TEAM CODE: NCR 30

XVIII LC-I All Delhi (NCR) Moot Court Competition, 2025

LAW CENTER – I, FACULTY OF LAW

UNIVERSITY OF DELHI, NEW DELH

BEFORE THE TRIBUNAL OF PERMANENT COURT OF ARBITRATION

IN THE CASE OF:

StarSpark Mining Co. (Through REPUBLIC OF MIRAGEA) & Ors

…................…..…………………………. PETITIONER

V.

THE REPUBLIC OF SHANDORA .........................…………. RESPONDENT

MEMORIAL ON BEHALF OF THE RESPONDENT

COUNSEL APPEARING ON BEHALF OF THE RESPONDENT
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TABLE OF CONTENTS

Sl. No. Topic Page

1. LIST OF ABBREVIATIONS 3

2. INDEX OF AUTHORITIES 4-5

3. STATEMENT OF JURISDICTION 6

4. STATEMENT OF FACTS 7-9

5. ISSUES RAISED 10

6. SUMMARY OF ARGUMENTS 11-12

7. ARGUMENTS ADVANCED 13-20

ISSUE 1: Whether the matter between the Shandora and

the investors of the ceded territory falls under the scope of
7.1 13-15
the Arbitration rules of the PCA? Whether Miragea holds
any locus standi to represent SS-MSM at PCA?

ISSUE 2: Whether the cession of the land of Karai Bora by

7.2 Shandora make the investment of the ‘SS-MSM’ JV and other 15-17
investors in the territory invalid?

ISSUE 3: Whether Shandora was bound by international

obligations to protect the rights of investors that were based in the
ceded region? Whether Shandora is liable to compensate for the
7.3 17-20
losses suffered by investors due to the prohibition of commercial
activity and destruction of a factory or mine during armed conflict
by Shandora?

8. PRAYER 21

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LIST OF ABBREVIATIONS

Art. Article

BIT Bilateral Investment Treaty

GRIN Global Refuge Insights Network

Hon’ble Honourable

ICJ International Court of Justice

ICSID International Centre for Settlement of Investment Dispute

ILC International Law Commission

JV Joint Venture

MSM Miragea State Mining Company

No. Number

Ors. Others

PCA Permanent Court of Arbitration

UN United Nations

UNCITRAL United Nation Commission on International Trade Law, 2021

UNGA Res United Nations General Assembly Resolution

UNSC United Nations Security Council

VCLT Vienna Convention on the Law of Treaties, 1969

VCST Vienna Convention on Succession of States in respect of Treaties,

1978

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INDEX OF AUTHORITIES

Books & Research Papers

1. A Guide to State Succession in International Investment Law (Elgar International

Investment Law series) by Patrick Dumberry
2. Oppenheim, International Law, 9th ed., Vol. I, p. 230.

Statutes and Conventions

1. UNITED NATIONS CHARTER, 1945.

2. PERMANENT COURT OF ARBITRATION RULES, 2012.
3. UNCITRAL ARBITRATION RULES, 2021.
4. CONVENTION ON SETTLEMENT OF INVESTMENT DISPUTES BETWEEN STATES AND
NATIONALS OF OTHER STATES.
5. VIENNA CONVENTION ON SUCCESSION OF STATES IN RESPECT OF TREATIES, 1978.
6. VIENNA CONVENTION ON LAW OF TREATY, 1969.
7. RESPONSIBILITY OF STATES FOR INTERNATIONALLY WRONGFULL ACTS, 2001.

Judgements & Bibliography

1. The PCA Arbitration Rules, 2012, Article 4

2. PCA Arbitration Rules (2012)
3. UNCITRAL Arbitration Rules (2010)
4. Republic of Ecuador v. Occidental Petroleum Corporation,
5. PCA Case No. 2009-23, Permanent Court of Arbitration (2012)
6. Draft Articles on Diplomatic Protection, U.N. Doc. A/61/10 (2006) Loewen Group,
Inc. v. United States, ICSID Case No. ARB(AF)/98/3, Award (June 26, 2003)
7. Muhammet Cap & Sehil Inşaat Endüstri v. Turkmenistan, ICSID Case No. ARB/12/6,
Award (July 7, 016)

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8. Vienna Convention on Succession of States in Respect of Treaties, Aug. 23, 1978,

1946 U.N.T.S. 3
9. Vienna Convention on the Law of Treaties, May 23, 1969, 1155 U.N.T.S. 331
10. Phoenix Action, Ltd. v. Czech Republic, ICSID Case No. ARB/06/5, Award (Apr. 15,
2009).
11. Larsen v. Hawaiian Kingdom, PCA Case No. 1999-01, Award (Feb. 5, 2001)
12. Stuart v. State of Sudan, No. 1:08-cv-01763 (D.D.C. Mar. 30, 2011).
13. Tokios Tokelės v. Ukraine, ICSID Case No. ARB/02/18, Decision on Jurisdiction, ¶¶
26–30 (Apr. 29, 2004).
14. Armed Activities on the Territory of the Congo (Dem. Rep. Congo v. Uganda),
Judgment, 2005 I.C.J. 168, ¶¶ 172–180.
15. PJSC CB PrivatBank and Finilon LLC v. Russian Federation, PCA Case No. 2015-
21, Interim Award (Feb. 2017).
16. Asian Agric. Prods. Ltd. v. Republic of Sri Lanka, ICSID Case No. ARB/87/3, Award
¶ 85 (June 27, 1990), 6 ICSID Rep. 526.
17. Int’l Law Comm’n, Draft Articles on Responsibility of States for Internationally
Wrongful Acts, art. 36, U.N. Doc. A/56/10 (2001).
18. Continental Casualty Co. v. Argentine Republic, ICSID Case No. ARB/03/9, Award ¶
174 (Sept. 5, 2008).
19. Técnicas Medioambientales Tecmed S.A. v. United Mexican States, ICSID Case No.
ARB(AF)/00/2, Award ¶ 154 (May 29, 2003).
20. Petrobart Ltd. v. Kyrgyz Republic, SCC Case No. 126/2003, Award (Mar. 29, 2005).
21. Patrick Dumberry, State Succession in International Investment Law 109–111 (2017);
Vienna Convention on the Law of Treaties art. 34, 1155 U.N.T.S. 331.
22. Mondev Int’l Ltd. v. United States of America, ICSID Case No. ARB(AF)/99/2,
Award ¶ 43 (Oct. 11, 2002); PCA Arbitration Rules art. 1(1) (2012).
23. Draft Articles on Diplomatic Protection art. 5, U.N. Doc. A/61/10 (2006); Barcelona
Traction, Light and Power Co. (Belg. v. Spain), Judgment, 1970 I.C.J. 3, ¶ 70.
24. EuroGas Inc. and Belmont Resources Inc. v. Slovak Republic, ICSID Case No.
ARB/14/14, Award ¶¶ 266–272 (Aug. 18, 2017)

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STATEMENT OF JURISDICTION

The counsels on behalf of the Respondent submit their response before the Hon’ble Tribunal
of PCA under Article 4 of the PCA Arbitration Rules, 2012, in response to the notice of
Arbitration by the petitioner under Article 3 and the petition filed by the Petitioner under the
aegis of Article 1 of the UNCITRAL.

Article 41 : Response to the notice of arbitration

1. Within 30 days of the receipt of the notice of arbitration, or such other period as
may be set by the International Bureau, the respondent shall communicate to the
claimant and the International Bureau a response to the notice of arbitration, which
shall include:

(a) The name and contact details of each respondent;

(b) A response to the information set forth in the notice of arbitration, pursuant to
Article 3, paragraphs 3 (c) to (g).

2. The response to the notice of arbitration may also include:

(a) Any plea that an arbitral tribunal to be constituted under these Rules lacks
jurisdiction;

(b) A proposal for the appointment of a sole arbitrator referred to in article 8,

paragraph 1;

(c) Notification of the appointment of an arbitrator referred to in articles 9 or 10;

(d) A brief description of counterclaims or claims for the purpose of a set-off, if any,
including, where relevant, an indication of the amounts involved, and the relief or
remedy sought;

1
The PCA Arbitration Rules, 2012, Article 4

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(e) A notice of arbitration in accordance with article 3 in case the respondent

formulates a claim against a party to the arbitration agreement other than the
claimant.

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STATEMENT OF FACTS

The state of Miragea, a developing country rich in diamond reserves, is home to two main
ethnic groups: the majority Mekas and the minority Seeris. Despite its natural wealth, Miragea
suffers from poor labor standards, particularly in its northern province of Karai Bari. This
region is infamous for its exploitation of the Seeris community, who are often subjected to
forced labor in sweatshops largely operated by foreign investors. One such investor is
StarSpark Mines, a globally renowned diamond mining corporation headquartered in Zephyria.
Observing the potential for lucrative diamond extraction in Miragea, StarSpark entered into a
joint venture agreement with the Miragea State Mining Company (MSM) in 2010. This
collaboration led to the formation of SS-MSM, a joint venture in which StarSpark held a 60%
stake and MSM the remaining 40%. Under the terms of the agreement, profits were to be split
70-30 in favor of StarSpark, and the venture was to operate for a span of thirty years. Over the
next five years, StarSpark invested approximately eight million dollars into mining activities
in the Karai Bari region, profiting from the low labor costs and systemic corruption.

As years passed, growing domestic unrest began to emerge in Miragea. Although opposition
parties had consistently raised concerns about labor violations, these were often overlooked
due to the dominance of the ruling party. However, with general elections approaching in 2016
and public dissent escalating—particularly among the youth—the government altered its
position. Seeking to regain public trust and shift the focus away from its own shortcomings,
the ruling administration blamed foreign companies for the labor abuses in Karai Bari. In 2015,
Miragea’s Parliament enacted a law imposing retrospective taxes specifically on foreign
investors operating in the Karai Bari region, exempting domestic entities. This new legislation
demanded approximately three million dollars in back taxes from SS-MSM for the period
between 2010 and 2015. While this development alarmed StarSpark, the company’s tangible
assets, including uncut diamonds, advanced mining equipment, and licenses, remained
unaffected. Consequently, StarSpark began contemplating arbitration under the ICSID
framework, citing violations of the Miragea–Zephyria Bilateral Investment Treaty (BIT),
signed in 2005.

Meanwhile, the deteriorating socio-economic conditions in Karai Bari led to mass illegal
migration of Seeris individuals into Shandora, Miragea’s northern neighbour. Shandora, also a
developing nation, found itself overwhelmed by the influx, which, according to the Global

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Refuge Insights Network (GRIN), amounted to nearly two million illegal migrants over a
decade. Shandora’s internal reports indicated even higher numbers. The migration crisis
triggered significant law and order issues, such as riots and crime, in Shandora’s southern
provinces. Despite having issued multiple diplomatic notes to Miragea in 2011, 2013, and
2015, Shandora’s pleas went unanswered. Consequently, in 2015, citing national security and
public unrest, Shandora launched a military invasion of Miragea, primarily targeting the Karai
Bari region. Miragea attempted resistance but failed to hold its territory. Following the
occupation, around 25 countries recognized the annexed land as Shandoran territory, and some
even initiated consulate setups. Shandora halted all commercial activities in the occupied area
for two years to suppress any potential rebellion.

Internationally, Miragea took the matter to the United Nations. While the Security Council
could not act due to a veto by U-SAM, a permanent member, the General Assembly adopted a
resolution in 2016 affirming Miragea’s territorial integrity and urging states not to recognise
the altered status of Karai Bari. Subsequently, in 2017, Miragea and Shandora entered into
diplomatic negotiations, which lasted six years. In 2023, a formal agreement was reached
wherein Miragea ceded approximately 100 square kilometers of territory to Shandora in
exchange for compensation amounting to one million dollars per square kilometre. As part of
the agreement, Miragea officially recognized Shandora’s sovereignty over the disputed region.

This territorial transfer had serious consequences for StarSpark Mines, whose entire investment
operations were located in the now-ceded territory. During the conflict and subsequent
occupation, StarSpark reported the loss and destruction of 20 million dollars’ worth of uncut
diamonds and mining equipment. When StarSpark sought compensation from the new
Shandoran administration, their request was denied. Shandora maintained that it only
recognized investments established after the occupation and claimed that any obligations from
before were extinguished due to state succession. StarSpark then turned to its home state,
Zephyria, requesting diplomatic support. Zephyria initiated discussions with Miragea, and
Miragea agreed to raise the issue at the Permanent Court of Arbitration (PCA), on the condition
that StarSpark pay the retrospective taxes and legal costs. After agreeing to these terms,
Miragea filed a case against Shandora at the PCA, representing the interests of StarSpark and
other Miragean investors affected by the conflict.

Shandora, however, challenged the jurisdiction of the PCA, stating that the BIT between
Shandora and Miragea did not include a state-to-state dispute settlement mechanism. It also

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argued that StarSpark and other entities could not be classified as “foreign investors” under
Shandora’s interpretation since the investments were not made post-occupation. Furthermore,
Shandora claimed Miragea failed in its duty to provide full protection and security during the
conflict and asserted that it was under no obligation to honour prior commitments due to the
legal principle of state succession. Shandora also objected to the use of third-party funding by
Miragea, noting that the PCA Arbitration Rules of 2012 do not explicitly allow such
arrangements. Lastly, it justified the ban on commercial activity in the occupied region as
necessary for maintaining its essential security interests.

Notably, Shandora and Zephyria have no BIT between them. However, all involved
countries—Miragea, Zephyria, Shandora, and U-SAM—are signatories to international
treaties, including the ICSID Convention (1966), the Vienna Convention on the Law of Treaties
(1969), and the Vienna Convention on Succession of States in Respect of Treaties (1978),
which may influence the outcome of the ongoing dispute.

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ISSUES RAISED

1. Whether the matter between the Shandora and the investors of the ceded territory
falls under the scope of the Arbitration rules of the PCA? Whether Miragea holds
any locus standi to represent at PCA?

2. Whether the cession of the land of Karai Bora by Shandora make the investment
of the ‘SS-MSM’ JV and other investors in the territory invalid?

3. Whether Shandora was bound by international obligations to protect the rights of

investors that were based in the ceded region? Whether Shandora is liable to
compensate for the losses suffered by investors due to the prohibition of
commercial activity and destruction of a factory or mine during armed conflict by
Shandora?

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SUMMARY OF ARGUMENTS

1. Whether the matter between the Shandora and the investors of the ceded territory
falls under the scope of the Arbitration rules of the PCA? Whether Miragea holds
any locus standi to represent at PCA?

Shandora argues that the dispute does not fall within the scope of the Permanent Court of
Arbitration (PCA) rules. The BIT between Miragea and Shandora refers only to the
UNCITRAL Arbitration Rules and does not expressly authorize PCA-administered arbitration.
According to Article 1(1) of the PCA Arbitration Rules, such jurisdiction requires clear and
explicit consent from both parties, which is absent here. Unilateral reference by Miragea to
PCA constitutes forum-shopping, undermining the procedural legitimacy of the proceedings.
Furthermore, Miragea lacks locus standi to represent the investors, as the investors lost
Miragean nationality following the formal cession of Karai Bora in 2023. Under Article 10 of
the ILC Draft Articles on Diplomatic Protection, continuous nationality from the time of injury
to the claim is required. Miragea’s representation is also ethically questionable, being funded
by the investor StarSpark Mines itself. This indirect funding raises concerns of champerty and
abuse of process, thereby compromising the neutrality and legitimacy of Miragea’s claim.

2. Whether the cession of the land of Karai Bora by Shandora make the investment
of the ‘SS-MSM’ JV and other investors in the territory invalid?
Shandora contends that the investment protections provided under the Miragea–Shandora BIT
are no longer valid after the territorial cession. Under principles of state succession and Article
34 of both the Vienna Convention on Succession of States in Respect of Treaties (1978) and
the Vienna Convention on the Law of Treaties (1969), treaty obligations do not automatically
transfer to successor states without express consent. Shandora has never agreed to continue
Miragea’s BIT obligations, and no conduct demonstrates an intention to be bound by them.
Moreover, the investment in question was not bona fide. It was grounded in a system of
exploitative labor practices and had already attracted scrutiny from Miragean authorities, as
evidenced by retrospective taxation in 2015. These circumstances indicate the investment’s

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illegitimacy and preclude it from receiving protection under international investment law. The
doctrine of acquired rights does not protect unlawful or non-vested investments, particularly
those tainted by violations of international human rights standards.

3. Whether Shandora was bound by international obligations to protect the rights of

investors that were based in the ceded region? Whether Shandora is liable to
compensate for the losses suffered by investors due to the prohibition of
commercial activity and destruction of a factory or mine during armed conflict by
Shandora?

Shandora maintains that it cannot be held liable for the alleged destruction of the investment in
2016 because it did not exercise effective control over the Karai Bora region at the time. The
state’s presence was primarily military and did not encompass administrative, legal, or
institutional authority required for effective jurisdiction, as established in DRC v. Uganda.
Miragea retained full sovereignty and civil governance over the territory until the formal
cession in 2023. Additionally, the destruction occurred during a period of armed conflict and
is thus exempt from liability under Article 5(2) of the BIT, which excludes losses arising from
military operations. The situation is comparable to AAPL v. Sri Lanka, where investor losses
during conflict were deemed non-compensable. Shandora also highlights that its post-
occupation commercial suspension was a temporary and non-discriminatory security measure
under Article 11 of the BIT, aligned with its right to protect essential security interests in an
unstable region. No legitimate expectations or specific commitments were made to the investor
that would give rise to a Fair and Equitable Treatment (FET) violation. Finally, Shandora
argues that the investment is fundamentally unprotected due to its lack of legality and
procedural defects in the claim. StarSpark Mines had a record of labor violations and was
penalized by Miragea even before the territory’s cession, indicating that its license and rights
were already in question. As affirmed in Phoenix Action v. Czech Republic and Petrobart v.
Kyrgyz Republic, only bona fide and lawful investments are entitled to treaty protection.
Furthermore, the PCA lacks jurisdiction as the BIT does not provide for PCA-administered
arbitration, and no agreement to that effect exists between the parties. The claim is also
procedurally flawed because Miragea lacks standing following the investors’ loss of
nationality, violating the requirement for continuous nationality under the ILC Articles on
Diplomatic Protection and Barcelona Traction. The claim is further compromised by the
presence of third-party funding, with StarSpark financing Miragea’s legal efforts—raising

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serious concerns of conflict of interest and abuse of the arbitral process, as cautioned in
EuroGas v. Slovak Republic. Given these issues, the claim should be dismissed in its entirety.

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ARGUMENTS ADVANCED

ISSUE 1: Whether the matter between the Shandora and the investors of the
ceded territory falls under the scope of the Arbitration rules of the PCA?
Whether Miragea holds any locus standi to represent SS-MSM at PCA?

1. That the application of the PCA2 arbitration rules, 2012 is applicable on the parties
who are either members of the PCA or who have entered into an agreement through
BIT or other treaties to resolve their investment dispute before the PCA established
under the Arbitration Rules of the UNCITRAL3.
2. That Miragea and Shandora have agreed in their BIT to resolve their investment
dispute before an arbitral tribunal established under the Arbitration Rules of
UNCITRAL, the other ingredients and conditions must be satisfied to bring the
matter before PCA through BIT.
3. That the conditions must be satisfied to apply relevant provisions are:
a) There must be some valid investment
b) There must be some dispute between the investor of one contracting party
and the other contracting parties.
c) The dispute sought to be settled amicably subject to negotiation between the
parties in dispute.
d) All the local remedies should be exhausted before approaching the
international forum.

The Dispute Does Not Fall Within the Scope of the PCA Arbitration Rules,
2012

4. That no express agreement between parties to submit to PCA Arbitration Article

1(1) of the PCA Arbitration Rules, 2012 clearly stipulates that these rules apply

2
PCA Arbitration Rules (2012)
3
UNCITRAL Arbitration Rules (2010)

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only where parties have agreed that disputes shall be referred under these specific
rules. In the present case, Clause 7(2)(c) of the Shandora–Miragea BIT only refers
to the application of UNCITRAL Arbitration Rules, not the PCA Arbitration
Rules. These are distinct legal frameworks, and mere reference to UNCITRAL
cannot be construed as consent to PCA administered arbitration.
5. That jurisdiction of the PCA requires explicit and unequivocal consent the
Permanent Court of Arbitration is not an automatic forum under UNCITRAL
Rules unless parties have consented to its administration. In Republic of Ecuador
v. Occidental Petroleum Corporation4, the tribunal reiterated that jurisdiction
under any arbitral institution must be based on clear and affirmative consent.
Since Shandora never agreed to PCA jurisdiction, such consent is absent.
6. That the arbitral forum-shopping undermines procedural legitimacy Miragea’s
unilateral reference to the PCA despite the BIT’s silence on any institutional
forum constitutes forum-shopping, which undermines procedural fairness and
compromises the integrity of investor–state arbitration.

Miragea Lacks Locus Standi to Represent the Investors

7. That nationality of the investors has shifted post-cession under customary
international law and Article 10 of the ILC Draft Articles on Diplomatic
Protection (2006)5, the right of a State to exercise diplomatic protection over a
corporation requires that the entity remain its national continuously from the date
of injury to the date of claim. Since the territory of Karai Bora was formally ceded
to Shandora in 2023, the investors no longer fall within Miragea’s jurisdiction.
8. That loss of Miragean nationality breaks continuity of protection after the 2023
agreement between Miragea and Shandora, Miragea officially relinquished
sovereignty over the Karai Bora region and acknowledged Shandora's authority.
Consequently, Miragea can no longer claim that the SS-MSM joint venture
operating exclusively in the ceded territory is under its diplomatic protection.
9. That claim is inadmissible under international investment law in Loewen Group,
Inc. v. United States6, the tribunal held that diplomatic protection must not be

4
Republic of Ecuador v. Occidental Petroleum Corporation, PCA Case No. 2009-23, Permanent Court of
Arbitration (2012)
5
Draft Articles on Diplomatic Protection, U.N. Doc. A/61/10 (2006)
6
Loewen Group, Inc. v. United States, ICSID Case No. ARB(AF)/98/3, Award (June 26, 2003)

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used to artificially trigger jurisdiction where direct investor-State remedies were

available. Miragea’s representation on behalf of StarSpark Mines after the
investor failed to bring its own claim constitutes a misuse of the arbitral process.

Miragea’s Representation is Tainted by Abuse of Process and Third-Party

Influence
10. That Miragea is not a neutral party; it was paid to bring the claim the factual
record reveals that StarSpark Mines agreed to pay Miragea's retrospective taxes
and legal costs in exchange for Miragea initiating proceedings before the PCA.
This form of indirect funding resembles third-party funding, a practice not
explicitly permitted under the PCA Arbitration Rules, 2012 and can raise ethical
concerns including champerty and conflict of interest.
11. That third-party funding is controversial and lacks regulation under PCA rules as
confirmed in Muhammet Cap & Sehil Inşaat Endustri v. Turkmenistan7, the
inclusion of third-party funding necessitates transparency. The PCA Rules are
silent on such arrangements. When a State initiates a claim based on a financial
arrangement with a private investor, it raises concerns about state neutrality and
abuse of diplomatic protection.
12. That the PCA lacks jurisdiction over the matter in the absence of express
agreement by both parties, and Miragea lacks locus standi due to the loss of
nationality link, the misapplication of diplomatic protection, and ethically
questionable funding arrangements. Therefore, the tribunal must dismiss the claim
as inadmissible under international law and PCA rules.

ISSUE 2: Whether the cession of the land of Karai Bora by Shandora make
the investment of the ‘SS-MSM’ JV and other investors in the territory
invalid?

The Investment is No Longer Valid Following State Succession and

Annexation
13. That change in Sovereignty Extinguishes Previous Investment Obligations that
under the general principles of State succession, obligations of the predecessor

7
Muhammet Cap & Sehil Inşaat Endüstri v. Turkmenistan, ICSID Case No. ARB/12/6, Award (July 7, 2016)

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State do not automatically bind the successor unless explicitly accepted. Article 34
of the Vienna Convention on Succession of States in Respect of Treaties (1978)8
although not binding on all States does not apply to cases of unilateral annexation
or forceful succession, particularly where the predecessor State ceases to exist in
the relevant territory or sovereignty is legally contested.
14. That BIT Obligations Do Not Automatically Transfer Upon Territorial Change as
in the absence of a formal agreement or notification of continuity, Shandora
cannot be presumed to have inherited the BIT obligations of Miragea. The
principle of pacta tertiis nec nocent nec prosunt—a treaty does not create
obligations for a third State without its consent—applies here (Article 34 of the
Vienna Convention on the Law of Treaties, 1969)9.
15. That the Doctrine of Acquired Rights Not Absolute in Cases of Unlawful
Investments The alleged rights acquired by SS-MSM were based on a regime of
forced labor, corruption, and exploitative practices, as highlighted in the moot
proposition. International law, including the UN Guiding Principles on Business
and Human Rights, does not protect investments grounded in violations of
fundamental human rights. As noted in Phoenix Action v. Czech Republic10,
“only bona fide investments are protected under investment treaties.”
Miragea’s Own Conduct Undermines the Validity of the Investment

16. That Miragea’s Sudden Retrospective Taxation Indicates Acknowledgement of

Investor Misconduct. The imposition of retrospective taxes by Miragea in 2015 on
foreign investors including SS-MSM for labour rights violations in Karai Bora
shows the State’s formal acknowledgment that the investment operated under
exploitative and illegitimate terms. These investments were already under scrutiny
and not in alignment with international legal standards when Shandora assumed
control.
17. That the investors no longer hold Miragean Nationality post-cession after the 2023
formal cession of Karai Bora to Shandora, the investors, including the SS-MSM
joint venture, lost any protective linkage to Miragea. This breaks the continuity of
nationality, which is necessary for treaty-based protection and diplomatic

8
Vienna Convention on Succession of States in Respect of Treaties, Aug. 23, 1978, 1946 U.N.T.S. 3
9
Vienna Convention on the Law of Treaties, May 23, 1969, 1155 U.N.T.S. 331
10
Phoenix Action, Ltd. v. Czech Republic, ICSID Case No. ARB/06/5, Award (Apr. 15, 2009).

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representation. As held in Loewen v. USA11, continuity of nationality is essential

for claims under BITs and customary diplomatic protection principles.

Investments Made in Contested Territory Do Not Automatically Gain Treaty

Protection
18. That no automatic treaty continuity in cases of disputed or forceful annexation that
Shandora does not recognize the validity of the Miragea–Shandora BIT in respect
of investments made prior to annexation. Article 29 of the Vienna Convention on
the Law of Treaties emphasizes that a treaty is binding only upon a State in
respect of its entire (recognized) territory. As the UN General Assembly
Resolution HF/27 (2016) affirms that Karai Bora remains Miragean territory,
Shandora denies that any lawful BIT obligations extended to it during its de facto
control period.
19. That successor states are not automatically bound by BITs and that In Larsen v.
Hawaiian Kingdom12 and Stuart v. Government of Sudan13, tribunals noted that
a successor State must either express consent or demonstrate conduct affirming
treaty obligations. Shandora did neither. There is no indication that Shandora
accepted obligations under the BIT post-annexation.
20. That Shandora submits that the cession and subsequent annexation of Karai Bora
invalidated the investment protections previously applicable under Miragea’s BIT
framework. Given the absence of continuity, express acceptance, and the unlawful
character of the underlying investment, the SS-MSM venture is not entitled to
protection under the BIT or international law. Any claim to the contrary
disregards essential principles of State sovereignty, territorial legality, and
investment legitimacy.

ISSUE 3: Whether Shandora was bound by international obligations to

protect the rights of investors that were based in the ceded region? Whether
Shandora is liable to compensate for the losses suffered by investors due to
the prohibition of commercial activity and destruction of a factory or mine
during armed conflict by Shandora?

11
Supra para- 9
12
Larsen v. Hawaiian Kingdom, PCA Case No. 1999-01, Award (Feb. 5, 2001)
13
Stuart v. State of Sudan, No. 1:08-cv-01763 (D.D.C. Mar. 30, 2011).

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Shandora Was Not Bound by the BIT at the Time of the Alleged Injury

21. That Shandora cannot be held liable under the Miragea–Shandora BIT as it never
consented to the treaty. Under Article 34 of the Vienna Convention on the Law of
Treaties14, no State can be bound by a treaty unless it has explicitly accepted its
obligations. Here, Shandora neither signed, ratified, nor affirmed the BIT through
conduct. Pacta tertiis nec nocent nec prosunt treaties neither harm nor benefit third
parties clearly applies. Thus, the investor protections in the BIT cannot apply
retroactively to a non-consenting State.
22. That even under the 1978 Vienna Convention on Succession of States in Respect
of Treaties15, automatic treaty continuity does not apply in cases of unlawful
annexation or forceful transitions. Article 34 of that Convention applies only
where succession occurs peacefully, not through contested or militarized cession
as in the present case. Karai Bora was subject to a military standoff, and only in
2023 did Miragea voluntarily cede the territory. Shandora is not obligated to
uphold BIT obligations preceding its recognized sovereignty.
23. That unlike in Tokios Tokelės v. Ukraine16, where the successor State continued
obligations of the USSR, Shandora made no such declaration or affirmation of
treaty obligations. In Tokios Tokelės, Ukraine exercised full administrative
control and expressly recognized its obligations under the Lithuania–Ukraine BIT.
In contrast, Shandora never accepted or performed any such commitments toward
investors in Karai Bora.

Shandora Did Not Exercise Effective Jurisdiction or Control

24. That Shandora’s presence in Karai Bora from 2015 to 2023 was primarily military
and lacked the administrative, legal, and institutional elements needed for
“effective control.” The ICJ in DRC v. Ugand17a established that a State’s
obligation to protect under international law only arises when it exercises effective

14
Vienna Convention on the Law of Treaties art. 34, May 23, 1969, 1155 U.N.T.S. 331.

15
Vienna Convention on Succession of States in Respect of Treaties art. 34, Aug. 23, 1978, 1946 U.N.T.S. 3.

16
Tokios Tokelės v. Ukraine, ICSID Case No. ARB/02/18, Decision on Jurisdiction, ¶¶ 26–30 (Apr. 29, 2004).
17
Armed Activities on the Territory of the Congo (Dem. Rep. Congo v. Uganda), Judgment, 2005 I.C.J. 168, ¶¶
172–180.

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jurisdiction. Miragea retained sovereignty and civil authority during this period.
Thus, the responsibility for investor protection remained with Miragea until the
2023 formal cession.

25. That the petitioner’s reliance on PrivatBank v. Russia18 is misplaced. In that case,
Russia exercised comprehensive administrative control over Crimea, including
taxation, licensing, and infrastructure. In contrast, Shandora did not govern Karai
Bora’s civil or legal affairs until after the 2023 treaty. Military occupation,
without effective governance, does not give rise to BIT obligations or liability for
investor losses.

No Liability for Destruction Occurring During Armed Conflict

26. That the alleged destruction of StarSpark’s property occurred in 2016, during
active military operations, and is therefore non-compensable under Article 5(2) of
the BIT. That clause exempts States from liability for destruction caused in
combat or where military necessity so requires. The ICSID tribunal in AAPL v.
Sri Lanka19 upheld this principle by denying compensation for property damaged
during counter-insurgency operations. No evidence suggests that Shandora
deliberately targeted the investor’s property; the loss was incidental to conflict.

27. That the claim also fails under the ILC’s Articles on State Responsibility20,
specifically Article 36, which requires that a breach of an international obligation
must occur for compensation to arise. Since Shandora had no legal obligation
toward StarSpark at the time of destruction, and the conduct was tied to armed
conflict rather than investor expropriation, no wrongful act or liability exists.

18
PJSC CB PrivatBank and Finilon LLC v. Russian Federation, PCA Case No. 2015-21, Interim Award (Feb.
2017).

19
Asian Agric. Prods. Ltd. v. Republic of Sri Lanka, ICSID Case No. ARB/87/3, Award ¶ 85 (June 27, 1990), 6
ICSID Rep. 526.*

20
Int’l Law Comm’n, Draft Articles on Responsibility of States for Internationally Wrongful Acts, art. 36, U.N.
Doc. A/56/10 (2001).

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Ban on Commercial Activity Was a Lawful Security Measure

28. That Shandora’s post-occupation suspension of commercial activity in Karai Bora

was a temporary and non-discriminatory security measure, aimed at restoring
public order. Article 11 of the BIT21 permits measures to protect “essential
security interests,” particularly in times of emergency. In Continental Casualty v.
Argentina22, the tribunal upheld Argentina’s emergency economic measures on
similar grounds. Therefore, the commercial ban does not violate FET or other
treaty protections.

29. That no specific assurances or legitimate expectations were ever created by

Shandora toward the investor. As clarified in Tecmed v. Mexico23, a violation of
FET requires that the State must have induced reliance or made specific
commitments. Since the investor had no engagement with Shandora before 2023,
no expectations could have arisen to form the basis of FET protection.

The Investment Was Not Bona Fide and Is Unprotected

30. That StarSpark Mines had a record of labor violations and was subject to
retrospective taxation by Miragea in 2015. These facts show that the investment
may have operated unlawfully under domestic law, and as held in Phoenix Action
v. Czech Republic24, only lawful, bona fide investments are entitled to protection
under BITs. Protection cannot be claimed where an investment is tainted by
illegality or exploitative conduct.
31. That the rights claimed by the investors under Miragea’s legal system do not
qualify as acquired rights that survive a change in sovereignty. The doctrine of
acquired rights under international law protects only those legal rights which are
vested and lawfully obtained. In Petrobart v. Kyrgyz Republic25, the tribunal

21
Shandora–Miragea BIT, art. 11.

22
Continental Casualty Co. v. Argentine Republic, ICSID Case No. ARB/03/9, Award ¶ 174 (Sept. 5, 2008).

23
Técnicas Medioambientales Tecmed S.A. v. United Mexican States, ICSID Case No. ARB(AF)/00/2, Award ¶
154 (May 29, 2003).
24
Phoenix Action, Ltd. v. Czech Republic, ICSID Case No. ARB/06/5, Award ¶¶ 93–106 (Apr. 15, 2009).

25
Petrobart Ltd. v. Kyrgyz Republic, SCC Case No. 126/2003, Award (Mar. 29, 2005).

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emphasized that rights must be “firmly established” and not simply assumed by
foreign investors. Here, StarSpark’s license was not renewed post-2015, and the
company had been penalized by Miragea for labor violations. These facts indicate
that the investment was already under regulatory scrutiny, and therefore not
vested.

32. That Shandora cannot be compelled to continue the BIT regime of Miragea as
there is no rule of customary international law mandating automatic succession to
BITs. Academic authority, including Patrick Dumberry26, confirms that the
continuity of BITs after state succession depends on express consent. Since
Shandora has not made any such affirmation, it retains the sovereign discretion to
decide whether to uphold or reject predecessor obligations. Imposing those
obligations without consent would violate Shandora’s sovereign rights.

PCA Lacks Jurisdiction and Claim is Procedurally Flawed

33. That the PCA lacks jurisdiction because Shandora never agreed to PCA-
administered arbitration. Clause 7(2)(c) of the Miragea–Shandora BIT only refers
to UNCITRAL arbitration rules and not the PCA Arbitration Rules. Article 1(1)
of the PCA Rules clearly states that parties must agree to refer disputes under
PCA rules. As held in Mondev v. United States27, consent to arbitration cannot be
presumed or implied. Since Shandora did not agree to arbitration under PCA
auspices, the tribunal lacks jurisdiction to hear the claim.

34. That Miragea lacks the necessary standing to bring this claim on behalf of the
investors, as the investors ceased to be Miragean nationals after the formal cession
in 2023. According to the ILC Articles on Diplomatic Protection, a State can
exercise protection only when the investor retains continuous nationality from the
date of injury to the date of claim. In this case, the investors lost their Miragean
nationality upon territorial transfer, thereby breaking the required link. As

26
Patrick Dumberry, State Succession in International Investment Law 109–111 (2017); Vienna Convention on
the Law of Treaties art. 34, 1155 U.N.T.S. 331.
27
Mondev Int’l Ltd. v. United States of America, ICSID Case No. ARB(AF)/99/2, Award ¶ 43 (Oct. 11, 2002);
PCA Arbitration Rules art. 1(1) (2012).

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clarified in Barcelona Traction28, diplomatic protection is inadmissible in the

absence of this continuity.

35. That the claim is procedurally tainted by improper third-party funding and conflict
of interest. The facts disclose that Miragea is being funded by StarSpark itself to
pursue this claim at the PCA. This raises concerns about champerty and abuse of
process. In EuroGas v. Slovak Republic29, the tribunal questioned the integrity of
claims backed by conflicted third-party interests. Here, Miragea’s incentive is not
sovereign duty but a financial arrangement with the investor, undermining the
legitimacy of the proceeding and further supporting dismissal.

28
Draft Articles on Diplomatic Protection art. 5, U.N. Doc. A/61/10 (2006); Barcelona Traction, Light and
Power Co. (Belg. v. Spain), Judgment, 1970 I.C.J. 3, ¶ 70.
29
EuroGas Inc. and Belmont Resources Inc. v. Slovak Republic, ICSID Case No. ARB/14/14, Award ¶¶ 266–
272 (Aug. 18, 2017)

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PRAYER
In light of the aforementioned submissions, the Respondent, the Republic of Shandora,
respectfully requests this Honourable Tribunal to:
1. Hold that the Claimant, the Republic of Miragea, lacks locus standi to represent the
investors of the SS-MSM joint venture due to the loss of continuous nationality
following the formal cession of Karai Bora in 2023, as per customary international law
and the ILC Draft Articles on Diplomatic Protection.
2. Find that the investment in question is not protected under the BIT or international law,
as it does not qualify as a bona fide investment owing to serious violations of labor
rights, retrospective taxation, and the absence of valid licenses post-2015.
3. Declare that no liability arises from the alleged destruction of the investment in 2016,
which occurred during armed conflict and is exempted from State responsibility under
both Article 5(2) of the BIT and Article 36 of the ILC Articles on State Responsibility.
4. Recognize that Shandora’s temporary suspension of commercial activity post-
annexation constituted a lawful and proportionate measure under Article 11 of the BIT
to protect essential security interests and does not amount to a violation of the Fair and
Equitable Treatment standard.
5. Dismiss all claims brought by the Claimant in their entirety, with costs awarded to the
Respondent for the expenses incurred in defending these proceedings.

And/Or,

Pass any other order, direction or relief that the court may deem fit in the best interest of justice,
fairness, equity and good conscience. For this act of kindness, the respondent shall be duty
bound and forever pray.

Sd/-

COUNSEL FOR THE

RESPONDENT

PLACE – HAGUE, SWITZERLAND

DATE - ……/…../……….

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