INTERNATIONAL CENTRE for SETTLEMENT of INVESTMENT DISPUTES in the Arbitration Proceeding Between Claimant and Respondent ICSID C
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INTERNATIONAL CENTRE FOR SETTLEMENT OF INVESTMENT DISPUTES WASHINGTON, D.C. In the arbitration proceeding between FRAPORT AG FRANKFURT AIRPORT SERVICES WORLDWIDE Claimant and REPUBLIC 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 Representing the Republic of the Philippines: Services Worldwide: Mr. Michael D. Nolan Hon. Florin T. Hilbay Ms. Elitza Popova-Talty, and Mr. Bernard G. Hernandez Mr. Edward Baldwin (until May 21, 2014) Mr. Eric Remegio O. Panga Milbank, Tweed, Hadley & McCloy LLP Ms. Ellaine Sanchez-Corro 1850 K Street, NW Ms. Myrna S. Agno, and Suite 1100 Ms. Jane E. Yu Washington, D.C. 20006 Office of the Solicitor General of the Philippines U.S.A. 134 Amorsolo St., Legaspi Village Makati City, 1229, and until March 12, 2014 Philippines Dr. Sabine Konrad and McDermott Will & Emery Rechtsanwälte Steuerberater LLP Justice Florentino P. Feliciano Feldbergstraβe 35 224 University Avenue 60323 Frankfurt am Main Ayala Alabang Village Germany Muntinlupa City, Metro Manila, Philippines and and Ms. Lisa M. Richman McDermott Will & Emery LLP Ms. Carolyn B. Lamm The McDermott Building Ms. Abby Cohen Smutny 500 North Capitol Street, NW Mr. Francis A. Vasquez Jr. Washington, D.C. 20001-1531 Mr. Hansel T. Pham U.S.A. 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: