Tokios Tokeles V Ukraine

International Centre for Settlement of Investment Disputes
Washington, D.C.
Tokios Tokele·s
(Claimant)
v.
Ukraine
(Respondent)
Case No. ARB/02/18
Decision on Jurisdiction
Members of the Tribunal

Professor Prosper Weil, President
Professor Piero Bernardini
Mr. Daniel M. Price
Secretary of the Tribunal

Ms. Martina Polasek
Representing the Claimant Representing the Respondent

Mr. Ivan Lozowy, Mr. Vasyl Marmazov,
General Counsel, Tokios Tokele·s Ministry of Justice
Mr. Sergiy Danylov, Mr. Kostyantyn Krasovsky,
Chairman of the Board of Ministry of Justice
Directors, Tokios Tokele·s Mr. Volodymyr Sitarchuk,
Ms. Ludmilla Zhyltsova, Cabinet of Ministers
Tokios Tokele·s Mr. Volodymyr Krokhmal,
Mr. Oleksandr Danylov, Ministry of Foreign Affairs
Tokios Tokele·s Mr. Victor Zav’yalov, State Tax
Administration of Ukraine
Mr. Dmytro Gryschenko, Counsel
Mr. Oleg Schevchuk, Counsel
Mr. Andriy Alekseyev, Counsel
Mr. Sergiy Voytovych, Counsel
205
206 ICSID REVIEW—FOREIGN INVESTMENT LAW JOURNAL
TABLE OF CONTENTS*
Page
I. The Dispute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
II. Procedural History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
III. Relevant Legal Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
IV. Analysis of Respondent’s Objections to Jurisdiction . . . . . . . . . . . . 8

A. First Objection: Claimant Is Not a Genuine “Investor”
of Lithuania . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1. Arguments of the Respondent . . . . . . . . . . . . . . . . . . . . 8
2. Nationality of Juridical Entities under Article 25
of the ICSID Convention . . . . . . . . . . . . . . . . . . . . . . . 9
3. Definition of “Investor” in Article 1(2) of the BIT . . . . 11
4. Consistency of Article 1(2) of the BIT with
the ICSID Convention . . . . . . . . . . . . . . . . . . . . . . . . . 17
5. Equitable Doctrine of “Veil Piercing” . . . . . . . . . . . . . . 22
6. Other Considerations Regarding
Corporate Nationality . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7. Conclusion of the Tribunal . . . . . . . . . . . . . . . . . . . . . . 30
B. Second Objection: The Claimant Did Not Make an
“Investment” “in Accordance with the Laws and
Regulations” of Ukraine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
1. Argument of the Respondent: Claimant Has Not
Shown that the Source of Capital Is Non-Ukrainian . . . 31
2. “Investment” under Article 25 of the Convention . . . . . 31
3. Definition of “Investment” in Article 1(1) of the BIT . . 32
4. Consistency of Article 1(1) of the BIT with
the ICSID Convention . . . . . . . . . . . . . . . . . . . . . . . . . 34
5. Argument of the Respondent: Investment Not Made
“in Accordance with Laws and Regulations”
of Ukraine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
C. Third Objection: The Dispute Does Not Arise from
the Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
*The page numbers in this Table of Contents refer to the page numbering in the original decision.
CASES 207
Page
V. Objections to Admissibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
A. First Objection: Claimant’s Written Consent Was
Improper and Untimely . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
B. Second Objection: Claimant and Respondent
Were Not “Parties” to the Negotiation Required by
Article 8 of the BIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
C. Third Objection: The “Dispute” Was Not the Subject
of Negotiation as Required by Article 8 of the BIT . . . . . . . . 46
VI. Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
I. THE DISPUTE
1. The Claimant, Tokios Tokele·s, is a business enterprise established under

the laws of Lithuania. It was founded as a cooperative in 1989, and, since
1991, has been registered as a “closed joint-stock company.” The Claimant is
engaged primarily in the business of advertising, publishing and printing in
Lithuania and outside its borders.
2. In 1994, Tokios Tokele·s created Taki spravy, a wholly owned subsidiary

established under the laws of Ukraine. Taki spravy is in the business of adver-
tising, publishing, and printing, and related activities in Ukraine and outside
its borders. The Claimant made an initial investment of USD 170,000 in Taki
spravy in 1994, consisting of office furniture, printing equipment, and the
construction of and repairs to office facilities. Since that time, the Claimant
has reinvested the profits of Taki spravy in the subsidiary, purchasing addi-
tional printing equipment, computer equipment, bank shares, and automo-
biles. The Claimant asserts that it has invested a total of more than USD 6.5
million in its Ukrainian subsidiary in the period 1994-2002.
3. The Claimant, Tokios Tokele·s, alleges that governmental authorities in

Ukraine engaged in a series of actions with respect to Taki spravy that breach
the obligations of the bilateral investment treaty between Ukraine and
Lithuania (“Ukraine-Lithuania BIT” or “Treaty”).1 The Claimant contends
that, beginning in February 2002, the Respondent engaged in a series of
unreasonable and unjustified actions against Taki spravy that adversely affect-
ed the Claimant’s investment. The Claimant alleges that governmental author-
ities of the Respondent: (1) conducted numerous and invasive investigations
under the guise of enforcing national tax laws; (2) pursued unsubstantiated
actions in domestic courts, including actions to invalidate contracts entered
into by Taki spravy; (3) placed the assets of Taki spravy under administrative
arrest; (4) unreasonably seized financial and other documents; and (5) falsely
accused Taki spravy of engaging in illegal activities. The Claimant argues that
the governmental authorities took these actions in response to the Claimant’s
publication in January 2002 of a book that favorably portrays a leading
Ukrainian opposition politician, Yulia Tymoshenko.
1 Agreement between the Government of Ukraine and the Government of the Republic of
Lithuania for the Promotion and Reciprocal Protection of Investments, Feb. 8, 1994 (entered into force
on Feb. 27, 1995) (“Ukraine-Lithuania BIT”). The Treaty was done in the “Ukrainian, Lithuanian and
English languages, both texts being equally authentic. In case of devergency [sic] of interpretation the
English text shall prevail.” Id. at 11.
CASES 209
4. The Claimant contends that it objected to this treatment by the govern-

mental authorities of the Respondent and made multiple unsuccessful efforts
to settle the dispute. These efforts included meeting with local tax officials,
sending written complaints to tax and law enforcement officials, and sending
a letter of appeal to the President of Ukraine. In each case, the Claimant con-
tends, these efforts were unsuccessful and the governmental action complained
of by the Claimant continued.
II. PROCEDURAL HISTORY
5. The Claimant initiated this proceeding on August 14, 2002, when it

filed a Request for Arbitration (“RFA”) with the International Centre for
Settlement of Investment Disputes (“ICSID”) along with its wholly owned
subsidiary, Taki spravy. The RFA included letters of consent to arbitration
from Tokios Tokele·s and Taki spravy dated August 7 and August 9, respec-
tively. In the RFA, the Claimants alleged that various actions by Ukrainian
governmental authorities during 2002 constituted violations of the Ukraine-
Lithuania BIT.
6. The requesting parties filed a supplement to their request on September

4, 2002, seeking, among other damages, just and adequate compensation for
the losses sustained by Tokios Tokele·s and Taki spravy for the requisitioning
and destruction of their property by Ukraine’s forces or authorities.
7. On October 15, 2002, ICSID notified the requesting parties that the
dispute had not been subject to negotiation for a period of six months as
required by Article 8 of the Ukraine-Lithuania BIT. On October 17, 2002, the
requesting parties withdrew their RFA until such time as it “may be renewed
and resubmitted for consideration to the Centre.” The RFA was reinstated by
Tokios Tokele·s and Taki spravy on November 22, 2002.
8. On December 6, 2002, ICSID notified the requesting parties that

Ukraine and Lithuania had not agreed that Taki spravy, an entity organized
under the laws of Ukraine, should be treated as national of Lithuania under
Article 25(2)(b) of the Convention on the Settlement of Investment Disputes
between States and Nationals of Other States (“ICSID Convention” or
“Convention”)2 and Article 1(2)(c) of the Ukraine-Lithuania BIT. In response,
2 Ukraine and Lithuania became parties to the ICSID Convention on July 7, 2000, and Aug. 5,
1992, respectively. See ICSID, “List of Contracting States and other Signatories of the Convention (as
of November 3, 2003)” available at http://www.worldbank.org/icdis/constate/c-states-en.htm.
Tokios Tokele·s removed Taki spravy as a requesting party on December 9,

2002, which ICSID acknowledged in a letter on the same date.
9. On December 9, 2002, Ukraine requested of ICSID the opportunity to

present preliminary observations on jurisdiction prior to the registration of the
RFA. In Ukraine’s view, the content of the RFA might have prompted the
Secretary-General not to register the same because, pursuant to Article 6(1)(b)
of the Rules of Procedure for the Institution of Conciliation and Arbitration
Proceedings, “the dispute is manifestly outside the jurisdiction of the Centre.”
After receiving the views of both Ukraine and the requesting party, the
Secretary-General of ICSID registered the RFA on December 20, 2002.
10. To constitute the Tribunal, the Claimant chose the option provided in
Article 37(2)(b) of the Convention, which provides for each party to appoint
one arbitrator and the two parties to agree on the third arbitrator to serve as
President of the Tribunal. In March 2003, the Claimant appointed Mr. Daniel
Price, a national of the United States, and Ukraine appointed Professor Piero
Bernardini, a national of Italy. When the parties were unable to agree on the
President of the Tribunal, the Claimant requested that the Chairman of the
Administrative Council appoint the presiding arbitrator, pursuant to Article
38 of the Convention and Rule 4(1) of the Arbitration Rules. After consulta-
tion with the parties, Professor Prosper Weil, a national of France, was
appointed to serve as President of the Tribunal. The Tribunal was officially
constituted on April 29, 2003 and Ms. Martina Polasek was designated to
serve as Secretary of the Tribunal.
11. The Tribunal held its first session on June 3, 2003, in Paris, France. At
this session, the Respondent raised objections to the jurisdiction of the
Tribunal and requested that the proceeding be bifurcated so that jurisdiction
could be addressed first and separately from the merits of the case. The
Claimant opposed this request, arguing that the merits of the case are inextri-
cably linked to the jurisdiction of the Tribunal. In addition, the Claimant sub-
mitted a request for provisional measures, namely, the suspension of parallel
court proceedings in Ukraine and investigations being conducted by
Ukrainian tax authorities, which the Claimant argued could seriously impact
its rights. The Respondent opposed this request.
12. After receiving written submissions from the parties, on July 1, 2003, the
Tribunal granted the Claimant’s request for provisional measures and the
Respondent’s request to bifurcate the proceedings.
CASES 211
13. In accordance with the Tribunal’s order, the Respondent filed its memo-
rial on jurisdiction on July 29, 2003, and the Claimant filed its counter-
memorial on August 25, 2003. The Respondent’s reply and the Claimant’s
rejoinder were filed on September 9 and September 24, 2003, respectively. On
December 10, 2003, the Tribunal held an oral hearing on jurisdiction in Paris,
France.
III. RELEVANT LEGAL PROVISIONS
14. In reaching its majority decision on jurisdiction,3 this Tribunal is guid-

ed by Article 25 of the ICSID Convention as well as Articles 1 and 8 of the
Ukraine-Lithuania BIT.
15. Article 25 of the ICSID Convention sets forth the objective criteria for
ICSID’s jurisdiction and provides in relevant part:
(1) The jurisdiction of the Centre shall extend to any legal dis-
pute arising directly out of an investment, between a Contracting
State…and a national of another Contracting State, which the par-
ties to the dispute consent in writing to submit to the Centre.
When the parties have given their consent, no party may withdraw
its consent unilaterally.
(2) National of another Contracting State means:
[...]
(b) any juridical person which had the nationality of a
Contracting State other than the State party to the dispute
on the date on which the parties consented to submit such
dispute to conciliation or arbitration and any juridical per-
son which had the nationality of the Contracting State
party to the dispute on that date and which, because of for-
eign control, the parties have agreed should be treated as a
national of another Contracting State for the purposes of
this Convention.
16. Article 8 of the Ukraine-Lithuania BIT sets forth the disputes that may
be submitted to international arbitration:
3 The dissenting opinion of Professor Weil is attached to this Decision.

(1) Any dispute between an investor of one Contracting Party and

the other Contracting Party in connection with an investment on
the territory of that other Contracting Party shall be subject to
negotiations between the parties in dispute.
(2) If any dispute between an investor of one Contracting Party
and the other Contracting Party can not be thus settled within a
period of six months, the investor shall be entitled to submit the
case to:
(a) The International Centre for Settlement of Investment
Disputes (ICSID)….
17. Article 1(1) of the BIT defines “investment” as “every kind of asset
invested by an investor of one Contracting Party in the territory of the other
Contracting Party in accordance with the laws and regulations of the latter….”
The definition includes a non-exhaustive list of the forms that an investment
may take, such as “(a) movable and immovable property…(b) shares [and]
stocks…(c) claims to money….” Article 1(1) further provides that “[a]ny
alteration of the form in which assets are invested shall not affect their charac-
ter as investment provided that such an alteration is made in accordance with
the laws of the Contracting Party in the territory of which the investment has
been made.”
18. Article 1(2) defines “investor” as:

(a) in respect of Ukraine:
– natural person [sic] who are nationals of the Ukraine according
to Ukrainian laws;
– any entity established in the territory of the Ukraine in con-
formity with its laws and regulations;
(b) in respect of Lithuania:
– natural person [sic] who are nationals of the Republic of
Lithuania according to Lithuanian laws;
– any entity established in the territory of the Republic of
Lithuania in conformity with its laws and regulations;
(c) in respect of either Contracting Party—any entity or organiza-
tion established under the law of any third State which is, directly
CASES 213
or indirectly, controlled by nationals of that Contracting Party or

by entities having their seat in the territory of that Contracting
Party; it being understood that control requires a substantial part
in the ownership.
19. The jurisdiction of the Centre depends first and foremost on the consent
of the Contracting Parties, who enjoy broad discretion to choose the disputes
that they will submit to ICSID.4 Tribunals shall exercise jurisdiction over all
disputes that fall within the scope of the Contracting Parties’ consent as long
as the dispute satisfies the objective requirements set forth in Article 25 of the
Convention.
20. Based on Article 25 of the Convention and the BIT, this Tribunal has
jurisdiction over the present dispute if the following requirements are met: (1)
the Claimant is an investor of one Contracting Party; (2) the Claimant has an
investment in the territory of the other Contracting Party; (3) the dispute aris-
es directly from the investment; and (4) the parties to the dispute have con-
sented to ICSID jurisdiction over it. We turn now to examine the
Respondent’s arguments that these requirements have not been met.
IV. ANALYSIS OF RESPONDENT’S OBJECTIONS TO

JURISDICTION
A. First Objection: Claimant Is Not a Genuine “Investor” of Lithuania
1. Arguments of the Respondent
21. The Respondent does not dispute that the Claimant is a legally estab-
lished entity under the laws of Lithuania. The Respondent argues, however,
that the Claimant is not a “genuine entity” of Lithuania first because it is
owned and controlled predominantly by Ukrainian nationals. There is no dis-
pute that nationals of Ukraine own ninety-nine percent of the outstanding
shares of Tokios Tokele·s and comprise two-thirds of its management.5 The
4 See Report of the Executive Directors of the International Bank for Reconstruction and
Development on the Convention on the Settlement of Investment Disputes between States and
Nationals of Other States, 1 ICSID Reports 28, at para. 23 (stating that “[c]onsent of the parties is the
cornerstone of the jurisdiction of the Centre”) (“Executive Directors’ Report”).
5 Messrs. Sergiy Danylov and Oleksandr Danylov, who are nationals of Ukraine, own ninety-
nine percent of the shares in Tokios Tokele·s, and Ms. Ludmilla Zhyltsova, a national of Lithuania, owns
the remaining one percent. See Request for Arbitration, at Annex 6, “Statute of the Closed Joint-Stock
Company ‘Tokios Tokele·s’” at para. 3.6. Messrs. Danylov and Ms. Zhyltsova serve as managers of Tokios
Tokele·s. See id. at Annex 7.
Respondent also argues, but the Claimant strongly contests, that Tokios
Tokele·s has no substantial business activities in Lithuania and maintains its
siège social, or administrative headquarters, in Ukraine. The Respondent con-
tends, therefore, that the Claimant is, in terms of economic substance, a
Ukrainian investor in Lithuania, not a Lithuanian investor in Ukraine.
22. The Respondent argues that to find jurisdiction in this case would be
tantamount to allowing Ukrainian nationals to pursue international arbitra-
tion against their own government, which the Respondent argues would be
inconsistent with the object and purpose of the ICSID Convention.6 To avoid
this result, the Respondent asks the Tribunal to “pierce the corporate veil,” that
is, to disregard the Claimant’s state of incorporation and determine its nation-
ality according to the nationality of its predominant shareholders and man-
agers, to what the Respondent contends is the Claimant’s lack of substantial
business activity in Lithuania, and to the alleged situs of its siège social in
Ukraine.
23. In support of its request to “pierce the corporate veil,” the Respondent
makes three arguments, which we encapsulate as follows:
• The context in which the ICSID Convention and the Ukraine-

Lithuania BIT reference and define corporate nationality allows the
Tribunal to disregard the Claimant’s state of incorporation and deter-
mine its corporate nationality based on the nationality of its controlling
shareholders, i.e., to pierce the corporate veil;
• The Tribunal should pierce the corporate veil of the Claimant in this
case because allowing an enterprise that is established in Lithuania but
owned and controlled predominantly by Ukrainians to pursue ICSID
arbitration against Ukraine is contrary to the object and purpose of the
ICSID Convention and the Ukraine-Lithuania BIT, namely, to provide
a forum for the settlement of international disputes; and
• The jurisprudence of ICSID arbitration supports the use of a “control-

test” rather than state of incorporation to define the nationality of juridi-
cal entities and it also supports piercing the corporate veil in certain cir-
cumstances that apply in the present case.
6 “The Convention is designed to facilitate the settlement of investment disputes between States
and nationals of other States. It is not meant for disputes between States and their own nationals.”
Christoph H. Schreuer, The ICSID Convention: A Commentary 290 (2001).
CASES 215
2. Nationality of Juridical Entities under Article 25 of the ICSID

Convention
24. Article 25 of the Convention requires that, in order for the Centre to
have jurisdiction, a dispute must be between “a Contracting State…and a
national of another Contracting State….”7 Article 25(2)(b) defines “national of
another Contracting State,” to include “any juridical person which had the
nationality of a Contracting State other than the State party to the dispute….”
The Convention does not define the method for determining the nationality
of juridical entities, leaving this task to the reasonable discretion of the
Contracting Parties.8
25. Thus, we begin our analysis of this jurisdictional requirement by under-

scoring the deference this Tribunal owes to the definition of corporate nation-
ality contained in the agreement between the Contracting Parties, in this case,
the Ukraine-Lithuania BIT. As Mr. Broches explained, the purpose of Article
25(2)(b) is not to define corporate nationality but to:
[I]ndicate the outer limits within which disputes may be submit-
ted to conciliation or arbitration under the auspices of the Centre
with the consent of the parties thereto. Therefore the parties should
be given the widest possible latitude to agree on the meaning of
‘nationality’ and any stipulation of nationality made in connection
with a conciliation or arbitration clause which is based on a reason-
able criterion.” 9
26. In the specific context of BITs, Professor Schreuer notes that the
Contracting Parties enjoy broad discretion to define corporate nationality:
“[d]efinitions of corporate nationality in national legislation or in treaties pro-
viding for ICSID’s jurisdiction will be controlling for the determination of
whether the nationality requirements of Article 25(2)(b) have been met.”10 He
adds, “[a]ny reasonable determination of the nationality of juridical persons
contained in national legislation or in a treaty should be accepted by an ICSID
commission or tribunal.”11
7 Emphasis added.
8 See Aron Broches, “The Convention on the Settlement of Investment Disputes between States
and Nationals of Other States,” 136 Recueil des Cours 331, 359-60 (1972-II).
9 Id. at 361 (emphasis added); see also C.F. Amerasinghe, “Interpretation of Article 25(2)(B) of
the ICSID Convention,” in International Arbitration in the 21st Century: Towards “Judicialization” and
Uniformity 223, 232 (R. Lillich and C. Brower eds. 1993).
10 Schreuer, at 286.
11 Id.
3. Definition of “Investor” in Article 1(2) of the BIT
27. As have other tribunals, we interpret the ICSID Convention and the
Treaty between the Contracting Parties according to the rules set forth in the
Vienna Convention on the Law of Treaties, much of which reflects customary
international law.12 Article 31 of the Vienna Convention provides that “[a]
treaty shall be interpreted in good faith in accordance with the ordinary mean-
ing to be given to the terms of the treaty in their context and in light of its
object and purpose.”13
28. Article 1(2)(b) of the Ukraine-Lithuania BIT defines the term

“investor,” with respect to Lithuania, as “any entity established in the territory
of the Republic of Lithuania in conformity with its laws and regulations.”14
The ordinary meaning of “entity” is “[a] thing that has a real existence.”15 The
meaning of “establish” is to “[s]et up on a permanent or secure basis; bring into
being, found (a…business).”16 Thus, according to the ordinary meaning of
the terms of the Treaty, the Claimant is an “investor” of Lithuania if it is a
thing of real legal existence that was founded on a secure basis in the territory
of Lithuania in conformity with its laws and regulations. The Treaty contains
no additional requirements for an entity to qualify as an “investor” of
Lithuania.
29. The Claimant was founded as a cooperative in 1989 and was registered
by the municipal government of Vilnius, Lithuania on August 9 of that year.17
In 1991, the founders of Tokios Tokele·s agreed to reorganize the cooperative
into a closed joint-stock company, which the municipal government of
Vilnius, Lithuania registered on May 2, 1991.18 According to the Certificate
of Enterprise, the address of Tokios Tokele·s is Vilnius, vul. Seskines, 13-3. On
August 11, 2000, the Ministry of the Economy of the Republic of Lithuania
re-registered the Claimant as an enterprise and re-registered the Claimant’s
12 See, e.g., Mondev Int’l Ltd v. United States of America, Award, Case No. ARB(AF)/99/2 (Oct.
11, 2002), 42 I.L.M. 85 (2003), at para. 43; Emilio Agustín Maffezini v. Kingdom of Spain, Decision on
Jurisdiction, Case No. ARB/97/7 (Jan. 25, 2000), at para. 27; Waste Management, Inc. v. United Mexican
States, Award, Case No. ARB(AF)/98/2 (June 2, 2000), 40 I.L.M. 56 (2001), at n. 2.
13 Vienna Convention on the Law of Treaties, art. 31(1) (May 22, 1969).
14 Emphasis added.
15 The New Shorter Oxford English Dictionary 830 (Thumb Index Edition 1993).
16 Id. at 852.
17 Claimant’s June 20, 2003 Submission of Documents, Vol. V, Annex 10.
18 Id. at Annex 13.
CASES 217
governing statute, both of which note the company’s location as Sheshkines,

13-3 (or d. 13 kv. 3), Vilnius.19 The Claimant, therefore, is a thing of real legal
existence that was founded on a secure basis in the territory of Lithuania. The
registration of Tokios Tokele·s by the Lithuanian Government indicates that it
was founded in conformity with the laws and regulations of that country.
According to the ordinary meaning of Article 1(2)(b), therefore, the Claimant
is an investor of Lithuania.
30. Article 1(2)(c) of the Ukraine-Lithuania BIT, which defines “investor”

with respect to entities not established in Ukraine or Lithuania, provides rele-
vant context for the interpretation of Article 1(2)(a) and (b). Article 1(2)(c)
extends the scope of the Treaty to entities incorporated in third countries using
other criteria to determine nationality—namely, the nationality of the indi-
viduals who control the enterprise and the siège social of the entity controlling
the enterprise. The Respondent argues that the existence of these alternative
methods of defining corporate nationality to extend the benefits of the BIT in
Article 1(2)(c) should also allow these methods to be used to deny the benefits
of the BIT under Article 1(2)(b). If the Contracting Parties had intended these
alternative methods to apply to entities legally established in Ukraine or
Lithuania, however, the parties would have included them in Article 1(2)(a) or
(b) respectively as they did in Article 1(2)(c). However, the purpose of Article
1(2)(c) is only to extend the definition of “investor” to entities established
under the law of a third State provided certain conditions are met. Under the
well established presumption expressio unius est exclusio alterius, the state of
incorporation, not the nationality of the controlling shareholders or siège
social, thus defines “investors” of Lithuania under Article 1(2)(b) of the BIT.
31. The object and purpose of the Treaty likewise confirm that the control-
test should not be used to restrict the scope of “investors” in Article 1(2)(b).
The preamble expresses the Contracting Parties’ intent to “intensify econom-
ic cooperation to the mutual benefit of both States” and “create and maintain
favourable conditions for investment of investors of one State in the territory
of the other State.” The Tribunal in SGS v. Philippines interpreted nearly iden-
tical preambular language in the Philippines-Switzerland BIT as indicative of
19 Request for Arbitration, at Annexes 5-6.

the treaty’s broad scope of investment protection.20 We concur in that inter-

pretation and find that the object and purpose of the Ukraine-Lithuania BIT
is to provide broad protection of investors and their investments.
32. The object and purpose of the Treaty are also reflected in the Treaty text.
Article 1, which sets forth the scope of the BIT, defines “investor” as “any enti-
ty” established in Lithuania or Ukraine as well as “any entity” established in
third countries that is controlled by nationals of or by entities having their seat
in Lithuania or Ukraine. Thus, the Respondent’s request to restrict the scope
of covered investors through a control-test would be inconsistent with the
object and purpose of the Treaty, which is to provide broad protection of
investors and their investments.
33. The Respondent also argues that jurisdiction should be denied because,
in its view, the Claimant does not maintain “substantial business activity” in
Lithuania. The Respondent correctly notes that a number of investment
treaties allow a party to deny the benefits of the treaty to entities of the other
party that are controlled by foreign nationals and that do not engage in sub-
stantial business activity in the territory of the other party.
34. For example, the Ukraine-United States BIT states, “[e]ach Party
reserves the right to deny to any company the advantages of this treaty if
nationals of any third country control such company and, in the case of a com-
pany of the other Party, that company has no substantial business activities in
the territory of the other Party….”21 Similarly, the Energy Charter Treaty, to
which both Ukraine and Lithuania are parties, allows each party to deny the
benefits of the agreement to “a legal entity if citizens or nationals of a third state
own or control such entity and if that entity has no substantial business activ-
ities in the Area of the Contracting Party in which it is organized.”22
20 SGS Société Générale de Surveillance S.A. v. Republic of the Philippines, Decision on Jurisdiction,
Case No. ARB/02/6 (Jan. 29, 2004), at para. 116 (“The BIT is a treaty for the promotion and recipro-
cal protection of investments. According to the preamble it is intended ‘to create and maintain
favourable conditions for investments by investors of one Contracting Party in the territory of the other.’
It is legitimate to resolve uncertainties in its interpretation so as to favour the protection of covered
investments.”) (“SGS v. Philippines”).
21 Treaty between the United States of America and Ukraine Concerning the Encouragement and
Reciprocal Protection of Investment, Mar. 4, 1994, at art. 1(2) (entered into force Nov. 16, 1996)
(emphasis added).
22 The Energy Charter Treaty, Annex 1 to the Final Act of the European Energy Charter
Conference, at art. 17(1), Dec. 16-17, 1994, Lisbon, Portugal, available at http://www.encharter.org/
upload/1/TreatyBook-en.pdf (emphasis added).
CASES 219
35. In addition, a number of investment treaties of other States enable the

parties to deny the benefits of the treaty to entities of the other party that are
controlled by nationals of the denying party and do not have substantial busi-
ness activity in the other party. For example, the BIT between the United
States and Argentina provides that “[e]ach Party reserves the right to deny to
any company of the other Party the advantages of this Treaty if (a) nationals of
any third country, or nationals of such Party, control such company and the
company has no substantial business activities in the territory of the other
Party….”23
36. These investment agreements confirm that state parties are capable of
excluding from the scope of the agreement entities of the other party that are
controlled by nationals of third countries or by nationals of the host country.
The Ukraine-Lithuania BIT, by contrast, includes no such “denial of benefits”
provision with respect to entities controlled by third-country nationals or by
nationals of the denying party. We regard the absence of such a provision as a
deliberate choice of the Contracting Parties. In our view, it is not for tribunals
to impose limits on the scope of BITs not found in the text, much less limits
nowhere evident from the negotiating history. An international tribunal of
defined jurisdiction should not reach out to exercise a jurisdiction beyond the
borders of the definition. But equally an international tribunal should exercise,
and indeed is bound to exercise, the measure of jurisdiction with which it is
endowed.24
37. We note that the Claimant has provided the Tribunal with significant
information regarding its activities in Lithuania, including financial state-
ments, employment information, and a catalogue of materials produced dur-
ing the period of 1991 to 1994.25 While these activities would appear to con-
stitute “substantial business activity,” we need not affirmatively decide that
they do, as it is not relevant to our determination of jurisdiction.
23 Treaty between the United States of America and the Argentine Republic Concerning the
Reciprocal Encouragement and Protection of Investment, Nov. 14, 1991, at art. 1(2).
24 See, e.g., Compañia de Aguas del Aconquija S.A. and Vivendi Universal (formerly Compagnie
Générale des Eaux) v. Argentine Republic, Decision on Annulment, Case No. ARB/97/3 (July 3, 2002).
“In the Committee’s view, the Tribunal, faced with such a claim and having validly held that it had juris-
diction, was obliged to consider and to decide it.” Id. at para. 112. “[T]he Committee concludes that
the Tribunal exceeded its powers in the sense of Article 52(1)(b), in that the Tribunal, having jurisdic-
tion over the Tucumán claims, failed to decide those claims.” Id. at para. 115.
25 Claimant’s December 30, 2003 Submission of Documents, Annexes 1-11, Catalogues of
Publications of Tokios Tokele·s for 1991, 1992, 1993 and 1994.
38. Rather, under the terms of the Ukraine-Lithuania BIT, interpreted

according to their ordinary meaning, in their context, and in light of the object
and purpose of the Treaty, the only relevant consideration is whether the
Claimant is established under the laws of Lithuania. We find that it is. Thus,
the Claimant is an investor of Lithuania under Article 1(2)(b) of the BIT.
39. We reach this conclusion based on the consent of the Contracting

Parties, as expressed in the Ukraine-Lithuania BIT. We emphasize here that
Contracting Parties are free to define their consent to jurisdiction in terms that
are broad or narrow; they may employ a control-test or reserve the right to
deny treaty protection to claimants who otherwise would have recourse under
the BIT. Once that consent is defined, however, tribunals should give effect to
it, unless doing so would allow the Convention to be used for purposes for
which it clearly was not intended.
40. This Tribunal, by respecting the definition of corporate nationality in

the Ukraine-Lithuania BIT, fulfills the parties’ expectations, increases the pre-
dictability of dispute settlement procedures, and enables investors to structure
their investments to enjoy the legal protections afforded under the Treaty. We
decline to look beyond (or through) the Claimant to its shareholders or other
juridical entities that may have an interest in the claim. As the tribunal in
Amco Asia Corp. v. Indonesia said in rejecting the respondent’s request to attrib-
ute to the claimant the nationality of its controlling shareholder, the concept
of nationality in the ICSID Convention is:
[A] classical one, based on the law under which the juridical per-
son has been incorporated, the place of incorporation and the
place of the social seat. An exception is brought to this concept in
respect of juridical persons having the nationality, thus defined, of
the Contracting state party to the dispute, where said juridical per-
sons are under foreign control. But no exception to the classical con-
cept is provided for when it comes to the nationality of the foreign con-
troller, even supposing—which is not at all clearly stated in the
Convention—that the fact that the controller is the national of one or
another foreign State is to be taken into account….26
26 Amco Asia Corp. and Others v. Republic of Indonesia, Decision on Jurisdiction, Case No.
ARB/81/1 (Sept. 25, 1983), 1 ICSID Reports 389, 396 (emphasis added) (“Amco”).
CASES 221
41. Thus, the decision of this Tribunal with respect to the nationality of the
Claimant is consistent with Amco Asia and other ICSID jurisprudence, as will
be discussed further below.
4. Consistency of Article 1(2) of the BIT with the ICSID Convention
42. In our view, the definition of corporate nationality in the Ukraine-

Lithuania BIT, on its face and as applied to the present case, is consistent with
the Convention and supports our analysis under it. Although Article 25(2)(b)
of the Convention does not set forth a required method for determining cor-
porate nationality, the generally accepted (albeit implicit) rule is that the
nationality of a corporation is determined on the basis of its siège social or place
of incorporation.27 Indeed, “ICSID tribunals have uniformly adopted the test
of incorporation or seat rather than control when determining the nationality
of a juridical person.”28 Moreover, “[t]he overwhelming weight of the author-
ity…points towards the traditional criteria of incorporation or seat for the
determination of corporate nationality under Art. 25(2)(b).”29 As Professor
Schreuer notes, “[a] systematic interpretation of Article 25(2)(b) would mili-
tate against the use of the control test for a corporation’s nationality.”30
43. As discussed above, the Claimant is an “investor” of Lithuania under

Article 1(2)(b) of the Ukraine-Lithuania BIT based on its state-of-incorpora-
tion. Although not required by the text of the Treaty, an assessment of the siège
social of the Claimant leads to the same conclusion. Among the relevant evi-
dence of siège social, the Claimant’s registration certificate (issued by the
Ministry of the Economy of Lithuania),31 its statute of incorporation,32 and
each of the Claimant’s “Information Notices of Payment of Foreign
27 Schreuer, at 278-79; see also G.R. Delaume, “ICSID Arbitration and the Courts,” 77 Amer. J.
Int’l Law 784, 793-94 (1983); M. Hirsch, The Arbitration Mechanism of the International Centre for the
Settlement of Investment Disputes 85 (1993).
28 Schreuer, at 279-80 (citing Kaiser Bauxite Company v. Jamaica, Decision on Jurisdiction, Case
No. ARB/74/3 (July 6, 1975), 1 ICSID Reports 296, 303 (1993); SOABI v. Senegal, Decision on
Jurisdiction, Case No. ARB/82/1 (Aug. 1, 1984), 2 ICSID Reports 175, 180-81; Amco, at 396); see also
Autopista Concesionada de Venezuela, C.A. v. Bolivarian Republic of Venezuela, Decision on Jurisdiction,
Case No. ARB/00/5 (Sept. 27, 2001), 16 ICSID Review-FILJ 469 (2001), at para. 108 (“Autopista”).
30 Id. at 278.
31 Request for Arbitration, at Annex 5.
32 Id. at Annex 6.
Investment” (registered by Ukrainian governmental authorities),33 all record

the Claimant’s address as Vilnius, Lithuania. Contrary to the assertion of the
Respondent, a nationality test of siège social leads to the same result as one
based on state of incorporation.34
44. The second clause of Article 25(2)(b) provides that parties can, by agree-
ment, depart from the general rule that a corporate entity has the nationality
of its state of incorporation. It extends jurisdiction to “any juridical person
which had the nationality of the Contracting State party to the dispute on [the
date on which the parties consented to submit the dispute to arbitration] and
which, because of foreign control, the parties have agreed should be treated as a
national of another Contracting State….”35 This exception to the general rule
applies only in the context of an agreement between the parties. The
Respondent asks the Tribunal to apply this exception in the present case, not
to give effect to an agreement between the Contracting Parties, but, rather, to
create an additional exception to the general state-of-incorporation or state-of-
seat rule—in the absence of an agreement to that effect between the Parties.
45. We find no support for the Respondent’s request in the text of the
Convention. The second clause of Article 25(2)(b) limits the use of the con-
trol-test to the circumstances it describes, i.e., when Contracting Parties agree
to treat a national of the host State as a national of another Contracting Party
because of foreign control. In the present case, the Claimant is not a national
of the host State nor have the parties agreed to treat the Claimant as a nation-
al of a State other than its state of incorporation.
46. The use of a control-test to define the nationality of a corporation to

restrict the jurisdiction of the Centre would be inconsistent with the object and
purpose of Article 25(2)(b). Indeed, as explained by Mr. Broches, the purpose
of the control-test in the second portion of Article 25(2)(b) is to expand the
jurisdiction of the Centre:
[T]here was a compelling reason for this last provision. It is quite
usual for host States to require that foreign investors carry on their
33 Id. at Annex 13.

34 This is not a surprising result. See D.P. O’Connell, 2 International Law 1041 (2d. ed. 1970)
(stating, “[u]nder French law it is not possible for a corporation to have a siège social at a place other than
that of incorporation….The corporation laws of Continental countries provide that the charter of incor-
poration must designate this central office, and the inference is that it must be in the country of incor-
poration.”).
35 Emphasis added.
CASES 223
business within their territories through a company organized

under the laws of the host country. If we admit, as the Convention
does implicitly, that this makes the company technically a nation-
al of the host country, it becomes readily apparent that there is
need for an exception to the general principle that that the Centre
will not have jurisdiction over disputes between a Contracting
State and its own nationals. If no exception were made for foreign-
owned but locally incorporated companies, a large and important sec-
tor of foreign investment would be outside the scope of the
Convention.36
47. ICSID tribunals likewise have interpreted the second clause of Article
25(2)(b) to expand, not restrict, jurisdiction. In Wena Hotels Ltd. v. Egypt, the
respondent argued that Wena, though incorporated in the United Kingdom,
should be treated as an Egyptian company because it was owned by an
Egyptian national.37 Egypt relied on Article 8.1 of the U.K.-Egypt BIT provi-
sion, which states:
Such a company of one Contracting Party in which before such
dispute arises a majority of shares are owned by nationals or com-
panies of the other Contracting Party shall in accordance with
Article 25(2)(b) of the Convention be treated for the purposes of
the Convention as a company of the other Contracting Party.38
48. Egypt argued that this provision could be used to deny jurisdiction over
disputes involving companies of the non-disputing Contracting Party that are
owned by nationals or companies of the Contracting Party to the dispute.
Wena, on the other hand, argued that this provision could be used only to
extend jurisdiction over disputes involving companies of the Contracting
Party to the dispute that are owned by nationals or companies of the non-dis-
puting Contracting Party. Although the tribunal found that both interpreta-
tions of the BIT provision were plausible, it decided to adopt Wena’s interpre-
tation as the more consistent with Article 25(2)(b) of the Convention.
36 Broches, at 358-59 (emphasis added).

37 Wena Hotels Ltd. v. Arab Republic of Egypt, Summary Minutes of the Session of the tribunal
held in Paris on May 25, 1999, Case No. ARB/98/4, 41 I.L.M. 881, 886 (2002).
38 Id. at 887.
49. As the Wena tribunal stated, “[t]he literature rather convincingly demon-
strates that Article 25(2)(b) of the ICSID Convention—and provisions like
Article 8 of the United Kingdom’s model bilateral investment treaty—are
meant to expand ICSID jurisdiction.”39 The tribunal in Autopista v. Venezuela
reached a similar result, concluding that the object and purpose of Article
25(2)(b) is not to limit jurisdiction, but to set its “outer limits.”40
50. ICSID jurisprudence also confirms that the second clause of Article
25(2)(b) should not be used to determine the nationality of juridical entities
in the absence of an agreement between the parties. In CMS v. Argentina, the
tribunal states, “[t]he reference that Article 25(2)(b) makes to foreign control
in terms of treating a company of the nationality of the Contracting State
party as a national of another Contracting State is precisely meant to facilitate
agreement between the parties….”41 In the present case, there was no agreement
between the Contracting Parties to treat the Claimant as anything other than
a national of its state of incorporation, i.e., Lithuania.
51. The second clause of Article 25(2)(b) does not mandatorily constrict
ICSID jurisdiction for disputes arising in the inverse context from the one
envisaged by this provision: a dispute between a Contracting Party and an
entity of another Contracting Party that is controlled by nationals of the
respondent Contracting Party.
52. In summary, the Claimant is an “investor” of Lithuania under Article

1(2)(b) of the BIT because it is an “entity established in the territory of the
Republic of Lithuania in conformity with its laws and regulations.” This
method of defining corporate nationality is consistent with modern BIT prac-
tice and satisfies the objective requirements of Article 25 of the Convention.
We find no basis in the BIT or the Convention to set aside the Contracting
Parties’ agreed definition of corporate nationality with respect to investors of
either party in favor of a test based on the nationality of the controlling share-
39Id. at 888.
40Autopista, at para. 109 (quoting Broches).
41 CMS Gas Transmission Company v. Republic of Argentina, Decision on Jurisdiction, Case No.
ARB/01/8 (July 17, 2003), 42 I.L.M. 788 (2003), at para. 51 (emphasis added) (“CMS”).
CASES 225
holders. While some tribunals have taken a distinctive approach,42 we do not

believe that arbitrators should read in to BITs limitations not found in the text
nor evident from negotiating history sources.
5. Equitable Doctrine of “Veil Piercing”
53. Finally, we consider whether the equitable doctrine of “veil piercing,” to

the extent recognized in customary international law, should override the
terms of the agreement between the Contracting Parties and cause the
Tribunal to deny jurisdiction in this case.43
54. The seminal case, in this regard, is Barcelona Traction.44 In that case, the
International Court of Justice (“ICJ”) stated, “the process of lifting the veil,
being an exceptional one admitted by municipal law in respect of an institu-
tion of its own making, is equally admissible to play a similar role in interna-
tional law.”45 In particular, the Court noted, “[t]he wealth of practice already
accumulated on the subject in municipal law indicates that the veil is lifted,
for instance, to prevent the misuse of the privileges of legal personality, as in cer-
tain cases of fraud or malfeasance, to protect third persons such as a creditor or
purchaser, or to prevent the evasion of legal requirements or of obligations.” 46
55. The Respondent has not made a prima facie case, much less demon-
strated, that the Claimant has engaged in any of the types of conduct described
42 See, e.g., SGS Société Générale de Surveillance S.A. v. Islamic Republic of Pakistan, Decision on
Jurisdiction, Case No. ARB/01/13 (Aug. 6, 2003), 42 I.L.M. 1290 (2003). In this case, a Swiss compa-
ny asserted claims against the Government of Pakistan for breach of contract and for breach of the BIT
between the Swiss Confederation and Pakistan. Article 9 of that BIT provides for ICSID arbitration of
“disputes with respect to investments….” Id. at para. 149. The provision does not in any manner restrict
the scope of such disputes. Although the tribunal recognized that BIT claims and contract claims “can
both be described as ‘disputes with respect to investment,’” it nonetheless decided—without support
from the text or evidence of the parties’ intent—to exclude contract claims from the scope of “disputes”
that could be submitted to ICSID arbitration. Id. at paras. 161-62.
43 Article 42(1) of the ICSID Convention states, “[t]he Tribunal shall decide a dispute in accor-
dance with such rules of law as may be agreed by the parties. In the absence of such agreement, the
Tribunal shall apply the law of the Contracting State party to the dispute (including its rules on the con-
flict of laws) and such rules of international law as may be applicable.” Emphasis added.
44 For the sake of clarity, the Tribunal notes that Barcelona Traction, which held that incorpora-
tion is the only criterion for nationality in cases of diplomatic protection, is inapplicable with respect to
agreements between the parties to treat companies of the host State as a national of the other Party under
the second clause of Article 25(2)(b). See Broches, at 360-361.
45 Barcelona Traction, Light and Power Co., Ltd. (Belg. v. Spain), 1970 I.C.J. 3 (Feb. 5), at para. 58
(“Barcelona Traction”).
46 Id. at para. 56 (emphases added).
in Barcelona Traction that might support a piercing of the Claimant’s corporate

veil. The Respondent has not shown or even suggested that the Claimant has
used its status as a juridical entity of Lithuania to perpetrate fraud or engage
in malfeasance. The Respondent has made no claim that the Claimant’s veil
must be pierced and jurisdiction denied in order to protect third persons, nor
has the Respondent shown that the Claimant used its corporate nationality to
evade applicable legal requirements or obligations.
56. The ICJ did not attempt to define in Barcelona Traction the precise scope
of conduct that might prompt a tribunal to pierce the corporate veil. We are
satisfied, however, that none of the Claimant’s conduct with respect to its sta-
tus as an entity of Lithuania constitutes an abuse of legal personality. The
Claimant made no attempt whatever to conceal its national identity from the
Respondent. To the contrary, the Claimant’s status as a juridical entity of
Lithuania is well established under the laws of both Lithuania and Ukraine
and well known by the Respondent. The Claimant manifestly did not create
Tokios Tokele·s for the purpose of gaining access to ICSID arbitration under
the BIT against Ukraine, as the enterprise was founded six years before the
BIT between Ukraine and Lithuania entered into force. Indeed, there is no
evidence in the record that the Claimant used its formal legal nationality for
any improper purpose.
6. Other Considerations Regarding Corporate Nationality
57. Although not necessary elements of our Decision, the section below
addresses the relevant ICSID jurisprudence and the views of ICSID scholars
raised by the parties that relate to the issue of defining corporate nationality.
a. ICSID Jurisprudence
58. The arbitral awards cited by the Respondent do not support a decision
by this Tribunal to set aside the definition of nationality agreed to by the
Contracting Parties. Among the awards cited, the Respondent quotes the fol-
lowing passage from Banro American Resources Inc. v. Congo in support of its
request to pierce the corporate veil of the Claimant:
These few examples demonstrate that in general, ICSID tribunals
do not accept the view that their competence is limited by formal-
ities, and rather they rule on their competence based on a review
of the circumstances surrounding the case, and, in particular, the
CASES 227
actual relationship among the companies involved. This jurispru-

dence reveals the willingness of ICSID tribunals to refrain from
making decisions on their competence based on formal appear-
ances, and to base their decisions on a realistic assessment of the
situation before them.47
59. The “few examples” to which the Banro tribunal refers, however, are
cases in which the claimant, as the party that requested arbitration, was not the
same entity as the party that consented to arbitration.48 The Banro tribunal
suggests that, in these cases, the tribunals have been willing to consider the
nationalities of the consenting party and the Claimant when making their
determinations of jurisdiction.
60. In Banro itself, the claimant’s parent, Banro Resources (Canada), trans-
ferred shares in its Congolese investment to its subsidiary, Banro American
(U.S.). The tribunal stated that the claimant, Banro American, could not avail
itself of the consent expressed by its parent, Banro Resources, because Banro
Resources, as a national of a non-Contracting Party, could not have validly
consented to ICSID arbitration and, thus, could not transfer any valid consent
to its U.S. subsidiary.49 Although the Banro tribunal indicated that it “could
have addressed the issue of jus standi of Banro American in a flexible man-
ner,”50 in the end, the tribunal did not deny jurisdiction by piercing the
claimant’s corporate veil. Instead, the Banro tribunal denied jurisdiction to
prevent Banro Resources from availing itself of diplomatic protection while its
U.S. subsidiary pursued ICSID arbitration, which, if allowed, would contra-
vene the object and purpose of Article 27 the Convention.51
47 Respondent’s Memorial, at 2.1.9 (citing Banro American Resources, Inc. and Société Aurifère du
Kivu et du Maniema S.A.R.L. v. Democratic Republic of Congo, Award, Case No. ARB/98/7 (Sept. 1,
2000), at para. 11 (“Banro”)).
48 Banro, at para. 10 (“This was the case, in particular, in two situations: when the request was
made by a member company of a group of companies while the pertinent instrument expressed the con-
sent of another company of this group; and when, following the transfer of shares, the request came from
the transferee company while the consent had been given by the company making the transfer.”).
49 Id. at para. 5.
50 Id. at para. 13.
51 Id. at paras. 13, 24. Article 27 states, “[n]o Contracting State shall give diplomatic protection,
or bring an international claim, in respect of a dispute which one of its nationals and another
Contracting State shall have consented to submit or shall have submitted to arbitration under this
Convention, unless such other Contracting State shall have failed to abide by and comply with the award
rendered in such dispute.”
61. Thus, the issue before the Tribunal in Banro and in the cases discussed
briefly therein was not, as it is here, the proper method of defining the nation-
ality of the claimant. In Banro, there was no dispute that the claimant was a
national of the United States and Banro Resources was a national of Canada,
both by virtue of their incorporation in those countries. The issue in Banro was
whether the claimant of one nationality could benefit from the consent given
by its parent company of another nationality. In the present case, it is undis-
puted that the Claimant made the request for arbitration and expressed con-
sent to ICSID jurisdiction. Accordingly, the decision in Banro provides no jus-
tification for looking beyond the nationality of the Claimant, Tokios Tokele·s,
to other related parties or to its controlling shareholders.
62. The decision in Autopista v. Venezuela is similarly unhelpful to the

Respondent. The Respondent’s Memorial in the case before this Tribunal cites,
in isolation, the following passage: “[a]s a general matter, the arbitral Tribunal
accepts that economic criteria often better reflect reality than legal ones.”52
Although seemingly helpful, the text of the decision that follows the quoted
passage directly undermines the Respondent’s objection. In particular, the tri-
bunal states:
However, in the present case, such arguments of an economic nature
are irrelevant. Indeed, exercising the discretion granted by the
Convention, the parties have specifically identified majority share-
holding as the criterion to be applied. They have not chosen to subor-
dinate their consent to ICSID arbitration to other criteria.
As a result, the Tribunal must respect the parties’ autonomy and
may not discard the criterion of direct shareholding, unless it proves
unreasonable.53
63. In the present case, as in Autopista, “arguments of an economic nature

are irrelevant” where “the parties have specifically identified” the country of
legal establishment “as the criterion to be applied” and “have not chosen to
subordinate their consent to ICSID arbitration to any other criteria.” This
Tribunal, like the tribunal in Autopista, is obliged to respect the parties’ agree-
ment “unless it proves unreasonable.” Far from unreasonable, reference to the
state of incorporation is the most common method of defining the nationali-
ty of business entities under modern BITs and traditional international law.54
52 Memorial, para. 2.1.9 (citing Autopista, para. 119).

53 Autopista, at paras. 119-120 (emphases added).
CASES 229
64. The Respondent also cites Loewen v. United States of America to support
its position.55 In that case, the Canadian claimant declared bankruptcy during
the arbitration proceedings and, immediately before going out of business,
assigned its claim to a newly created Canadian corporation whose sole asset
was the claim against the United States.56 The newly created corporation was
wholly owned and controlled by the U.S. enterprise that emerged from the
earlier bankruptcy proceeding. Although the claim remained at all times in the
possession of a Canadian enterprise, the Loewen tribunal held that the assign-
ment of the claim changed the nationality of the claimant from Canadian to
U.S. origin. Accordingly, the tribunal denied jurisdiction because the
claimant’s nationality was not continuous from the date of the events giving
rise to the claim through the date of the resolution of the claim, as the tribu-
nal believed was required by customary international law.57
65. Although the Loewen tribunal denied that it pierced the claimant’s cor-
porate veil,58 in reality, the tribunal did exactly that. Indeed, the tribunal could
not have concluded that the nationality of the claimant had changed from
Canadian to U.S. origin without piercing the claimant’s corporate veil.
Although one may debate whether veil piercing was justified in that case, the
Loewen decision does not clarify the jurisprudence of veil piercing because the
tribunal did not admit to, much less explain its reasons for, piercing the
claimant’s corporate veil.
66. As Loewen provides no additional guidance on the doctrine of veil pierc-

ing, we refer instead to the jurisprudence of Barcelona Traction. As noted
above, we are convinced that the equitable doctrine of veil piercing does not
apply to the present case.
b. Views of ICSID Scholars
67. The Respondent also argues that some ICSID scholars encourage the
application of the control-test to determine corporate nationality in the first
clause of Article 25(2)(b) as well as the second, citing the views of Dr.
55 Respondent’s Reply, at 2.1.5.

56 Loewen Group, Inc. and Raymond Loewen v. United States of America, Award, Case No.
ARB(AF)/98/3 (June 26, 2003), 42 I.L.M. 811 (2003), at paras. 220, 240.
57 Id. at para. 225.
Amerasinghe and Mr. Broches as discussed by Professor Schreuer.59 The

Respondent, however, misinterprets the views of these scholars.
68. Dr. Amerasinghe does argue that Article 25 of the Convention allows tri-
bunals to be “extremely flexible” in using various methods to determine the
nationality of juridical entities, including the control-test.60 He advocates this
flexible approach, however, in the context of a challenge to jurisdiction where,
unlike here, the parties to the dispute have not agreed on a particular method
of determining the nationality of juridical entities. In addition, the
Respondent fails to mention Dr. Amerasinghe’s corollary rule of interpreta-
tion, that is, “every effort should be made to give the Centre jurisdiction by
the application of the flexible approach.61
69. Likewise, Mr. Broches states that the text of Article 25(2)(b) “implicitly
assumes that incorporation is a criterion of nationality.”62 He argues, howev-
er, that this provision does not preclude an agreement between parties to define
juridical entities by methods other than state of incorporation, including own-
ership and control.63 In other words, the Convention permits deviation from
the general rule for defining the nationality of juridical entities, but only if
there is an agreement between the Contracting Parties to do so. Here, there is
no such agreement providing for deviation. On the contrary, the agreement
under the Ukraine-Lithuania BIT confirms that the standard rule (incorpora-
tion) applies.
c. Traditional Approach under International Law
70. As with the Convention, the definition of corporate nationality in the

Ukraine-Lithuania BIT is also consistent with the predominant approach in
international law. As the International Court of Justice has explained, “[t]he
traditional rule attributes the right of diplomatic protection of a corporate
entity to the States under the laws of which it is incorporated and in whose
territory it has its registered office. The two criteria have been confirmed by
long practice and by numerous international instruments.”64 According to
59 Respondent’s Reply, at 2.1.10 (citing Schreuer, at 278-79).

60 C.F. Amerasinghe, “The Jurisdiction of the International Centre for the Settlement of
Investment Disputes,” 19 Indian J. Int’l Law 166, 214 (Apr.-June 1979).
61 Id. at 214-215.
62 Broches, at 360.
63 Id. at 360-61.
64 Barcelona Traction, at para. 70.
CASES 231
Oppenheim’s International Law, “[i]t is usual to attribute a corporation to the

state under the laws of which it has been incorporated and to which it owes its
legal existence; to this initial condition is often added the need for the corpo-
ration’s head office, registered office, or its siège social to be in the same state.”65
Thus, the Ukraine-Lithuania BIT uses the same well established method for
determining corporate nationality as does customary international law.
7. Conclusion of the Tribunal
71. The Tribunal concludes that the Claimant is an “investor” of Lithuania

under Article 1(2)(b) of the BIT and a “national of another Contracting
State,” under Article 25 of the Convention.
B. Second Objection: The Claimant Did Not Make an “Investment”

“in Accordance with the Laws and Regulations” of Ukraine
1. Argument of the Respondent: Claimant Has Not Shown that the Source of
Capital Is Non-Ukrainian
72. The Respondent argues that, even if the Tribunal determines that the
Claimant is an investor of Lithuania, the Claimant did not make an “invest-
ment” in Ukraine as defined by the Treaty. More specifically, the Respondent
argues that the Claimant has not proved that it had sufficient capital to make
the initial investment in its subsidiary, Taki spravy, nor that the capital other-
wise originated outside Ukraine. According to the Respondent, the investment
in Taki spravy therefore falls outside the scope of the Ukraine-Lithuania BIT
and the ICSID Convention, as the purpose of both agreements is to protect
international, i.e., cross-border, investment. The Respondent also argues that,
even if the Claimant is judged to have made investments in Ukraine, those
investments were not made in accordance with Ukrainian law and thus are not
covered by the Ukraine-Lithuania BIT.
2. “Investment” under Article 25 of the Convention
73. Article 25 of the Convention requires that, in order for the Centre to
have jurisdiction, a dispute must arise from “an investment.” As with corpo-
rate nationality, the parties have broad discretion to decide the “kinds of
65 1 Oppenheim’s International Law 859-60 (Sir Robert Jennings and Sir Arthur Watts eds., 9th
ed. 1996) (footnotes omitted).
investment they wish to bring to ICSID.”66 Indeed, “[p]recisely because the

Convention does not define ‘investment,’ it does not purport to define the
requirements that an investment should meet to qualify for ICSID jurisdic-
tion.”67 Parties have a “large measure of discretion to determine for themselves
whether their transaction constitutes an investment for the purposes of the
Convention.”68 Here, that discretion is exercised in the BIT.
3. Definition of “Investment” in Article 1(1) of the BIT
74. As mentioned above, Article 1(1) of the BIT defines “investment” as

“every kind of asset invested by an investor of one Contracting Party in the ter-
ritory of the other Contracting Party in accordance with the laws and regula-
tions of the latter….” In addition, Article 1(1) provides that “[a]ny alteration
of the form in which assets are invested shall not affect their character as an
investment….” The Treaty contains no requirement that the capital used by
the investor to make the investment originate in Lithuania, or, indeed, that
such capital not have originated in Ukraine.
75. To phrase the Respondent’s objection in the terms of the Treaty, it main-
tains that the assets of Taki spravy in the territory of Ukraine were not “invest-
ed by” the Claimant because the Claimant has not shown that it used non-
Ukrainian capital to finance the investment. To assess the Respondent’s objec-
tion, we follow the standard rule of interpretation: we apply to the terms of
the Treaty their ordinary meaning, in their context, in light of the object and
purpose of the Treaty. The ordinary meaning of “invest” is to “expend (money,
effort) in something from which a return or profit is expected….”69 The ordi-
nary meaning of “by” is “indicating agency, means, [or] cause ….”70 Thus, an
investment under the BIT is read in ordinary meaning as “every kind of asset”
for which “an investor of one Contracting Party” caused money or effort to be
expended and from which a return or profit is expected in the territory of the
other Contracting Party. In other words, the Claimant must show that it
caused an investment to be made in the territory of the Respondent.
67 CMS, at para. 51.
68 See Fedax N.V. v. Republic of Venezuela, Decision on Jurisdiction, Case No. ARB/96/3 (July 11,
1997), 37 I.L.M. 1378 (1998), at para. 22 (quoting Carolyn B. Lamm and Abby Cohen Smutny, “The
Implementation of ICSID Arbitration Agreements,” 11 ICSID Review-FILJ 64, 80 (1996)) (“Fedax”).
69 The New Shorter Oxford English Dictionary, at 1410.
70 Id. at 310.
CASES 233
76. The Claimant has provided substantial evidence of its investment in

Ukraine, beginning with its initial investment of USD 170,000 in 1994, and
continuing reinvestments71 each year until 2002, for a total investment of
more than USD 6.5 million.72 Moreover, although the Treaty does not require
the Contracting Parties to acknowledge the investments of entities of the other
Contracting Party in order for such investments to fall within the scope of the
Treaty, in this case, the Respondent has done so. In particular, the Claimant
has produced copies of twenty-three “Informational Notice(s) of Payment of
Foreign Investment,” in which the Claimant’s investments were registered by
Ukrainian governmental authorities.73
77. The Respondent requests the Tribunal to infer, without textual founda-
tion, that the Ukraine-Lithuania BIT requires the Claimant to demonstrate
further that the capital used to make an investment in Ukraine originated
from non-Ukrainian sources. In our view, however, neither the text of the def-
inition of “investment,” nor the context in which the term is defined, nor the
object and purpose of the Treaty allow such an origin-of-capital requirement
to be implied. The requirement is plainly absent from the text. In addition, the
context in which the term “investment” is defined, namely, “every kind of asset
invested by an investor,” does not support the restriction advocated by the
Respondent.74 Finally, the origin-of-capital requirement is inconsistent with
the object and purpose of the Treaty, which, as discussed above, is to provide
broad protection to investors and their investments in the territory of either
party. Accordingly, the Tribunal finds no basis on which to impose the restric-
tion proposed by the Respondent on the scope of covered investments.
78. We conclude that, under the terms of the BIT, both the enterprise Taki
spravy and the rights in the property described in the above-referred
“Informational Notices,” are assets invested by the Claimant in the territory of
Ukraine. The investment would not have occurred but for the decision by the
Claimant to establish an enterprise in Ukraine and to dedicate to this enter-
prise financial resources under the Claimant’s control. In doing so, the
Claimant caused the expenditure of money and effort from which it expected
a return or profit in Ukraine.
71 The definition “investment” in Article 1(1), “every kind of asset invested by an investor” cer-
tainly includes reinvestments of the profits generated by the initial investments.
72 See, e.g., Claimant’s June 20, 2003 Submission of Documents, Vols. II-IV.
74 Emphasis added.
4. Consistency of Article 1(1) of the BIT with the ICSID Convention
79. The Tribunal’s finding under the BIT is also consistent with the ICSID
Convention. The broad definition of “investment” in the Lithuania-Ukraine
BIT is typical of the definition used in most contemporary BITs.75 Because
the Convention leaves the definition of the term to the Contracting Parties,
which in general have defined it broadly, there have been few cases in which
the Respondent has challenged the underlying transaction as not being an
“investment” under the Convention.76 One such case was Fedax N.V. v.
Republic of Venezuela. The treaty under which that dispute was arbitrated, the
Netherlands-Venezuela BIT, defines “investment,” like the Ukraine-Lithuania
BIT, as “every kind of asset.” In that case, the Respondent argued that the gov-
ernment-issued promissory notes held by the Claimant were not “invest-
ment(s)” because the Claimant had acquired the notes by way of endorsement
from a Venezuelan company.77 The Respondent argued that the Claimant had
not made a “direct” investment in Venezuela, which the Respondent argued
was required by the ICSID Convention.78 In the following passage, the Fedax
tribunal rejected the respondent’s argument and also underscored the broad
definition of investment contemplated by the Convention:
[T]he text of Article 25(1) establishes that the “jurisdiction of the
Centre shall extend to any legal dispute arising directly out of an
investment.” It is apparent that the term “directly” relates in this
Article to the “dispute” and not the “investment.” It follows that
jurisdiction can exist even in respect of investments that are not
direct, so long as the dispute arises directly from such transaction.
This interpretation is also consistent with the broad reach that the
term “investment” must be given in light of the negotiating histo-
ry of the Convention.79
75 See Fedax, at para. 34 (citing Antonio Parra, “The Scope of New Investment Laws and
International Instruments,” in Economic Development, Foreign Investment and the Law 27, 35-36
(Robert Pritchard ed. 1996)); see also Rudolph Dolzer and Margrete Stevens, Bilateral Investment Treaties,
26-31 (1995).
76 Fedax, at para. 25.
77 Id. at para. 18.
78 Id. at para. 24.
79 Id.
CASES 235
80. The Respondent in the present case also asks the Tribunal to narrow the
scope of covered investments by adding a condition—in this case, an origin-
of-capital requirement—not found in the instrument of consent or the
Convention. The Respondent alleges that the Claimant has not proved that
the capital used to invest in Ukraine originated from non-Ukrainian, sources,
and, thus, the Claimant has not made a direct, or cross-border, investment.
Even assuming, arguendo, that all of the capital used by the Claimant to invest
in Ukraine had its ultimate origin in Ukraine, the resulting investment would
not be outside the scope of the Convention. The Claimant made an invest-
ment for the purposes of the Convention when it decided to deploy capital
under its control in the territory of Ukraine instead of investing it elsewhere.
The origin of the capital is not relevant to the existence of an investment.
81. That the ICSID Convention does not require an “investment” to be

financed from capital of any particular origin was confirmed by the tribunal
in Tradex Hellas S.A. v. Republic of Albania. In that case, the tribunal consid-
ered a definition of “foreign investment” under Albanian law that is substan-
tially similar to the definition of “investment” in the Ukraine-Lithuania BIT:
“every kind of investment in the territory of the Republic of Albania owned
directly or indirectly by a foreign investor.”80 The tribunal found that the def-
inition, “nowhere requires that the foreign investor has to finance the invest-
ment from his own resources…the law provides for a broad interpretation of
‘investment.’ ”81 As in Tradex, the Claimant in the present case owns and con-
trols the assets in Ukraine that have given rise to this dispute. The origin of the
capital used to acquire these assets is not relevant to the question of jurisdic-
tion under the Convention.
82. In our view, the ICSID Convention contains no inchoate requirement

that the investment at issue in a dispute have an international character in
which the origin of the capital is decisive. Although the Convention contem-
plates disputes of an international character, we believe that such character is
defined by the terms of the Convention, and in turn, the terms of the BIT.
Were we to accept the origin of capital as transcending the textual definition
of the nationality of the Claimant and the scope of covered investment in the
Ukraine-Lithuania BIT, we would override the explicit choice of the
Contracting Parties as to how to define these terms. Ukraine, Lithuania and
80 Tradex Hellas S.A. v. Republic of Albania, Award, Case No. ARB/94/2 (Apr. 29, 1999) 14
ICSID Review-FILJ 161, at para. 105 (citing Albanian law).
other Contracting Parties chose their methods of defining corporate national-

ity and the scope of covered investment in BITs with confidence that ICSID
arbitrators would give effect to those definitions. That confidence is premised
on the ICSID Convention itself, which leaves to the reasonable discretion of
the parties the task of defining key terms. We should be loathe to undermine
it.
5. Argument of the Respondent: Investment Not Made “in Accordance with

Laws and Regulations” of Ukraine
83. According to the Respondent, even if the Claimant were found to have
made investments, those investments were not made in accordance with
Ukrainian law as required by Article 1(1) of the Ukraine-Lithuania BIT. For
example, the Respondent argues that the full name under which the Claimant
registered its subsidiary, “The Lithuanian subsidiary private enterprise The
Publishing, Informational and Advertising Agency Taki Spravy,”82 is improp-
er because “subsidiary enterprise” but not “subsidiary private enterprise” is a
recognized legal form under Ukrainian law.83 The Respondent also alleges that
it has identified errors in the documents provided by the Claimant related to
asset procurement and transfer, including, in some cases, the absence of a nec-
essary signature or notarization.84 The Claimant disputes the Respondent’s
allegations.85
84. The requirement in Article 1(1) of the Ukraine-Lithuania BIT that

investments be made in compliance with the laws and regulations of the host
state is a common requirement in modern BITs.86 The purpose of such provi-
sions, as explained by the tribunal in Salini Costruttori S.p.A and Italstrade
S.p.A v. Morocco, is “to prevent the Bilateral Treaty from protecting invest-
ments that should not be protected, particularly because they would be ille-
gal.”87

83 Respondent’s Memorial, at 2.2.2. Although the Certificate Regarding the State Registration of
a Subject of Entrepreneurial Activity includes the phrase “The Lithuanian subsidiary private enterprise,”
as part of the name of the Claimant’s subsidiary, the “organizational form” is recorded as “subsidiary
enterprise.” Request for Arbitration, at Annex 8.
84 Respondent’s Reply, at Section 4.
85 Claimant’s Rejoinder, at 48, 86-134.
87 Salini Costruttori S.p.A and Italstrade S.p.A v. Kingdom of Morocco, Decision on Jurisdiction,
Case No. ARB/00/4 (July 23, 2001), 42 I.L.M. 609 (2003), at para. 46.
CASES 237
85. Thus, the question before the Tribunal is whether the alleged violations
establish that the assets invested by the Claimant were invested not “in accor-
dance with the laws and regulations of ” Ukraine. Under the Vienna
Convention, the ordinary meaning of these terms “must emerge in the context
of the treaty as a whole and in the light of its objects and purposes.”88 As dis-
cussed above, the object and purpose of the BIT is to provide broad protec-
tion for investors and their investments.
86. In the present case, the Respondent does not allege that the Claimant’s
investment and business activity—advertising, printing, and publishing—are
illegal per se. In fact, as discussed above, governmental authorities of the
Respondent registered the Claimant’s subsidiary as a valid enterprise in 1994,
and, over the next eight years, registered each of the Claimant’s investments in
Ukraine, as documented in twenty-three Informational Notices of Payment of
Foreign Investment.89 The Respondent now alleges that some of the docu-
ments underlying these registered investments contain defects of various types,
some of which relate to matters of Ukrainian law. Even if we were able to con-
firm the Respondent’s allegations, which would require a searching examina-
tion of minute details of administrative procedures in Ukrainian law, to
exclude an investment on the basis of such minor errors would be inconsistent
with the object and purpose of the Treaty. In our view, the Respondent’s reg-
istration of each of the Claimant’s investments indicates that the “investment”
in question was made in accordance with the laws and regulations of Ukraine.
C. Third Objection: The Dispute Does Not Arise from the Investment
87. In order for this Tribunal to have jurisdiction over a dispute, there must
be an adequate nexus between the dispute and the Claimant’s investment in
the territory of the Contracting Party.
88. Article 25(1) of the ICSID Convention extends jurisdiction to any dis-
pute “arising directly out of an investment.” In order for the directness require-
ment to be satisfied, the dispute and investment must be “reasonably closely
connected.”90 As Professor Schreuer notes, “[d]isputes arising from ancillary
88 Ian Brownlie, Principles of International Law 634 (5th ed. 1998) (footnotes omitted).
89 Request for Arbitration, Annex 13.
or peripheral aspects of the investment operation are likely to give rise to the
objection that they do not arise directly from the investment ….”91
89. Article 8 of the Ukraine-Lithuania BIT, in turn, provides that an

investor of one Contracting Party may submit to arbitration a dispute “in con-
nection with” an investment in the territory of the other Contracting Party.92
It may be held that the scope of arbitrable disputes under the Treaty is broad-
er than that contemplated by Article 25(1) of the Convention which refers to
any “dispute arising directly out of an investment.”93 Even if based only on the
language of the Convention, however, the Respondent’s contention is in any
case bound to fail.
90. The Respondent argues that the present dispute does not “arise directly
out of an investment” because the allegedly wrongful acts by Ukrainian gov-
ernmental authorities (including unwarranted and unreasonable investigations
of the Claimant’s business, unfounded judicial actions to invalidate the
Claimant’s contracts, and false, public accusations of illegal conduct by the
Claimant) were not directed against the physical assets owned by the
Claimant, i.e., its facilities and equipment.94
91. In this regard, the Respondent misapprehends the jurisdictional require-

ments of Article 25. For a dispute to arise directly out of an investment, the
allegedly wrongful conduct of the government need not be directed against the
physical property of the investor. The requirement of directness is met if the
dispute arises from the investment itself or the operations of its investment, as
in the present case. The scope of this requirement was addressed by the first
ICSID tribunal, Holiday Inns S.A. v. Morocco, which found jurisdiction over
loan contracts that were separate but related to the investment agreement,
emphasizing “the general unity of an investment operation.”95
92. Thus, the Respondent’s obligations with respect to “investment” relate

not only to the physical property of Lithuanian investors but also to the busi-
ness operations associated with that physical property. States’ obligations with
91 Id.
92 Emphasis added.
93 Emphasis added.
94 Respondent’s Memorial on Jurisdiction, at 12-16.

95 Schreuer, at 116 (citing P. Lalive, “The First World Bank Arbitration (Holiday Inns v.
Morocco)—Some Legal Problems,” 1 ICSID Reports 645).
CASES 239
respect to “property” and “the use of property” are well established in interna-
tional law. For example, the Draft Convention on the International
Responsibility of States for Injuries to Aliens, defines a “taking of property” to
include “not only an outright taking of property but also any such unreason-
able interference with the use, enjoyment, or disposal of property as to justify
an inference that the owner thereof will not be able to use, enjoy or dispose of
the property within a reasonable period of time after the inception of such
interference.”96 Further, the Iran-U.S. Claims Tribunal found that “[a] depri-
vation or taking of property may occur under international law through inter-
ference by a state in the use of that property or with the enjoyment of its ben-
efits.”97
93. In the present case, each of the allegedly wrongful government actions—
investigations, document seizures, public accusations of illegal conduct, and
judicial actions to invalidate contracts and seize assets—involved the opera-
tions of the Claimant’s subsidiary enterprise in Ukraine. Accordingly, we are
satisfied that the present dispute arises directly from the Claimant’s invest-
ment.
V. OBJECTIONS TO ADMISSIBILITY
A. First Objection: Claimant’s Written Consent Was Improper

and Untimely
94. Article 25(1) states, “jurisdiction of the Centre shall extend to any legal
dispute… which the parties to the dispute consent in writing to submit to the
Centre.” The consent of the Ukraine is found in Article 8(2) of the Treaty,
which provides that “the investor shall be entitled to submit the case to [arbi-
tration]…” It is well established that, “formulations [in a BIT] to the effect
that a dispute ‘shall be submitted’ to the Centre’… leave no doubt as to the
binding character of these clauses.”98 The Respondent does not contest that it
has consented to ICSID arbitration.
96 L. Sohn and R. Baxter, “Responsibility of States for Injuries to the Economic Interests of
Aliens, 55 Am J. Int’l L. 545, 553 (1961) (Article 10.3 of Draft Convention on the International
Responsibility of States for Injuries to Aliens).
97 Tippetts, Abbott, McCarthy, Stratton v. TAMS-AFFA, Award No. 141-7-2, 6 Iran-U.S. C.T.R.
219, 225 (June 22, 1984).
95. The Respondent does argue, however, that the Claimant’s consent was
improper and untimely, and, thus, its claim should be inadmissible. As dis-
cussed above, the Claimant attached an unaddressed document entitled,
“Letter of Consent to Arbitration,” dated August 7, 2002, to its Request for
Arbitration, which was received by ICSID on August 14, 2002.99 The
Claimant withdrew its request on October 17, 2002, and resubmitted it on
November 22, 2002.
96. The Respondent argues that the Claimant’s consent was improper
because its Letter of Consent was not addressed and sent directly to the
Respondent.100 In addition, the Respondent argues that the consent was
untimely because it was not given before the initiation of ICSID proceedings,
which, according to the Respondent, is required by the Convention.101
Finally, the Respondent argues that the Claimant’s consent was untimely
because it was expressed before the expiration of the six-month negotiating
period required by Article 8 of the BIT.102
97. Each of the Respondent’s arguments fails. First, the Convention does not
stipulate the form that written consent must take, much less to whom it must
be addressed and sent. As Dr. Amerasinghe explains:
The Convention requires only that the consent be in writing.
Thus, it is not necessary that the consent of both parties be includ-
ed in a single instrument. The consents may, indeed, be expressed
in instruments of completely diverse character, and not necessarily
addressed to the other party or made with particular reference to any
dispute of arrangement with it.103
98. In fact, the Claimant need not have expressed its consent in a document
separate from the RFA itself. As Professor Schreuer notes, “[i]t is established

100 Respondent’s Memorial on Jurisdiction, at 3.1.3.
101 Id. at 3.1.4.
102 Id.
103 C.F. Amerasinghe, “The Jurisdiction of the International Centre for the Settlement of
Investment Disputes,” at 224 (emphases added).
CASES 241
practice that an investor may accept an offer of consent contained in a BIT by

instituting ICSID proceedings.”104 Thus, not only the Claimant’s letter but
also the RFA itself satisfy the requirement to “consent in writing” to the juris-
diction of the Centre. As the Convention contemplates “no requirement that
the consent[] either precede or follow the incidence of a particular dispute,”
neither does it require consent to precede or follow negotiations concerning a
dispute.105
99. Further, the Claimant was not required to submit its consent prior to
initiating ICSID proceedings. The Executive Directors’ Report addresses the
timing of parties’ consent in paragraph 24: “[c]onsent of the parties must exist
when the Centre is seized (Articles 28(3) and 36(3)) but the Convention does
not otherwise specify the time at which consent should be given.”106 When an
investor accepts a State’s general offer of consent in a BIT, as in the present
case, the timing of such an acceptance is proper as long as it occurs not later
than the time at which the Claimant submits its request for arbitration.107
There is no requirement that the Claimant’s consent precede the request.
Similarly, neither the BIT nor the Convention requires the Claimant to wait
until after the requisite six-month negotiating period has ended before express-
ing its consent to ICSID jurisdiction. Article 8 of the BIT merely requires that
there be a negotiating period of six months after a dispute arises before a claim
may be submitted to arbitration. We are confident that this requirement has
been fulfilled.
100. For the foregoing reasons, the Claimant’s written consent satisfies the
requirements of the ICSID Convention.
B. Second Objection: Claimant and Respondent Were Not “Parties” to

the Negotiation Required by Article 8 of the BIT
101. The Respondent argues that, to the extent that negotiations occurred,
they involved Taki spravy and local governmental authorities in Kyiv, not the
104 Schreuer, at 218. As stated by the tribunal in SGS v. Philippines, “the Claimant relies upon the
consent to ICSID arbitration given by the Philippines in the BIT, combined with its own written con-
sent contained in the Request for Arbitration. It is well established that the combination of these forms
of consent can constitute ‘consent in writing’ within the meaning of Article 25(1), provided that the dis-
pute falls within the scope of the BIT.” SGS v. Philippines, at para. 31.
105 Amerasinghe, “The Jurisdiction of the International Centre for the Settlement of Investment
Disputes,” at 224.
106 Executive Directors’ Report, at para. 24.
Claimant and Respondent themselves.108 Accordingly, the Respondent con-

tends that the requirement in Article 8 of the BIT that negotiations occur
between “an investor of one Contracting Party and the other Contracting
Party” has not been met.109 The Respondent further argues that the govern-
mental authorities in Kyiv were not duly authorized to negotiate on behalf of
Ukraine. In addition, the Respondent argues that officials acting on behalf of
Taki spravy, not Tokios Tokele·s, engaged governmental officials in negotiation.
102. We are satisfied that the Claimant and the Respondent participated to
the extent necessary in the negotiations concerning this dispute. The Claimant
did bring this dispute to the attention of the central government authorities,
including the President of Ukraine.110 In addition, the Claimant has provid-
ed evidence of its negotiations with federal officials in the form of letters that
the Claimant exchanged with the General Procurator of Ukraine and the
Chairman of the State Tax Administration of Ukraine.111 There is, in addition,
evidence of extensive negotiations between the Claimant and municipal gov-
ernment authorities.112 While the actions of municipal authorities are attrib-
utable to the central government,113 we need not decide whether the negotia-
tions by those authorities may count toward the six-month “cooling off ” peri-
od prescribed by the Treaty, as the direct negotiations with central government
authorities satisfy the jurisdictional requirement. Moreover, whether the
President authorized any of these negotiations is irrelevant, as “[a] state cannot
plead the principles of municipal law, including its constitution, in answer to
an international claim.”114
103. With respect to the Claimant’s participation in the negotiation, it is

immaterial whether the Claimant’s representatives negotiated as agents of the
parent enterprise, Tokios Tokele·s, or its wholly owned subsidiary, Taki spravy.
In either case, the Claimant was a party to the negotiation.
108 Respondent’s Memorial, at 3.2.5-3.2.6; Transcript of Oral Hearing on Jurisdiction, at 57-59.

109 Ukraine-Lithuania BIT, at art. 8.1–8.2.
111 Id. at Annexes, 16, 17, 18, 19, and 21.
112 See Supplement to the Request for Arbitration, at 3-8.
113 See Draft Articles on Responsibility of States for Internationally Wrongful Acts, in Report of
the International Law Commission, Fifty-third session, U.N. GAOR, 56th Sess., Supp. No. 10, at 47,
U.N. Doc. A.56/10 (2001) (Article 17, “Conduct of organs of a State,” provides that [t]he conduct of
any State organ shall be considered an act of that State under international law, whether the organ exer-
cises legislative, exe 1924 P.C.I.J. Ser. A, No. 2, at 11-12.
114 Brownlie, at 451.
CASES 243
104. Thus, the present dispute was the subject of negotiation between “an
investor of one Contracting Party and the other Contracting Party” in accor-
dance with Article 8 of the BIT.
C. Third Objection: The “Dispute” Was Not the Subject of Negotiation

as Required by Article 8 of the BIT
105. The Respondent further argues that the claim is inadmissible even if the
Claimant and Respondent did negotiate because the “dispute” was not the
subject of their negotiations.115 In particular, the Respondent argues that the
governmental actions complained of by the Claimant did not crystallize into
a dispute until August 16, 2002, the date on which the Respondent received
the Request for Arbitration. Accordingly, the Respondent argues that the par-
ties did not negotiate “the dispute” for the requisite six months before the case
was registered on December 20, 2002.
106. In the Mavrommatis Case, the International Court defined dispute “as a
disagreement on a point of law or fact, a conflict of legal views or interests
between two persons.”116 Professor Schreuer described the requirements of a
“dispute” in the following passage:
The dispute must relate to clearly identified issues between the
parties and must not be merely academic. This is not to say that a
specific action must have been taken by one side or that the dis-
pute must have escalated to a certain level of confrontation, but
merely that it must be of immediate interest to the parties. The dis-
pute must go beyond general grievances and must be susceptible of
being stated in terms of a concrete claim.117
107. We are convinced that the dispute was sufficiently defined for negotia-
tions to occur at least six months prior to the date upon which the Centre reg-
istered the claim. The Claimant notified governmental authorities of the
Respondent of specific grievances, including allegedly unwarranted investiga-
tions, unreasonable seizures of documents, unfounded judicial actions, and
publicly stated accusations by governmental authorities of the Respondent
that the Claimant had engaged in illegal conduct. Although we reserve judg-
115 Respondent’s Memorial, at 3.3.2.

116 Mavrommatis Case 1924 P.C.I.J. Ser. A, No. 2, at 11-12.
ment as to merits of the Claimant’s allegations, we find at this point that the
claims constitute a “dispute” for the purpose of satisfying jurisdictional
requirements.
VI. DECISION
108. For the foregoing reasons, and after taking notice of the President’s
Dissenting Opinion, the Tribunal decides by a majority of its members that
the present dispute is within the jurisdiction of the Centre and the competence
of the Tribunal.
DANIEL M. PRICE PIERO BERNARDINI

[Arbitrator] [Arbitrator]
April 29, 2004

Tokios Tokeles V Ukraine

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International Centre for Settlement of Investment Disputes

Case No. ARB/02/18

Members of the Tribunal

Secretary of the Tribunal

Representing the Claimant Representing the Respondent

II. Procedural History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

III. Relevant Legal Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

IV. Analysis of Respondent’s Objections to Jurisdiction . . . . . . . . . . . . 8

1. The Claimant, Tokios Tokele·s, is a business enterprise established under

2. In 1994, Tokios Tokele·s created Taki spravy, a wholly owned subsidiary

3. The Claimant, Tokios Tokele·s, alleges that governmental authorities in

4. The Claimant contends that it objected to this treatment by the govern-

II. PROCEDURAL HISTORY

5. The Claimant initiated this proceeding on August 14, 2002, when it

6. The requesting parties filed a supplement to their request on September

8. On December 6, 2002, ICSID notified the requesting parties that

Tokios Tokele·s removed Taki spravy as a requesting party on December 9,

9. On December 9, 2002, Ukraine requested of ICSID the opportunity to

III. RELEVANT LEGAL PROVISIONS

14. In reaching its majority decision on jurisdiction,3 this Tribunal is guid-

3 The dissenting opinion of Professor Weil is attached to this Decision.

(1) Any dispute between an investor of one Contracting Party and

18. Article 1(2) defines “investor” as:

or indirectly, controlled by nationals of that Contracting Party or

IV. ANALYSIS OF RESPONDENT’S OBJECTIONS TO

A. First Objection: Claimant Is Not a Genuine “Investor” of Lithuania

1. Arguments of the Respondent

• The context in which the ICSID Convention and the Ukraine-

• The jurisprudence of ICSID arbitration supports the use of a “control-

2. Nationality of Juridical Entities under Article 25 of the ICSID

25. Thus, we begin our analysis of this jurisdictional requirement by under-

3. Definition of “Investor” in Article 1(2) of the BIT

28. Article 1(2)(b) of the Ukraine-Lithuania BIT defines the term

governing statute, both of which note the company’s location as Sheshkines,

30. Article 1(2)(c) of the Ukraine-Lithuania BIT, which defines “investor”

19 Request for Arbitration, at Annexes 5-6.

the treaty’s broad scope of investment protection.20 We concur in that inter-

35. In addition, a number of investment treaties of other States enable the

38. Rather, under the terms of the Ukraine-Lithuania BIT, interpreted

39. We reach this conclusion based on the consent of the Contracting

40. This Tribunal, by respecting the definition of corporate nationality in

4. Consistency of Article 1(2) of the BIT with the ICSID Convention

42. In our view, the definition of corporate nationality in the Ukraine-

43. As discussed above, the Claimant is an “investor” of Lithuania under

Investment” (registered by Ukrainian governmental authorities),33 all record

46. The use of a control-test to define the nationality of a corporation to

33 Id. at Annex 13.

business within their territories through a company organized

36 Broches, at 358-59 (emphasis added).

52. In summary, the Claimant is an “investor” of Lithuania under Article

holders. While some tribunals have taken a distinctive approach,42 we do not

5. Equitable Doctrine of “Veil Piercing”

53. Finally, we consider whether the equitable doctrine of “veil piercing,” to

in Barcelona Traction that might support a piercing of the Claimant’s corporate

6. Other Considerations Regarding Corporate Nationality

actual relationship among the companies involved. This jurispru-

62. The decision in Autopista v. Venezuela is similarly unhelpful to the

63. In the present case, as in Autopista, “arguments of an economic nature

52 Memorial, para. 2.1.9 (citing Autopista, para. 119).