[PDF] INTERNATIONAL CENTRE FOR SETTLEMENT OF INVESTMENT DISPUTES



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INTERNATIONAL CENTRE FOR SETTLEMENT OF INVESTMENT DISPUTES

Ms Elitza Popova-Talty, and Mr Edward Baldwin (until May 21, 2014) Milbank, Tweed, Hadley & McCloy LLP 1850 K Street, NW Suite 1100 Washington, D C 20006



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INTERNATIONAL CENTRE FOR SETTLEMENT OF INVESTMENT DISPUTES W

ASHINGTON, D.C.

In the arbitration proceeding between

F

RAPORT AG FRANKFURT AIRPORT SERVICES WORLDWIDE

Claimant

and R

EPUBLIC OF THE PHILIPPINES

Respondent

ICSID Case No. ARB/11/12

AWARD

Members of the Tribunal

Professor Piero Bernardini, President

Mr. Stanimir A. Alexandrov

Professor Albert Jan van den Berg

Secretary of the Tribunal

Ms. Aurélia Antonietti

Date of dispatch to the Parties: December 10, 2014

REPRESENTATION OF THE PARTIES

Representing Fraport AG Frankfurt Airport

Services Worldwide:

Mr. Michael D. Nolan

Ms. Elitza Popova-Talty, and

Mr. Edward Baldwin (until May 21, 2014)

Milbank, Tweed, Hadley & McCloy LLP

1850 K Street, NW

Suite 1100

Washington, D.C. 20006

U.S.A.

and until March 12, 2014

Dr. Sabine Konrad

Steuerberater LLP

Feldbergstra

ȕe 35

60323 Frankfurt am Main

Germany

and

Ms. Lisa M. Richman

McDermott Will & Emery LLP

The McDermott Building

500 North Capitol Street, NW

Washington, D.C. 20001

-1531

U.S.A.

Representing the Republic of the Philippines:

Hon.

Florin T. Hilbay

Mr. Bernard G. Hernandez

Mr. Eric Remegio O. Panga

Ms. Ellaine Sanchez-Corro

Ms. Myrna S. Agno, and

Ms. Jane E. Yu

Office of the Solicitor General of the Philippines

134 Amorsolo St., Legaspi Village

Makati City, 1229,

Philippines

and

Justice Florentino P. Feliciano

224 University Avenue

Ayala Alabang Village

Muntinlupa City, Metro Manila,

Philippines

and

Ms. Carolyn B. Lamm

Ms. Abby Cohen Smutny

Mr. Francis A. Vasquez Jr.

Mr. Hansel T. Pham

Ms. Anne

D. Smith

Mr. Frank Panopoulos, and

Mr. Brody

K. Greenwald

White & Case LLP

701 13th Street, N.W.

Washington, D.C. 20005

U.S.A.

i

TABLE OF CONTENTS

I. INTRODUCTION AND PARTIES .................................................................................................... 1

II. OVERVIEW OF THE CASE AND PARTIES' REQUESTS FOR RELIEF ..................................... 1

III. PROCEDURAL HISTORY ................................................................................................................ 5

IV. FACTUAL BACKGROUND ........................................................................................................... 25

A. The NAIA Terminal 3 Project and the Concession Agreements .............................................. 25

B. Fraport's Investment in the Terminal 3 Project ........................................................................ 38

C. Attempts to Renegotiate Terminal 3 Concession Agreement ................................................... 44

D. Nullification of the Terminal 3 Concession .............................................................................. 46

E. Further 2003/2004 Proceedings ................................................................................................ 52

F. The Government's Taking of NAIA Terminal 3 ...................................................................... 53

V. SUMMARY OF THE PARTIES' POSITIONS ............................................................................... 61

V.I RESPONDENT'S OBJECTIONS TO JURISDICTION AND ADMISSIBILITY .......................... 61

A. Respondent's Basis for its Objections to Jurisdiction and Inadmissibility ............................... 62

B. Fraport Knowingly Based its Investment on a Concession that had been Illegally Obtained and

that was Invalid under Philippine Law ..................................................................................... 63

C. Fraport Violated the Anti-Dummy Law .................................................................................... 64

1.

The Philippine Anti-Dummy Law ............................................................................................ 64

2.

Fraport's Alleged ADL Violations ........................................................................................... 66

D. Fraport's Corruption and Unlawful Conduct Render its Claims Inadmissible ......................... 67

1.

The Four "Liongson Schemes" to Procure Government Approvals ......................................... 67

2.

The EPC Contract Schedule 7 Kickback Scheme ..................................................................... 69

3.

Improper Receipt of Funds by Fraport Officials ....................................................................... 70

4.

Fraport's Responses .................................................................................................................. 70

5. Respondent's Argument Relating to Fraport's Ultimate Use of the Funds Put in the

Project ....................................................................................................................................... 72

V.II

SUMMARY OF FRAPORT'S CLAIMS AND RELIEFS ............................................................... 74

A. Fraport's Claims for Expropriation ........................................................................................... 74

1.

The Alleged Acts of Expropriation ........................................................................................... 74

2. Respondent's Defense of the Invalidation of the Terminal 3 Concession Agreements ............ 75 3.

Failure to Pay Compensation .................................................................................................... 78

4.

Public Purpose .......................................................................................................................... 80

B. Unfair and Inequitable Treatment ............................................................................................. 81

1.

Legitimate Expectations ............................................................................................................ 82

2.

Bad Faith ................................................................................................................................... 83

3.

Denial of Justice ........................................................................................................................ 85

4.

Lack of Transparency................................................................................................................ 86

ii

C. Impairment by Arbitrary and Discriminatory Measures ........................................................... 86

D. Failure to Afford Full Protection and Security ......................................................................... 87

E. Breach of Umbrella Clause ....................................................................................................... 88

F. Compensation under Theories of Unjust Enrichment and Quantum Meruit ............................ 89

V.III THE PHILIPPINES' COUNTERCLAIMS ...................................................................................... 89

VI. JURISDICTION ................................................................................................................................ 91

A. Governing Law and Burden of Proof ........................................................................................ 91

B. The "Investment" under the BIT ............................................................................................... 93

1.

The Parties' Positions ............................................................................................................... 93

1.1

Respondent's Position ................................................................................................... 93

1. 2

Claimant's Position........................................................................................................ 95

2.

The Tribunal's Analysis ............................................................................................................ 98

C. Respondent's Jurisdictional Objections .................................................................................. 103

1.

Introduction ............................................................................................................................. 103

2.

Jurisdictional Objection 1: Fraport Violated the Anti-Dummy Law ...................................... 105

2.1

Introduction to the Anti-Dummy Law ......................................................................... 105

2.2

The Parties' Arguments ............................................................................................... 106

a) Respondent's Position ......................................................................................... 106

b) Claimant's Position ............................................................................................. 115

2.3

The Tribunal's Analysis .............................................................................................. 120

a) Interpretation of the ADL .................................................................................... 122

(i) Whether the ADL Applied Prior to the Operation of Terminal 3 ........................ 122

(ii) Shareholder Conduct under the ADL .................................................................. 125

(iii) Whether the ADL Prohibits Planning a Prohibited Act without More ................ 128 (iv) Whether a Violation Requires "Knowledge" ...................................................... 131

(v) Whether a Violation Can Be Cured ..................................................................... 133

(vi)

Good Faith as a Defense ..................................................................................... 134

b) Assessment of Fraport's Alleged ADL Violation ............................................... 139 3. Jurisdictional Objection 2: There is no Jurisdiction and all of Fraport's Claims are

Inadmissible as a Result of Fraport's Corruption and Fraud .................................................. 148

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