Dr.
TMA Pai International Technology
Arbitration Moot Competition, 2024
(March 30-31,2024)
MOOT PROPOSITION
1. Luminor Aegis (officially named as the Sovereign State of Luminor Aegis (SSLA)) is a
sovereign state known for its picturesque landscapes and technological advancements, nestled
between the azure waters of the Serenus Sea and the towering peaks of the Montis Aeternum
range. Its capital, Techiza, is a bustling metropolis that blends modern architecture with
ancient traditions, symbolizing the nation's commitment to progress while honouring its rich
heritage. The diverse geography, ranging from fertile plains in the Valoria region to the dense,
resource-rich forests of Silva Obscura, supports a vibrant economy. Renowned for its
forward-thinking policies and a thriving emerging economy, Luminor Aegis has attracted
substantial foreign investments, particularly in the sectors of artificial intelligence (AI) and
Financial Technology (Fintech).
2. Scienterra, a nation renowned for its lush landscapes and architectural marvels, was equally
celebrated for its intellectual capital. The country's investment in education and innovation,
especially since the mid 1970s after years of civil war and internal strife had cultivated a
generation of visionaries, engineers, and entrepreneurs dedicated to harnessing the power of
technology for the betterment of humanity.
3. Both Luminor Aegis and Scienterra had entered into a bilateral investment treaty (BIT) in
2023 as a pledge of mutual respect and collaboration in line with the economic and strategic
relations between these two countries since 1972, when a rapprochement was agreed between
two countries. [Copy of the BIT can be found in Annexure.]
4. Now, Aurum Intellectus PVT LTD, a fintech start-up based in Luminoria, a prominent
metro city in Luminor Aegis, greatly benefited from these policies. The company was
registered as a private limited entity under the Luminor Aegis Companies Act, which entitled
it to various benefits and incentives provided by the Government of Luminor Aegis.
Additionally, the bilateral investment treaty between Luminor Aegis and Scienterra facilitated
foreign direct investment (FDI), allowing Finatius Orbis, an investment firm based in
Schioza, the capital of Scienterra, to contribute up to 100 percent of the capital of Aurum
Intellectus under the automatic route.
5. Under this conducive investment climate, Aurum Intellectus developed Econosight, an
advanced GenAI-driven Fintech solution specifically tailored for fraud detection and
prevention. Econosight is the brainchild of the partnership between Finatius Orbis and Aurum
Intellectus. By analysing large volumes of financial data in real-time, Econosight was capable
of (a) identifying and alerting to fraudulent activities, (b) identifying patterns and anomalies
that were indicative of fraudulent activities, (c) predictive modelling of potential fraud
scenarios and (d) offering customisable alert mechanisms to key institutions.
6. The development of Econosight by Aurum Intellectus was significantly bolstered by a strategic
investment from the government of Luminor Aegis. In January 2025, the SSLA government
invested USD 50 million, acquiring a 25% stake in the venture, complementing Finatius Orbis’
earlier investment of USD 100 million in January 2024 for a 40% stake. A nodal officer from
the Ministry of Algorithmic, Information and New Technologies (MAINTy) of the SSLA Government
was authorised to participate in the governance structure of Aurum Intellectus as a full-term
board member. The officer was initially required to (a) submit regular audits of AI models to
MAINTy based on the model’s explanations to uncover potential biases in Econosight, even
those not immediately apparent in model outputs and (b) ushering stakeholder consultations
for Aurum Intellectus to undergo human-guided retraining and refinement of AI models.
7. Econosight’s capabilities in predictive modelling were particularly lauded when, in March 2026,
it successfully predicted a potential large-scale financial fraud that could have impacted the
Luminor Aegis’s central bank, i.e., the Reserve Bank of Luminor Aegis (RBLA). Econosight’s
success in August 2026, in detecting a potential large-scale fraud against the central bank of
Luminor Aegis, was primarily due to its advanced predictive modelling algorithms. These
algorithms were adept at analysing trends and patterns over extended periods, allowing them
to forecast potential fraudulent scenarios based on historical and current financial transaction
data. In this instance, Econosight successfully flagged a series of anomalous transactions that
were subtly deviating from established patterns, indicative of an impending fraudulent scheme.
In a weekly media briefing by the Spokesperson of the Ministry of Finance in November 2026,
Econosight’s predictive modelling capabilities and the AI compliance record of Fintech start-
ups were cited. The Ministry of Finance stated that Fintech start-ups have created a privacy-
friendly AI compliance ecosystem so far.
8. However, an incident in December 2026 exposed critical vulnerabilities in Econosight’s
functionality. Despite its advanced predictive modelling, Econosight failed in its primary
functions of identifying and alerting to real-time fraudulent activities in a high-profile case. The
fraudsters, aware of Econosight's reliance on pattern recognition, devised a method to
camouflage their illicit transactions. They executed a series of small, inconspicuous transactions
that individually appeared legitimate and fell within the normal range of financial activities.
These transactions were strategically scattered across multiple accounts and timed to coincide
with peak transaction periods, effectively blending in with legitimate traffic.
9. This tactic exploited a critical vulnerability in Econosight's design: its real-time anomaly
detection algorithms were less effective in identifying fraudulent activities concealed within
high-volume transaction periods. The system's algorithms, while robust in identifying outright
anomalies, struggled to differentiate between legitimately complex transaction patterns and
those artfully crafted to mimic them.
10. In the aftermath of the breach in December 2026, the government of Luminor Aegis found
itself in a precarious situation, owing to widespread public protests against a proposed digital
banking reform bill, known as the "Digital Financial Governance Bill (DFGB)." The DFGB was
tabled in September 2026 in a special session, aimed to further digitize banking operations and
introduce more AI-driven tools for financial management and customer services. However,
one particular aspect of the DFGB sparked controversy: the mandatory linkage of personal
biometric data with financial accounts for enhanced security and identity verification.
11. This provision stirred significant unrest among the public. In the first week of January 2027,
citizens took to the streets in major cities across Luminor Aegis, including the capital, Techiza,
demanding the withdrawal of the biometric linkage clause. In response to the escalating
protests in January 2027 and growing public dissent against the Digital Financial Governance
Bill (DFGB), the government of Luminor Aegis made a strategic decision to divest a portion
of its shares in Aurum Intellectus. This decision, announced in early February 2027, was aimed
at distancing the government from the technology and alleviating public concern over the
government’s involvement in digital financial surveillance.
12. The SSLA government sold 15% of its stake, reducing its shareholding from 25% to 10%.
This divestment was executed swiftly and was accompanied by a public statement emphasizing
the government's commitment to respecting citizens' privacy and recalibrating its approach to
digital financial governance.
13. Following the December 2026 security breach, the Luminor Aegis government, leveraging the
National Economic Security and Innovation Act (NESIA), took decisive steps impacting
Aurum Intellectus and their platform, Econosight. Amidst widespread public protests against
digital financial policies, the government enforced a temporary but critical suspension of
Econosight's key operational processes. This action, aimed at reassessing security protocols,
inadvertently resulted in substantial operational disruptions. Combined with the volatile public
sentiment, which had escalated to physical confrontations at facilities of Aurum Intellectus,
the suspension directly led to significant operational delays and financial setbacks. The Ministry
of Finance, acknowledging these challenges in April 2027, stressed the necessity of balancing
national security measures with the stability of digital financial operations.
14. In addition, the SSLA government swiftly introduced an ordinance in May 2027 that
significantly limited the use of AI in financial services. This legislative move, part of the broader
strategy under NESIA, had a profound impact on Econosight's core functionality. Specifically,
the ordinance imposed stringent restrictions on the real-time analysis of financial data, a key
feature of Econosight's AI-driven capabilities. These restrictions likely included limitations on
the speed and volume of data processing, which are critical for the detection and prevention
of financial fraud as it happens. The government justified the restrictions in the ordinance as
a measure to ensure that any AI system in financial governance does not make decisions based
on large volumes of data without adequate oversight and checks for bias and robustness.
15. Within months of the rapid implementation of the ordinance, Econosight's ability to provide
immediate insights and alerts on fraudulent transactions was severely compromised,
undermining its operational effectiveness. This regulatory change not only accelerated financial
losses for Aurum Intellectus but also eroded investor confidence. This compounded the
already dire situation caused by the temporary suspension of operations and the damaging
protests, placing Econosight in a precarious economic position.
16. Amidst this turmoil, another critical issue surfaced. Aurum Intellectus faced compliance and
tax challenges. In early March 2027, they were embroiled in a dispute with the Luminor Aegis
Revenue Authority (LARA) over alleged discrepancies in tax payments and non-compliance
with newly introduced digital financial regulations. These regulations, part of the broader
DFGB framework, mandated stringent reporting and operational standards for fintech
companies, especially those dealing with AI-driven financial solutions.
17. Aurum Intellectus contested these allegations, arguing that they were fully compliant with all
applicable laws and regulations. The dispute escalated to the Luminoria High Court, where,
after months of legal battles, the court ruled in favour of LARA in August 2027. The court's
decision was based on a strict interpretation of the DFGB regulations, which Aurum
Intellectus argued were being unfairly applied to them.
18. After the unsuccessful domestic legal proceedings that spanned a year, as stipulated by the
BIT, Finatius Orbis, in conjunction with Aurum Intellectus PVT LTD, transmitted a notice of
dispute to the Government of Luminor Aegis. Despite efforts to amicably resolve the dispute
over a period of six months, no resolution was forthcoming. Consequently, Finatius Orbis
served a notice of arbitration to the Government of Luminor Aegis and filed a request for
arbitration before the International Centre for Settlement of Investment Disputes (ICSID). In
their claim, they sought damages amounting to USD 800 Million, in addition to demanding
the full costs of the arbitration proceedings.
Issues
1. Was the expropriation of Econosight by the Government of the Sovereign State of
Luminor Aegis in accordance with the provisions and spirit of the Bilateral Investment
Treaty (BIT) between Luminor Aegis and Scienterra?
2. Did the Government of the Sovereign State of Luminor Aegis's decision to divest some
of its shares from Aurum Intellectus prior to the expropriation affect the legality of its
subsequent expropriation under the BIT and international investment law?
3. Are the compliance and tax disputes faced by Aurum Intellectus with the Luminor
Aegis Revenue Authority (LARA) justifiable grounds for the investment arbitration
claim under the BIT?
4. Should the Government of Luminor Aegis be held liable for damages to Finatius Orbis,
and if so, what is the appropriate quantum of compensation in light of the
circumstances surrounding the expropriation and divestment?
Guidance Note for Participants
1. ICSID Statute Ratification: The Government of Scienterra ratified the ICSID Statute in
1983, and the Government of Luminor Aegis ratified it in July 2019.
2. Current Legal Status: Considering the future setting of the moot problem, laws, judicial
precedents, and legal literature should reflect the current status quo. Any non-existent legal
developments not specified in the moot problem will not be considered during the
competition.
3. Legal Systems Reference: The laws of Scienterra reflect those of present-day Singapore, and
the laws of Luminor Aegis mirror those of present-day India, along with additional legal
developments detailed in the moot problem.
4. Knowledge Expectation: Participants are expected to have a basic understanding of GenAI
technologies used in financial fraud detection and prevention, blockchain technology, and its
implications in fintech, as well as the legal issues discussed.
5. Adherence to Framed Issues: Participants should not make any additions to the issues
already framed in the moot problem.
ANNEXURE
Bilateral Investment Treaty (BIT)
Between
Scienterra
and
Luminor Aegis
Preamble: The Republic of Scienterra and the Sovereign State of Luminor Aegis (hereinafter
referred to as "the Parties"),
Desiring to promote bilateral cooperation between the Parties with respect to foreign investments;
and
Recognizing that the promotion and the protection of investments of investors of one Party in the
territory of the other Party will be conducive to the stimulation of mutually beneficial business
activity, to the development of economic cooperation between them and to the promotion of
sustainable development,
Reaffirming the right of Parties to regulate investments in their territory in accordance with their
law and policy objectives.
Have agreed as follows:
Article 1: Definitions
1.1 “confidential information” means business confidential information, e.g. confidential
commercial, financial or technical information which could result in material loss or gain or
prejudice a disputing party’s competitive position, and information that is privileged or otherwise
protected from disclosure under the law of a Party.
1.2 “enterprise” means:
(i) any legal entity constituted, organised and operated in compliance with the law of a
Party, including any company, corporation, limited liability partnership or a joint
venture; and
(ii) a branch of any such entity established in the territory of a Party in accordance with its
law and carrying out business activities there.
1.3 “force majeure event” means an unforeseeable and uncontrollable natural disaster or man-
made constraints which makes the performance of an obligation impossible.
1.4 “investment” means an enterprise constituted, organised and operated in good faith by an
investor in accordance with the law of the Party in whose territory the investment is made, taken
together with the assets of the enterprise, has the characteristics of an investment such as the
commitment of capital or other resources, certain duration, the expectation of gain or profit, the
assumption of risk and a significance for the development of the Party in whose territory the
investment is made. An enterprise may possess the following assets:
(a) shares, stocks and other forms of equity instruments of the enterprise or in another
enterprise;
(b) a debt instrument or security of another enterprise;
(c) a loan to another enterprise
(i) where the enterprise is an affiliate of the investor, or
(ii) where the original maturity of the loan is at least three years;
(d) licenses, permits, authorisations or similar rights conferred in accordance with the law of
a Party;
(e) rights conferred by contracts of a long-term nature such as those to cultivate, extract or
exploit natural resources in accordance with the law of a Party, or
(f) Copyrights, know-how and intellectual property rights such as patents, trademarks,
industrial designs and trade names, to the extent they are recognized under the law of a
Party; and
(g) moveable or immovable property and related rights;
(h) any other interests of the enterprise which involve substantial economic activity and out
of which the enterprise derives significant financial value;
For greater clarity, investment does not include the following assets of an enterprise:
(i) portfolio investments of the enterprise or in another enterprise;
(ii) debt securities issued by a government or government-owned or controlled enterprise,
or loans to a government or government-owned or controlled enterprise;
(iii) any pre-operational expenditure relating to admission, establishment, acquisition or
expansion of the enterprise incurred before the commencement of substantial business
operations of the enterprise in the territory of the Party where the investment is made;
(iv) claims to money that arise solely from commercial contracts not leading to a violation
of this Treaty, for the sale of goods or services by a national or enterprise in the
territory of a Party to an enterprise in the territory of another Party;
(v) goodwill, brand value, market share or similar intangible rights;
(vi) claims to money that arise solely from the extension of credit in connection
with any commercial transaction;
(vii) an order or judgment sought or entered in any judicial, administrative or
arbitral proceeding;
(viii) any other claims to money that do not involve the kind of interests or
operations set out in the definition of investment in this Treaty.
1.5 “investor” means a natural or juridical person of a Party, other than a representative office,
that has made an investment in the territory of the other Party;
For the purposes of this definition, a “juridical person” means:
(a) a legal entity that is constituted, organised and operated under the law of that Party and
that has substantial business activities in the territory of that Party; or
(b) a legal entity that is constituted, organised and operated under the laws of that Party and
that is directly or indirectly owned or controlled by a natural person of that Party or by a
legal entity mentioned under sub- clause (a) herein.
1.6 “law” includes:
(i) the Constitution, legislation, subordinate/delegated legislation, laws & bylaws, rules &
regulations, ordinance, notifications, policies, guidelines, procedures, administrative
measures/executive actions at all levels of government, as amended, interpreted or
modified from time to time;
(ii) decisions, judgments, orders and decrees by Courts, regulatory authorities, judicial and
administrative institutions having the force of law within the territory of a Party.
Article 2: Scope and General Provisions
2.1 This Treaty shall apply to measures adopted or maintained by a Party relating to
investments of investors of another Party in its territory, in existence as of the date of entry
into force of this Treaty or established, acquired, or expanded thereafter, and which have
been admitted by a Party in accordance with its law, regulations and policies as applicable
from time to time.
2.2 Nothing in this Treaty shall extend to any pre-investment activity related to establishment,
acquisition or expansion of any investment, or to any measure related to such pre-
investment activities, including terms and conditions under such measure which continue
to apply post-investment to the management, conduct, operation, sale or other disposition
of such investments.
2.3 This Treaty shall not apply to claims arising out of events which occurred, or claims which
have been raised prior to the entry into force of this Treaty.
Article 3: Full Protection and Security
3.1 Each Party shall accord in its territory to investments of the other Party and to investors
with respect to their investments full protection and security. For greater certainty, “full
protection and security” only refers to a Party’s obligations relating to physical security of
investors and to investments made by the investors of the other Party and not to any other
obligation whatsoever.
3.2 In considering an alleged breach of this article, a Tribunal shall take account of whether
the investor or, as appropriate, the locally-established enterprise, pursued action for
remedies before domestic courts or tribunals prior to initiating a claim under this Treaty.
3.3 Force majeure events do not constitute a valid breach under this article and the Parties can
be excluded from their obligations in case of occurrence of force majeure events.
Article 4: National Treatment
4.1 Each Contracting Party shall accord to investors of the other Contracting Party, as regards
the management, maintenance, use, enjoyment or disposal of their investments, treatment
no less favourable than that which it accords, in like circumstances, to its own investors or
to investors of any third country, whichever is more favourable.
4.2 The treatment accorded under this Article shall include all matters relating to the
ownership, operation, management, and sale or other disposition of investments.
4.3 The treatment accorded by a Party under Article 4.1 means, with respect to a Sub-national
government, treatment no less favourable than the treatment accorded, in like
circumstances, by that Sub-national government to investors, and to investments of
investors, of the Party of which it forms a part.
Article 5: Compensation for Losses
5.1 The Parties agree that expropriation of investments shall only be for a public purpose, in
a non-discriminatory manner, on payment of prompt, adequate, and effective
compensation, and in accordance with due process of law.
5.2 Expropriation shall include both direct expropriation, where an investment is nationalized
or otherwise directly seized by the State, and indirect expropriation, where the State's
actions or policies have an effect equivalent to direct expropriation without formal transfer
of title or outright seizure.
Article 6: Investor Obligations
6.1 The Parties reaffirm and recognize that:
(i) Investors and their investments shall comply with all laws, regulations,
administrative guidelines and policies of a Party concerning the establishment,
acquisition, management, operation and disposition of investments.
(ii) Investors and their investments shall not, either prior to or after the establishment
of an investment, offer, promise, or give any undue pecuniary advantage,
gratification or gift whatsoever, whether directly or indirectly, to a public servant
or official of a Party as an inducement or reward for doing or forbearing to do any
official act or obtain or maintain other improper advantage nor shall be complicit
in inciting, aiding, abetting, or conspiring to commit such acts.
(iii) Investors and their investments shall comply with the provisions of law of the
Parties concerning taxation, including timely payment of their tax liabilities.
(iv) An investor shall provide such information as the Parties may require concerning
the investment in question and the corporate history and practices of the investor,
for purposes of decision making in relation to that investment or solely for
statistical purposes.
Article 7: Fair and Equitable Treatment
7.1 Each Party shall accord to covered investments treatment in accordance with customary
international law minimum standard of treatment, including fair and equitable treatment
and full protection and security.
7.2 This obligation to provide “fair and equitable treatment” includes the obligation not to
deny justice in criminal, civil, or administrative adjudicatory proceedings in accordance
with the principle of due process embodied in the principal legal systems of the world.
Article 8: Transparency
8.1 Each Party shall, to the extent possible, ensure that its laws, regulations, procedures, and
administrative rulings of general application in respect of any matter covered by this Treaty
are promptly published or otherwise made available in such a manner as to enable
interested persons and the other Party to become acquainted with them.
8.2 Each Party shall, as provided for in its laws and regulations:
(i) publish any such measure that it proposes to adopt; and
(ii) provide interested persons and the other Party a reasonable opportunity to
comment on such proposed measures.
Article 9: Settlement of Disputes
9.1 This Article shall apply to disputes between a Party and an investor of the other Party
concerning their investment, arising out of an alleged breach of this Treaty. The nature of
the breach, whether it constitutes a violation of the Fair and Equitable Treatment, Full
Protection and Security, or other substantive standards, is to be determined through the
dispute resolution process.
9.2 Disputes arising out of an alleged breach of contract related to the investment, which also
implicate a violation of this Treaty's provisions, fall under this Article. Pure breaches of
contract, absent a Treaty violation, are subject to resolution by domestic courts.
9.3 Before initiating arbitration, a disputing investor must first seek resolution through
domestic courts or administrative bodies for 6 months following the alleged breach.
9.4 If after 1 year from the breach, no satisfactory resolution is reached domestically, the
investor may issue a “notice of dispute” to the Defending Party. The notice must detail
the nature of the dispute, the provisions of the Treaty allegedly breached, the relief sought,
and an estimate of damages, accompanied by proof of the investor's status.
9.5 Following the notice, both Parties should attempt to resolve the dispute amicably in the
capital city of the Defending Party for a minimum of 6 months, exploring consultation,
negotiation, or third-party mediation.
9.6 If amicable resolution fails, the investor must send a “notice of arbitration” to the
Defending Party 60 days before commencing arbitration, outlining the basis for arbitration.
9.7 Disputes under this Treaty shall be submitted to ICSID arbitration, subject to the
fulfilment of conditions in paragraphs 9.1 to 9.6.
Article 10: Applicable Law
10.1 The place and mode of arbitration shall be “physical”.
10.2 The disputing investor at all times bears the burden of establishing:
(a) jurisdiction;
(b) the existence of an obligation under the provisions of this Treaty, other than the
obligations under Article 10 or 11;
(c) a breach of such obligation;
(d) that the investment, or the investor with respect to its investment, has suffered
actual and non-speculative losses as a result of the breach; and
(e) that those losses were foreseeable and directly caused by the breach.
10.3 The governing law for interpretation of this Treaty and for this dispute shall be:
(f) this Treaty;
(g) ICSID Convention;
(h) the general principles of public international law relating to the interpretation of
treaties, including the presumption of consistency between international treaties
to which the Parties are party, principles of international economic law and
customary international law principles;
(i) for matters relating to domestic law, the law of the Defending Party.
(j) Rules of the [Name of the Moot Court Competition, 2024]
Article 11: General Exceptions
11.1 Nothing in this Treaty shall be construed to prevent the adoption or enforcement by a
Party of measures of general applicability applied on a non- discriminatory basis that are
necessary to:
(i) protect public morals or maintaining public order;
(ii) protect human, animal or plant life or health;
(iii) ensure compliance with law and regulations that are not inconsistent with the
provisions of this Agreement;
(iv) protect and conserve the environment, including all living and non-living natural
resources;
(v) protect national treasures or monuments of artistic, cultural, historic or archaeological
value.
Article 12: Costs
12.1 The disputing Parties shall share the costs of the arbitration, with arbitrator fees, expenses,
allowances and other administrative costs. The disputing Parties shall also bear the cost of
its representation in the arbitral proceedings. The Tribunal may, however, in its discretion
direct that the entire costs or a higher proportion of costs shall be borne by one of the two
disputing Parties and this determination shall be final and binding on both disputing
Parties.
Author: Abhivardhan, Managing Partner, Indic Pacific Legal Research and Chairperson & Managing Trustee, Indian
Society of Artificial Intelligence and Law
