 As a result in the claimants' 131 1 submission, conduct after the submission of the 2 waivers, which I will refer to for ease of 3 reference as "post-waiver conduct," is not 4 relevant to whether this tribunal has 5 jurisdiction. Jurisdiction can neither be lost 6 nor found by events occurring after the 7 submission of the notice of arbitration. 8 Now, there is a difference between 9 the parties on the date for determining 10 jurisdiction. The parties agree that Article 11 10.16.4 which governs the notice of arbitration 12 is deemed to be submitted when it's received by 13 the Secretary General of ICSID. 14 Claimants submit that the date of 15 receipt of notice of arbitration was July 2, 16 2009, the date that the claimants -- the date of 17 the claimants' consent to arbitration and the 18 date that the notice of arbitration was E-Mailed 19 to the Secretary General. 20 The respondent submits that the 21 date of receipt is July 6th, the date of the 22 secretary general's formal acknowledgement of 132 1 receipt. 2 I would like to explain why the 3 claimants take this position. 4 The MARN revolution, the Ministry 5 of Environment Resolutions invoking the 6 environmental permits are dated July 5th and 7 6th, 2006. But it's clear from the record that 8 the resolutions were notified to the parties on 9 September 13, 2006; and this is the position 10 that is taken by both parties and supported by 11 all of the evidence, all of the -- all of the 12 exhibits. 13 The three-year time limitation for 14 bringing a claim under Article 10.18.1, with 15 respect to the revocation of environmental 16 permits, runs from the date of knowledge of the 17 event and thus runs from September 13, 2006. 18 So we submit that, since the notice 19 of arbitration was received on July the 2nd, 20 2009, there can be no question of the three-year 21 time limit running. But out of an abundance of 22 caution, we submit that the earlier date, the 133 1 July 2nd date, applies in order to -- to ensure 2 that the respondent does not later 3 opportunistically change its position and make a 4 further jurisdictional objection, that the 5 three-year time limit applies on the earlier 6 date of the date of the actual -- the date of 7 resolutions revoking the -- the permits, which 8 were 5th and 6th of July. 9 Thus, if the date of receipt is 10 July 6th, there may be a -- a-- a potential for 11 further preliminary objection. So that's the -- 12 the -- the sort of the reason, the rationale, 13 why we submit that July 2nd is the date for 14 determining jurisdiction. 15 I now turn to my primary 16 submission, the primary dispute between the 17 parties. 18 Were the claimants required under 19 Article 10.18.2 to request discontinuance of the 20 domestic proceedings prior to submitting a 21 notice of claim? 22 This is fundamentally a question of 134 1 treaty interpretation. The interpretation 2 proposed by the respondent reads in a 3 jurisdictional precondition in Article 10.18.2 4 that does not exist in the text of the treaty: 5 "It's well accepted in 6 international law that there is no presumption 7 of restrictive or" expansion -- "expansive 8 interpretation of jurisdictional provisions in 9 treaties. A positive obligation to request 10 termination of domestic proceedings prior to 11 submitting a notice of arbitration imposes an 12 additional and restrictive jurisdictional 13 condition that's not present in the 14 jurisdictional provision." 15 CAFTA Article 1.2.2 requires -- 16 provides that: 17 "The parties shall interpret and 18 apply the provisions of disagreement in light of 19 its objectives set out in paragraph one and in 20 accordance with applicable rules of 21 international law." 22 The objectives set out in paragraph 135 1 one of CAFTA include creating effective 2 procedures for the resolution of disputes, 3 substantially increasing investment 4 opportunities in the territories of the parties; 5 so these are objectives F and D. 6 Further, the preamble of the CAFTA 7 states that the parties resolve to ensure a 8 predictive commercial framework for business 9 planning and investment. 10 As the tribunal is well aware, 11 Article 31.1 of the Vienna Convention of the Law 12 of Treaties codifies the well-established 13 guiding principle of treaty interpretation. 14 It's revealing that the respondent in its 15 written pleadings does not refer once to 16 principles of treaty interpretation in the 17 Vienna Convention on the Law of Treaties. 18 This is particularly surprising 19 since the entire preliminary objection rests on 20 the interpretation of Article 10.18.2. Rather, 21 the respondent asserts that there must a 22 positive obligation to discontinue under Article 136 1 10.18.2 since otherwise a waiver is defective or 2 invalid or repudiated or a number of other 3 adjectives. 4 But this is simply not the case. 5 The whole point of the submission of a binding 6 and written waiver is that it's effective, 7 notwithstanding the subsequent conduct of the 8 claimant. The state obtains the benefit of the 9 waiver and can use it to have the domestic 10 proceedings dismissed if the claimant fails to 11 discontinue proceedings or initiates new 12 proceedings. 13 As the claimants submit in 14 paragraph 17 of their rejoinder, the ordinary 15 meaning of Article 10.18.2 -- we have the text 16 in front of us -- is that a written waiver must 17 -- the notice of arbitration is accompanied by a 18 written waiver. 19 The ordinary meaning of -- of these 20 words cannot be reasonably interpreted as 21 requiring discontinuance of existing proceedings 22 prior to submitting a claim, while 137 1 simultaneously requiring a written waiver of the 2 right to continue those same proceedings. 3 If this were the case, there would 4 be no reason -- there would be no need for the 5 -- or the -- for the waiver of the right to 6 continue because there would already have been 7 discontinuance. 8 The respondent's interpretation of 9 CAFTA -- of the CAFTA text rewrites the 10 requirement to our requirement to discontinue 11 existing proceedings prior to the submission of 12 a claim and then to waive any right to initiate 13 new proceedings. And our submission is that the 14 ordinary meaning of the text does not -- does 15 not support this interpretation. 16 We say that, if the CAFTA -- the 17 CAFTA drafters have intended to make this 18 discontinuance of existing proceedings a 19 jurisdictional precondition to submitting a 20 claim, they would have done so expressly through 21 clear language to that effect, while maintaining 22 a requirement for the waiver of rights with 138 1 respect to the initiation of new claims. 2 Turning to the surrounding context, 3 the fact that Article 10.18.3 states that 4 certain types of action may be continued does 5 not warrant reading in an obligation to 6 discontinue proceedings. Rather, Article 7 10.18.3 provides an exception to the scope of 8 the required waiver. Paragraph 53 of the 9 decision on jurisdiction, and RDC in Guatemala 10 expressly refers to Article 10.18.3 as an 11 exception. 12 And we submit that this is -- that 13 this interpretation is correct, that what the 14 CAFTA drafters intended by 10.18.3 was to create 15 an exception, a limited -- a limited exception, 16 for the waivers, which, of course, is really not 17 at issue in this -- in this case. 18 If the intent of the CAFTA drafters 19 had to have been -- had been to provide an 20 absolute prohibition on continuation of domestic 21 proceedings as a condition on jurisdiction, 22 Article 10.18.3 would have been read as a 139 1 prohibition, and it's not. 2 When the CAFTA drafters wanted to 3 prohibit certain types of concurrent 4 proceedings, they did so expressly. This was 5 done, for example, in Article 10.18.4 that says 6 that no claims may be made for breaches of an 7 investment authorization, of an investment 8 agreement, if the claimant has previously 9 submitted the same breach in domestic 10 proceedings. 11 Further, Annex 10E provides that a 12 US investor may not submit a claim to 13 arbitration under CAFTA if the investor had 14 alleged a breach of CAFTA in the domestic courts 15 of a Central American party. So in the other 16 instances, we have an express prohibition. 17 Throughout its written submission, 18 the respondent states that the claimants' 19 waivers are invalid or defective because the 20 claimants did not request discontinuance of the 21 proceedings prior to submitting a notice of 22 arbitration. 140 1 The respondent argues that the 2 waivers were an -- invalid the moment they were 3 submitted. At the same time, the respondent 4 appears to agree that, as a result of the 5 waivers -- the claimants waived right to the -- 6 to the domestic proceedings. 7 Thus, on one hand, the respondent 8 acknowledges that the waivers were effective for 9 the purposes of waiving rights. There -- there 10 -- there were waivers -- there was a waiver of 11 legal rights to initiate the proceedings; but, 12 on the other hand, the respondent argues that 13 the waivers were not effective for the purposes 14 of complying with CAFTA's jurisdictional 15 requirements. 16 In addition to being -- in addition 17 to being inconsistent, the respondent's argument 18 rested on this assumption that, in order to be 19 effective, the claimant must do something more, 20 that the claimants must request termination. 21 Claimants reject this interpretation of CAFTA. 22 As noted by the tribunal in Waste 141 1 Management Two, in reference to waivers under 2 Article 11.21 of NAFTA, a waiver is definitive 3 in its effect. A waiver is a unilateral and 4 final abandonment, extinguishment, and 5 abdication of legal rights. 6 It's the very fact that a waiver 7 has this definitive effect that makes it such an 8 effective tool to protect the interests of host 9 states. 10 The respondent argues in its reply 11 at paragraph 32, that, if the -- despite the 12 written waiver, concurrent proceedings, in fact, 13 exist, the waiver is not effective because it is 14 not achieving its purpose. 15 The very effectiveness of the 16 waiver is that it provide the final and 17 definitive abandonment of the investor's rights 18 to continue any domestic proceedings with 19 respect to measures that are also subject to 20 CAFTA claims. The submission of assigned and 21 binding waiver to a respondent state ensures 22 that a state is not required to defend itself in 142 1 concurrent proceedings. 2 If the respondent's submission is 3 correct, then the corollary must be that CAFTA 4 does not -- does not permit, indeed, prohibits 5 concurrent proceedings. Since the respondent's 6 argument is that concurrent proceedings make a 7 waiver defective and thus deprives the CAFTA 8 tribunal of jurisdiction, therefore, there could 9 never be concurrent proceedings because the 10 CAFTA tribunal would never have jurisdiction. 11 In the claimants' submission, CAFTA 12 does not require exclusivity of proceedings as a 13 condition of consent to arbitration as a 14 jurisdictional condition. The structure of the 15 waiver requirement in Article 10.18 means that 16 the state is the beneficiary of the waiver, 17 ultimately has some discretion whether to allow 18 domestic proceedings to continue. 19 We do not say that this is a likely 20 or frequent occurrence. Rather, the point is 21 simply that the existence of concurrent domestic 22 and CAFTA proceedings, with respect to the same 143 1 measure, is not impossible. 2 The delivery of the waiver puts the 3 respondent state in the position of having a 4 choice. Although in the vast majority of cases, 5 respondent states will undoubtedly want to have 6 the benefit of the waiver, at the same time a 7 respondent state may have an interest in certain 8 cases in allowing the domestic proceedings to 9 continue to completion. 10 The non-disputing party of -- 11 submission of the Republic of Costa Rica 12 suggests that the principle of effectiveness in 13 treaty interpretation requires that the treaty 14 be interpreted to -- to impose a positive 15 obligation on a claimant to discontinue any 16 ongoing domestic proceedings. 17 Claimants agreed that the principle 18 of effectiveness applies to treaty 19 interpretation. In accordance with Article 31 20 of the Vienna Convention, treaty interpretation 21 should be interpreted to give effect to the 22 objects and the purposes of the treaty, and 144 1 effect should be given to the treaty text. 2 Treaty provisions and terms should not be 3 interpreted in such a way as to be infective or 4 to render them meaningless, redundant or 5 inutile. 6 Costa Rica's submission, however, I 7 respectfully submit, assumes that a written 8 waiver is not effective. In the claimants' 9 submission, it is. It ensures that a state is 10 not forced to defend itself in -- in concurrent 11 proceedings. Further, it appears that Costa 12 Rica's submission addresses post-waiver conduct, 13 conduct after the submission. The claimant and 14 the respondent agree, however, that post-waiver 15 conduct is not a jurisdictional issue. 16 Article 10.18 sets out the 17 limitations and conditions on the consent to 18 arbitration. The principle of effectiveness is 19 not served by adding additional jurisdictional 20 requirements that are not present in a treaty 21 text. Imposing an additional jurisdictional 22 requirement not evident on the face of the 145 1 treaty does not create effective procedures for 2 the resolution of disputes; nor does it give 3 effect to the ordinary meaning of the treaty 4 text as agreed between the parties. 5 The -- to complete my submissions 6 on the question of whether the failure to 7 discontinue the domestic proceedings is a 8 jurisdictional impediment, I'll -- I would like 9 to briefly address the award in Waste Management 10 One, the decision in jurisdiction in RDC 11 Guatemala, and in addition I will briefly 12 address the decision on jurisdiction in Vanessa 13 Ventures and Venezuela. 14 First, the claimants submit that 15 the -- the decisions -- with the award in the 16 decision in Waste Management and RDC 17 respectively are distinguishable on their facts. 18 In both Waste Management One and 19 RDC, the tribunals were faced with situations in 20 which there were ongoing domestic proceedings at 21 the time of -- of the issue arose before the 22 tribunal. In the case at hand, the domestic 146 1 proceedings ended three months before this 2 tribunal was constituted, this tribunal being 3 constituted on July 1st. 4 First, it's clear that there are no 5 currently ongoing proceedings in El Salvador, 6 with -- with respect to Commerce or Sanseb. The 7 jurisdictional defect in Waste Management One 8 was that the investor submitted a waiver with a 9 restrictive scope, a waiver that purported not 10 to apply to non-NAFTA claims, including claims 11 based upon domestic law. 12 As a result, the waiver was 13 defective from the day that it was submitted 14 because it did not satisfy the required "show 15 me" merit scope of the waiver. The Waste 16 Management One tribunal determined that the 17 waiver -- that a waiver containing the 18 additional language did not comply with the 19 treaty, pointing to the interpretation that the 20 investor itself gave to the additional language 21 as evidenced by its conduct, the fact that the 22 investor in that case filed three new legal 147 1 proceedings after tendering its claim. 2 In its award, the tribunal 3 repeatedly refers to the investor's post-waiver 4 conduct in assessing the investor's intention in 5 granting a qualified waiver. 6 The Waste Management tribunal 7 concluded that, in Section 30: 8 "Based on the foregoing, it's clear 9 that the claimant issued a statement of intent 10 different from that required in a waiver 11 pursuant to NAFTA Article 11.21. The waiver was 12 defective from the beginning, and also defective 13 for all claims." 14 So the -- the -- the point about 15 the Waste Management One sort of applying to the 16 situation here is -- doesn't -- is not 17 applicable because in the Waste Management case, 18 you had a defective waiver, a qualified waiver 19 that applied to all claims. 20 The issue here is to the extent 21 that there is a defect, the -- the -- the 22 noncompliance was -- is allegedly that there -- 148 1 the -- the domestic proceedings with respect to 2 one measure were not -- were not withdrawn. 3 The waiver was defective in Waste 4 Management because -- from the beginning because 5 of the qualified language. And in the 6 claimants' submission, the tribunal rightly 7 found that there was no jurisdiction because the 8 waiver was defective when it was submitted. 9 The Waste Management One tribunal 10 does not stand for the proposition, in our view, 11 that a valid waiver, generally, is invalidated 12 by subsequent conduct. That's not the issue. 13 That's not the real issue that was in dispute in 14 Waste Management One. 15 With respect to the decision on 16 jurisdiction in RDC and Guatemala, to the extent 17 that the -- that RDC and Guatemala stands for 18 the principle that the mere existence of 19 concurrent proceedings on the date of submission 20 of a CAFTA claim makes a waiver defective, we 21 respectfully submit that the -- the decision in 22 RDC should not be followed. 149 1 Although the RDC tribunal found 2 that the defect in the investor's waiver was 3 triggered because the -- the two domestic 4 arbitration proceedings existed -- sorry -- 5 existed and overlapped with the CAFTA 6 arbitration, with the greatest respect to the -- 7 the tribunal in RDC, the tribunal does not 8 explain -- there is no reasoning on why an 9 overlap necessarily renders an otherwise valid 10 waiver defective, and why that conclusion is 11 mandated by the CAFTA text as interpreted by 12 rules of a treaty interpretation. 13 The approach of the tribunal in RDC 14 may be explained by the fact that RDC's argument 15 really focused on the question of whether there 16 was an overlap. Their -- their primary 17 submission was that there wasn't an overlap; 18 therefore, there was no issue. Of course, the 19 RDC tribunal then found that there was an 20 overlap, and then made the determination that, 21 because of the overlap, there was no 22 jurisdiction. 150 1 In the claimants' submission, it's 2 incorrect to analyze concurrent proceedings and 3 -- and overlap sort of as a question of defect 4 in the waiver. Where there's a written waiver, 5 it has definitive effect. The jurisdictional 6 requirement with respect to the CAFTA 7 arbitration is met. The question is then the 8 effect of the waiver in the other proceeding and 9 whether with respect to the arbitration -- and 10 then -- and then -- and then, I guess, the 11 subsequent question, which I'll be turning to in 12 a moment, is whether sort of bad faith 13 non-compliance with the waiver might render 14 claims inadmissible. 15 The RDC tribunal's focus on the 16 overlap of different proceedings as a 17 jurisdictional test under Article 10.18.2 is 18 unpersuasive. In a case where claimants begin 19 domestic proceedings after the initiation of a 20 CAFTA claim, there would be concurrent 21 proceedings; but in that case a CAFTA tribunal 22 would still presumably have jurisdiction. 151 1 Indeed, the CAFTA tribunal may have made an 2 affirmative -- may have made a decision on 3 jurisdiction. 4 In that case, we -- it's clear that 5 the -- the tribunal has jurisdiction based upon 6 the fundamental principle, the events after the 7 submission of arbitration are not relevant to 8 the determination of jurisdiction. Simply put, 9 the initiation of proceedings after the 10 submission to arbitration would not be a 11 jurisdictional issue. 12 And the claimant asked, if the 13 initiation of new proceedings is not a 14 jurisdictional issue, why is it that the 15 continuation of existing proceedings is a 16 jurisdictional issue? 17 Different jurisdictional treatment 18 is not justified, and is not justified clearly 19 on the basis -- there is no distinction in the 20 clear language of the treaty between the effect 21 of a waiver with respect to continuation versus 22 the effect of a waiver with respect to 152 1 initiation of new proceedings. 2 This goes back to the claimants' 3 fundamental point that the mere existence of the 4 fact that there were concurrent proceedings does 5 not deny a CAFTA tribunal of jurisdiction, and 6 that there is no positive obligation to -- to 7 discontinue prior to submitting a claim. 8 Finally, just in terms of my 9 submissions on this issue, I would like to refer 10 to the Vanessa Ventures in Venezuela case, a 11 case under the Canada Venezuela Investment 12 Treaty. That treaty, like CAFTA and NAFTA, 13 requires that the investors submit a waiver of 14 the right to initiate or continue other 15 proceedings. 16 Now, in Vanessa, the tribunal 17 dismissed Venezuela's objections to jurisdiction 18 based on non-compliance with the waiver, 19 notwithstanding the fact that at the time the 20 notice of arbitration was submitted, there were 21 at least ten ongoing domestic proceedings. 22 Now, as the claimant rightly notes, 153 1 it is true that -- that Vanessa thereafter 2 discontinued those. But at the time of -- at 3 the time of the submission there were the 4 concurrent proceedings. Further, after the 5 submission of the notice of arbitration, there 6 was a final judgment in one of the cases, just 7 as in -- in -- in this case. 8 Further, Vanessa began a new 9 proceeding seeking extraordinary review of a 10 decision of the constitutional chamber. The 11 constitutional chamber then subsequently 12 dismissed Venezuela's petition for seeking 13 extraordinary review based upon the waiver, the 14 application of the waiver. 15 In Vanessa, therefore, the tribunal 16 rejected the objection to jurisdiction, even 17 though, one, Vanessa did not continue all 18 proceedings before submitting a claim; and, two, 19 that there was a final court judgment in -- 20 rendered in one of the proceedings after the 21 submission of the notice of arbitration, similar 22 to this case. 154 1 Further, the constitutional court 2 in that case, in Vanessa, dismissed the -- the 3 extraordinary review proceeding, based upon 4 Vanessa -- Vanessa's waiver. So, again, we have 5 a -- we have a domestic court that a state that 6 is a beneficiary of waiver that uses the waiver 7 to have a proceeding dismissed. 8 The respondent in its reply 9 correctly notes that the Vanessa -- in Vanessa 10 there claimants discontinued proceedings after 11 the submission of the notice of arbitration, and 12 that one of the disputes in that case was 13 whether the discontinuance had to be with or 14 without prejudice. 15 That aside, Vanessa Ventures is a 16 clear case where an investment treaty tribunal 17 found that the existence of concurrent 18 proceedings was not fatal to jurisdiction. 19 Further, Vanessa's waiver was not found to be 20 defective, even though it had initiated a new 21 proceeding. Rather, Venezuela was able to rely 22 on Vanessa's written waiver to have the 155 1 constitutional chamber review proceeding 2 initiated by Vanessa dismissed. 3 I'll now turn to the -- the -- 4 unless there are any questions regarding the 5 claimants' submissions on the issue of sort of 6 the discontinuance prior to submission of notice 7 of claim, I'll turn to the issue of -- of such a 8 post-waiver conduct. 9 Claimants' second submission is the 10 fact that -- the fact that the domestic 11 proceedings are continued after the submission 12 of the notice of arbitration is a question of 13 admissibility of claims, not jurisdiction. 14 Although the respondent accepts that 15 jurisdiction is determined as of the date of 16 filing, indeed the -- the -- the respondent 17 notes that -- I will highlight paragraph 86 of 18 its reply -- that, as of July 6, 2009, of 19 course, we -- we -- we disagree. We -- we say 20 that the date is July 2nd -- the parties' legal 21 rights and obligations relevant for the 22 tribunal's determination of its jurisdiction 156 1 were frozen as a result of the filing. 2 So even though the respondent 3 accepts that jurisdiction is determined as of, 4 you know, in our view, the 2nd of July, 2009, 5 the respondent at times also seems to suggest in 6 particular parts of its -- of its reply that the 7 validity of -- of -- of the waiver also depends 8 upon post-waiver conduct. 9 Our submission is clear that the 10 claimant -- that, in accordance with the 11 established jurisdictional principles, the 12 claimants' post-waiver conduct is simply -- and 13 cannot be relevant to the question of 14 jurisdiction. Events that take -- take place 15 after the submission of a claim to arbitration 16 do not affect jurisdiction. 17 This, however, does not mean that a 18 claimant's post-waiver conduct is irrelevant, 19 and that a respondent's state and the tribunal 20 are powerless in the face of the existence of 21 concurrent proceedings. 22 First and foremost, the 157 1 respondent's state is the beneficiary of the 2 investor's waiver, which has definitive effect 3 and which it can use to have domestic 4 proceedings dismissed. 5 And this afternoon I will return to 6 the point about the -- the -- the procedural 7 question under El Salvadorean law that was 8 discussed this morning about whether it was 9 actually possible for the -- for El Salvador to 10 have the -- the pleadings, the -- the domestic 11 proceedings dismissed. 12 In summary, the -- the -- the 13 opinion of the attorney general clearly states 14 that claimants can request to have proceedings 15 discontinued. And the claimants agree with 16 that. We -- we -- we do not object -- we do not 17 -- we agree that the -- that if -- the 18 claimants -- it was possible for the claimants 19 to have discontinued the proceedings, even 20 though the -- the issue was before the 21 deliberation of -- of the court. 22 However, the attorney general's 158 1 opinion does not say anything about the other 2 question about whether the respondent state 3 under Article 40 could have also requested to 4 have the proceedings discontinued. That -- 5 there is nothing in -- in -- in the attorney 6 general's opinion on that point -- point. 7 Our submission would be that it is 8 possible under El Salvadorean law for the 9 respondent state to have submitted the -- the -- 10 the waivers. 11 And I guess, also, in the 12 alternative, if it was impossible, in this case 13 it would be clearly -- this is not a situation 14 where the -- El Salvador tried to submit the 15 waivers to the court. The court said: 16 "Well, actually we can't do that 17 procedurally." 18 And then the respondent said -- - 19 asked the claimant: 20 "Well, can you please discontinue?" 21 And then there was a refusal by the 22 claimant. That's not the situation. 159 1 Turning to the main point, the 2 claimants submit that the tribunal has the power 3 to find that a CAFTA claim is inadmissible where 4 there are ongoing current proceedings. Once the 5 tribunal has jurisdiction, then we have the 6 existence of certain jurisdictional power. 7 The question of admissibility is 8 with respect to sort of the -- is the question 9 of, once the tribunal has jurisdiction, the 10 exercise of that power -- and it's highlighted 11 in the decision in SG Philippines: 12 "International Tribunals have a 13 certain flexibility in dealing with questions of 14 competing forums. ICSID tribunals have the 15 power to" -- "to stay a proceeding, or to find 16 that a particular claim is inadmissible until an 17 impediment to the claim has been remedied. A 18 tribunal's supervisory power to find claims 19 inadmissible provides a powerful disincentive 20 from claimants from pursuing concurrent 21 proceedings." 22 It's a control mechanism because 160 1 claimants are going to be -- will be aware that, 2 if they engage in abusive conduct, in bad faith 3 conduct, by -- in -- in -- in -- in their -- 4 their respondent's submission, you know, by -- 5 by starting, you know, multiple proceedings in 6 multiple fora, that our submission is clearly 7 that that type of abusive conduct can be 8 controlled by a tribunal on the basis of the -- 9 a -- a flagrant, sort of via bad faith 10 continuation of proceedings, can be sanctioned 11 by the tribunal by finding that those claims are 12 inadmissible. 13 MR. Van den BERG: May I ask a 14 question? On the language of Article 10.18, 15 paragraph 2, it is the period between the filing 16 of the notice of arbitration, accompanied by the 17 waiver and the date that the Supreme Court 18 renders its decision -- is that caught by the 19 words to continue before any administrative 20 tribunal as set forth in Article 10.18.2 under 21 B? 22 MR. NEWCOMBE: Mr. President, I am 161 1 unable to answer that question at the -- I would 2 like to take time to consider it. 3 MR. Van den BERG: Do you 4 understand the question? I'm saying, the -- 5 does the time between the filing of the -- the 6 request for arbitration, accompanied by the 7 waiver, which sets forth the language as 8 contained in Article 10.18.2, and the decision 9 by the Supreme Court, that period of time -- 10 MR. NEWCOMBE: Our -- our 11 submission would be that the waiver covers that 12 period of time. 13 MR. Van den BERG: That -- that 14 period, that would be covered by those words to 15 continue before the administrative tribunal, or 16 any administrative matter to be correct. 17 MR. NEWCOMBE: In our submission, 18 yes, although I would like to reserve the 19 opportunity to provide a -- a fuller submission 20 on that point this afternoon. 21 MR. Van den BERG: Now, could you 22 then also apply then your mind to the following? 162 1 That -- is it fair to assume that the claimants 2 knew that a decision would be forthcoming of the 3 Supreme Court? 4 MR. NEWCOMBE: The claimants -- 5 from the claimants' position, the proceedings in 6 the -- El Salvador after the -- the last 7 claimant -- the claimants' last submission in 8 the domestic proceedings appears to have been 9 sometime in 2008. From the claimants' 10 submission -- position, the -- the proceedings 11 were then essentially a black -- a black hole, 12 in the sense that we -- there -- there was not 13 -- there was nothing happening in those -- in 14 those proceedings. The claimants -- 15 MR. Van den BERG: Yeah, okay. 16 Right. Let's -- let's be more specific, please. 17 MR. NEWCOMBE: Yes. 18 MR. Van den BERG: On the 2nd of 19 July of 2009 -- 20 MR. NEWCOMBE: Yes. 21 MR. Van den BERG: -- your clients 22 filed a notice of arbitration together with a 163 1 written waiver. 2 MR. NEWCOMBE: Yes. 3 MR. Van den BERG: We just 4 established that -- unless you -- but subject to 5 what you would like to reflect further on and to 6 come back, that it appeared between the 2nd of 7 July 2009, and the decision of the Supreme Court 8 on the 29th of April, 2010, that period of time 9 is caught by the words: 10 "Continue before any administrative 11 tribunal." 12 MR. NEWCOMBE: Yes, Mr. -- 13 Mr. President. 14 MR. Van den BERG: All right. 15 MR. NEWCOMBE: Yes. 16 MR. Van den BERG: On the -- is 17 then my -- my follow-up question is, is it fair 18 to assume factually that on the 2nd of July of 19 2009, the date of the filing of the notice of 20 arbitration, your clients knew that at some 21 point in time after the 2nd of July of 2009, the 22 Supreme Court would render the decision? 164 1 MR. NEWCOMBE: The claimants were 2 aware that the -- as stated in the notice of 3 arbitration, that those proceedings were 4 continuing, and, yes, at some point that there 5 would -- that the matter was -- at -- at that 6 point, upon submission, the claimants were not 7 aware that it was currently in deliberation be 8 -- before the Supreme Court. 9 MR. Van den BERG: Sorry. 10 MR. NEWCOMBE: Yes. 11 MR. Van den BERG: Your clients 12 were not aware, on the 2nd of July, 2009, is 13 that your submission, that it would be that the 14 Supreme Court was in the phase of deliberating 15 its decision? 16 MR. NEWCOMBE: That's -- that's -- 17 that's correct. 18 MR. Van den BERG: Was there not a 19 subsequent notice that they were in the phase of 20 deliberations? 21 MR. NEWCOMBE: Not that we are 22 aware of. There is no evidence to that -- to 165 1 that effect. 2 There was -- 3 MR. Van den BERG: Well, were your 4 clients totally ignorant of those proceedings 5 before the Supreme Court? 6 MR. NEWCOMBE: There were -- there 7 were issues of miscommunication with -- with 8 local counsel. There was not a free flow of 9 information -- of -- of -- of information. The 10 -- in early 2009, the claimants were not, you 11 know, at the time of submitting the notice of 12 arbitration, knew that the proceedings were 13 continuing, but did not know exactly at what 14 state of -- those -- those proceedings were at. 15 MR. Van den BERG: And when did 16 they become aware of what the status was of 17 those proceedings to the extent that you -- you 18 -- you know this? 19 MR. NEWCOMBE: The claimants became 20 aware -- well, became aware of the fact that a 21 judgment had been rendered in -- in July 2010. 22 MR. Van den BERG: Very well. The 166 1 date of the Supreme Court judgment is which 2 date? 3 MR. NEWCOMBE: Is -- the 29th of 4 April is the date of the notification of 2010. 5 That -- and that information was not 6 communicated to -- to -- to claimants in the 7 United States. There was not -- 8 MR. Van den BERG: We are talking 9 about two judgments? 10 MR. NEWCOMBE: The -- yes, the two 11 judgments. 12 MR. Van den BERG: Okay. Thank 13 you. 14 MR. THOMAS: I just want to make 15 sure I understand. 16 You used the term "black hole" 17 before. As I understood the record, the 18 respective disputing parties in court 19 proceedings may file their pleadings and 20 whatever evidence in accordance with the civil 21 procedure of the respondent, and at a certain 22 point that pleading phase was completed. 167 1 And, I mean, when you say -- when 2 you use the term "black hole," which is 3 rhetorical -- 4 MR. NEWCOMBE: Yes, yes. 5 MR. THOMAS: -- not descriptive, I 6 am trying to understand whether you mean 7 something different than what one would 8 ordinarily expect following legal argument to a 9 court -- 10 MR. NEWCOMBE: Yes. 11 MR. THOMAS: -- which is that the 12 court would be deliberating, and that period of 13 time during the -- it takes to deliberate can be 14 very short, or in some cases can be very long. 15 It's not a comment about any particular legal 16 system. It's a generally known fact. 17 Do you mean something different 18 than that, that anything other than the court 19 was deliberating? 20 MR. NEWCOMBE: No, I -- I -- I 21 retract the comment that it was a -- a black 22 hole. I mean, the point was that the -- the -- 168 1 the -- nothing more than the fact that the -- 2 from the claimants' perspective, they did not 3 know when those proceedings would be resolved, 4 and that -- and that the -- yes, I say the 5 pleading part of the proceedings was -- was -- 6 was finished. 7 MR. Van den BERG: But simply to 8 confirm, you just stated also that they were 9 aware that the proceedings were continuing 10 before the Supreme Court. 11 MR. NEWCOMBE: Well, they were -- 12 they were -- the question is, as -- as of 13 July 2, 2009, when the notice of arbitration was 14 submitted, the claimants were aware that the 15 proceedings were continuing. They were not 16 aware that the attorney general had just, in 17 June, done their final submissions. That -- 18 that sort of -- that is the -- the position that 19 is put forward by the respondent -- that the 20 final sort of step in the litigation sort of 21 completed in June of 2009, that was unknown to 22 the -- to the claimants. 169 1 There is no -- there is no 2 correlation between the June 2009 date of the 3 completion of the proceedings in El Salvador and 4 the filing date on July 2, 2009. The filing 5 date on July 2, 2009 was because of the 6 three-year time limitation issues. 7 And -- and so although the dates 8 when you put them up against each other might 9 suggest that there was a reaction based upon -- 10 the claimants were acting because of the -- the 11 completion of the proceedings, that's -- that's 12 actually not -- not the case, and the claimants 13 did not know -- knew that the claims were -- the 14 proceedings were continuing, but did not know 15 that -- with respect -- with respect to the 16 attorney general's final submission in June of 17 2009. 18 MR. Van den BERG: Much earlier 19 than the Q and A -- 20 MR. NEWCOMBE: Yes. 21 MR. Van den BERG: -- may I ask you 22 a question which is just a previous point, it 170 1 has -- not -- not about what you are at this 2 point in time, which is about the 3 post-submission waiver conduct, if I may follow 4 up -- 5 MR. NEWCOMBE: Yes. 6 MR. Van den BERG: -- you were 7 discussing Waste Management One -- 8 MR. NEWCOMBE: Yes. 9 MR. Van den BERG: -- and if I 10 understand your -- the submission on your side 11 correctly, you say in -- let's see, it is your 12 response of paragraph 43. Perhaps you -- you 13 would like to take it in front of you -- you 14 rely on the dissenting opinion of Mr. Hyatt. 15 MR. THOMAS: Hyatt. 16 MR. Van den BERG: Hyatt. Sorry. 17 Do you see that? 18 MR. NEWCOMBE: Yes. 19 MR. Van den BERG: May I invite to 20 take Waste Management Two? And there's also a 21 question I have for the respondent. 22 So look at this. So you say you 171 1 rely on this dissenting opinion. Then you go to 2 Waste Management Two, and please go first to 3 paragraph 19 of Waste Management Two. Do you 4 have it there in front of you? 5 MR. NEWCOMBE: Yes. 6 MR. Van den BERG: Very well. And 7 there they discuss what happens in the first 8 arbitration. 9 And then you see the last sentence 10 of this paragraph, it says: 11 "The respondent" -- that is in this 12 -- in this case Mexico -- "however stresses Mr. 13 Hyatt's" -- 14 MR. NEWCOMBE: Hyatt's. 15 MR. Van den BERG: -- Hyatt's 16 statement that I quote: 17 "Entire" -- "the entire NAFTA claim 18 has been undone." Unquote. 19 "In its view this indicated" more 20 -- "much more than a procedural error 21 immediately for approval by new proceedings." 22 Do you see that statement? 172 1 MR. NEWCOMBE: Yes. 2 MR. Van den BERG: So that's you 3 rely on the statement of -- of -- of Mr. Hyatt. 4 They go on in paragraph 20, 21, 5 discussing this, 22, and then they comment at 6 paragraph 23, and that's where my question is 7 directed at. 8 It says, and I quote now from Waste 9 Management Two: 10 "In the present tribunal's view, 11 the dissenting arbitrator's characterization of 12 the effect of the decision cannot be decided, 13 even if that characterization was clear and 14 unambiguous, (which it is not)" closed brackets. 15 "Only the majority of the tribunal 16 could determine the effects of its decision, 17 and, as noted, there is no indication on the 18 face of the award that the majority expressed 19 any view on the matter." End of the quote. 20 My question to you is, and then 21 probably also for the -- for the respondent, is, 22 what value, if any, has this tribunal to attach 173 1 to the dissenting opinions, especially the 2 dissenting opinion of Mr. Hyatt, on which you 3 rely in paragraph 43 of your response, in light 4 of paragraph 23, or in Waste Management Two? 5 Perhaps you would like to reflect on this. 6 MR. NEWCOMBE: Yes, thank you. 7 (Brief pause.) 8 MR. Van den BERG: You are online 9 now. I got a note. 10 MR. NEWCOMBE: Although the 11 claimants affirm that this tribunal has the 12 power to find that claims are inadmissible 13 because of the continued existence of concurrent 14 proceedings, we submit there is no impediment to 15 the admissibility of this -- in this case, 16 because domestic proceedings ended before this 17 tribunal was constituted. 18 In this case, there were no 19 concurrent proceedings. Under arbitration rule 20 six, the tribunal was constituted; and the 21 proceedings in this arbitration are deemed to 22 have begun on July 1, 2010, well over three 174 1 months after the date of the second Supreme 2 Court judgment on 18th March, 2010. 3 MR. THOMAS: May I just understand 4 -- may I just understand what that means? 5 Is it your argument that, because 6 the domestic proceedings were completed, that 7 the tribunal has jurisdiction over all claims, 8 including the claims relating to the revocation 9 of the environmental permits? 10 MR. NEWCOMBE: Yes. We -- we -- we 11 -- we -- we submit that there is jurisdiction 12 with respect to all claims because of the way -- 13 yes. 14 MR. THOMAS: And you would say that 15 to the extent that the tribunal -- you would say 16 that the question then becomes one of 17 admissibility because of the fact that the 18 domestic proceedings were not discontinued. 19 MR. NEWCOMBE: Discontinued. 20 MR. THOMAS: And do you -- do you 21 say that those claims are admissible? 22 MR. NEWCOMBE: Yes, in our 175 1 submission the -- the -- the claims are 2 admissible, because there is currently -- there 3 is currently no impediment to the tribunal 4 considering those -- those claims. 5 And may I -- I will turn to my -- 6 my -- my submissions. 7 The third submission is that the 8 claimants have acted consistently with the 9 waivers since July 2, 2009. Respondents charge 10 that the claimants have engaged in manifest 11 violation of an explicit precondition up to 12 initiating CAFTA arbitration and have acted in 13 bad faith and that their conduct is an affront 14 to the international arbitration process. These 15 allegations are frivolous and not worthy of 16 serious attention. 17 What is the evidence of claimants' 18 bad faith? In its reply at paragraphs 128 to 19 132, the respondent points to a delay in 20 constituting this tribunal, some factual errors 21 in the notice of arbitration, and, of course, 22 the failure to get -- discontinue the domestic 176 1 proceedings. 2 The revocation of the environmental 3 permits in the respondent's other measures have 4 destroyed the claimants' business in El Salvador 5 and prevent the claimants from benefiting from 6 their investments. 7 The claimants worked hard to 8 address the legal and logistical and financial 9 challenges resulting from the measures. The 10 claimants prepared their waivers with careful 11 attention to CAFTA requirements, and did exactly 12 what CAFTA Article 10.18.2 says that they should 13 do. 14 Claimants did not commence any new 15 litigation and took no action in the domestic 16 proceedings. Shortly after the submission of 17 their notice of arbitration, the Attorney 18 General of El Salvador sent a letter to the 19 Secretary General of ICSID, and in the attorney 20 general's letter of 14th August, 2008, the 21 attorney general asked the -- the secretary 22 general to find that there was -- the claims 177 1 were manifestly outside the jurisdiction, 2 because the claimants' waivers were defective. 3 The attorney general's letter then 4 states that, even if the claimants were to 5 withdraw the legal proceedings still pending in 6 El Salvador, claimants' failure to honor their 7 waivers before submitting their request for 8 arbitration to ICSID cannot be remedied once the 9 request has been filed. 10 The letter made it clear that the 11 attorney general's position was that the waivers 12 were defective, the defects could not be 13 remedied, and that formally discontinuing the 14 domestic proceedings would have no effect on 15 ICSID jurisdiction. 16 The fact that the claimants took no 17 action to formally discontinue the domestic 18 proceedings is entirely consistent with the 19 attorney general's position that any such action 20 would be pointless. Further, it must be noted 21 that the Republic of El Salvador never at any 22 point requested that the claimant take the 178 1 formal step to discontinue the domestic 2 proceedings. Rather, El Salvador's position was 3 that the CAFTA arbitration should be 4 discontinued. 5 The respondent refers in its reply 6 to the attorney general's communication of 7 August 1, 2009, to the Court regarding the 8 status of the proceedings. 9 Despite having complained of the 10 concurrent proceedings four days earlier in the 11 letter to ICSID, it does not appear that the 12 attorney general brought the waivers to the 13 attention of the court in August of 2009 or 14 thereafter, including when the attorney general 15 received the court notification on October 1, 16 2009. 17 El Salvador suggests that the 18 claimants should have responded to this 19 notification from the court, but the 20 notification is clearly addressed to the 21 attorney general. And it's in any event sort of 22 unclear why local counsel, given that it was a 179 1 noticed to the attorney general, why local -- 2 there was no reason for local counsel to respond 3 to that notice from the court. 4 Respondent also refers to a letter 5 from El Salvador's lawyer, Attorney Pedro Valle, 6 in December of 2009 to MARN, to suggest the 7 claimants were awaiting the domestic 8 proceedings. The letter in -- the letter, in 9 fact, suggests quite the opposite. 10 Attorney General Pedro Valle 11 explains that, due to the domestic proceedings 12 challenging the revocation of the environmental 13 permits, that Commerce had not complied with 14 various requirements established in the 15 resolution for the closure of the San Cristobal 16 plant. 17 He then says that the company was 18 closing the facility. In paragraph four he says 19 that: 20 "Compliance with the measures 21 established by the Ministry in its reference -- 22 in reference to its resolution dated July 5, 180 1 2006, will begin." 2 Commerce thus was complying with 3 the very same resolutions that were the subject 4 of the domestic proceedings. Contrary to the 5 respondent's view of the claimants waiting for a 6 favorable result overturning the resolutions, in 7 December of 2009, the claimants were actually in 8 -- complying with the requirements for the 9 closure of the facilities required with MARN 10 resolutions. 11 This demonstrates that the 12 claimants were, in fact, complying with the 13 challenged act, conduct completely at odds with 14 the respondent's allegations that the claimants 15 were awaiting a favorable result in the domestic 16 litigation. 17 This -- this allegation is 18 completely fanciful. Having delivered the 19 waivers in good faith, there was no need to take 20 the formal step of discontinuing the 21 proceedings, a step that the attorney general 22 had in any event informed them was pointless. 181 1 Finally, let us note that 2 respondent has suffered no prejudice by the 3 conclusion of the domestic proceedings in its 4 favor. Indeed, the respondent relies upon the 5 court decisions to suggest that the revocation 6 of the environmental permits were justified and 7 legal under El Salvadorean law. 8 Of course, what's at issue in -- in 9 -- in -- in the CAFTA claim is whether there was 10 a breach of -- of -- of CAFTA obligations, not 11 whether there was a breach of El Salvadorean 12 administrative code. 13 And if the claimants had obtained a 14 favorable result in the domestic proceedings, 15 respondents would now undoubtedly be arguing 16 that the waivers were effective to waive any 17 rights in those proceedings, and that a waiver 18 of rights to initiate any enforce -- and that 19 there was -- would be also a waiver of any 20 rights to initiate sort of any enforcement 21 action to obtain the benefit of this fanciful, 22 favorable result. 182 1 The point with the respond -- the 2 claimants' submission with respect to the 3 definitive defect of the waivers is that, after 4 the claimants submitted the waivers, there is 5 not going to be a favorable result, whatever 6 happened. The waivers ended -- ended any 7 expectation or right to the benefit from the 8 domestic proceedings. 9 Mr. President, I am aware of the 10 time. Perhaps the -- could I -- according to my 11 watch, I have three, four more minutes. 12 You know, I am -- I was asking for 13 clarification on the amount of time. 14 MR. Van den BERG: You are right on 15 your watch, and there is also another right; but 16 there is a human right to food. 17 MR. NEWCOMBE: Yes. 18 MR. Van den BERG: And -- and let's 19 see how you can deal with this. Do you still 20 have -- you're at your slide 52? And you're -- 21 still to slide 59. 22 MR. NEWCOMBE: Mr. President, what 183 1 -- what I would propose doing would be to -- to 2 make the submission on -- on point four, with 3 respect to the preliminary objection cannot 4 result in the dismissal of the CAFTA's -- 5 claimants' CAFTA claims, the -- sort of the RDC 6 overlap issue, which should take about five 7 minutes, and then my -- my -- my submissions 8 with respect to San Sebastian and their foreign 9 investment law can really be wrapped into the 10 claimants' response this afternoon, and -- and 11 we can be responsive to the -- to the 12 respondent's arguments this morning on -- on 13 those further submissions. 14 MR. Van den BERG: Fine from the 15 respondents? 16 MR. SMITH: Yes. 17 MR. Van den BERG: Please proceed. 18 But really stop at a quarter to 2. You may do 19 that. 20 MR. NEWCOMBE: Thank you very much, 21 Mr. President. 22 My fourth submission addresses the 184 1 point that the respondent's preliminary 2 objection cannot result in the dismissal of all 3 of the CAFTA -- claimants' CAFTA claims. The 4 question for the tribunal to decide -- decide is 5 this: 6 If the tribunal were to find that 7 the failure to discontinue the domestic 8 proceedings creates a jurisdictional impediment, 9 does this affect El Salvador's consent to the 10 entire CAFTA arbitration? 11 Or is its consent -- or is its 12 consent to arbitrate claims relating to sort of 13 -- does it affect El Salvador's consent to the 14 entire CAFTA arbitration, or -- or only its 15 consent to arbitrate claims relating to the 16 revocation of the environmental permits? 17 Claimants submit that any 18 jurisdictional defect that the tribunal finds 19 applies only to the claims with respect to the 20 respondent's revocation of the environmental 21 permits. The claimants submit that the general 22 approach in the tribunal in RDC and Guatemala 185 1 should be followed on this issue, and any defect 2 and consent only applies to the extent of the 3 overlap at -- at -- of the measures at issue in 4 the CAFTA, and the other proceedings. 5 As stated by the RDC tribunal, the 6 word "claim" in Article 10.18 means the specific 7 claim and not the whole arbitration in which the 8 claim is maintained. The interpretive issue is 9 whether the word "claim" in Article 10.18.2, "no 10 claim may be submitted to arbitration," means 11 the entire arbitration proceeding or whether a 12 claim submitted to arbitration may contain 13 multiple claims, such that each claim is to be 14 considered separately as a claim subject to the 15 provisions of Article 10.18.2. 16 In RDC the tribunal noted that 17 Article 10.18.1 time-bars claims older than 18 three years from the date on which the claimant 19 first acquired knowledge of the alleged breach. 20 Here the word "claim" must mean each individual 21 claim submitted to arbitration, because the time 22 limit runs from the date of each individual 186 1 measure that is alleged to breach CAFTA. The 2 RDC tribunal rightly notes that there is no good 3 reason why the same word in 10.18.2 would have a 4 different meaning. 5 As the RDC tribunal also notes, the 6 reference to claim in 10.18.4 is to a specific 7 type of claim. And, further, Article 10.16.2 8 clearly indicates that a claim to arbitration 9 can include a number of different claims for 10 breaches of various provisions of CAFTA. 11 Article 16.2B and C require 12 information for each claim. Respondent's 13 interpretation of "No claim may be submitted to 14 arbitration," and Article 10.18.2 is excessively 15 restrictive. 16 Consent to arbitration is not a 17 binary choice between consent to all claims, and 18 consent to no claims. Each claim must be 19 assessed on its merits with respect to the -- 20 with -- with respect to various jurisdictional 21 requirements imposed by the treaty, whether they 22 be temporal requirements, subject matter 187 1 requirements, or with respect to the submission 2 of a waiver. 3 Claimants make claims of breach of 4 CAFTA and the foreign investment law based on a 5 number of measures other than -- other than the 6 revocation of the environmental permits, 7 including respondent's conduct with respect to 8 the extension of the exploration -- exploration 9 licenses, the de facto moratorium, and other 10 measures. 11 The respondent self-acknowledges 12 that the resolutions revoking environmental 13 measures do not constitute all the claims in 14 this arbitration. Dismissing an entire 15 arbitration and all claims based on a partial 16 overlap is not inconsist -- is not consistent 17 with the objective of CAFTA to introduce 18 effective procedures of dispute settlement, and, 19 as rightly noted by the tribunal in RDC, this is 20 a rather ineffective and procedurally 21 inefficient result. 22 The de facto moratorium is a 188 1 continuing measure. El Salvador is not issuing 2 any regulatory approvals for metallic mining. 3 So notwithstanding the fact of the -- the 4 question of the revocation of the environmental 5 permits, there is an ongoing de facto moratorium 6 on mining. 7 Dismissal of the entire 8 arbitration, specifically all the claims based 9 upon the waiver issue, would simply result in 10 the claimants resubmitting the CAFTA claims 11 based upon the de facto moratorium and other 12 measure, a procedurally inefficient result, and 13 not one dictated by the clear text of NAFTA as 14 affirmed by the tribunal in RDC and Guatemala, 15 which correctly decided this issue. 16 With that I will complete my 17 submissions and -- and continue in the 18 afternoon. 19 MR. Van den BERG: But you are 20 doing that during the time of the rebuttal? 21 MR. NEWCOMBE: Yes. I -- our -- 22 the -- within the one hour. 189 1 MR. Van den BERG: Yeah, fine. 2 MR. NEWCOMBE: I understand that we 3 will have the -- the one hour. 4 MR. Van den BERG: I would like to 5 make -- make one thing clear. If there is 6 something which has not yet been raised and to 7 which the respondents would like to reply, then 8 I would just leave it to reply on -- on the side 9 of the respondents. Otherwise, you get an 10 uneven -- unbalanced proceeding, yes. 11 MR. SMITH: Yes. 12 MR. Van den BERG: Okay. Then we 13 will now adjourn for lunch until quarter past 3. 14 I understand that the recording has 15 been made of this morning's session, and the 16 taped DVD, okay. 17 MR. MONTANES-RUMAYOR: It will be 18 working shortly. We're working with that. 19 MR. Van den BERG: Okay. For those 20 who are now viewing us, the morning session can 21 be viewed during the intermission. On the web 22 site, it will be posted shortly. What do you 190 1 mean by word "shortly"? 2 MR. MONTANES-RUMAYOR: Today, in 3 the next two or three hours. 4 MR. Van den BERG: Next -- as soon 5 as possible. Let's put it that way. Okay. 6 Recess until 3:15. 7 (There was a lunch break.) 8 MR. Van den BERG: All right. Then 9 we resume the hearing. And it's now time for 10 rebuttal for the respondents. 11 Mr. Smith, please proceed. 12 REBUTTAL ARGUMENT BY THE RESPONDENTS 13 BY MR. SMITH: 14 MR. SMITH: Thank you very much, 15 Mr. President, members of the tribunal. 16 I would like to begin this 17 afternoon by -- I would like to begin this 18 afternoon by responding to the specific 19 questions that the tribunal has posed this 20 morning. 21 The first question I would like to 22 respond to is with regard to Costa Rica's 191 1 reference to the principle of "effet utile" in 2 their non-party -- their non-disputing party 3 submission as regards the waiver requirement and 4 CAFTA Article 10.18.2. 5 In their affirmative submission 6 this morning, claimants indicated that they 7 agree that the principle of "effet utile" is 8 applicable to CAFTA and to the waiver of 9 requirement, and El Salvador also agrees that 10 this is a fundamental principle of treaty 11 interpretation, and it would apply to the 12 interpretation of CAFTA. 13 As regards the decision in Mobile 14 v. Venezuela, my understanding of that decision 15 is that the tribunal came to the conclusion 16 that, while this principal applies to treaty 17 interpretation, it does not apply to the 18 interpretation of the unilateral acts of states. 19 For instance, it would apply to the 20 interpretation of CAFTA. It would apply to the 21 interpretation of the ICSID Convention, but it 22 would not, for example, apply to the 192 1 interpretation of the investment law of 2 El Salvador, which under international law is 3 considered a unilateral act. 4 In fact, the decision regarding 5 "effet utile" at paragraph 23 of the Mobile v. 6 Venezuela decision was a discussion of 7 Venezuela's investment law as a unilateral act, 8 and the decision of the tribunal was that 9 because that investment law is a unilateral act, 10 it is not to be interpreted under the principle 11 of "effet utile." 12 If we apply the principle to the 13 waiver requirement and -- well, let's just say 14 this: 15 As -- if applying the principle to 16 the waiver requirement is proper as Costa Rica 17 did, it also leads to the conclusion that, in 18 this case, the waiver must be understood to 19 include the obligation to comply with the terms 20 of the waiver. Otherwise, there would have been 21 no way to terminate the proceeding in 22 El Salvador. 193 1 The waiver requirement would be 2 deprived of all effectiveness if the claimants 3 had no obligation to withdraw their proceedings 4 to discontinue, their proceedings in 5 El Salvador, because there would have been no 6 way for the waiver requirement to be complied 7 with. 8 The state would not be able to make 9 it -- would not be able to cause compliance, and 10 the claimants, if they did not cause compliance, 11 obviously -- if the claimants had no obligation 12 to comply, then the waiver itself would be 13 completely without any effect. 14 The next question posed by the 15 tribunal was with regard to the discontinuance 16 of proceedings before the Supreme Court of 17 El Salvador under Article 40 of the 18 administrative -- administrative jurisdiction 19 law. 20 In the short time that we have had 21 over the lunch break to look at this issue, it 22 has not been possible for me to come to a 194 1 conclusion as to whether that withdrawal would 2 be with or without prejudice, both looking at 3 Article 40 itself and also the Salvadorean civil 4 code. And I would not like to put forward an 5 opinion on the complicated matter of Salvadorean 6 procedural law without being certain of the 7 conclusion. 8 And I would ask the tribunal to 9 give us the opportunity to consult with local 10 counsel and do some research and provide perhaps 11 in writing in a time period established by the 12 tribunal an answer to the question of whether 13 that termination of the proceeding would be with 14 or without prejudice. 15 MR. Van den BERG: You would like 16 an answer from the tribunal now? 17 MR. SMITH: No, no. I'm just 18 saying that that is our position. The tribunal 19 does not have to give us an answer now. 20 MR. Van den BERG: While we are at 21 it, how many days do you need for that? 22 MR. SMITH: I would -- I would 195 1 think a minimum of seven days. I would like to 2 have 14, if possible. 3 MR. Van den BERG: You are mindful 4 that we are on expedited proceeding. 5 MR. SMITH: Okay. Seven is fine. 6 MR. Van den BERG: Seven real days, 7 okay. 8 MR. SMITH: Okay. Seven real days, 9 yes. 10 MR. Van den BERG: Okay. Thank 11 you. 12 MR. SMITH: The next question posed 13 by the tribunal was the question of whether the 14 statements of the CAFTA state parties would be 15 considered subsequent practice in accordance 16 with the Vienna Convention on the law of 17 treaties, Article 31:3(b). That article 18 indicates that there shall be taken into account 19 in interpreting a treaty together with the 20 context any subsequent practice in the 21 application of the treaty which establishes the 22 agreement of the parties regarding its 196 1 interpretation. 2 Without a doubt, the statements of 3 the CAFTA parties, both in the context of 4 arbitration hearings where they are acting as 5 respondent and putting forward legal briefs 6 which state their legal positions, as well as in 7 submitting non-disputing party submissions in 8 CAFTA proceedings, are subsequent practice to 9 the treaty. 10 We do not have subsequent practice 11 of all seven CAFTA members; so it is not 12 possible to reach the conclusion that there is 13 an agreement among all of the CAFTA members. I 14 think it is, however, possible to say that the 15 acts of these states are subsequent practice and 16 signify the agreement of those states who have 17 engaged in that practice. 18 MR. Van den BERG: Would you, then, 19 say that these positions taken by the states 20 is -- the number of them is not all seven as you 21 indicated -- Honduras, for example, has not 22 taken a position -- why not be in a position to 197 1 take a position. To be more accurate in that 2 respect -- is equivalent to, for example, the 3 interpretive note of 2001 of the NAFTA parties? 4 In other words, I don't know if you are familiar 5 with that note. 6 MR. SMITH: I -- 7 MR. Van den BERG: Don't worry if 8 you're not. Then you have to ask somebody else 9 what the note means, whether they took the NAFTA 10 parties -- said -- together, then said, "Look, 11 we want, for example, the minimum requirements 12 to be interpreted in this way." 13 MR. SMITH: It is not equivalent to 14 the interpretive note because the interpretive 15 note is a statement by all of the parties which 16 would, in fact, I think be a subsequent 17 agreement between the parties regarding the 18 interpretation of the treaty under the Vienna 19 Convention Article 31:3(a). 20 MR. Van den BERG: Thank you. 21 MR. SMITH: It is, in this regard, 22 notable in this context that the claimant here, 198 1 who is only a third-party beneficiary of the 2 treaty signed by its state of nationality, is 3 actually asserting an interpretation of the 4 treaty that contradicts the interpretation of 5 its state of nationality. 6 I think that that is an important 7 thing for -- an important point for the tribunal 8 to keep in mind as a investor under a treaty 9 such as CAFTA, is not a party to the treaty -- 10 is a third-party beneficiary to that treaty and 11 is acting in a way in putting forward an 12 interpretation that actually contradicts the 13 interpretation of the state of which it is a 14 national. 15 The next question posed by the 16 tribunal is whether the Government of 17 El Salvador may oppose discontinuance of a case 18 before the Supreme Court and a case under the 19 administrative procedure law of El Salvador. 20 And it is clear to us that the government cannot 21 prevent discontinuance. Article 40 of that law 22 makes clear that the claimant may terminate the 199 1 proceedings without the consent of the 2 government, and the government cannot prevent 3 termination. 4 The next question as regards -- 5 although it was posed to the claimants, it also 6 was directed to us -- regards the value or the 7 extent to which dissenting opinions can or 8 should be followed by arbitration tribunals. 9 The first point is that it's very 10 clear that only the award in an arbitration has 11 legal effect. A dissenting opinion has no legal 12 effect. El Salvador agrees with the statement 13 of the Waste Management Two tribunal that only 14 the majority of the tribunal speaking as the 15 tribunal could determine the effect of its 16 decision. 17 El Salvador also believes that 18 dissenting opinions are clearly less persuasive 19 than the awards of arbitration tribunals, in 20 part because they are almost always issued by 21 party-appointed arbitrators as in the case of 22 the dissenting opinion of Keith Hyatt in Waste 200 1 Management One. 2 Obviously, dissenting opinions are 3 very often written by very learned legal 4 scholars and to the extent that they are in and 5 of themselves persuasive as legal scholarship, 6 they certainly do not need to be ignored. But 7 as legal authority, they do not have any binding 8 legal effect. 9 Finally, the tribunal raised a 10 question with regard to whether the waiver in 11 CAFTA Article 10.18.2, applies to the -- to any 12 proceeding on the investment law of El Salvador 13 and particularly whether that waiver would apply 14 to proceedings on the investment law before this 15 tribunal. 16 El Salvador maintains that, in 17 fact, the waiver applies to all proceedings, 18 other than CAFTA proceedings before this 19 tribunal, including investment law proceedings 20 whether they be brought before this tribunal or 21 before any other tribunal. 22 If we could bring 10.18.2 up on the 201 1 screen. Can we -- 2 (There was a discussion off the 3 record.) 4 MR. SMITH: Okay. 5 (There was a discussion off the 6 record.) 7 MR. SMITH: The waiver is of any 8 right to initiate or continue before any 9 administrative tribunal or court under the law 10 of any party or other dispute settlement 11 procedures any proceeding with respect to any 12 measure. 13 It is the view of El Salvador that 14 the adjudication of claims under the investment 15 law is a proceeding within the meaning of any 16 proceeding, and it would be -- it is a 17 proceeding even when those claims are 18 adjudicated before the same tribunal as the 19 CAFTA claims. 20 The fact that there is a single 21 tribunal doesn't make the CAFTA proceeding and 22 the investment law proceeding the same 202 1 proceeding. The reference to other dispute 2 settlement procedures is not a reference to 3 dispute settlement procedures other than this 4 tribunal. El Salvador is not arguing that this 5 tribunal is somehow a dispute -- a dispute 6 proceeding other than itself. Other dispute 7 procedures as to distinguish it from local 8 proceedings, that could essentially be read 9 international arbitration. 10 So it is clearly El Salvador's 11 position that the waiver would apply to 12 investment law proceedings even before this 13 tribunal. 14 Of course, this issue, in the 15 understanding of El Salvador, is not currently 16 before the tribunal for decision. El Salvador 17 certainly reserves its right to raise it in a 18 jurisdictional objection at a later time, but 19 doesn't consider that that issue has been placed 20 before the tribunal at this time for decision. 21 I also want to mention the decision 22 in the Pac Rim v. El Salvador case mentioned by 203 1 claimant this morning. No doubt that decision 2 was issued, but it was a decision under the 3 expedited proceedings under CAFTA 10.20.5, which 4 was without prejudice for El Salvador to raise 5 the issue again in jurisdictional objections at 6 a later time. 7 In fact, El Salvador has raised the 8 issue again. So in El Salvador's view, that 9 decision is not a final decision. It's a 10 decision still subject to further review by the 11 tribunal that issued it, and it will not become 12 final until that further review has been 13 completed. 14 I believe with that, I have 15 answered all of the tribunal's questions. If I 16 have left anything unanswered, please let me 17 know. 18 MR. Van den BERG: We have one 19 further question for you, for the respondents. 20 Obviously, also the claimants may wish to 21 comment on this. And it is this: 22 What is the legal basis for 204 1 respondent to state that claimant should have 2 acted beyond the text of Article 10.18.2? And 3 this means -- what the text says is that, put 4 colloquially, a piece of paper has to be added 5 to the notes of arbitration. And it says, "We 6 waive any right to initiate or continue," et 7 cetera. 8 MR. SMITH: Okay. Yes. 9 MR. Van den BERG: You take it one 10 step further and the respondent says, "And you 11 should have, therefore, actively discontinued 12 proceedings in El Salvador before the Supreme 13 Court." 14 So what is the legal basis? What I 15 heard this morning from you was two bases -- and 16 we heard this morning you say "implied 17 obligation," and then we read your submissions 18 that was in reference to good faith. 19 Could you enlighten us more about 20 the legal basis for you taking that position? 21 MR. SMITH: Yes. 22 (There was a discussion off the 205 1 record.) 2 MR. SMITH: The text -- again, I -- 3 going back to the interpretation of treaties -- 4 because here we are interpreting a treaty and 5 Article 31 of the Vienna Convention on the Law 6 of Treaties -- does state that a treaty must be 7 interpreted in good faith in accordance with the 8 ordinary meaning, to be given the terms of the 9 treaty in their context and in the light of 10 their object and purpose. 11 The text says, "No claim may be 12 submitted to arbitration under this section 13 unless claimants submit a written waiver." 14 Now -- so there's the term 15 "waiver," and there is a meaning under law and 16 an understood meaning of the term "waiver," and 17 El Salvador would submit that the term "waiver" 18 includes two aspects. One is a formal 19 submission of the waiver, and the second is the 20 material compliance, the material aspect of the 21 waiver which is to act in conformity with the 22 waiver. 206 1 And the good faith requirement 2 comes in that, when a party makes an 3 irrevocable, final decision, that is, they put 4 forward a waiver that binds them in law that 5 they have the obligation to comply with that 6 waiver, and that obligation is part of the 7 meaning of the word "waiver." 8 "Implicit" may be the right word, 9 but when states use the term "waiver," states 10 mean -- mean formally waive and materially 11 waive, which means acting in compliance with the 12 waiver. This is precisely the interpretation 13 that the Waste Management One tribunal gave to 14 NAFTA, and it is the interpretation that all but 15 one of the states' parties have also given to 16 this text. 17 MR. Van den BERG: The text itself 18 says the written waiver, and that's -- at least, 19 textually, would refer to a document. And if I 20 listen to the claimants, they say: 21 "Well, that is what we have done. 22 We have submitted that document. It's a written 207 1 waiver, and we have actually repeated the text 2 here." 3 And what Waste Management One, 4 apparently, does is go beyond that. And now you 5 are going to distinguish between a formal 6 requirement, which is the written document, and 7 then take it one step further; and there is also 8 a material requirement. And do you, in means of 9 interpretation -- and which view of 10 interpretation do you use? 11 MR. SMITH: It is El Salvador's 12 position that the use of the term "waiver" 13 includes the material aspect of a waiver, that 14 is, it is included in the meaning of the term. 15 It is in the plain meaning of the text within 16 the use of the word "waiver." 17 MR. Van den BERG: But if you use 18 the expression "written waiver," then you 19 disconnect the word "written" from "waiver." 20 MR. SMITH: No, well, written -- 21 MR. Van Den BERG: That would be 22 parsing the language here too much. 208 1 MR. SMITH: Let me address that. 2 "Written waiver" as opposed to "oral waiver." 3 That is, if the waiver, in order to be valid, 4 must be in writing, it's a requirement to put it 5 in writing. It is not a distinction to say that 6 it is a written waiver and, therefore, only a 7 formal waiver. It has to be in writing. 8 If it were presented orally, it 9 would be invalid. Written is just to indicate 10 that the form of the waiver must be in writing, 11 but it does not change the meaning of the word 12 "waiver." 13 MR. NAÓN: So if I understand you 14 correctly, the waiver -- the written waiver that 15 would be required under this provision should 16 say, "And we have submitted -- submitted a 17 waiver in writing before the Salvadorean Supreme 18 Court." 19 Those words should have been 20 included in the waiver to be a waiver qualified 21 under the treaty? 22 MR. SMITH: No. The waiver -- the 209 1 waiver would not need to include those words. 2 The waiver includes the requirement to act in 3 conformity with the waiver. That is, the fact 4 that it is a waiver means that there is a 5 material requirement to comply with the waiver. 6 So it is the act of issuing the 7 waiver that creates the requirement to act in 8 conformity. The waiver does not need to have 9 any additional language in order for it to 10 include a material requirement. The waiver, as 11 stands, would include the requirement to act in 12 good faith in accordance with the waiver. 13 MR. NAÓN: Thank you. 14 MR. SMITH: One -- now, I will 15 turn -- sir? Yes. 16 MR. THOMAS: Let me just ask a 17 question. 18 Are the parties in agreement that 19 the only relevant date for evaluating the waiver 20 is the date of the submission of the claim? 21 MR. SMITH: I don't think I can 22 give a yes-or-no answer to that question. 210 1 El Salvador agrees that the waiver must be valid 2 on the date that it is submitted. El Salvador 3 agrees that, as a general rule and international 4 arbitration law, jurisdiction is determined on 5 the date of filing of -- or the date of 6 initiation of arbitration proceedings. 7 That doesn't necessarily mean that 8 acts that take place after that date are 9 irrelevant to the validity of the waiver. That 10 is the key date. But the validity of the waiver 11 depends, as the Waste Management tribunal 12 indicated, on the good faith intent of the party 13 to comply with the waiver. Subsequent acts may 14 be evidence that the waiver was invalid on the 15 date that it was filed. 16 Similarly, the fact that the waiver 17 is filed on the date of the notice of 18 arbitration, and that is the date for 19 determining jurisdiction, that clearly and as 20 admitted by claimants does not mean that 21 pre-waiver -- that conduct before that date is 22 not relevant. 211 1 And the question for the tribunal 2 is: Was the waiver valid when filed? El 3 Salvador's position is that, because the 4 claimants did not take steps to terminate the 5 proceedings, and at the date of filing had taken 6 no such steps and the proceedings continued, 7 they continued the proceedings that the waiver 8 was invalid. 9 That implies that they must have 10 taken some steps prior to filing; but the date, 11 as you've indicated, the crucial date, is the 12 date of filing. But there are relevant actions 13 before and after -- actions relevant to 14 evaluating the validity of the waiver on that 15 date. I hope that answers your question. 16 MR. THOMAS: Yes. Do I take that 17 to mean -- and I'm thinking -- I'm mindful of 18 what was said in the RDC case where there is a 19 discussion of the overlap of claims. 20 Are you saying to us that, if there 21 were domestic proceedings extant as of the date 22 of the filing of the waiver, that a proper 212 1 waiver cannot be given? Is that your argument? 2 It's not possible for the claimant to give a 3 proper waiver if there are extant domestic 4 proceedings in relation to the same measure? 5 MR. SMITH: If -- again, the 6 claimant -- the requirement is that the claimant 7 act in conformity with the waiver, that is, it 8 comply with the material requirement that is 9 inherent in the issuance of a waiver, inherent 10 in the term of a waiver. 11 So it is -- it is whether or not 12 they have complied with their obligations under 13 the waiver that is determinative. It may be 14 that the proceedings are still continuing 15 because they have taken steps to comply by 16 requesting discontinuance, and that 17 discontinuance has not happened yet. Okay? Am 18 I being clear? 19 That is, the focus is on the waiver 20 itself and the validity of the waiver. And it 21 is on the actions of the claimants in complying 22 with the material aspect of the waiver, not 213 1 necessarily with what is happening in the 2 proceedings themselves. 3 I would like to move now to some 4 rebuttal points as to what was said by the 5 claimants this morning. Claimants spent a 6 considerable amount of time discussing the 7 letters sent by El Salvador at the initiation of 8 this arbitration and indicating what those 9 letters told them or did not tell them they 10 should do. They have indicated that they did 11 not comply with the waivers because El Salvador 12 said in its letters -- told them that 13 withdrawing the local proceedings would not cure 14 jurisdiction. 15 But the obligation to comply with 16 the waiver does not come from El Salvador's 17 letters. Claimants had the obligation under 18 CAFTA. And they did have a way to comply and 19 preserve their CAFTA claims, but they chose not 20 to use it. El Salvador had nothing to do with 21 this. El Salvador did not have an obligation to 22 send the claimants a later saying, "If you take 214 1 the following steps, the problems we have 2 pointed out to you might be cured." 3 Claimants are in a position to hire 4 counsel, to study issues, and to understand 5 international arbitration proceedings. The 6 burden is not on El Salvador to tell them how 7 they need to act in order to preserve their 8 claims. 9 El Salvador was simply putting them 10 on notice that there was a defect in their 11 waivers, that El Salvador gave them -- offered 12 them the opportunity to withdraw the -- the 13 arbitration in order to avoid what we have gone 14 through over the past months and this hearing 15 which has cost El Salvador a considerable amount 16 of money, which should have been avoided because 17 claimants should have understood their waiver, 18 should have understood international law, and 19 should have complied with their waivers. 20 What El Salvador said or did not 21 say in its letters is not determinative in any 22 way of the obligations of the claimants. 215 1 A further point, claimants 2 continued this morning to rely on a view of the 3 purpose of the waiver that is impractical. Let 4 me just go back because I think I didn't restate 5 the way in which they could have preserved their 6 claims. 7 They had the opportunity to 8 withdraw this arbitration, withdraw their -- 9 seek discontinuance of the proceedings before 10 the Supreme Court of El Salvador, and then 11 reinitiate arbitration. They chose not to do 12 that. Because of the time bar in CAFTA, they 13 have lost the opportunity to do that, but that 14 was a choice that they made. 15 The claim -- the claimants claim -- 16 moving on to the next point -- claimants claim 17 that the sole purpose of the waiver is to let 18 states seek dismissal of cases brought against 19 them. They continue to say that, regardless of 20 the solemn commitment in the waiver, the waiver 21 gives them no obligation to do anything. They 22 may allow as many proceedings as they want to 216 1 continue, and it would appear they may initiate 2 as many proceedings as they want. And the 3 waiver only serves for the state to go around 4 and try to defeat those proceedings. 5 That is what they said that 6 El Salvador should have done in El Salvador. 7 But we have pointed out this morning that the 8 waiver would be an effective protection for 9 El Salvador in this circumstance. Without a 10 doubt, part of the purpose of the waiver was to 11 arm states with a way to try to defeat 12 proceedings as Venezuela did with regard to the 13 Vanessa Ventures case. 14 But the waiver also generates 15 obligations on claimants to end proceedings, to 16 not initiate proceedings, to not pursue 17 proceedings. It is -- there are two pieces to 18 that protection, and claimants want to rely on 19 only one -- and one that in this case, and in 20 many cases, would be ineffective for states. 21 With regard to the letters sent by 22 the attorney general of El Salvador and counsel 217 1 for El Salvador, the claimants stated that they 2 were not the recipients of those letters and had 3 to request those letters to get copies. But 4 that's -- it's true that they weren't the 5 recipients. But the ICSID secretariat, as it 6 always does -- and is very efficient in doing -- 7 sent the letters to counsel for claimants within 8 two days of their filing. 9 And the fact that the letters were 10 not addressed to claimants doesn't mean that the 11 claimants should not pay attention to them and 12 could not have taken heed of them and acted in 13 consequence, if that is what the claimants 14 wanted to do. The fact that they were not 15 addressed to them doesn't mean that they were 16 not made aware of them and given copies of them. 17 And, finally, in a related point to 18 this, as regards to the date of filing of the 19 claim, the ICSID secretary general's letter 20 acknowledging receipt of the claims states that 21 the date of receipt was July 6, 2009, not 22 July 2, 2009. 218 1 Finally, I want to address 2 claimants' misrepresentation of the Waste 3 Management One decision. That tribunal clearly 4 stated that the waiver was defective for two 5 reasons: 6 Because there was a formal defect 7 in the addition of reservation language, and 8 because there was a material defect created by 9 non-compliance. 10 Claimants, again, read only half of 11 the quote leaving out the last clause of the 12 sentence. They did this in their pleading, and 13 they did it again today. The full quote is: 14 "Based on the foregoing, it is 15 clear that claimant issued a statement of intent 16 different from that required in a waiver 17 pursuant to NAFTA Article 11.21, since it 18 continued with the proceedings initiated against 19 BONABRAS after the date of submission of the 20 waiver, September 28 -- 29 September 1998, until 21 all avenues of recourse had been exhausted." 22 The continuation of the proceedings 219 1 was a key part to the tribunal's conclusion that 2 claimant -- that claimant had filed waivers that 3 were defective. And it's the same situation as 4 existed in this case. It is the claimants' 5 actions that created the defective waivers 6 because they did not act in conformity with 7 those waivers. 8 In conclusion, Mr. President and 9 members of the tribunal, El Salvador believes 10 that it has demonstrated and affirmed that the 11 claimants did not file, did not comply with the 12 waiver requirements of Article 10.18.2. 13 The waiver requirement is a 14 condition of consent. Consent is a condition of 15 jurisdiction. Because they did not meet those 16 requirements, there is no jurisdiction, and this 17 entire arbitration must be dismissed. 18 Thank you very much. 19 MR. Van den BERG: Thank you, 20 Mr. Smith. Does the -- would the claimants want 21 to have a -- 22 MR. MACHULAK: A short time. 220 1 MR. Van den BERG: -- short time 2 out? How much do you need? 3 MR. NEWCOMBE: 15 minutes, please. 4 MR. Van den BERG: 15 minutes, 5 okay. Recess 15 minutes. 6 (There was a discussion off the 7 record.) 8 MR. Van den BERG: Mr. Machulak, 9 please proceed with the rebuttal. 10 CLAIMANTS' REBUTTAL 11 BY MR. MACHULAK: 12 MR. MACHULAK: Thank you. 13 Good afternoon, again. 14 There is only -- again, I will be 15 giving, hopefully, a short presentation, 16 followed by Professor Newcombe. There's only 17 really four points that I want to make, which 18 are perhaps more factual in nature than the 19 legal interpretation. 20 The first is that, in response to 21 what El Salvador has argued, it says -- well, my 22 first point is that claimants' interpretation of 221 1 the treaty is not at all at odds with the 2 interpretation of the United States. I disagree 3 with the premise in the argument that they just 4 made. 5 I don't know what is proper and 6 improper in these proceedings. But in the 7 interest of transparency, less than a month ago, 8 received a call from our State Department 9 indicating that opposing counsel was down there 10 asking them to put an opinion on the thing, and 11 would I like equal time. 12 So we both had equal time -- I went 13 to the later time. We both had equal time to 14 relate our views to the State Department. The 15 United States has chosen not to make a 16 submission in these proceedings at the end of 17 the day. 18 As to the other two states that we 19 have in connection with these proceedings, it 20 doesn't escape notice, looking at the Dewey & 21 LeBoeuf web site, that their law firm is 22 representing those two countries. 222 1 So to sit here and listen, in all 2 fairness to my clients, that everybody else in 3 the world is against us in our interpretation of 4 the treaty is just plain not true. 5 The other -- when I watched -- 6 listened to the presentation again this 7 afternoon, I mean, this is derived from language 8 from snippets of opinions that do not relate to 9 the particular facts before you or the 10 particular issue before you. And that is 11 whether or not we had to discontinue local 12 proceedings before we could even think about 13 filing a CAFTA proceeding. 14 The comment was made -- and also, a 15 lot of commenting was made suggesting that we 16 did something once we gave our waivers to 17 somehow upset it. We did nothing. The real 18 complaint is that we did nothing that -- we did 19 not file something with the court down there. I 20 agree. That's factually true. Did we do 21 something to promote proceedings down there? 22 No, we did not. Did we -- what was our mindset 223 1 at the time? Our mindset at the time, again, is 2 we received correspondence from El Salvador 3 saying that "No matter what you do now, you have 4 no jurisdiction, and we're going to fight you on 5 that point." 6 And everything that they've said 7 here today suggests that, if we would have done 8 like they say, dismissed, and then tried to 9 dismiss the local proceedings and then refile a 10 CAFTA, we'd be into a big statute of limitations 11 fight. I mean, it's, more than ever before, 12 clear to me today that perhaps that was the 13 object at the time. 14 I don't -- I would agree with 15 Mr. Smith that El Salvador was never required to 16 teach us, our law firm, international law on the 17 subject, and the correspondence that we received 18 was telling us what their interpretation of the 19 law is. 20 But I believe today, even more so 21 than I've ever believed it before, that our 22 interpretation of the law is correct, that we 224 1 followed the plain language of the treaty. We 2 did what was required for us. We gave them a 3 waiver that they could have presented anywhere 4 in the world they wanted. 5 They say this is unfair to a 6 state -- that, how is a state supposed to know. 7 We told them in the notice of arbitration where 8 the pending litigation was. And then within a 9 month after filing, they're in touch with the 10 clerk of the Supreme Court, but never once 11 raised the issue of the fact that they have the 12 waiver. 13 In fact, I'm glad we did not follow 14 El Salvador's advice, because I think we would 15 be in a very poor, poor position here today. 16 Lastly, the last point is this: 17 El Salvador complains that this preliminary 18 objection proceeding is very expensive to them. 19 Well, it's expensive to us, too. I mean, we're 20 not a huge company. We -- Mr. Newcombe -- 21 Professor Newcombe didn't get to that point in 22 the presentation. I mean, we would like to 225 1 recover the costs that we have expended in 2 addressing a motion which we don't think that we 3 were -- that we think we acted perfectly proper 4 on in terms of presenting them with a -- the 5 exact waiver as required by the treaty, and then 6 having them tell us that's not enough, something 7 beyond the language of the treaty is required, 8 having to fight that, and hopefully prevail on 9 that issue. 10 Thank you very much. 11 CLAIMANTS' REBUTTAL 12 BY MR. NEWCOMBE: 13 MR. NEWCOMBE: The all important 14 watch. 15 MR. Van den Berg: Don't worry 16 about the watch for the time being because the 17 tribunal has three questions for you, unless you 18 would like to first start the rebuttal. 19 MR. NEWCOMBE: I believe I better 20 obtain my copy of CAFTA before the questions 21 start. 22 MR. Van den BERG: And I would 226 1 invite you, also, to take a copy of, I think, 2 your response. 3 MR. NEWCOMBE: Yes, Mr. President. 4 MR. Van den BERG: Okay. Could you 5 please go to paragraphs 80 and 81 of your 6 response. 7 MR. NEWCOMBE: Yes. 8 MR. Van den BERG: In paragraph 80, 9 you start to say: 10 "The only measures at issue in the 11 Domestic Proceedings," both capitalized, "were 12 the revocation of the environmental permits." 13 And you go on, and then you say: 14 "The claimants' notice of 15 arbitration defines a series of other measures 16 that includes CAFTA and foreign investment law. 17 MR. NEWCOMBE: My apologies, 18 Mr. President. Are we in the response or the 19 rejoinder? 20 MR. Van den BERG: The response. 21 MR. NEWCOMBE: At paragraph? 22 MR. Van den BERG: 80. 227 1 MR. NEWCOMBE: 80. Thank you. My 2 apologies. 3 The question again? 4 MR. Van den BERG: What you see 5 here is in the first two sentences, it's stated 6 in the claimants' response: 7 "The only measures at issue in the 8 Domestic Proceedings," both capitalized, "were 9 the revocation of the environmental permits. 10 The claimants' notice of arbitration provides a 11 series of other measures that includes CAFTA and 12 foreign investment law." 13 And it goes on: 14 "First, the respondent's decision 15 is between you, the claimant's exploration 16 licenses are undoubtedly measures." 17 And then if you go to 81 -- that's 18 the second one -- it says: 19 "Second, the notice of arbitration 20 claims that the respondent has imposed a 21 defective ban on gold and silver mining, which 22 is arbitrary, discriminatory, and 228 1 expropriatory." 2 The question is: Where do we find 3 those two points, those two measures complained 4 about in the notice of arbitration, in the sense 5 they are presented as a claim in this case? 6 So let's take them in turn. 7 First, you have the respondent's 8 decision not to review the claim's exploration 9 license. 10 MR. NEWCOMBE: Paragraph 24 of the 11 notice of arbitration says that: 12 "On January 29th, 2009, Commerce 13 and SanSeb's" -- 14 MR. Van den BERG: January 20, it 15 says, my copy. 16 MR. NEWCOMBE: "January 20th, 2009, 17 Commerce and SanSeb's legal counsel filed a 18 challenge in the courts to the government's 19 refusal to honor Commerce and SanSeb's request 20 to extend its exploration permits pursuant to 21 the terms of the 2002 permits." 22 So those are the measures with 229 1 respect to -- 2 MR. Van den BERG: Not the 3 proceedings that had already been resolved, or 4 am I confused here? 5 MR. NEWCOMBE: As clarified later, 6 clarified by the respondent in its -- I believe 7 their preliminary objection, that there were 8 not -- there were never any legal proceedings 9 with respect to the exploration permits. There 10 was an administrative review process, an 11 internal administrative review process, but not 12 the legal proceedings before the El Salvadorean 13 Supreme Court in the same way that there was 14 with respect to the revocation of the 15 environmental permits. So the reference to 16 these legal proceedings have not been resolved 17 is a -- is not factually correct. 18 MR. Van den BERG: Yes. 19 MR. NEWCOMBE: In a sense, the 20 administrative review process is a legal 21 process. But with respect to the question of 22 application of the waivers, internal review 230 1 process or the -- our submission is that 2 internal review processes are not caught by 3 the -- the -- you know, the waiver requirement. 4 MR. Van den BERG: Could you help 5 me? 6 Whether or not proceedings have 7 taken place about the exploration permits, are 8 the measures complained about in notice of 9 arbitration, where is it that you complain about 10 them in the notice? 11 MR. NEWCOMBE: In paragraph 23, it 12 says: 13 "On October 10, 2006, Commerce 14 applied to MARN for an environmental permit for 15 its exploration in connection with the new San 16 Sebastian exploration license and the 17 Nueva Esparta license. MARN did not respond to 18 the request; and on March 8th, 2007, 19 Commerce/Sanseb applied to the El Salvadorean 20 Ministry of Economy for an extension of these 21 exploration licenses, as was its right." 22 "On October 28th, 2008, the 231 1 Ministry of Economy denied Commerce and SanSeb's 2 application, citing Commerce's and SanSeb's 3 failures to secure an environmental permit." 4 And that was an environmental 5 permit with respect to the exploration licenses. 6 MR. Van den BERG: Look at 7 paragraph 80 of your response. You say that the 8 notice -- you say that: 9 "The claimants' notice of 10 arbitration identifies a series of other 11 measures that breach CAFTA. 12 MR. NEWCOMBE: Yes. 13 MR. Van den BERG: And then you say 14 the first one is not to renew claimants' 15 exploration licenses. 16 MR. NEWCOMBE: Yes. 17 MR. Van den BERG: What I am 18 looking for is a place where you could find it 19 in the -- this is a measure referred to as a 20 breach of CAFTA. 21 MR. NEWCOMBE: In paragraph 26, the 22 claimants refer to the government's ban on 232 1 development of gold and silver mine supplies and 2 practice vis-a-vis to foreign companies. 3 And in A: 4 "The Government of El Salvador 5 asserts that the current ban on mining and -- 6 silver mining and exploration connected with 7 this mining stems from the government's desire 8 to protect the environment, the government 9 permits, and other -- and other activities." 10 So there's -- 11 MR. Van den BERG: Slower, please. 12 MR. NEWCOMBE: In paragraph -- 13 MR. Van den BERG: Can you please 14 repeat? Because what you are saying is that 15 paragraph 26 contains an identification of a 16 measure that breaches CAFTA. And as the first 17 one identified in paragraph 80 is not to renew 18 the claimants' exploration licenses. 19 MR. NEWCOMBE: Yes. 20 MR. Van den BERG: And 26 talks 21 about, at least the opening, the policy as 22 applied, that this would discriminate against 233 1 foreign investment. Could you please help me 2 with how I could connect the two? 3 MR. NEWCOMBE: Article -- paragraph 4 26A says that: 5 "While the Government of 6 El Salvador asserts that the current ban on gold 7 and silver mines and exploration." 8 So there's A, a reference to the 9 fact of the current ban on gold and silver 10 mining. 11 We then turn to B, the government's 12 ban on the development of gold and silver mines. 13 And that ban on the development of gold and 14 silver mines, we say is -- is a de facto 15 moratorium or practice. And this would include 16 the decisions, regulatory decisions, not to 17 approve exploration licenses, not to approve 18 permits, environmental permits. 19 And then in paragraph 30, there is 20 a reference "by its conduct," conduct referring 21 to the government's ban on the development of 22 gold and silver mines, which includes the 234 1 exploration licenses. 2 I accept that there's -- the notes 3 of arbitration is -- does not set that -- set 4 the issue clearly with respect to exploration 5 licenses, but our submission is that it is -- it 6 is pleaded that the -- that there was -- a one 7 of the measures complained about is the denial 8 of the -- the denial of the exploration license. 9 In paragraph 23, we're saying that 10 this is -- in paragraph 26, we're saying that 11 this is a policy or a practice that 12 discriminates against foreign investment, and 13 further, in B, elaborated is a ban on 14 development, development both of exploration 15 concessions and exploration licenses. The 16 policy that's being referred to is the sort of 17 the -- the -- sort of the de facto moratorium. 18 Paragraph 27 refers to this policy. 19 And I would read that as this measure or this 20 conduct as applied is arbitrary and irrational 21 and has denied Commerce of its property rights. 22 And then paragraph 30 pleads the 235 1 reference to "by its conduct" in reference to 2 all of the previously enumerated paragraphs. By 3 its conduct, El Salvador has breached these 4 obligations, natural treatment, MFN, minimum 5 standard of treatment, and expropriation. 6 MR. Van den BERG: Then I have a -- 7 the chairman has a further question. 8 Now, the Supreme Court has rendered 9 a decision on the environmental permits. Does 10 that decision have any effect, either legally or 11 factually, in the presentation? 12 MR. NEWCOMBE: Clearly, it has an 13 effect factually. It is an act of the Supreme 14 Court, one of the -- there are issues of minimum 15 standard of treatment in the claim. But the 16 Supreme Court judgment was -- made a 17 determination that the revocation of the 18 environmental permits was in accordance with the 19 law of administrative procedure in El Salvador, 20 and so we have a determination, a final 21 determination, of the -- of the highest court in 22 El Salvador that there was compliance. And 236 1 so -- so there's sort of a final determination 2 of a court on that issue, and that may have some 3 type of -- you know, of res judicata with 4 respect to, you know, factual determinations of 5 El Salvadorean law. 6 But the main claim in the 7 arbitration is that there is a de facto 8 moratorium on gold mining, despite that the fact 9 that the claimants have a concession which runs 10 until 2034. In practice, as a measure, the 11 government is not issuing any regulatory 12 approvals. And the acts since 2006, including 13 the revocation of Commerce's permits and the 14 exploration license, is -- is -- is background 15 to that -- to that main claim, in addition to 16 the other additional claims that are submitted. 17 MR. Van den BERG: Now, let's 18 hypothetically -- for law professors, there's 19 always an amount of exercise. 20 Now, hypothetically, reverse the 21 situation, and let's assume now that the Supreme 22 Court would have granted the relief sought by 237 1 the claimants. 2 MR. NEWCOMBE: Yes. 3 MR. Van den BERG: How would that 4 have had an effect, if any, on the present 5 proceedings? 6 MR. NEWCOMBE: The claimants' 7 submission is that the effect of the waiver is 8 definitive, and that with respect to there's a 9 waiver of rights to continue and initiate 10 proceedings with respect to the environmental 11 measures. 12 The claimants' submission is that, 13 if there had been a final determination in favor 14 of Commerce, that there was a breach of 15 El Salvadorean law, and that Commerce was 16 awarded $100 million, that the waivers would -- 17 would be operative and legally definitive to 18 extinguish and abandon any right that the 19 claimants had to the benefit of that judgment or 20 to initiate proceedings, initiate -- because we 21 also waived the right to initiate proceedings 22 with respect to any enforcement because, of 238 1 course, there is a court judgment that says 2 El Salvador must pay $100. 3 But if El Salvador doesn't comply 4 with that, there still have to be enforcement 5 procedures. And our view is that the waiver, 6 given its definitive effect and wide effect with 7 respect to the measures at issue, would -- would 8 include anything. So that goes back to the 9 position that the waivers provide a complete 10 release to the state with respect to any -- any 11 legal rights or -- legal rights that the 12 claimants might have with respect to those -- 13 those future proceedings. 14 So once the waiver is submitted, 15 those proceedings from the point of view of the 16 claimant are essentially -- I am not -- I am not 17 sure what the -- quite what the exact word is, 18 but the idea is that the claimants would never 19 be able to obtain any benefit from a favorable 20 judgment given the waiver having definitive 21 effect. 22 MR. Van den BERG: But would it, 239 1 then, not work also in the same way with -- with 2 regard to the previous question of the tribunal? 3 What you are saying now, as I understand, is the 4 waiver operates as an obstacle to give any 5 effect to the Supreme Court judgment in cases 6 that would have been in favor of the claimants. 7 Is my understanding correct? 8 MR. NEWCOMBE: Yes. 9 MR. Van den BERG: Would it also 10 have been an obstacle in respect of the 11 situation that actually occurred, that they did 12 not reject the claimants' relief, it also has no 13 effect whatsoever? 14 MR. NEWCOMBE: It has no effect 15 from the -- for the purposes of El Salvadorean 16 law. But the claim, the CAFTA claim -- 17 MR. Van den BERG: In other words, 18 let me say: 19 Assume now you would have won in 20 El Salvador. You would -- the claimants. Could 21 you still pursue the claim in the present case? 22 MR. NEWCOMBE: Yes, because the 240 1 claimant has complied with the jurisdictional 2 requirements in the -- in the waiver. The win 3 in El Salvador is a determination with respect 4 to whether the revocation of the environmental 5 permits were valid under El Salvadorean 6 administrative law. They don't make any sort of 7 determination with respect to CAFTA breaches. 8 And the -- the claimants would be able to -- in 9 our submission, be able to continue to make a -- 10 submissions with respect to the breach of CAFTA 11 obligations based upon the revocation of the 12 environmental permits. 13 MR. Van den BERG: I see. 14 So everyone has -- so the question 15 is in the hypo that the claimants would win in 16 El Salvador. And your submission is that you 17 could not collect, you being the claimants, on 18 the judgment in El Salvador because of the 19 waiver; is that correct? 20 MR. NEWCOMBE: Yes, that's correct. 21 MR. Van den BERG: But how does it 22 work? Because the Supreme Court has issued a 241 1 decision, and then you completed the 2 hypothetical by saying, "We got our hundred 3 million in damages," because you also, at the 4 same time, were claiming damages in the 5 proceeding; right? 6 MR. NEWCOMBE: Yes. 7 MR. Van den BERG: Assume now -- 8 and, now, how does it operate? So you -- 9 basically, you could collect the judgment. And 10 how does it operate under El Salvadorean law? 11 Could then the response be, you waived your 12 right to continue in the court the proceedings? 13 MR. NEWCOMBE: Yes. 14 MR. Van den BERG: And now I go on. 15 You can now say, "The proceedings are over. I 16 have now a judgment against you." 17 How does it operate under 18 El Salvadorean law? You can simply -- couldn't 19 then the respondents say, "Here, we have a 20 waiver of you, whereas there's already a 21 judgment offered by the Supreme Court"? 22 MR. NEWCOMBE: Mr. President, I am 242 1 not a licensed attorney in El Salvador. We do 2 not have El Salvadorean law on that question of 3 what the -- what the effect would be. 4 Our submission, given our view that 5 the waiver is a complete extinguishment of all 6 legal rights, any legal rights with respect to 7 those proceedings or benefits from those 8 proceedings, that there is just absolutely no 9 opportunity for the claimants to obtain a 10 benefit. 11 And our submission would be that -- 12 that the -- that the attorney general would be 13 able to submit a -- the waiver to the courts to 14 show that there had been a -- this complete 15 abandonment of rights, as was done in the 16 Vanessa Ventures case. 17 MR. Van den BERG: I assume it has 18 not done so. The attorney general has waived 19 from his side the right to invoke the waiver. 20 Is that your position? Because it gets now 21 complicated. All of this would not have 22 happened if one way or the other before the 243 1 judgment had been issued somebody had told the 2 court, "I think we should stop," because the -- 3 there is now -- the proceedings have been -- the 4 legal case goes to an international arbitration 5 and we have to get a waiver. 6 MR. NEWCOMBE: We go back to our 7 fundamental submission that CAFTA does not 8 prevent or prohibit concurrent proceedings. The 9 mere fact that the -- the mere fact -- if the 10 El Salvadorean Supreme Court had issued its 11 judgment on June 30th, and then claimants had 12 commenced arbitration on July 2nd, there would 13 be no issue. So the mere fact that there is a 14 definitive judgment of the El Salvadorean 15 Supreme Court with respect to the revocation of 16 the environmental permits is not a problem for 17 the purposes of the CAFTA arbitration. 18 MR. Van den BERG: Let's not sort 19 of complicate the hypo, because we're not 20 talking about proceedings that have ended before 21 the 2nd of July 2009. We're talking about 22 something still that's going on on the 2nd of 244 1 July 2009. And there we -- we wonder how -- how 2 this works if you do not do anything -- do not 3 take any step in those proceedings because of 4 the commencement of the operation. What then 5 may happen is that you are running on two 6 parallel tracks, if somebody does not say later 7 on to stop here. 8 MR. NEWCOMBE: Yes. And our 9 submission is that respondents state, in some 10 situations, may want, after having engaged in 11 three years of litigation, to have a resolution 12 of an issue such as -- as this determined, and 13 that there's nothing in CAFTA that prevents 14 that. 15 What if this was, for example, test 16 litigation, and this is one claimant, and there 17 were 100 other claimants in the similar 18 situation in El Salvador? The state might have 19 an interest in having a definitive resolution on 20 this -- on this issue that would then -- you 21 know, would be useful for -- for the state. 22 So it goes back to the submission 245 1 that -- the fact that there was a final decision 2 of the Supreme Court on a specific matter of 3 El Salvadorean administrative law is a fact, but 4 that it doesn't, one, affect the jurisdiction of 5 this tribunal. And this tribunal can proceed to 6 make determinations of whether El Salvador's 7 conduct breaches CAFTA obligations and the 8 foreign investment law. 9 MR. Van den BERG: Thank you. 10 After you have finished your 11 rebuttal, we would like to ask the -- also, the 12 respondent to comment on this question, if they 13 wish to, unless you think that the respondent 14 could already now comment on this question. 15 Then we can dispose of it now, if that's 16 procedurally proper really. But now we are 17 really deviating from the written part of your 18 rebuttal. 19 MR. NEWCOMBE: I'm in your hands, 20 Mr. President. If Mr. Smith would like to 21 address the question now, I'm -- that is fine 22 with me. 246 1 MR. Van den BERG: Mr. Smith, if 2 you would like -- I think we could finish this 3 question if at all you are in a position to do 4 so. 5 MR. SMITH: Okay. I think I can 6 respond. I can. 7 (There was a discussion off the 8 record.) 9 MR. SMITH: I think the 10 hypothetical has become somewhat complicated, 11 but I guess the question is -- or part of the 12 question is, at least, is what would be the 13 effect on this proceeding, and particularly with 14 regard to the waivers, if the Supreme Court of 15 El Salvador had decided in favor of the 16 claimants, issuing them an award for 17 $100 million. 18 The claimants take the position 19 that they would have -- because of the waivers, 20 they would have no right to collect on that 21 award, and that they have renounced all rights. 22 The first point to make is, I very 247 1 seriously doubt that, had the decision gone 2 their way, that they ever would have taken the 3 position that their waiver presented them from 4 collecting $100 million. That is a position 5 that they can take now because it is coherent 6 with -- in some sense, with their position on 7 the waiver. 8 But if the case had gone the other 9 way, I would find it very surprising if they 10 would interpret it, their waiver, to that 11 extent. 12 What would the effect have been on 13 these proceedings? The measures at issue before 14 the Supreme Court of El Salvador were the 15 revocation of the environmental permits. Those 16 are the measures that give rise essentially to 17 100 percent of the claims of the claimants. 18 At the time that their 19 environmental permits were revoked, they lost 20 their right to their concession. Every right 21 that they had in El Salvador was ended. Nothing 22 that would have happened after 2006, when they 248 1 lost those permits, could have caused them any 2 further injury. They have no claims for 3 measures taken by the Government of El Salvador 4 other than that. 5 Let me finish. 6 So if the Supreme Court of 7 El Salvador has decided that those measures were 8 invalid, and issued an order for compensation, 9 there would be no further issue in this 10 arbitration. 11 MR. Van den BERG: Take it one step 12 further. 13 The hypo was, as you stated, that 14 the claimants would have won, prevailed in the 15 court case. And then on the question was: 16 Under Salvadorean law, could you invoke the 17 waiver? Now, there are two aspects of this. 18 First of all, a procedure aspect, 19 because you have already a judgment against you. 20 And is there still a possibility, then, to 21 invoke the waiver? 22 And the second one is: Even if 249 1 there's a possibility to invoke the waiver, 2 since you have previously taken the position 3 that the waiver is invalid, can you then still 4 say, "After I have now second thoughts about 5 this, the waiver is relevant"? 6 MR. SMITH: The decision of the 7 Supreme Court of El Salvador would be binding on 8 the Government of El Salvador. The existence of 9 the waiver would not be something that the 10 government could, as a legal matter, use to 11 oppose the enforcement of a binding judgment of 12 the Supreme Court of El Salvador. The 13 government would be obligated to pay the award 14 because it is an award of the highest court of 15 the government. 16 MR. Van den BERG: Thank you. 17 That's -- okay. Dr. Naón has some questions. 18 MR. NAÓN: I'm sorry. Is that a 19 statement of counsel, or is there any 20 authorities behind that? Because this seems to 21 be an important issue. And the same -- my 22 question is also to the claimants. Whatever you 250 1 have said regarding defense of the waiver, is 2 that your position or is that supported by some 3 authorities, precedent? And the question goes 4 to both parties, because I have seen assertions 5 in one sense and the contrary assertion on the 6 other. And I want to know legally speaking 7 where we stand on the subject. I want to know 8 your positions. 9 MR. Van den BERG: Let's first 10 start with Mr. -- the respondents on this. Then 11 we finish this one, because we actually are in 12 rebuttal time. 13 MR. SMITH: Okay. Simply, we -- we 14 have conferred with a representative of the 15 Attorney General's Office of El Salvador, and 16 that was the opinion he related to us. It is 17 not based on a review of court cases or 18 decisions. If the tribunal would like further 19 documentation on this issue, we certainly would 20 be willing to provide it. 21 MR. Van den BERG: Please, also, 22 finish this point. And then you can start your 251 1 real rebuttal. 2 MR. NEWCOMBE: Our submissions with 3 respect to the waiver in El Salvador are 4 submissions that are not based on -- we don't -- 5 we do not have legal opinions of local counsel 6 in -- in the materials. 7 One point, however, is that, if 8 we're thinking of the waiver, it's sort of -- 9 one of the questions here are, what is the law 10 that applies with respect to the requirements 11 for the waiver. And my submission is that 12 the -- the effectiveness and requirements for 13 the waiver, must they not be determined by 14 international law? 15 Why is it that El Salvador law is 16 controlling, particularly, where the waiver 17 requirement applies in different captive 18 parties? And so why are we so focused on 19 El Salvadorean law? 20 Our submission is that CAFTA as an 21 international treaty requires a certain form of 22 legal document to be provided. That's -- and it 252 1 was provided in accordance with CAFTA. So 2 really, in some sense -- and I know there has 3 not been submissions on this -- the question 4 seems to me more about whether the waiver is 5 effective under -- as a matter -- you know, as a 6 matter of treaty interpretation under 7 international law. 8 MR. Van den BERG: The question is 9 not so much about the waiver in and of itself. 10 The question is, how you can procedurally invoke 11 it once the Supreme Court has issued a judgment? 12 MR. NEWCOMBE: Yes. 13 MR. Van den BERG: And is there a 14 procedure in place, then, to invoke the waiver? 15 And then especially because, as I said, the 16 added aspect to this is that it may not be that 17 the party, that in this case, El Salvador, in 18 the hypo, cannot invoke the waiver because they 19 have previously taken the position that the 20 waiver is invalid. 21 MR. NEWCOMBE: Yes, I understand. 22 The additional issue I would 253 1 suggest is: 2 In many court procedures in many 3 countries, there is an opportunity to apply for 4 revision of a Supreme Court judgment, so to the 5 extent of a court decision based upon 6 information that was not before the court at the 7 time -- so if the court did make a decision, a 8 final decision, in favor of the claimants, 9 again, would it not be available to the -- to 10 the attorney general to make a submission for 11 revision of that decision based upon new 12 information that was not before the court? 13 And I would submit that in most -- 14 in most domestic court procedures, that 15 procedure is available and would be -- would be 16 effective. And you would have a similar 17 situation that we had in Vanessa Ventures where 18 the constitutional chamber of the Venezuelan 19 Supreme Court dismissed the action based upon 20 the waiver. 21 I know -- 22 MR. Van den BERG: Thank you for 254 1 all of these -- these answers. You can now 2 proceed with the rebuttal. 3 MR. NEWCOMBE: Thank you. 4 Mr. President, members of the 5 tribunal, in light of the time, I will try to 6 use the utmost economy in making my submissions 7 brief. 8 My next submission from this 9 morning is the point that San Sebastian was not 10 a party to the domestic proceedings. The record 11 in the domestic proceedings is clear that only 12 Commerce was a party to the proceedings. The 13 court's judgments highlight that the 14 environmental permits were issued to Commerce. 15 The MARN resolutions in question revoked 16 Commerce's permit. The notifications refer to 17 Commerce as the party. The judgment only refers 18 to -- only to Commerce. 19 My submission is, if San Sebastian 20 had sort of moved to discontinue the domestic 21 proceedings, the courts would have been clear, 22 San Sebastian was not a party to the 255 1 proceedings. 2 Now -- 3 MR. Van den BERG: You're now with 4 slide 57 of the -- 5 MR. NEWCOMBE: Yes, slide 57. 6 The fact that the claimants' 7 lawyers identified himself as the attorney for 8 both companies which operates as a joint 9 venture, we submit, is not relevant to the 10 question of whether -- of whether San Sebastian 11 was a party itself to the domestic proceedings. 12 Further, the claims by 13 San Sebastian in this arbitration are as San 14 Sebastian as a -- a separate entity which has an 15 investment in the joint venture. Investment in 16 CAFTA is defined to include an equity 17 participation in an enterprise. And an 18 enterprise is defined in CAFTA to include a 19 joint venture. 20 SanSeb's investment was its -- it 21 was its participation, its ownership directly 22 and indirectly in the -- in the joint venture. 256 1 And, also, San Sebastian had separate 2 investments in El Salvador, including the lease 3 on the actual -- on the mine. 4 The point is that in this 5 proceeding, the claim is not being made by the 6 investor on behalf of the -- of an enterprise in 7 El Salvador. This is not a claim where Commerce 8 is claiming on behalf of the Commerce/SanSeb 9 joint venture under Article 10.16(1)(b) of -- of 10 CAFTA. There's the provisions about claiming as 11 an investor in your own right and claiming on 12 behalf of the enterprise. 13 So the question is not -- the issue 14 is not about whether Commerce was acting on 15 behalf of the joint venture in the domestic 16 proceedings for the purposes of CAFTA. For the 17 purposes of CAFTA, San Sebastian is an 18 independent investor with an investment which 19 includes an equity participation in the -- in 20 the joint venture it's claiming for -- for 21 damages for the effect of El Salvador's measures 22 on the -- on its -- its investment. And its 257 1 investment is the equity participation in the 2 joint venture plus its separate investments 3 which it contributes to the joint venture. 4 So in response, our submission is 5 that SanSeb is -- the waivers did not apply to 6 SanSeb. And the court record makes that -- 7 makes that clear. 8 Finally, with respect to the 9 tribunal's jurisdiction with respect to the 10 foreign investment law issue, I would just 11 highlight that the claimants' notice of 12 arbitration requests arbitration both under 13 CAFTA and Article 15 of the foreign investment 14 law. 15 There is an issue with respect to 16 the particulars claimed by the -- by the 17 claimant with respect to the breaches of the 18 foreign investment law. Respondents this 19 morning have raised an issue about whether there 20 was consent. We submit that there is consent. 21 I would just -- I would just note that the issue 22 of whether there is jurisdiction with respect to 258 1 the foreign investment law was not -- was not an 2 issue that was pleaded in the preliminary 3 objection. 4 My understanding with respect -- 5 the preliminary objection was -- it was 6 primarily focused on the issue of whether there 7 was consent under CAFTA. Of course, we do 8 submit that there is the separate consent to 9 arbitration under -- under the foreign 10 investment law. 11 With respect to the issue of 12 ancillary claims, claimants submit that if -- 13 that, if the pleading just with respect to 14 naming the foreign investment law is 15 insufficient, that we claim to make an ancillary 16 claim with respect to certain breaches, and that 17 we rely on various authorities on the ancillary 18 claims, including in Enron, I'll just note -- 19 and this is in Professor Schreuer's commentary, 20 which has not been submitted as a legal 21 authority, although with permission I would 22 submit it -- that in Enron the tribunal decided 259 1 to accept the new request for arbitration as an 2 ancillary claim. 3 So to the extent that there are 4 deficiencies with the notice of arbitration, our 5 submission is that, based upon ICSID -- ICSID 6 rules, based upon the convention, that we can 7 submit an ancillary claim to address any of 8 those deficiencies. 9 Further, with respect to the -- 10 with respect to the foreign investment law, the 11 waivers do not prevent the claimants from 12 bringing claims in this arbitration based on the 13 foreign investment law. The CAFTA waiver is a 14 waiver of the right to bring another separate 15 proceeding under another dispute settlement 16 procedure. 17 These are -- these are not -- there 18 are not two proceedings in this case. In this 19 case, we have one proceeding based on two 20 consents to arbitration in which the CAFTA is 21 making claims both under CAFTA and the foreign 22 investment law. And we submit that the Pac Rim 260 1 decision on this is persuasive. The whole 2 purpose of the waiver requirement is so that 3 there's not concurrent proceedings. The whole 4 purpose is to ensure that claims are brought 5 in -- in one forum. 6 MR. THOMAS: I'm going to just ask 7 a question about that. 8 MR. NEWCOMBE: Yes, Mr. Thomas. 9 MR. THOMAS: The question I have 10 relates to the structure of Article 10.18.2, the 11 last limb, where we get into the waiving of 12 other procedures. And I think I take your 13 submission to be that, under the foreign 14 investment law, the consent to ICSID arbitration 15 there would allow the claimant to bring before 16 this tribunal claims in respect of the 17 revocation of the environmental permits. 18 MR. NEWCOMBE: Yes. 19 MR. THOMAS: Is that correct? 20 MR. NEWCOMBE: Yes, it is. 21 MR. THOMAS: Okay. If that's 22 correct, I just draw you to -- your attention to 261 1 the use of the wording "any proceeding with 2 respect to any measure alleged to constitute a 3 breach." And the question I have for you is: 4 How do you differentiate -- when 5 we're talking about the environmental permit's 6 revocation, how do you differentiate between a 7 cause of action based on local law, municipal 8 law, a cause of action based on the foreign 9 investment statute, and a cause of action based 10 on the treaty? 11 Where do you find the right to have 12 a different cause of action in respect of the 13 same measure? This is what I'm having trouble 14 with in your argument. Just to be absolutely 15 clear, isn't it really -- isn't the focus here 16 on the measure? If the measure has been 17 challenged in the claim for damages in whatever 18 forum captured by that language -- 19 MR. NEWCOMBE: Yes. 20 MR. THOMAS: -- isn't that what the 21 tribunal should be focusing on, on the measure, 22 as opposed to the cause of action which gives 262 1 rise to the claim? 2 MR. NEWCOMBE: Thank you for the 3 clarification. 4 Our submission is that, if the 5 claimants commenced a separate arbitration 6 proceeding under the foreign investment law, 7 that the waiver would apply, because the 8 reference is to any proceeding with respect to 9 any measure. 10 And we are -- and in that -- in the 11 context of any proceeding, the focus is on 12 proceedings other than the CAFTA arbitration, 13 and that there is only one proceeding, there is 14 only one ICSID proceeding, and that the waiver 15 does not -- would not apply when the foreign 16 investment law is brought into the same 17 proceeding. 18 And it goes back to the -- the 19 whole purpose of Article 10.18 is primarily with 20 respect to ensure that there is not concurrent 21 proceedings with respect to the same measure and 22 all the difficulties that that arises. 263 1 In this case, there would be one 2 tribunal making the determination, so therefore 3 there is -- one, there is not concurrent 4 proceedings. There is no problem with respect 5 to concerns about inconsistent decisions or 6 double recovery. And in our view, the Pac Rim 7 decision supports that -- that interpretation. 8 MR. THOMAS: Sorry. This is the 9 last question on this point, because I know that 10 you have to go on. 11 But the provisions of the CAFTA 12 which provide for the submission of a claim to 13 arbitration list what can be alleged to be at 14 issue in the arbitration in Articles 10.16, and 15 they only refer to either an obligation under 16 section A or an investment authorization or an 17 investment agreement. They don't refer to any 18 other legal regime that can be the subject of a 19 CAFTA claim. 20 MR. NEWCOMBE: No, but the -- this 21 proceeding involves both the consent to 22 arbitration under CAFTA and the consent to 264 1 arbitration under the foreign investment law. 2 The reference to -- if I may say that -- this. 3 With respect to Article 10.18.2, the provision 4 says in the very last: 5 "Any right to initiate or continue 6 before any administrative tribunal or court 7 under the law of any party or other dispute 8 settlement procedure, any proceeding with 9 respect to any measure." 10 Now, it's not any claim with 11 respect to any measure. Right? If it was any 12 claim with respect to any measure, then the idea 13 would be that you can only bring -- you can only 14 bring CAFTA claims. But the focus is on any -- 15 any proceeding. So you waive the right, and the 16 waiver of the right only extends to other 17 proceedings. 18 But within the CAFTA -- I'm sorry, 19 within this arbitration, which is only one 20 proceeding, any type of claim based upon 21 consents in other instruments can be -- can be 22 brought. 265 1 MR. THOMAS: Thank you. 2 MR. NEWCOMBE: Finally, just with 3 respect to the foreign investment law, I would 4 just -- the respondent argues that the waiver 5 is -- the claimants' waiver is effective with 6 respect to the foreign investment law claims, 7 although which we of course reject. But, of 8 course, at the same time, they're also saying 9 that it's the -- it was not effective vis-à-vis 10 the domestic proceedings. 11 In our view, the waiver -- the 12 waiver is effective with respect to the domestic 13 proceedings, but does not prohibit to have one 14 proceeding involving two consents. 15 I would now turn to just a number 16 of the -- of questions and issues in response. 17 With respect to the tribunal's 18 question with respect to the dissenting opinion 19 of Mr. Hyatt, in the response, we didn't -- 20 didn't -- do not suggest -- or we do not suggest 21 or claim that Mr. Hyatt's dissenting opinion is 22 authoritative as a statement of the meaning of 266 1 the decision of Waste Management. 2 We refer to the decision of 3 Mr. Hyatt to highlight the -- sort of the 4 treaty -- a point about treaty interpretation 5 which he makes about, if NAFTA had contemplated 6 the determination of domestic litigation as a 7 jurisdictional requirement, we would have 8 expected the treaty drafters to have that 9 express requirement. So it's more to just 10 highlight and draw upon our argument about 11 treaty interpretation. 12 The second, we refer to Mr. Hyatt's 13 dissenting opinion for the principle that there 14 is the distinction between jurisdiction and 15 admissibility, and that post-waiver conduct is 16 an issue of admissibility. 17 Our submission is not that 18 Mr. Hyatt's dissenting opinion was the correct 19 determination of the case, as I submitted this 20 morning. Our submission is that the majority of 21 the Waste Management tribunal was correct to 22 find that there was no jurisdiction, because in 267 1 that case there was a defective waiver 2 because -- at the time of submission because 3 it -- the claim -- the investor in that case 4 carved out something from the waiver, and it was 5 not -- not effective. 6 Clearly, I would -- I would agree 7 that dissenting opinions in the international 8 arbitration are -- I mean, they're clearly not 9 binding. Depending on the -- on the strength of 10 the reason, they may be persuasive in certain 11 circumstances, like -- like any other legal 12 authority. 13 With respect to the issue of 14 whether there is an agreement between the CAFTA 15 parties with respect to the interpretation of 16 CAFTA, I would highlight that the various 17 statements of the CAFTA parties which have been 18 referred to by the respondents on the 19 requirement for conduct focused more on the 20 question of the requirement for conduct 21 consistent with the waiver. 22 So most of the submissions, for 268 1 example -- for example, the US's submissions in 2 Tembeck [phonetic], argue that the claimants' 3 conduct subsequent to the waiver can negate the 4 waiver because of post-waiver conduct. 5 In this case, the interpretive 6 issue is with respect to whether there is a 7 requirement to discontinue prior to 8 submitting -- prior to submitting a notice of 9 arbitration. And there is -- there's -- the 10 various statements of the CAFTA parties are 11 primarily addressing the post-waiver conduct 12 issue. They're not addressing the specific 13 treaty interpretation issue. 14 So there is not -- there clearly is 15 an agreement on that issue, and -- and there 16 is -- because -- and -- because primarily the 17 CAFTA states are referencing post-waiver 18 conduct. 19 Finally, CAFTA provides an express 20 procedure for binding interpretation of 21 provisions, and that has not been used in this 22 case. 269 1 On the question of, could 2 El Salvador have discontinued the domestic 3 proceedings, the respondents have submitted this 4 morning, the respondents were powerless to have 5 the domestic proceedings dismissed. 6 First, we would note that 7 El Salvador never requested the claimants to 8 take the active step to discontinue the 9 proceedings. The respondent never notified the 10 court of the -- of the waiver. Respondent 11 suggests that only claimants could request 12 termination. 13 However, the attorney general's 14 opinion only addresses -- the submission that 15 came in on Friday only addresses whether the 16 claimant can discontinue the claim. And we 17 agree that the claimant -- there is the 18 possibility the claimant discontinuing the 19 claim. 20 The attorney general's opinion and 21 those -- and the materials do not address the 22 question of whether it is impossible for the 270 1 attorney general to have the proceedings 2 dismissed with the waivers in hand. 3 We would note that Article 40 of 4 the Law of the Administrative Litigation refers 5 to discontinuance by the claimant or 6 discontinuance of the claimant. And it's not 7 clear why the waiver could not be considered 8 itself a discontinuance by the -- by the 9 claimant. 10 In the claimants' submission, the 11 material before the tribunal does not -- does 12 not proof that the -- that -- there is just 13 simply not evidence of the -- before this 14 tribunal that the -- that El Salvador was 15 powerless. What the materials establish is that 16 the claimants could have discontinued. But 17 there is the -- the point is not established 18 that the respondent could not have submitted the 19 waiver to the court, again, as was done in the 20 Vanessa case. 21 Mr. Smith made the point that the 22 waiver includes the requirement to act in 271 1 conformity. The difficulty with this submission 2 is that it then means that jurisdiction is not 3 determined at a particular date, because, if the 4 waiver includes the requirement to act in 5 conformity with the waiver, well, then we have 6 sort of a situation not where jurisdiction is 7 determined on the date of the submission of the 8 notice of arbitration, but a situation where 9 jurisdiction sort of floats in the air. 10 And it then depends upon the 11 subsequent conduct of the -- of the claimant. 12 And we submit that this is not the regime that 13 is established by CAFTA. Jurisdiction is 14 determined as of -- as of the date, and there is 15 no sort of post -- post-waiver conduct is 16 irrelevant to the jurisdiction of the tribunal. 17 Mr. Smith suggests that our 18 submission is that the claimant has the 19 obligation to do nothing and may initiate 20 proceedings everywhere. That is not our 21 submission. 22 Our claimants' submission is not 272 1 that they can -- they can engage in an abuse of 2 process. We have been very clear that the 3 tribunal has a supervisory mechanism to ensure 4 that claimants did not act in good faith. The 5 claimants accept that -- that the claimant has 6 an obligation to arbitrate in good faith, that 7 the tribunal can -- can control the use of 8 waivers, but the submission is that there simply 9 is no bad faith in this -- this circumstance. 10 The -- there was never a request to discontinue. 11 And the -- the attorney general's position was 12 in -- in his letter to the -- to ICSID that 13 whatever the claimants did, it didn't matter. 14 It was pointless because jurisdiction was -- was 15 lost. 16 In conclusion, the claimants submit 17 that CAFTA Article 18.2 should not be 18 interpreted to read in a restrictive 19 jurisdictional condition. The claimants fully 20 satisfied the jurisdictional requirement. The 21 claimants submit that the preliminary objection 22 must be rejected in its entirety with cost to 273 1 the claimants. And the claimants respectfully 2 request that the tribunal grant the relief 3 requested in the claimants' response at 4 paragraph 101. 5 I will now conclude, unless there 6 are any further questions. 7 MR. Van den BERG: There are no 8 further questions. Thank you. 9 MR. NEWCOMBE: Those are my 10 remarks. 11 MR. Van den BERG: This concludes 12 the rebuttal by the claimants. 13 You said there was liberty to reply 14 before the lunch break. I see Mr. Smith looking 15 with some consternation. 16 MR. SMITH: I would like the 17 opportunity to reply briefly. I assure you I 18 will be brief, but I would like maybe just one 19 or two minutes to gather my thoughts. 20 MR. Van den BERG: Two-minutes 21 recess. 22 (Recess.) 274 1 MR. Van den BERG: Mr. Smith, are 2 you ready? 3 RESPONDENT'S SURREBUTTAL BY 4 MR. SMITH: 5 MR. SMITH: Thank you. I know it's 6 late. I will be brief. 7 I just first want to quickly 8 correct a couple of factual misstatements that 9 were made. 10 El Salvador did not request that 11 the United States issue any specific sort of 12 non-disputing party submission in this case. 13 It's true, obviously, that El Salvador consulted 14 with the other party and invited them to make a 15 decision, but it certainly wasn't a request to 16 make a particular type of decision. And 17 El Salvador was perfectly ready to have them put 18 in a submission that was contrary to 19 El Salvador. 20 It is equally true that their 21 decision not to make a submission in no way 22 infers that their position has changed. And 275 1 there was not some sort of a competition between 2 the parties to see if they could get the US to 3 submit. And then since they didn't, somehow the 4 US now supports the position of the claimants. 5 But, again, I can't speak for the US. 6 The other -- the other point of 7 fact is that the law firm of Dewey & LeBoeuf 8 does not represent Nicaragua and does not 9 represent Costa Rica. In fact, our law firm has 10 been adverse to Costa Rica in a recent ICSID 11 case in Galube [phonetic] versus Costa Rica. So 12 I wanted to clarify those facts. 13 Another issue that was raised that 14 I think needs brief clarification is whether 15 somehow El Salvador had forced claimants into 16 some sort of a situation where they were going 17 to be faced with a statute of limitations, and 18 somehow El Salvador is to blame for the fact 19 that they couldn't act in conformity with their 20 waivers. There's a couple of things. 21 First, claimant was at liberty at 22 any time to act in conformity with their 276 1 waivers. But even if we look to the point where 2 El Salvador brought the issue to their 3 attention, they were still at least a little 4 over two months away from the running of the 5 statute of limitations, because El Salvador has 6 been very clear that the three-year period in 7 CAFTA runs not from the date of a particular 8 act, but from the date on which the possible 9 claimant becomes aware of the act and aware of 10 those damages. That date was September 13th, 11 2006, when the -- when the revocation of the 12 environmental permits was notified to the 13 claimants; and therefore, the date of the 14 running of the statute of limitations would have 15 been September 13th, 2009. 16 They had plenty of time from the 17 time they filed their case until that date to 18 withdraw this proceeding with -- seek 19 termination of the proceedings in El Salvador 20 and then refile a new case, but they chose not 21 to do that. It was not El Salvador's obligation 22 to tell them that they should have done that or 277 1 invite them to do that. 2 As regards the joint venture, the 3 issue of the relationship between Commerce, San 4 Sebastian Gold Mines, and the Commerce/SanSeb 5 joint venture, they've now taken the position 6 that San Sebastian Gold Mines is an independent 7 investor and is making their claims based on 8 their investments that is based on their 9 percentage participation in the joint venture. 10 That's not the way that they pleaded this case. 11 They pleaded this case as if they had 12 independent rights independent of the joint 13 venture. 14 But, more importantly, under their 15 new representation of the facts where Commerce 16 Group is a holder of all of the interests, the 17 recipient of the environmental permits, the 18 holder of the concession, and the recipient of 19 the revocation of the environmental permits, not 20 only does San Sebastian Gold Mines have no 21 interest and no claim in El Salvador, the joint 22 venture doesn't either. It would only be 278 1 Commerce. So again, they're still in the same 2 position of having to choose between either they 3 have no claims because they were not involved or 4 they were a part of the proceedings and they 5 violated their waivers. They can't have it both 6 ways, but they keep trying to have it both ways. 7 I also just want to point out, 8 there has been a considerable discussion of 9 whether or not the waiver applies to the 10 investment law proceedings regarding the 11 investment law before this tribunal. We've 12 heard the position of the parties. 13 From El Salvador's point of view, 14 that issue is not yet ripe for decision. It has 15 not been placed before the tribunal. 16 El Salvador again reserves its right to raise 17 that issue if the time came, but would hope that 18 the tribunal would reserve a decision on that 19 until it has been fully briefed, as it is a 20 rather significant and complicated legal issue. 21 And, finally, with regard to the 22 issue of whether or not El Salvador could have 279 1 taken the waiver to the Supreme Court of 2 El Salvador and sought the termination of the 3 case, they have said that the attorney general's 4 opinion submitted in response to the tribunals 5 in question did not address that issue. Of 6 course, it didn't address that issue. It was in 7 response to an entirely different question. 8 However, the case that was 9 submitted along with that -- with the 10 respondent's submission, one of the two Supreme 11 Court cases clearly states that the only way for 12 a termination under Article 40 by a party is for 13 the claimant itself or a representative of the 14 claimant to request in writing to the tribunal 15 for discontinuance. 16 So I -- while claimants may not 17 have their own separate knowledge of this issue 18 under Salvadorean law, I don't think they've put 19 forward anything to challenge that position. 20 And just finally, to read it: 21 "In this regard, this chamber 22 clarifies that the ground for discontinuance 280 1 provides for in Article 40 letter B of the Law 2 of the Administrative Litigation, jurisdiction 3 is an integral part of the right of a petition 4 that every citizen has when appearing before the 5 judicial body. Such expression is of concrete 6 character, just as a claim filed in writing and 7 admitted by this tribunal indicates at the 8 beginning of the process, the discontinuance is 9 the concrete expression by the claimant in 10 writing before this tribunal that it does not 11 intend to continue with the proceeding." 12 One final point. Claimants' 13 counsel has said that it is not their position 14 that the waiver requires them to do nothing. 15 But that is exactly what claimants' counsel has 16 claimed in this case, that because they took no 17 affirmative actions, they have not violated 18 their waiver. But of course everyone knows that 19 violations can be undertaken by act or omission, 20 and claimants had no right just to do nothing 21 when they had a proceeding for the court of 22 El Salvador that was in violation of the waiver 281 1 which they could have and should have and had 2 the obligation to discontinue. 3 Thank you. 4 MR. Van den BERG: Mr. Machulak, 5 you have, also, the possibility for a short 6 surrebuttal. 7 CLAIMANTS' SURREBUTTAL 8 BY MR. MACHULAK: 9 MR. MACHULAK: I didn't want to -- 10 I did not want to leave on a note that somehow 11 suggested that I gave misinformation to this 12 tribunal. 13 In the very last paragraph -- and 14 you can see the web site yourself -- there's a 15 press release from Dewey & LeBoeuf that they're 16 representing the governments of Costa Rica, 17 El Salvador, and Nicaragua in a lawsuit. I 18 don't know how to display the whole article on 19 the web site, but that's the top part of it. 20 And my information from this press release is, 21 their representation started within the last 22 couple of months. So I leave it to you to 282 1 decide what is the accurate information. That's 2 all I have to say on it. 3 MR. Van den BERG: Then we come to 4 the point in the agenda on the table of final 5 matters. 6 First of all, what is outstanding 7 is a very brief submission by the respondents 8 within seven days on the question of with or 9 without prejudice. The tribunal wonders whether 10 the claimants would also like to avail 11 themselves of this opportunity to file also, in 12 a very brief submission, on exactly the same 13 question so that we get the same information. 14 All right. So both parties will 15 file within seven days of today. This is by 16 next Tuesday, not the Tuesday tomorrow, but 17 tomorrow, seven days -- or eight days, if my 18 count is correct. Take the seven days a little 19 bit generously. 20 The question is whether the 21 discontinuance of administrative proceedings 22 before the Supreme Court of El Salvador is with 283 1 or without prejudice to reinstatement, to use 2 the full term. 3 Then the time for rendering the 4 awards -- this is also an expedited proceeding. 5 If I understand correctly, the time started to 6 run on 16 August 2010, if that's correct. I 7 look to the parties whether my start date is 8 correct. 9 MR. SMITH: El Salvador agrees it's 10 correct. 11 MR. Van den BERG: And can, then, 12 both parties help me on the 50 days? Who knows 13 the answer? 14 MR. SMITH: I believe that because 15 there was a hearing, that in fact the tribunal 16 has 180 days. 17 MR. Van den BERG: No. We start 18 with the before position. A good lawyer, you're 19 immediately asking for an extension. 20 Let's see. Where does 150 days 21 bring us? Somewhere in January, isn't it? 22 Anybody knows the exact date? You can do it on 284 1 Excel. 2 VOICE: January 13th, 2011. 3 MR. Van den BERG: Now, the 4 tribunal will endeavor to render its decision 5 before January 13th, 2011. It might be that we 6 have to apply for extension for 30 days. That, 7 we will try to avoid. 8 We are blessed by the cooperation 9 of the parties at the first session that the -- 10 we do not have to submit simultaneously the 11 Spanish translation. In other cases, that is -- 12 really, that delays enormously the process. But 13 here you will get immediately the English text, 14 and then we will, as quickly as we can, provide 15 you with the Spanish text. 16 This leads me to the next question. 17 Are there any issues or questions left of a 18 procedural administrative nature that the 19 parties would like to raise at this point in 20 time? 21 Mr. Machulak? 22 MR. MACHULAK: I don't think so. 285 1 No, Mr. President. 2 MR. Van den BERG: Thank you. 3 Mr. Smith? 4 MR. SMITH: Excuse me? 5 MR. Van den BERG: Do you have any 6 questions or issue which you would like to raise 7 on a procedural or administrative nature? 8 MR. SMITH: No, not at this time. 9 MR. Van den BERG: Now, then the 10 tribunal would like to ask both parties whether 11 the fundamental principles of due process have 12 been observed by this tribunal until now in the 13 sense that has there been any serious departure 14 from the fundamental rule of procedure taken 15 place within the meaning of Article 52, 16 paragraph 100-E, of the Washington Convention? 17 MR. MACHULAK: Absolutely not. 18 MR. SMITH: No, nothing from the 19 perspective of El Salvador. 20 MR. Van den BERG: Thank you. Then 21 the tribunal would like to thank, first of all, 22 the court reporter for the perseverance. And we 286 1 would like thank very much, also, the 2 interpreters for keeping up. Muchas gracias. 3 And the ICSID secretariat, who as of today had a 4 minicrisis in terms of finding out because the 5 site was crashed. We much appreciate that they 6 got us back on the air. 7 We particularly would like to 8 extend thanks to the secretary of the tribunal, 9 Marco Montanes-Rumayor. And above all, the 10 tribunal would like to commend counsel on both 11 sides for the high degree of professionalism, 12 but also the courtesy they have presented in the 13 case here today, and also in their written 14 pleadings. 15 And we do not fail, also, to thank 16 the back benches, because we know that the 17 paralegals and the junior lawyers have worked a 18 lot in this case as well. So we also extend our 19 thanks to them. 20 On that, I close the hearing. 21 Thank you. 22 (Deposition adjourned, 5:50.) 287 1 2 I N D E X 3 4 Arguments 5 6 BY MR. SMITH 21, 190, 274 7 8 BY MR. MACHULAK 100, 220, 281 9 10 BY MR. NEWCOMBE 121, 225 11 12 13 14 15 16 17 18 19 20 21 22 288 1 CERTIFICATE 2 I, TAB PREWETT, A Registered 3 Professional Reporter, Notary Public, Certified 4 LiveNote Reporter, and Certified Shorthand 5 Reporter, do hereby certify that the foregoing 6 is a true and accurate transcript of the 7 testimony as taken stenographically by and 8 before me at the time, place and on the date 9 hereinbefore set forth. I DO FURTHER CERTIFY 10 that I am neither a relative nor employee nor 11 attorney nor counsel of any of the parties to 12 this action, and that I am neither a relative 13 nor employee of such attorney or counsel, and 14 that I am not financially interested in the 15 action. 16 _________________________________________ Notary Public 17 My Commission expires February 9, 2014 Dated: November 15, 2010 18 19 20 21 22