Frankfurt Investor-State International Arbitration Moot 2015

Skeleton Arguments on behalf of the Respondents

BANCO DE PORTUGALV.UNITED KINGDOM

2015

SKELETON ARGUMENTS FOR THE RESPONDENT

THE TRIBUNAL HAS NO JURISDICTION RATIONE PERSONAE

1)The first objection :

Status of the Claimant (Banco de Portugal) as a Joint Stock Corporation is not valid.

Reasons: a) The alleged fraud occurred during the time period of 1924-

1926 and Banco de Portugal registered itself in the commercial register in 1926 only.

b) The registration was not in agreement with the requirements of Articles 18(3), 47 & 49(5) of Portuguese Commercial Code.

c) Banco de Portugal’s capital was fixed at 13.5 million Escudos in 1887 and was raised to 100 million Escudos in 1931 and this was not registered.

2) The second objection :

Investor-State Arbitration opportunity is not available to the Banco de Portugal.

Reasons:

a) Banco de Portugal is a part of Portuguese State and is not a National of another contacting State according to Article 25 of ICSID Convention and Article 1 clause (c) of 1919 UK-CHINA BIT.

b) Banco de Portugal is not a Subject either according to Article 1 of Treaty of Commerce 1842. They did not enjoy the status of being a subject of another contracting State, that is, UK (indication to this is the stoppage by customs officer during transfer of notes).

c) Since not being a subject of UK, Banco de Portugal cannot claim to be Company within the meaning of Article 1 clause (d) of 1919 UK-CHINA BIT.

d) After the 1932 reforms Banco de Portugal was put under an obligation to maintain the value of Portuguese money which indicates it being an entity of Portuguese State. Also being “banker Of Portuguese government”.State-State mechanism being more suitable to solve the dispute.

THE TRIBUNAL HAS NO JURISDICTION 0RATIONE MATERIAE

1) The first objection The contract between Banco de Portugal and Waterlow & Sons Ltd. was not an investment.Reasons:a) Banco de Portugal was not working at any time in UK and also

as earlier mentioned not a subject of UK and therefore does not qualify to apply Article 1 clause (a) “investment” of 1919 UK-CHINA BIT.

2) The second objectionNo protection could be availed by Banco de Portugal.

Reasons:a) With reference to Article 1 of the Treaty of Commerce 1842

Banco de Portugal does not enjoy the clause of most favored nations and the immunity, protection or privileges terms.

THE TIBUNAL HAS NO JURSIDICTION RATIONAE CONSENSUS

Reasons:

a) Article 7 of 1919 UK-CHINA BIT cannot be called in since the requirements of being a national or a company and carrying out an investment in UK is not fulfilled by Banco de Portugal.

b) Treaty of Commerce 1842 does not mention any Investor-State Arbitration clause.

NO PRIMA FACIE DENIAL OF JUSTICE

REASONS:

a)High Court, Banco de Portugal v. Waterlow and Sons, Ltd., Judgment of 22 December 1930-

The argument put forward by Waterlow & Sons Ltd ( with regard to the amount and measure of damages) were rejected by the Hon’ble Justice Wright.The subsequent House of Lords judgment reveals that Justice Wright ordered for £569,421 with costs and rejected the remainder of Banco de Portugal’s claim. To this Waterlow & Sons Ltd appealed that the amount was excessive.

b)Court of Appeal, Banco de Portugal v. Waterlow and Sons Ltd., 26 March 1931, The Times Law Reports.

The Court of Appeal by majority held that the plaintiff were entitled to damages of £300,000. The amount was limited to this because the Court held that the Banco de Portugal should have known the way to distinguish between forged noted and real notes. The step to withdraw all noted including real ones was not reasonable.

c) House of Lords, Banco de Portugal v. Waterlow and Sons Ltd, Judgment of 28 April 1932.

House of Lords also held in favor of Banco de Portugal that they should be awarded entitled to £8992 that is the cost for reprinting of new notes. Viscount Sankey L.C. and Lord MacMillan explained in their dissenting opinion that Banco de Portugal should receive £610,392 in damages- the amount that it had claimed. They argued that Banco de Portugal’s total loss amounted to £1,098,822

From which the sum of £488,430 (which Banco de Portugal had already redeemed in the liquidation of Banco Angola e Metropole) had to be subtracted.

The above mentioned judgments do not at any point render the Banco de Portugal being denied of justice.

Issues have been raised against Waterlow and Sons Ltd and the right of Banco de Portugal to secure damages has not been denied.

Banco de Portugal’s claim fails on the basis of “tu quoque”

Reasons:

The whole sting planned and executed by Reis also involved negligence on the part of Portuguese state too.

Portuguese notaries were not vigilant while attesting the documents of Reis which is one of the main causes for this fraud to have occurred successfully.

The Minister to Hague was also a contributor to fraud. Reis’s bank, that is, Banco Angola e Metropole was

established after clearance from the Banking Council which led to Ministry of Finance allowing such a bank.

NO SHOWING OF DAMAGE (1) The Commission in its Judgment of 1926 disallowed 2 points of

claim of the Banco de Portugal regarding interest which was not reasonable.

Banco de Portugal had also received £488,430 when Banco Angola e Metropole was liquidated.

The respondent, that is, Waterlow and Sons Ltd (in House of Lords proceedings) denied that the Bank had suffered any loss and if the Bank had suffered any loss that was caused solely by the Bank’s own voluntary act by withdrawing the Vasco de Gama 500 Escudo notes when the forged notes and the real ones were distinguishable.

NO SHOWING OF DAMAGE (2)

Banco de Portugal was under no liability to pay the authorized notes.

The note holders in public did not suffer loss due this fraud and Reis’s bank Banco Angola e Metropolis proved to be a blessing for Portuguese economy.

Also, after the fraud was discovered the Portuguese government on 19 July 1926 allowed for enhancement of bank’s power to issue notes.

Request of Documents by Respondent

1) Documents related to the monetary policy of Banco de Portugal are necessary to be provided. In order to analyze the real damages suffered by the bank such documents are relevant.

2) Denying producing the documents would not ensure a fair trial.

3) Documents related to the formation and supervision of Banco Angola e Metropolis are relevant to determine that Banco de Portugal is a part of Portugal and negligence on the part of Portuguese officials.

Request of Documents by Claimant

1) The documents asked by the Claimant relating to deliberations of the House of Lords related to its judgment are not admissible as that would violate the privacy laws of court.

2) The second documents relating to communications of Hon’ble judges are the property of the court of law. The respondent does not have any authority to procure them.