Claimants' Memorial
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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’ MEMORIAL Counsel for Claimants JONES DAY JONES DAY 600 Brickell Avenue 21 Tudor Street Brickell World Plaza, Suite 3300 London EC4Y 0DJ Miami, Florida 33131 England United States JONES DAY INTERNATIONAL DISPUTE RESOURCES 51 Louisiana Avenue, N.W. 701 Brickell Avenue, Suite 1550 Washington, DC 20001 Miami, FL 33131 United States United States 25 JUNE 2018 TABLE OF CONTENTS I. INTRODUCTION .................................................................................................................. 1 II. RELEVANT POLITICAL BACKGROUND .............................................................................. 4 III. CLAIMANTS’ INVESTMENT IN PANAMA ............................................................................ 7 A. Mr. Rivera Successfully Built One of the Largest Construction Companies in Puerto Rico ................................................................................... 7 B. Mr. Rivera Takes Over Omega U.S. and Focuses on Expanding into Panama................................................................................................................ 10 1. Mr. Rivera’s Strategy to Penetrate the Panamanian Market While Protecting the Omega Brand. .................................................................. 13 a. PR Solutions S.A. ........................................................................ 13 b. Omega Panama ............................................................................ 14 c. Omega U.S. .................................................................................. 16 2. Claimants’ Outstanding Projects in Panama .......................................... 18 a. Contracts with the Panamanian Ministry of Health ..................... 19 b. Contract with the Panamanian Ministry of the Presidency .......... 23 c. Contract with the Panamanian National Institute of Culture ....... 24 d. Contract with the Panamanian Judiciary ...................................... 25 e. Contract with the Panamanian Municipality of Colón ................ 26 f. Contract with the Panamanian Municipality of Panama .............. 27 IV. CLAIMANTS’ INVESTMENT IN PANAMA WAS PROGRESSING WELL UNTIL PRESIDENT VARELA ASSUMED OFFICE IN 2014 ............................................................. 28 V. IN 2013, THEN-PRESIDENTIAL CANDIDATE CARLOS VARELA MET WITH MR. RIVERA AND REQUESTED A CAMPAIGN CONTRIBUTION FROM HIM ............................ 34 VI. UPON TAKING OFFICE, THE VARELA ADMINISTRATION LAUNCHED AN ORCHESTRATED CAMPAIGN OF HARASSMENT AGAINST CLAIMANTS AND THEIR INVESTMENT .................................................................................................................... 38 A. The Government Obstructed Progress of the Construction Projects by Refusing to Issue Necessary Permits and Plans .............................................. 39 B. The Government Refused to Approve Payment of the Omega Consortium’s Invoices ....................................................................................... 41 C. The Government Terminated, Suspended or Allowed to Lapse All of Claimants’ Contracts in Panama ..................................................................... 42 D. The Government Opened a Series of Bogus Criminal Investigations into Claimants and their Investments .............................................................. 50 1. The Prosecution of Judge Moncada Luna and the First Criminal Investigation ............................................................................................. 51 ii 2. The Second Criminal Investigation .......................................................... 58 3. The Third Criminal Investigation ............................................................ 60 VII. RESPONDENT’S UNLAWFUL ACTIONS NOT ONLY DECIMATED CLAIMANTS’ INVESTMENT IN PANAMA, BUT ALSO OMEGA U.S.’S REPUTATION AND GOODWILL ....................................................................................................................... 61 VIII. CLAIMANTS MEET ALL JURISDICTIONAL REQUIREMENTS OF THE BIT, THE TPA, AND THE ICSID CONVENTION ........................................................................... 66 A. The BIT and the TPA Apply in this Arbitration ............................................ 67 B. The BIT’s Jurisdictional Requirements Are Satisfied ................................... 68 C. The TPA’s Jurisdictional Requirements Are also Satisfied ........................... 71 D. The ICSID Convention’s Jurisdictional Requirements Are Satisfied .......... 74 IX. RESPONDENT, THROUGH ITS ILLEGAL ACTIONS AGAINST CLAIMANTS AND THEIR INVESTMENTS, HAS BREACHED THE BIT AND THE TPA ................................... 77 A. Respondent Has Unlawfully Expropriated Claimants’ Investments in Violation of the BIT and the TPA .................................................................... 77 1. Claimants’ Investment Was Protected Against Unlawful Expropriation ........................................................................................... 78 2. Respondent’s Acts Constituted an Expropriation of Claimants’ Investment ................................................................................................ 79 a. Respondent’s Acts Constituted an Expropriation of Claimants’ Contractual Rights ..................................................... 85 b. Respondent’s Acts Constituted an Expropriation of Claimants’ other Investments in Panama ..................................... 88 c. The Cumulative Effect of Respondent’s Acts Constitutes an Expropriation under the BIT and the TPA ................................... 89 3. Respondent’s Expropriation of Claimants’ Investment Was Unlawful Under the Treaty and as a Matter of International Law .......... 90 B. Respondent Has Treated Claimants Unfairly and Inequitably in Violation of the BIT and the TPA .................................................................... 92 1. Respondent Frustrated Claimants’ Legitimate Expectations and Contractual Rights ................................................................................... 94 2. Respondent Harassed and Coerced Claimants and Their Investment .................................................................................................................. 98 3. Respondent’s Actions Were Arbitrary, Unreasonable, Inconsistent, Non-Transparent and Not Taken in Good Faith ................................... 101 4. Respondent’s Actions Amount to a Creeping Violation of the FET Standard ................................................................................................. 105 iii C. Respondent Deprived Claimants and their Investment of Full Protection and Security ................................................................................... 107 D. Respondent Has Subjected Claimants’ Investments to Unreasonable, Arbitrary and Discriminatory Measures ....................................................... 110 E. Respondent Has Breached The Treaties’ Umbrella Clauses ....................... 112 X. RESPONDENT’S UNLAWFUL ACTS CAUSED CLAIMANTS SIGNIFICANT MONETARY DAMAGES FOR WHICH CLAIMANTS ARE ENTITLED TO FULL REPARATION............... 116 A. Claimants Are Entitled to Full Reparation as a Matter of International Law .................................................................................................................... 117 1. Full Reparation Requires Compensation for All Assessable Damage Caused by Respondent’s Actions ........................................... 120 a. Loss of Value of the Investment ................................................ 120 b. Moral Damages .......................................................................... 126 2. Full Reparation Also Requires Payment of Interest............................ 129 XI. FULL REPARATION JUSTIFIES AN AWARD OF AT LEAST US$ 81.58 MILLION AS PROVEN BY THE EVIDENCE AND CLAIMANTS’ EXPERTS ............................................. 131 A. General Approach to Calculating Damages .................................................. 131 1. The Counterfactual or But For Situation ............................................... 132 a. Approaches to Calculating the Value of the Existing Contracts .................................................................................... 133 b. Approaches to Calculating the Value of Potential Contracts in Panama ................................................................................... 134 c. Valuation of Losses on the Existing Contracts .......................... 137 d. Valuation of Losses on Potential New Contracts ...................... 139 e. Total Losses under the But For Situation as of the Date of Valuation .................................................................................... 142 2. The Actual Situation ............................................................................... 142 3. Final Calculations ................................................................................. 143 XII. RELIEF REQUESTED ...................................................................................................... 143 iv I. INTRODUCTION 1. This dispute pertains to a series of measures targeted against Mr. Oscar Rivera (“Mr. Rivera”)—a construction entrepreneur—and his company and investments by the Government of Panama (“Panama”, “Respondent”, or the