In the Matter of an Arbitration Under the Arbitration Rules of the United Nations Commission on International Trade Law 1976

IN THE MATTER OF AN ARBITRATION UNDER THE ARBITRATION RULES OF THE UNITED NATIONS COMMISSION ON INTERNATIONAL TRADE LAW 1976 AND PURSUANT TO THE AGREEMENT BETWEEN THE GOVERNMENT OF THE REPUBLIC OF INDIA AND THE REPUBLIC OF MOZAMBIQUE FOR THE RECIPROCAL PROMOTION AND PROTECTION OF INVESTMENT BETWEEN PATEL ENGINEERING LIMITED Claimant and THE REPUBLIC OF MOZAMBIQUE Respondent STATEMENT OF CLAIM 30 OCTOBER 2020 Contents Clause Page I. EXECUTIVE SUMMARY ....................................................................................................................... 3 II. PROCEDURAL BACKGROUND .......................................................................................................... 15 III. FACTUAL BACKGROUND .................................................................................................................. 19 A. PEL CONCEIVED OF THE PROJECT THAT MOZAMBIQUE CONSIDERED IMPOSSIBLE AND INVESTED IN MOZAMBIQUE TO IMPLEMENT IT 19 B. THE GOVERNMENT AND PEL FORMALISED THEIR RELATIONSHIP AND RESPECTIVE COMMITMENTS BY ENTERING INTO THE MOI 31 C. MOZAMBIQUE’S ALLEGATIONS AS TO THE ACCURACY OF THE ENGLISH MOI AS RELIED UPON BY PEL ARE UNSUPPORTED 42 D. PEL IMPLEMENTED THE MOI WITH MOZAMBIQUE’S ACTIVE PARTICIPATION 46 E. MOZAMBIQUE APPROVES THE PFS AND REQUESTS PEL TO WAIVER ITS RIGHT OF FIRST REFUSAL 51 F. MOZAMBIQUE ADOPTED AN INCONSISTENT AND CONTRADICTORY APPROACH TOWARDS THE PROJECT WITH PEL 54 G. MOZAMBIQUE RENEGED ON ITS PROMISE TO AWARD THE CONCESSION TO PEL AND PROCEEDED WITH A PUBLIC TENDER IN VIOLATION OF ITS COMMITMENT IN THE MOI 60 H. PEL WAS FORCED TO PARTICIPATE IN A PUBLIC TENDER FOR THE PROJECT UNDER PROTEST 63 I. MOZAMBIQUE REVERSED COURSE AND OFFERED TO AWARD THE CONCESSION DIRECTLY TO PEL AS REQUIRED BY THE MOI 69 J. MOZAMBIQUE REVERSED COURSE ONCE MORE AND PROCEEDED WITH A PUBLIC TENDER FOR PEL’S PROJECT 70 K. MOZAMBIQUE’S PUBLIC TENDER WAS REPLETE WITH SERIOUS IRREGULARITIES 72 L. THE PROJECT TODAY 76 IV. THE TRIBUNAL HAS JURISDICTION OVER PEL’S CLAIM .......................................................... 78 A. BOTH PARTIES CONSENTED TO ARBITRATION 78 B. THE TREATY’S JURISDICTIONAL AND PROCEDURAL REQUIREMENTS ARE SATISFIED 79 C. THE ARBITRATION CLAUSE IN THE MOI DOES NOT AFFECT THE JURISDICTION OF THIS TRIBUNAL 92 V. MOZAMBIQUE BREACHED THE TREATY THROUGH ITS WRONGFUL CONDUCT ............... 94 A. MOZAMBIQUE BREACHED THE TREATY’S FAIR AND EQUITABLE TREATMENT STANDARD 94 B. MOZAMBIQUE BREACHED THE TREATY’S MOST-FAVOURED NATION CLAUSE, WHICH ENTITLES PEL TO PROTECTIONS FROM OTHER MOZAMBICAN TREATIES 118 C. MOZAMBIQUE INDIRECTLY EXPROPRIATED PEL’S INVESTMENT 127 VI. RESPONDENT’S TREATY BREACHES CAUSED SUBSTANTIAL DAMAGE FOR WHICH CLAIMANT IS ENTITLED TO FULL REPARATION ...................................................................... 132 A. CLAIMANT IS ENTITLED TO FULL REPARATION AS A MATTER OF INTERNATIONAL LAW 132 B. FULL REPARATION JUSTIFIES AN AWARD OF AT LEAST USD 115.3 MILLION, AS AMPLY PROVEN BY THE EVIDENCE AND CLAIMANT’S EXPERT 140 C. FULL REPARATION ALSO REQUIRES PAYMENT OF INTEREST 152 VII. RESERVATION OF RIGHTS AND RELIEF REQUESTED .............................................................. 154 I. EXECUTIVE SUMMARY 1 This Statement of Claim is submitted on behalf of Patel Engineering Limited (“PEL” or “Claimant”), pursuant to Annex I of Procedural Order No. 1. 2 In 2023, the Republic of Mozambique (“Mozambique,” “Republic,” “Government,” or “Respondent”) expects to unveil a brand-new port in Macuse and rail line from Moatize, in the coal-rich province of Tete, to that new port. The port and rail line will open a novel logistics corridor within Mozambique that will transform the prospects of Mozambique to transport and export coal to the world. Currently, coal mined in the Tete province is transported across the country to the only existing ports in Beira and Nacala; those ports are both far away, making transportation expensive, and have limited capacity, meaning that there is always a quota on how much coal can even be transported. As a result, internal logistics mean that the entire coal mining industry in Mozambique is itself constrained. With no way to transport and ship large quantities of coal, there is little need or ability to maximise the extraction of a valuable commodity that would otherwise simply pile up beyond that used for domestic use or the limited international export that is feasible. Now, the new logistics corridor will break that limitation cap and release the coal industry from its previous shackles. 3 The idea to create a new port in or around Macuse and a rail line linking the port to a location in Tete was not novel. Mozambique had itself previously considered it and asked the State-owned Directorate of Ports and Railways in Mozambique (“CFM”), to investigate whether such a corridor would be feasible. The experts at CFM considered that the siltation and swampland along the Macuse coast made it wholly unsuitable for a port, and Mozambique therefore resigned itself to the fact that its coal industry would continue to be circumscribed by the limits of Mozambican geography, geology, and geoscience. Considering the sheer amount of coal estimated to be under Mozambican soil, and the dire need for coal to satisfy the voracious energy needs around Africa, India, and China, among others, this limitation on Mozambique’s economy, infrastructure, and job creation prospects was beyond unfortunate. 3 4 PEL, an Indian company with years of infrastructure and project expertise, saw the idea that Mozambique had previously considered unfeasible, and industriously turned it into reality. 5 Through knowledge gained from pre-existing projects in Mozambique and India, PEL envisioned that this game-changer for the Mozambican coal industry could be unlocked only if a new rail line from the Tete province coal belt area to a new port along the Zambezi coast was built with a larger haulage capacity, as existing haulage capacity of the rail link between Tete and Beira was minimal and insufficient. The new rail line would also be shorter in distance as compared to the existing Beira line, which would result in savings on transportation costs. Mozambique lacked both the port infrastructure and rail transport connections to port infrastructure necessary for the export of significant quantities of coal and other minerals. However, PEL had both the experience and expertise to bring its idea of a rail and port logistics corridor between Macuse and Moatize (the “Project”) to fruition. 6 In February 2011, Mr Kishan Daga, PEL’s Director of Projects and a witness in this arbitration, met with Mr Paulo Zucula, then the Minister of the Ministry of Transport and Communications (the “MTC”), to explore the possibility of investing in Mozambique and, in particular, to present its idea of the Project, which would assist in reducing the infrastructure constraints impeding Mozambique that PEL had identified. 7 Despite Minister Zucula’s confirmation that they had already studied such an idea and ruled it out as unfeasible, PEL demonstrated that its concept had real potential, and could substantially benefit Mozambique. In particular, Mr Daga expressed an interest in developing a deep-water port and rail corridor between Tete and Chinde as part of a public-private partnership (“PPP”), to facilitate the transport and ultimate export of Mozambican coal and other minerals. 8 The Parties agreed that PEL should conduct a preliminary study (the “Preliminary Study”) at PEL’s own costs, with assistance from an expert nominated by the MTC. This Preliminary Study assessed potential locations for a deep-water port in the eastern Zambezi Province, which could be connected by rail to coal mines located in the Moatize District in western 4 Mozambique.1 It also set out PEL’s recommendations as to the port location and, additionally, detailed specialist studies to be carried out in relation to the proposed port and rail corridor, including detailed engineering, environmental, and economic studies.2 9 The Preliminary Study was well received by the MTC, despite Mozambique’s previous assessment that a port in that area of the Zambezia coastline was an impossibility. Minister Zucula agreed that PEL’s concept appeared feasible and viable. Consequently, he agreed that the MTC and PEL should enter into a memorandum of interest (the “MOI”) in which PEL would agree – again at its own expense — to compile a prefeasibility study (the “PFS”), and in exchange, if the MTC approved the PFS, Mozambique would grant a concession directly to PEL. The PFS would focus on the new port location at Macuse and the connecting railway link from Moatize to Macuse, and form the basic terms and conditions of the concession. 10 On 6 May 2011, the Parties entered into the MOI.3 The MOI set out the basis under which PEL would incur millions of dollars to conduct the PFS to implement the Project it had envisaged. In exchange for PEL bringing this concept to the Government, financing it, and completing the PFS to the Government’s full satisfaction, the MTC agreed to grant the Project to PEL, as stated at Clause 2.1 of the MOI through the “granting of a concession by the [Government] to PEL for the construction and operation of the Project”4 and the offer of “the first right of refusal for the implementation of the Project on the basis of the concession which will be given by the Government of Mozambique”, which is set out at Clause 2.2.5 The MOI likewise provided PEL with exclusivity in relation to the Project (and similar projects

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