In the Matter of an Arbitration Under the Arbitration Rules of the International Centre for Settlement of Investment Disputes O
Total Page：16
File Type：pdf, Size：1020Kb
IN THE MATTER OF AN ARBITRATION UNDER THE ARBITRATION RULES OF THE INTERNATIONAL CENTRE FOR SETTLEMENT OF INVESTMENT DISPUTES OMEGA ENGINEERING LLC AND MR. OSCAR RIVERA CLAIMANTS v. THE REPUBLIC OF PANAMA RESPONDENT CLAIMANTS’ REJOINDER ON PRELIMINARY OBJECTIONS Counsel for Claimants JONES DAY SHOOK, HARDY & BACON LLP 51 Louisiana Avenue, N.W. Citigroup Center Washington, DC 20001 201 S. Biscayne Blvd., Suite 3200 United States Miami, FL 33131 United States of America JONES DAY 21 Tudor Street London EC4Y 0DJ England 20 JANUARY 2020 TABLE OF CONTENTS I. INTRODUCTION ..................................................................................................................... 5 II. THE ARBITRAL TRIBUNAL HAS JURISDICTION OVER ALL CLAIMS ................................ 10 A. Respondent’s Illegality Objection Does Not Impugn This Tribunal’s Jurisdiction (and, in any Event, Fails on the Facts)......................................... 10 1. Respondent’s Illegality Allegations Are Baseless as a Matter of Fact ..... 14 a. Respondent Fails to Prove the Key Elements of Bribery and Corruption ..................................................................................... 16 b. The Criminal Investigations Were Fatally Flawed and Do Not Prove that the La Chorrera Contract Was Acquired Through Corruption ..................................................................................... 23 c. Respondent Ignores Key Evidence that Shows that Claimants Did Not Secure the La Chorrera Contract Through Corruption and Instead Focuses on Irrelevancies .................................................. 34 d. Respondent’s Accusation that the Real Estate Transaction is a Sham is Meritless as a Matter of Panamanian Law and Real Estate Practice .......................................................................................... 39 e. Respondent’s own Prosecutor and Courts Have Found that the Evidence Is Insufficient to Support a Charge of Corruption ........ 63 2. Respondent’s Illegality Arguments Fail as a Matter of Law .................... 67 a. The Tribunal Has Jurisdiction Over All of the Claims Before It .. 67 b. Claimants’ Claims Are Not Inadmissible ..................................... 77 c. Principles of Proportionality and Contributory Fault Guide Any Evaluation of Alleged Illegality in the Operation of an Investment ....................................................................................................... 86 d. Respondent Should Be Estopped from Asserting its Illegality Objection ....................................................................................... 88 B. The Claims Levied Against Respondent Concern Quintessential Sovereign Acts and Not Mere “Commercial Claims” ....................................................... 90 1. The Government Agencies’ Attitude Toward the Omega Consortium Deteriorated Unexpectedly When the Varela Appointees Took Office ..... 94 a. The INAC...................................................................................... 95 b. The Municipality of Panama ....................................................... 103 c. The MINSA ................................................................................ 111 d. The Municipality of Colón.......................................................... 117 e. The Judiciary ............................................................................... 121 f. The Ministry of the Presidency ................................................... 126 2. Upon President Varela Being Elected, and Threatening the Incumbent Comptroller General, the Comptroller General’s Office Abruptly Stopped Endorsement of Payments and Change Orders on Virtually All the Contracts ................................................................................................. 132 a. Respondent Provides Spurious Justifications for the Slowdown with the Comptroller General’s Office During the Varela Administration ............................................................................ 134 b. The Comptroller General’s Office Stonewalls the Omega Consortium’s Payment Requests ................................................ 138 c. The Comptroller General’s Office Stonewalls the Omega Consortium’s Change Order Requests ........................................ 148 3. The Government’s Attack Focused on the Omega Consortium’s Largest Project in Panama—the Ciudad de las Artes Project ............................ 156 a. The Varela-Appointed Director, Ms. Nuñez, Began to Stonewall the Project Immediately and the Project Inspectors Began to Find (Alleged) Serious Problems Not Previously Encountered .......... 156 b. The Ministry of Economy and Finance Slashed the Budget for the Project ......................................................................................... 162 c. The INAC Unlawfully Terminated the Contract by Administrative Resolution, Leaving the Omega Consortium Unable to Bid on Public Work Projects .................................................................. 168 4. While Causing the Remaining Contracts to Lapse, the Government also Demanded that the Omega Consortium Continue Working on the Projects Knowing that the Omega Consortium Could Not Bill for Work Performed under Lapsed Contracts .......................................................................... 170 5. Notwithstanding Respondent’s Attacks Against the Omega Consortium’s Projects, Claimants Remained Committed to Completing the Projects . 175 6. Through the Attorney General’s Office, the Government Opened Baseless Criminal Investigations Into Mr. Rivera and His Companies, Which Remain Open and Unresolved After Almost Five Years ......................... 183 7. Contemporaneous Communications with Government Officials and Individuals Close to the Government Confirm this Multi-Faceted Attack was Directed by President Varela .......................................................... 187 8. Recently Published WhatsApp Messages Confirm that Corruption and Abuse of Power Were Endemic to the Varela Administration ................ 193 a. Corruption and Manipulation Favoring Certain Public Contractors and Persecuting Others ............................................................... 197 b. Corruption and Manipulation of the Comptroller General ......... 200 - 3 - c. Corruption and Manipulation with Respect to the Attorney General’s Office .......................................................................... 201 d. Corruption and Manipulation of the Country’s National Budget Process ........................................................................................ 204 e. Corruption and Manipulation of the Judiciary ............................ 206 9. Respondent’s “Commercial” Argument Not Only Fails as a Matter of Fact, but Also as a Matter of Law........................................................... 209 C. This Tribunal Has Jurisdiction Over Claimants’ Umbrella Clause Claims 212 D. The Tribunal Has Jurisdiction Over Claims Relating to the Baseless Criminal Investigations .................................................................................... 220 E. This Arbitration Is the Proper Venue for the Resolution of this Investment Dispute ............................................................................................................... 223 1. This Tribunal’s Jurisdiction Is Unfettered by Article VII of the BIT ...... 225 2. Claimants’ Corporate Structure Does Not Affect the Tribunal’s Jurisdiction ............................................................................................. 230 3. Respondent’s Attempts to Attack the Unity of Investment Theory Fail .. 237 III. CONCLUSION .................................................................................................................... 239 - 4 - I. INTRODUCTION 1. Respondent’s Reply on Preliminary Objections 1 consists of a scattershot compilation of internally inconsistent legal theories, unsupported factual claims, and mischaracterizations of international law. It is a failed search for a silver bullet to avoid international responsibility—an effort to trip up these claims on a made-up theory of Claimants’ alleged corruption (which has been disavowed by every arm of the Panamanian State to look at the issue since 2014); a naïve expression of President Varela’s incorruptibility (despite the recent publication of evidence that proves his unlawful political reprisal campaign against opponents); a singular effort to smear the Claimants’ operational success; and arguments to effectively neuter the substantive protections of the treaties. Nonsense. 2. This dispute is now fully plead on the merits (because Respondent apparently did not believe its preliminary objections worthy of bifurcation), and the timeline of events is clear. When Juan Carlos Varela assumed the Presidency in 2014, he set out to extinguish any remnants of former President Ricardo Martinelli’s Administration, especially what he called the “children of Martinelli” who signed public works contracts with the previous Administration. Before that time, Claimants spent years building a successful investment in Panama, but within months of President Varela winning the Presidential elections, Respondent began to systematically destroy it. Every ministry and agency with which Claimants had a contract, every Government official upon whom Claimants depended for invoicing, change orders, and payments, simultaneously began to impede and interfere with Claimants’ projects. The Municipality of Panama, the 1 For purposes