Rand Investments

INTERNATIONAL CENTRE FOR SETTLEMENT OF INVESTMENT DISPUTES
In the arbitration proceeding between
RAND INVESTMENTS LTD., WILLIAM ARCHIBALD RAND, KATHLEEN ELIZABETH RAND, ALLISON RUTH
RAND, ROBERT HARRY LEANDER RAND AND SEMBI INVESTMENT LIMITED
Claimants
and
REPUBLIC OF SERBIA
Respondent
ICSID Case No. ARB/18/8
AWARD
Members of the Tribunal

Prof. Gabrielle Kaufmann-Kohler, President
Mr. Baiju S. Vasani
Prof. Marcelo G. Kohen
Secretary of the Tribunal

Ms. Marisa Planells-Valero
Assistant to the Tribunal

Mr. Rahul Donde
Date of dispatch to the Parties: 29 June 2023

TABLE OF CONTENTS
I. INTRODUCTION AND PARTIES ...................................................................................... 1

A. The Claimants ............................................................................................................ 1
B. The Respondent ........................................................................................................ 2
11. FACTUAL BACKGROUND ............................................................................................... 3
A. BD Agro ..................................................................................................................... 3
B. The Privatization of BD Agro ...................................................................................... 3
C. The MDH Agreement ................................................................................................. 3
D. The Privatization Agreement ...................................................................................... 4
E. The Claimants’ Beneficial Ownership of BD Agro ....................................................... 5
F. The Claimants’ Indirect Shareholding of BD Agro....................................................... 5
G. The Sembi Agreement ............................................................................................... 5
H. The Financial condition of BD Agro from 2005 to 2011 .............................................. 8
I. The 2010 Loan Agreement......................................................................................... 9
J. The Privatization Agency’s First Notice of 25 February 2011 ..................................... 9
K. Subsequent notices and discussions.........................................................................10
L. The Payment of Final Instalment of the Purchase Price ............................................10
M. Mr. Obradović’s requests to release the pledge on the Privatized Shares .................10
N. The Agency’s request for instructions from the Ministry of Economy .........................11
O. The 2012 Loan Agreement........................................................................................11
P. Mr. Obradović’s request for assignment of the Agreement ........................................11
Q. The Ombudsman’s investigation ...............................................................................12
R. The Ministry of Economy’s supervision proceedings .................................................12
S. The pre-pack reorganization plans ............................................................................12
T. The Ministry of Economy’s report of 7 April 2015 ......................................................13
U. The Ombudsman’s recommendation of 23 June 2015 ..............................................13
V. The Agency’s notice of 24 June 2015........................................................................14
W. The initial approval of the amended pre-pack reorganization plan .............................14
X. The renewed request for assignment of the Agreement ............................................14
Y. The Ombudsman’s letters to the Agency and the Ministry of Economy of
18 September 2015...................................................................................................14
Z. The reversal of the approval of the amended pre-pack reorganization plan and
Subsequent Steps .....................................................................................................15
AA. The Agency’s Termination of the Agreement.............................................................15
BB. The transfer of the Privatized Shares ........................................................................15
i
CC. BD Agro’s Bankruptcy ...............................................................................................16
111. PROCEDURAL HISTORY ................................................................................................16
A. Initial Steps ...............................................................................................................16
B. Written Phase ...........................................................................................................18
C. Hearing on Merits, Liability and Quantum ..................................................................32
D. Post-Hearing Phase ..................................................................................................36
IV. REQUESTS FOR RELIEF................................................................................................37
A. Claimants’ Request for Relief ....................................................................................37
B. Respondent’s Request for Relief ...............................................................................38
V. PRELIMINARY MATTERS ...............................................................................................39
A. Scope of this Award ..................................................................................................39
B. Iura Novit Arbiter .......................................................................................................39
C. Relevance of Previous Decisions and Awards ..........................................................40
D. Transparency ............................................................................................................40
VI. JURISDICTION ................................................................................................................41
A. Jurisdiction under the ICSID Convention ...................................................................41
1. Investment under the ICSID Convention ............................................................42
a. Interest in the Beneficially Owned Shares...................................................43
b. Mr. Rand’s Indirect Shareholding in BD Agro through MDH Serbia .............67
c. Payments for the benefit of BD Agro ...........................................................68
d. Sembi’s rights stemming from the Sembi Agreement..................................69
e. Conclusion on the existence of an investment under the ICSID Convention
...................................................................................................................69
2. Consent .............................................................................................................69
3. Standing under the ICSID Convention ...............................................................70
4. Conclusion on jurisdiction under the ICSID Convention .....................................70
B. Jurisdiction under the Canada-Serbia BIT .................................................................70
1. Legal Framework ...............................................................................................71
2. Investment .........................................................................................................73
a. Interest in the Beneficially Owned Shares...................................................73
b. Payments for the benefit of BD Agro ...........................................................87
c. Conclusion ..................................................................................................91
3. Illegality ..............................................................................................................91
a. Respondent’s Position ................................................................................92
ii
b. Claimants’ Position .....................................................................................95
c. Analysis ....................................................................................................101
d. Conclusion ................................................................................................107
4. Non-Retroactivity and Time Bar .......................................................................107

a. Respondent’s Position ..............................................................................107
b. Claimants’ Position ...................................................................................112
c. Analysis ....................................................................................................116
d. Conclusion ................................................................................................120
5. Abuse of Process .............................................................................................121

a. Respondent’s Position ..............................................................................121
b. Claimants’ Position ...................................................................................122
c. Analysis ....................................................................................................123
d. Conclusion on Jurisdiction ........................................................................124
LIABILITY .......................................................................................................................125
A. Attribution ................................................................................................................125
1. Claimants’ Position ..........................................................................................125
2. Respondent’s Position .....................................................................................126
3. Analysis ...........................................................................................................128
a. Article 4 of the ILC Articles........................................................................128
b. Article 5 of the ILC Articles........................................................................130
B. Exercise of Sovereign Powers.................................................................................133

3. Analysis ...........................................................................................................136
C. Fair and Equitable Treatment ..................................................................................138
a. The Termination of the Privatization Agreement .......................................138
b. Seizure of the Beneficially Owned Shares ................................................146
c. Refusal to release the pledge ...................................................................147
d. Refusal to allow the assignment of the Privatization Agreement ...............147
e. Ombudsman’s interventions .....................................................................149
f. Other breaches .........................................................................................149
iii
a. Termination of the Privatization Agreement ..............................................151
b. Seizure of the Beneficially Owned Shares ................................................160
c. Refusal to release the pledge ...................................................................161
d. Refusal to allow assignment of the Privatization Agreement .....................162
e. Ombudsman’s interventions .....................................................................162
f. Other breaches .........................................................................................162
3. Analysis ...........................................................................................................163
a. Seizure of the Beneficially Owned Shares ................................................166
b. Expropriation of the Beneficially Owned Shares .......................................180
D. General Exception...................................................................................................181
3. Analysis ...........................................................................................................182
E. Conclusion on Liability ............................................................................................182
DAMAGES .....................................................................................................................182
VIII.
A. Claimants’ Position..................................................................................................182
1. Causation ........................................................................................................183
2. Methodology ....................................................................................................183
a. Dr. Hern’s valuation ..................................................................................183
b. Critique of Mr. Cowan’s Valuations ...........................................................186
3. Size of the Construction Land ..........................................................................187

4. Price per m2 ....................................................................................................189
5. 30% Discount...................................................................................................191
6. Bankruptcy sale discount .................................................................................191
7. Liabilities ..........................................................................................................191
8. Distress discount..............................................................................................192
9. Interest.............................................................................................................192
B. Respondent’s position .............................................................................................192
1. Causation ........................................................................................................192
2. Methodology ....................................................................................................193
a. Mr. Cowan’s Valuation ..............................................................................193
b. Critique of Dr. Hern’s valuation .................................................................195
iv
4. Price per m2 ....................................................................................................197
5. 30% Discount...................................................................................................198
7. Liabilities ..........................................................................................................199
9. Interest.............................................................................................................199
C. Analysis ..................................................................................................................199
1. Causation ........................................................................................................200
2. Methodology ....................................................................................................204
4. Price per m2 ....................................................................................................209
5. 30% Discount...................................................................................................211
7. Liabilities ..........................................................................................................213
9. Interest.............................................................................................................216
10. Conclusion .......................................................................................................217
IX.
COSTS...........................................................................................................................219
A. Claimants’ Position..................................................................................................219
B. Respondent’s Position ............................................................................................221
C. Arbitration Costs .....................................................................................................221
D. Analysis ..................................................................................................................222
X.
OPERATIVE PART ........................................................................................................223
v
TABLE OF SELECTED ABBREVIATIONS
ICSID Rules of Procedure for Arbitration

Arbitration Rules
Proceedings [2006]
Witness Statement of Aksel Azrac dated 16

Azrac WS I
January 2019
BD Agro BD Agro AD
Expert Report of Bojana Tomić Brkušanin

Brkušanin ER I
dated 3 October 2019
Witness Statement of Erinn Broshko dated 5

Broshko WS I
February 2018
Second Witness Statement of Erinn Broshko

Broshko WS II
dated 16 January 2019
Third Witness Statement of Erinn Broshko

Broshko WS III
date 3 October 2019
Fourth Witness Statement of Erinn Broshko

Broshko WS IV
date 5 March 2020
Agreement between Canada and the Republic

of Serbia for the Promotion and Protection of
Canada-Serbia BIT
Investments, which entered into force on 27
April 2015
Rand Investments Ltd., William Archibald

Rand, Kathleen Elizabeth Rand, Allison Ruth
Claimants
Rand, Robert Harry Leander Rand, and Sembi
Investment Limited
Respondent’s Counter-Memorial with Request

C-Mem.
for Bifurcation dated 19 April 2019
Coropi Coropi Holdings Limited
Expert Report of Sandy Cowan dated 19 April

Cowan ER I
2019
Second Expert Report of Mr. Sandy Cowan

Cowan ER II
Third Expert Report of Mr. Sandy Cowan

Cowan ER III
dated 16 March 2020
vi
Claimants’ Post Hearing Brief dated 27
C-PHB 1
September 2021
Claimants’ Second Post Hearing Brief dated

C-PHB 2
22 October 2021
Witness Statement of Vladislav Cvetkovic

Cvetkovic WS I
dated 4 April 2019
Exh. CE-[#] Claimant’s Exhibit
Exh. CLA-[#] Claimants’ Legal Authority
Exh. RE-[#] Respondent’s Exhibit
Exh. RLA-[#] Respondent’s Legal Authority
Second Expert Report of Agis Georgiades of

Georgiades ER II
Cyprus Law dated 3 October 2019
Expert Report of Uglješa Grušić dated 3

Grusic ER I
October 2019
Expert Report of Krzystof Grzesik dated 3

Grzesik ER I
October 2019
Hearing on jurisdiction, merits and damages

Hearing on Jurisdiction and Merits held at the Permanent Court of Arbitration
from 12 to 20 July 2021
Expert Report of Dr. Richard Hern dated 16

Hern ER I
January 2019
Second Expert Report of Richard Hern dated

Hern ER II
3 October 2019
Third Expert Report of Richard Hern dated 6

Hern ER III
March 2020
Convention on the Settlement of Investment

ICSID Convention Disputes Between States and Nationals of
Other States dated 18 March 1965
International Centre for Settlement of

ICSID or the Centre
Investment Disputes
Witness Statement of Robert Jennings dated 3

Jennings WS I
October 2019
MDH Serbia Marine Drive Holding d.o.o.
vii
Witness Statement of Igor Markićević dated 5
Markićević WS I
February 2018
Second Witness Statement of Igor Markićević

Markićević WS II
Third Witness Statement of Igor Markićević

Markićević WS III
Fourth Witness Statement of Igor Markićević

Markićević WS IV
dated 5 March 2020
Claimant’s Memorial on the Merits dated 16

Mem.
January 2019
Expert Report of Miloš V. Milošević dated 16

Milošević ER I
January 2019
Second Expert Report of Miloš V. Milošević

Milošević ER II
Third Expert Report of Miloš V. Milošević

Milošević ER III
dated 5 March 2020
NoD Notice of Dispute dated 4 August 2017
Witness Statement of Djura Obradović dated

Obradović WS I
20 September 2017
Second Witness Statement of Djura Obradović

Obradović WS II
Third Witness Statement of Djura Obradović

Obradović WS III
dated 5 March 2020
Privatization Agency of the Republic of Serbia

Privatization Agency
and Montenegro
Privatization Agreement between Mr.

Obradović and the Privatization Agency of the
Privatization Agreement
Republic of Serbia and Montenegro dated 4
October 2005
Expert Report of Professor Mirjana Radović

Radović ER I
dated 19 April 2019
Second Expert Report of Professor Mirjana

Radović ER II
Radović dated 22 January 2020
Rand Investments Rand Investments Ltd.
viii
Witness Statement of William Rand dated 5
Rand WS I
February 2018
Second Witness Statement of William Rand

Rand WS II
Third Witness Statement of William Rand

Rand WS III
dated 5 March 2020
Respondent’s Rejoinder on the Merits and

Rej. Counter-Memorial on Jurisdiction dated 24
January 2020
Claimants’ Rejoinder on Jurisdiction dated 6

Rej. J.
March 2020
Reply Claimants’ Reply dated 4 October 2019
Request for Arbitration Request for Arbitration dated 9 February 2018
Respondent or Serbia Republic of Serbia
Respondent’s Submission on Quantum dated

R-Submission on Quantum
16 March 2020
Respondent’s Post Hearing Brief dated 27

R-PHB 1
September 2021
Respondent’s Second Post Hearing Brief

R-PHB 2
Sembi Sembi Investment
Agreement between Serbia and Montenegro

and the Republic of Cyprus on Reciprocal
Serbia-Cyprus BIT Promotion and Protection of Investments,
which entered into force on 23 December
2005
Tr., Hearing on Jurisdiction and Merits, Day [#]

Transcript of the Hearing
[page:line]
Arbitral Tribunal constituted on 2 October

Tribunal
2018 in ICSID Case No. ARB/18/8
Vienna Convention or VCLT Vienna Convention on the Law of Treaties
ix
I. INTRODUCTION AND PARTIES
1. This case concerns a dispute submitted to the International Centre for Settlement of
Investment Disputes (“ICSID” or the “Centre”) on the basis of the Agreement between
Canada and the Republic of Serbia for the Promotion and Protection of Investments, signed
on 1 September 2014 and which entered into force on 27 April 2015 (the “Canada-Serbia
BIT”), the Agreement between Serbia and Montenegro and the Republic of Cyprus on
Reciprocal Promotion and Protection of Investments, signed on 21 July 2005 and which
entered into force on 23 December 2005 (the “Cyprus-Serbia BIT”) (together, “the Treaties”),
and the Convention on the Settlement of Investment Disputes between States and Nationals
of Other States, which entered into force on October 14, 1966 (the “ICSID Convention”).
A. The Claim ants
2. The claimants are Rand Investments Ltd., (“Rand Investments”), a company incorporated
under the laws of Canada, Mr. William Archibald Rand (“Mr. Rand”), a natural person having
the nationality of Canada, Ms. Kathleen Elizabeth Rand (“Ms. Kathleen Rand”), a natural
person having the nationality of Canada, Ms. Allison Ruth Rand (“Ms. Allison Rand”), a
natural person having the nationality of Canada, Mr. Robert Harry Leander Rand (“Mr.
Robert Rand”) a natural person having the nationality of Canada (together, the “Canadian
Claimants”), and Sembi Investment Limited (“Sembi”), a company incorporated under the
laws of Cyprus (together, the Canadian Claimants and Sembi are referred to as the
“Claimants”). The Claimants are represented in this arbitration by:
Mr. Rostislav Pekař

Mr. Matej Pustay
Mr. David Seidl
Squire Patton Boggs s.r.o., advokátní kancelář
Václavské náměstí 813/57
110 00 Prague 1
Czech Republic
Mr. Stephen Anway

Mr. Douglas Pilawa
2550 M Street NW
Washington DC 20037
United States of America
1
Mr. Luka Misetic
Squire Patton Boggs (US) LLP
30 Rockefeller Plaza, 23rd Floor
New York, New York 10112
United States of America
Mr. Nenad Stankovič

Ms. Sara Pendjer
Stankovic & Partners
Njegoševa 19/II
11000 Belgrade
Republic of Serbia
B. The Respondent
3. The respondent is the Republic of Serbia (“Serbia” or the “Respondent”). The Respondent
is represented in this arbitration by:
Ms. Olivera Stanimirović

State Attorney of the Republic of Serbia
22 – 26 Nemanjina street
11000 Belgrade
Republic of Serbia
Ms. Senka Mihaj

Attorney at Law
Čika Ljubina 12
11000 Belgrade
Republic of Serbia
Prof. Petar Djundic

Faculty of Law University of Novi Sad
Trg Dositeja Obradovića 1
21101 Novi Sad
Republic of Serbia
Dr. Vladimir Djeric

Attorney at law
Vlajkoviceva 28
11000 Belgrade
Republic of Serbia
4. The Claimants and the Respondent are collectively referred to as the “Parties.” The Parties’
representatives and their addresses are listed above.
2
II. FACTUAL BACKGROUND
5. The following summary is meant to give a general overview of the factual background of the
dispute as alleged by the Parties. The facts referred to are not necessarily regarded as
established; where they are disputed and relevant, they are discussed in the analysis. The
summary is limited to the milestones that the Tribunal considers most useful to understand
the merits of this dispute. Other facts may be referred to as part of the analysis if and when
appropriate.
A. BD Agro
6. BD Agro AD (“BD Agro”) is a dairy farm located on the outskirts of Belgrade, Serbia, close
to the Belgrade International Airport. 1
7. In 1989, it was transformed from a state-owned producers’ cooperative into a “socially-

owned” company under State control. 2
B. The Privatization of BD Agro
8. In 2005, BD Agro was sought to be privatized with 70% of its shares (the “Privatized Shares”)
put up for auction by the Privatization Agency (the “Privatization Agency” or the “Agency”).
The remaining 30% of BD Agro shares were owned by a large number of small
shareholders, mainly BD Agro’s employees.
C. The MDH Agreement
9. On 19 September 2005, in view of the impending public auction of BD Agro’s shares, Marine
Drive Holdings Inc., a company held in majority by Mr. Rand and incorporated in the British
Virgin Islands (“MDH”) and Mr. Obradović entered into a written agreement concerning BD
Agro (the “MDH Agreement”). 3 Under the terms of that agreement, Mr. Obradović would
take part in BD Agro’s public auction, and, if successful, he would become the owner of the
Privatized Shares. 4 The Agreement further specified that Mr. Obradović would hold the
shares at the risk of MDH and that MDH would have a call option to purchase the Privatized
1 Reply, §30.
2 Mem., §§59-60.
3 Exh. CE-15, Share Purchase Agreement, 19 September 2005.
4 Ibid., Art. 3
3
Shares, as well as any shares in BD Agro subsequently acquired by Mr. Obradović, for a
nominal price of EUR 1,000. 5
D. The Privatization Agreement
10. On 4 October 2005, following a public auction, Mr. Obradović, as “Buyer”, and the
Privatization Agency entered into a Privatization Agreement (the “Privatization
Agreement”). 6 Under the terms of that agreement, Mr. Obradović purchased 70% of the
socially owned capital of BD Agro for EUR 5,548,996.46 to be paid in six annual
instalments. 7 Mr. Obradović also committed to invest in BD Agro an additional amount of
approximately EUR 2 million within the following year. 8
11. The Privatization Agreement was coupled with a Share Pledge Agreement concluded on
the same day between Mr. Obradović and the Agency. 9 Under the terms of the Share Pledge
Agreement, Mr. Obradović pledged the Privatized Shares to the Privatization Agency for a
five-year period within which he agreed to pay the full purchase price. 10
12. On 9 January 2006, the Privatization Agreement was amended with the amount of additional
investment in BD Agro required under Article 5.2.1 being increased to EUR 1,998,554.
Deadlines for making the investments were extended. 11
13. On 15 March 2006, the Privatization Agreement was amended again, requiring the
submission to the Privatization Agency of four consecutive bank guarantees: two for
EUR 501,153 and another two for EUR 493,123. 12
5 Ibid., Art. 1.
6 Exh. CE-17, Privatization Agreement, 4 October 2005.
7 Exh. CE-17, Privatization Agreement, 4 October 2005, Arts. 1.2 and 1.3.
8 Exh. CE-50, Notice on Termination of the Privatization Agreement, Art. 5.2.1 as amended on 9 January
2006, Exh. CE-110, Amendment I to the Privatization Agreement, 9 January 2006. It is not disputed that
the Agency, on 10 October 2006, confirmed that such additional investment had been made, see Exh. CE-
18, Confirmation of the Privatization Agency of the Completion of Investment, 10 October 2006; Mem., §78
and Rej., §§389-390. However, the Respondent argues in this arbitration that Mr. Obradović, at the time,
“misrepresented” financial information and that, in reality, “there have been no ‘investments’ paid by any of
the other affiliated companies of Mr. Obradović, nor any such payments from Mr. Rand and his affiliated
companies”, Rej., §§388-389.
9 Exh. CE-17, Privatization Agreement, 4 October 2005, p. 10.
10 Ibid., Art. 2.
11 Exh. CE-110, Amendment I to the Privatization Agreement, 9 January 2006, Art. 2.
12 Exh. CE-76, Amendment II to the Privatization Agreement, 15 March 2006, Art. 2.
4
14. On 29 August 2006, BD Agro’s General Assembly resolved to increase its capital by issuing
an additional 171,974 shares at a nominal value of 1,000 RSD per share, all of which were
issued to Mr. Obradović (the “New Shares”). 13 On 25 October 2006, the Serbian Business
Register Agency registered this capital increase. 14 Accordingly, Mr. Obradović’s
shareholding in BD Agro increased from 70% to 75.87%.
15. On 6 January 2012, the Privatization Agency confirmed that “the buyer, as of April 8, 2011,
has settled his obligations in respect of the 1st, 2nd, 3rd, 4th, 5th and 6th installment and
thus paid the entire sale and purchase price.” 15
E. The Claimants' Beneficial Ownership of BD Agro
16. The Claimants contend that the combined effect of the MDH Agreement and the
Privatization Agreement was that Mr. Rand became the beneficial owner of 75.87% of BD
Agro’s shares (the “Beneficially Owned Shares”, consisting of the “Privatized Shares” and
the “New Shares”).
F. The Claimants' Indirect Shareholding of BD Agro
17. Mr. Rand is the indirect owner of an additional 3.9% shareholding in BD Agro (the “Indirect
Shareholding”) that he holds through his 100% owned Serbian company, Marine Drive
Holding d.o.o. (“MDH Serbia”). 16
G. The Sembi Agreement
18. Mr. Rand allegedly arranged funds for the purchase and subsequent investments in BD
Agro from Mr. Rand’s long-time business partners, the Lundin family from Geneva,
Switzerland (the “Lundin Family” or the “Lundins”) and their investment bank, 1875 Finance
S.A. 17 At the end of 2007, the Lundin family decided to exit the project and requested
13 Mem., §77.
14 Ibid.
15 Exh. CE-19, Confirmation of the Privatization Agency on the Buyer’s full payment of the Purchase Price,
6 January 2012.
16 MDH Serbia is different from MDH. As mentioned above (§9), the latter is a company held in majority by
Mr. Rand and incorporated in the British Virgin Islands.

17 Rand WS II, §27, Azrac WS, §12.
5
repayment of the funds lent to Mr. Obradović. 18 Mr. Rand decided to replace the Lundins’
funds with his own. 19
19. Mr. Rand also decided to change the holding structure of the Beneficially Owned Shares, to
include his three children, Ms. Kathleen Rand, Ms. Allison Rand and Mr. Robert Rand. 20
20. Mr. Rand thus purchased a Cypriot shelf company called Sembi Investment (“Sembi”) to
serve as the new holding company of the Beneficially Owned Shares. 21 Sembi is a limited
liability company organized under the laws of Cyprus. All of the preferred shares issued by
Sembi were owned by Rand Investments. 22 All of the ordinary shares issued by Sembi were
owned by The Ahola Family Trust, a trust domiciled in Guernsey whose beneficiaries are,
and have always been, Mr. Rand’s three children. 23 The Claimants allege that Sembi is, and
was at all relevant times, controlled by Mr. Rand.
21. The investment structure on the alleged expropriation date of 21 October 2015 was thus:
18 Azrac WS, §15.

19 Rand WS I, §30; Rand WS II, §52; Rand WS III, §53.
20 Rand WS I, §31; Rand WS III, §54.
21 Rand WS III, §54.
22 Exh. CE-6, Certificate of Shareholders of Sembi, 8 June 2017.
23 Ibid.
6
William Rand A.R.Rand R.H.L.Rand K.E.Rand
(Canada) (Canada) (Canada) (Canada)
33.3% interest
Rand Investments
(Canada) Ahola Trust
100% shareholding
Sembi (Cyprus)
Beneficial ownership of 75.9%

shareholding in BD Agro
l\lIDH (Serbia) Djura Obradovic
Nominal ownership of 75.9%

1 shareholding
I
'f
3.9% shareholding
BDAGRO
22. On 22 February 2008, Mr. Obradović, the Lundin Family, Mr. Rand and Sembi entered into
an agreement on the repayment of the Lundins’ funds by Sembi, whereby Sembi agreed to
repay EUR 9 million to the Lundin Family (the “Lundin Agreement”). 24 The Lundin Family in
turn extinguished any claims it had in respect of the Privatization Agreement and BD Agro. 25
Mr. Rand personally guaranteed all of Sembi’s and Mr. Obradović’s obligations to the
Lundins. 26 By October 2010, Sembi had repaid EUR 5.6 million to the Lundins. 27 The
Lundins waived the outstanding debt. 28
24 Exh. CE-28, Agreement between D. Obradović, the Lundin Family, W. Rand and Sembi, 22 February
2008.
25 Ibid., Art. 6.
26 Ibid., Art. 5.
27 Rand WS I, §33; Rand WS II, §59; Azrac WS, §16.
28 Azrac WS, §16.
7
23. On the same date, i.e. 22 February 2008, Mr. Obradović entered into a second agreement
with Sembi (the “Sembi Agreement”). Under the Sembi Agreement, Sembi assumed all of
Mr. Obradović’s obligations, including any payments owing to the Privatization Agency and
the repayment of loans provided by the Lundins. 29 In consideration, Mr. Obradović agreed
to transfer to Sembi “all of his right, title and interest in and to [the Privatization Agreement]”
and to “sign any such documents and do all such things as may be necessary to effect the
transfer to [Sembi] of the [Privatization Agreement] together with any other assets
whatsoever held by Mr. Obradović which are related to BD Agro.” 30 The Sembi Agreement
contains a choice of Cypriot law. 31
24. The Claimants contend that the result of the Sembi Agreement was that Sembi became the
beneficial owner of the Beneficially Owned Shares.
H. The Financial condition of BD Agro from 2005 to 2011
25. The Parties disagree on the financial condition of BD Agro and the quality of the
management of BD Agro during the period from 2005 to 2011. 32
26. In particular, the Respondent alleges that BD Agro was “disastrously mismanaged” and that
BD Agro, through “machinations”, in particular relating to BD Agro’s real estate, paid the
price for its own shares and financed the investments made in the business. 33
27. On their side, the Claimants state that BD Agro “flourished” under their control and that they
invested more than EUR 30 million within a few years after the conclusion of the Privatization
Agreement. 34 The Claimants concede that BD Agro’s liquidity at some point started to
“deteriorate”, but stress that this was due to “extensive investments” and “temporary adverse
market conditions.” 35
29 Exh. CE-29, Agreement between Mr. Obradović and Sembi, 22 February 2008.
30 Ibid., Art. 4.
31 Ibid., Art. 9.
32 Reply, §§77-96; Rej., §§324-401.
33 Rej., §§324-401, in particular §§324-325.
34 Reply, §§77-96, in particular §§88-90.
35 Mem., §127.
8
I. The 201 0 Loan Agreement
28. On 2 June 2010, Crveni Signal (a Serbian company owned by Mr. Obradović and allegedly
beneficially owned by Mr. Rand) and the Serbian bank Agrobanka (“Agrobanka”) concluded
a loan agreement for approximately EUR 670,000. BD Agro guaranteed the loan (the
“Guarantee Agreement”). 36
29. On 22 December 2010, BD Agro and Agrobanka concluded a loan agreement for
approximately EUR 2 million (the “2010 Loan Agreement”) 37 “for the purposes of
consolidation of the company [BD Agro] and related entities.” 38 The loan was secured with
pledges on BD Agro’s fixed assets including its real estate, land and buildings, located in
cadastral municipality Dobanovci. 39 The court registered the pledge on 14 January 2011.
30. On 28 December 2010, Crveni Signal, Agrobanka and BD Agro concluded an Agreement
on Assumption of Debt under which BD Agro assumed the EUR 670,000 loan of Crveni
Signal towards Agrobanka. 40
31. On 29 December 2010, BD Agro and Inex (another Serbian company owned by
Mr. Obradović and allegedly beneficially owned by Mr. Rand) concluded an Agreement on
Interest-Free Loan to Inex by which BD Agro provided Inex a cash loan of approximately
EUR 300,000. 41
J. The Privatization Agency's First Notice of 25 February 2011
32. The Privatization Agency conducted periodic controls of BD Agro to monitor its compliance
with the Privatization Agreement. The final control was conducted on 17 January 2011 and
a report was prepared on 25 February 2011. On that date, the Agency sent a “Notice on
additionally granted terms for fulfilment of contractual obligations” (the “First Notice”) to Mr.
Obradović and BD Agro. The Agency found Mr. Obradović in breach of the Privatization
Agreement inter alia in respect of the pledges created in favor of Agrobanka under the 2010
36 Exh. RE-5, Guarantee agreement between BD Agro and Agrobanka, 2 June 2010. See also Obradović
WS II, §§ 66-67.
37 Exh. RE-6, Short Term Loan Agreement no, K-571/10-00, 22 December 2010.
38 Exh. RE-6, Short Term Loan Agreement no, K-571/10-00, 22 December 2010, p. 1.
39 Exh. RE-6, Short Term Loan Agreement no, K-571/10-00, 22 December 2010, pp. 2-3.
40 Exh. RE-11, Agreement on Assumption of Debt of 28 December 2010.
41 Exh. RE-10, Agreement on Interest-Free Loan of 29 December 2010.
9
Loan Agreement. The Agency granted Mr. Obradović 60 days “for fulfillment of obligations
referred to in items 5.3.3 and 5.3.4 of the Agreement” and “submission of a report […] stating
whether the Buyer has fulfilled the obligations.” 42
K. Subsequent notices and discussions
33. In the wake of the First Notice, the Agency and Mr. Obradović corresponded and held
several meetings. The Agency issued further notices extending the time limits provided in
the First Notice. On his part, Mr. Obradović explained BD Agro’s position on the various
alleged breaches of Article 5.3.3 and 5.3.4 of the Agreement, requested extensions to the
time-limits set by the Agency, and submitted several audit reports and letters concerning
the financial transactions at issue. 43
L. The Payment of Final Instalment of the Purchase Price
34. On 8 April 2011, the final instalment of the purchase price under the Privatization Agreement
was paid. 44
M. Mr. Obradovic's requests to release the pledge on the Privatized Shares
35. In parallel with the discussions between Mr. Obradović and the Privatization Agency on the
alleged breach of the Privatization Agreement, and in light of the payment of the final
instalment of the purchase price, Mr. Obradović requested that the Agency release the
Privatized Shares pledged under the Agreement. For instance, on 2 April 2012,
Mr. Obradović wrote to the Ministry of Economy that he had complied with his obligations
under the Privatization Agreement but that the Agency had not released the pledge on the
Privatized Shares. 45
42 Exh. CE-31, Notice of the Privatization Agency on Additional Time Period, 24 February 2011, p. 2.
43 See, for instance, Exhs. RE-13, 15, 17, 19, 21, 27, 60 and CE-32, 77, 78, 79.
44 Exh. CE-19, Confirmation of the Privatization Agency on the Buyer’s Full Payment of the Purchase Price,
6 January 2012.
45 Exh. CE-77, Letter from Mr. Djura Obradović to the Ministry of Economy, 2 April 2012, p. 2.
10
N. The Agency's request for instructions from the Ministry of Economy
36. On 10 May 2012, the Privatization Agency requested that the Ministry of Economy issue
“further instructions and directions for additional actions” concerning BD Agro and the
Privatization Agreement. 46
37. On 5 June 2012, the Ministry of Economy replied that “there is no economic justification to
terminate the agreement.” 47
38. On 31 July 2012 and 8 November 2012, the Privatization Agency extended the time limit for
Mr. Obradović to “comply with the terms of the Privatization Agreement.” 48
0. The 2012 Loan Agreement
39. On 22 June 2012, BD Agro and Nova Agrobanka, a bridge bank owned and controlled by
Serbia, that was assigned Agrobanka’s loan portfolio, entered into an agreement for “Long-
term Dinar Loan with Currency Clause for Restructuring of Claims” in an amount of
EUR 9’500’000 (the “2012 Loan Agreement”). 49 Part of this amount was used to fully repay
the loan that BD Agro had taken under the 2010 Loan Agreement. 50 Crveni Signal acted as
guarantor for BD Agro’s obligations under the 2012 Loan Agreement. 51
P. Mr. Obradovic's request for assignment of the Agreement
40. On 1 August 2013, Mr. Obradović requested that the Privatization Agency “issue prior
approval for the assignment” of the Privatization Agreement to Coropi Holdings Limited
(“Coropi”), a Cypriot company solely owned by Mr. Robert Jennings, a Canadian lawyer
acting as the trustee of the Ahola Family Trust. 52
46 Exh. CE-33, Letter from the Ministry of Economy to the Privatization Agency, 30 May 2012; see also
Exhs. RE-65, Letter from Mr. Vasiljevic to the Privatization Agency, 16 June 2015 and RE-66, Letter from
the Privatization Agency to Mr. Vasiljevic of 26 June 2015.
47 Exh. CE-33, Letter from the Ministry of Economy to the Privatization Agency, 30 May 2012.
48 Exhs. CE-78, Notice of the Privatization Agency on Additional Time Period, 31 July 2012 and CE-79,
Notice of the Privatization Agency on Additional Time Period, 8 November 2012.

49 Exh. CE-441, Loan agreement between BD Agro and Nova Agrobanka, 22 June 2012.
50 Exh. CE-441, Loan agreement between BD Agro and Nova Agrobanka, 22 June 2012, Art. 8.
51 Exh. CE-442, Guarantee agreement between Crveni Signal and Nova Agrobanka, 22 June 2012.
52 Exh. CE-273, Letter from D. Obradović to the Privatization Agency, 1 August 2013; see also Mem., §145.
11
41. On 6 August 2013, allegedly at Mr. Rand’s behest, Mr. Obradović concluded an agreement
with Coropi through which he agreed to assign to Coropi “the [Privatization Agreement] with
all rights and obligations arising out of that Agreement” (the “Coropi Agreement”). 53 The
assignment was conditional upon the Privatization Agency’s approval. 54
Q. The Ombudsman's investigation
42. In November 2013, allegedly prompted by complaints from employees of BD Agro, the
Serbian Ombudsman launched an investigation into allegations of “omissions committed by
the Privatization Agency in its control of fulfillment of contractual obligations from the
Agreement on sale of this company.” 55
R. The Ministry of Economy's supervision proceedings
43. On 23 December 2013, the Ministry of Economy decided to initiate a “procedure of

supervision of the work of the Privatization Agency in the case of privatization of the
company AD ‘BD Agro.’” 56
44. In its reasoning, the Ministry of Economy referred to a request for termination of the
Agreement submitted by BD Agro’s “unions and strike committee” and the ongoing
processes of the Privatization Agency relating to the alleged breaches of the Privatization
Agreement. 57
S. The pre-pack reorganization plans
45. On 25 November 2014, BD Agro filed a “pre-pack reorganisation plan” before the
Commercial Court of Belgrade to improve the financial situation of the company, while it
continued its business. 58
53 Exh. CE-35, Agreement on Assignment of Agreement on Sale of Socially Owned Capital Through Public
Auction between Djura Obradović and Coropi Holdings Limited, 6 August 2013.
54 Ibid., Art. 8.
55 Exh. CE-42, Opinion of the Ombudsman, 19 June 2015, p. 2.
56 Exh. CE-206, Decision of the Ministry of Economy, 23 December 2013, p. 1.
57 Exh. CE-206, Decision of the Ministry of Economy, 23 December 2013, p. 1.
58 Exh. CE-85, BD Agro’s submission accompanying the Pre-pack Reorganization Plan received by the
Commercial Court in Belgrade, 25 November 2014; see also accompanying Adventis Valuation, Exh. CE-
508, Valuation Report of real estate owned by BD Agro a,d. Dobanovci at several locations in Serbia as at
30 August 2014 by Adventis Real Estate Management D.O.O., September 2014.
12
46. On 6 March 2015, BD Agro filed an amended reorganization plan before the Commercial
Court of Belgrade. 59
T. The Ministry of Economy's report of 7 April 2015
47. On 7 April 2015, the Ministry of Economy finalized its supervision proceedings by issuing a
report “instructing” the Agency to grant Mr. Obradović an additional term of 90 days to
remedy the breaches of the Privatization Agreement and, in case of his failure to comply, to
“undertake the measures within its legal authorizations.” 60
U. The Ombudsman's recommendation of 23 June 2015
48. On 23 June 2015, having completed its investigation into the conduct of the Agency relating
to the Agreement, the Ombudsman published a “recommendation” “directing” the Agency
and the Ministry of Economy to “take all necessary measures to determine, within the
shortest period of time, whether all conditions stipulated by the Law on Privatization of 2001
for termination of the Agreement […] have been fulfilled, in order to finally clarify legal status
of the subject of privatization.” 61
59 Exh. CE-101, Amendment to the Pre-pack Reorganization Plan of BD Agro, 6 March 2015 and Exh. CE-
116; BD Agro’s submission to Commercial Court accompanying the Pre-pack Reorganization Plan, 6 March
2015see also accompanying Mrgud Valution, Exh. CE-175, Report on the valuation of the market value of
construction land in the BD Agro complex Zones A, B and C in the town of Dobanovci, December 2014.
60 Exh. CE-98, Report of Ministry of Economy on the Control over the Privatization Agency, 7 April 2015, p.
13.
61 Exh. CE-42, Opinion of the Ombudsman, 19 June 2015 and Exh. CE-45, The Ombudsman’s On-Line
Statement, 23 June 2015.
13
V. The Agency's notice of 24 June 2015
49. On 24 June 2015, the Privatization Agency granted Mr. Obradović until 27 July 2015 to
remedy the alleged breaches of the Privatization Agreement. 62
W. The initial approval of the amended pre-pack reorganization plan
50. On 25 June 2015, the Commercial Court of Belgrade, after hearing the creditors’ votes,
approved the amended pre-pack reorganization plan submitted by BD Agro on
6 March 2015. 63
X. The renewed request for assignment of the Agreement
51. On 2 July 2015, Mr. Markićević, the General Manager of BD Agro at the time, renewed the
earlier request for the Agency to approve the assignment of the Privatization Agreement
from Mr. Obradović to Coropi Holdings Limited. 64
52. On 20 July 2015, the Agency denied Mr. Markićević’s request citing “unresolved legal status
of the Subject of privatization and incomplete documentation submitted with the request for
assignment of the said agreement.” 65
Y. The Ombudsman's letters to the Agency and the Ministry of Economy of 18 September
2015
53. On 18 September 2015, the Ombudsman sent two identical letters to the Agency and the
Ministry of Economy whereby he requested these entities to “submit to us a new notice on
actions based on the recommendations and undertaken measures in which you will inform
us whether the issue of validity of disputable Agreement on sale of socially owned capital
was solved or not.” 66
62 Exh. CE-351, Letter from the Privatization Agency to D. Obradović and BD Agro, 23 June 2015.
63 Exh. CE-39, Court hearing minutes, 25 June 2015.
64 Exh. CE-46, Letter from BD Agro to Privatization Agency, 2 July 2015.
65 Exh. CE-47, Letter from Privatization Agency to BD Agro, 20 July 2015, p. 2.
66 Exh. CE-88, Letter from the Ombudsman to the Privatization Agency, 18 September 2015 and Exh. CE-
115, Letter from the Ombudsman to the Ministry of Economy, 18 September 2015.
14
Z. The reversal of the approval of the amended pre-pack reorganization plan and
Subsequent Steps
54. On 30 September 2015, the Commercial Court of Appeal (the “Appellate Court”) reversed
the approval of the amended pre-pack reorganization plan and remanded the case to the
Commercial Court of Belgrade. 67
55. On 22 October 2015, the Commercial Court ordered BD Agro to amend the reorganization
plan in accordance with the decision of the Appellate Court within 15 days. 68
56. On 26 October 2015, Mr. Markićević, the then General Director of BD Agro, sent a letter to
the Privatization Agency attaching the court’s notice and requested instructions. 69
57. The Privatization Agency did not respond and the 15-day time-limit provided by the Court
expired. On 8 December 2015, the Commercial Court rejected the reorganization plan. 70
AA. The Agency's Termination of the Agreement
58. On 28 September 2015, the Agency terminated the Agreement for failure to “provide
evidence in the additionally granted term that he [Mr. Obradović] had complied with the
obligation referred to in item 5.3.4 of the Agreement” (the “Termination”). 71
BB. The transfer of the Privatized Shares
59. On 21 October 2015, the Agency issued a decision ordering the transfer of BD Agro’s capital
to itself (the “Decision on Transfer of Capital”). 72 The Decision on Transfer of Capital
allegedly covered both the Privatized Shares and the New Shares. 73
67 Exh. CE-358, Decision of the Appellate Court, 30 September 2015.

68 Markićević WS II, § 191.
69 Exh. CE-360, Letter from I. Markićević to the Privatization Agency of 26 October 2015. Markićević WS
II, §196.
70 Exh. CE-361, Decision of the Commercial Court in Belgrade of 8 December 2015; Markićević WS II,
§197.
71 Exh. CE-50, Notice on Termination of the Privatization Agreement.
72 Exh. CE-105, Decision of the Privatization Agency on the Transfer of BD Agro’s Capital, 21 October
2015.
73 Milošević ER I, §102.
15
60. The Decision on Transfer of Capital was sent to the Central Securities Depository and
Clearing House, a joint stock company owned by Serbia. 74 The Depository registered the
Privatization Agency as the new owner of the Beneficially Owned Shares on 21 October
2015. In 2016, upon the dissolution of the Privatization Agency, the Beneficially Owned
Shares were transferred to the Register of Stocks and Shares maintained by the Ministry of
Economy. 75
CC. BD Agro's Bankruptcy
61. On 30 August 2016, BD Agro was declared bankrupt. 76
Ill. PROCEDURAL HISTORY
A. Initial Steps
62. On 14 February 2018, ICSID received a request for arbitration dated 9 February 2018 from
the Claimants against Serbia (the “Request for Arbitration”), with exhibits CE-1 to CE-118,
and legal authorities CLA-1 to CLA-20. The Request for Arbitration was also accompanied
by four witness statements: (i) Witness Statement of Mr. William Archibald Rand dated 5
February 2018 (“Rand WS I”); (ii) Witness Statement of Mr. Igor Markićević dated 5 February
2018 (“Markićević WS I”); (iii) Witness Statement of Mr. Erinn Bernard Broshko dated 5
February 2018 (“Broshko WS I”); and (iv) Witness Statement of Mr. Djura Obradović dated
20 September 2017 (“Obradović WS I”). The Request was supplemented by the Claimants’
letter dated 16 March 2018.
63. On 22 March 2018, the Acting Secretary-General of ICSID registered the Request in
accordance with Article 36(3) of the ICSID Convention and notified the Parties of the
registration. In the Notice of Registration, the Acting Secretary-General invited the Parties
to proceed to constitute an arbitral tribunal as soon as possible in accordance with Rule 7(d)
of ICSID’s Rules of Procedure for the Institution of Conciliation and Arbitration Proceedings.
76 Exh. CE-109, Decision of the Commercial Court in Belgrade on opening bankruptcy proceedings over
BD Agro, 30 August 2016.
16
64. In accordance with Article 37(2)(a) of the ICSID Convention, the Parties agreed that the
Tribunal would be composed of three arbitrators, one to be appointed by each Party and the
third presiding arbitrator to be appointed by agreement of the Party-appointed arbitrators
from a list of potential candidates prepared after consultation with the Parties or, in case of
disagreement, by the Secretary General of ICSID. On 16 May 2018, following appointment
by the Claimants, Mr. Baiju S. Vasani a national of the United Kingdom and the United
States of America, accepted his appointment as arbitrator. On 17 May 2018, following
appointment by the Respondent, Prof. Marcelo Kohen, a national of Argentina, accepted his
appointment as arbitrator. On 20 September 2018, in view of the party-appointed arbitrator’s
failure to agree on a candidate from the list, the Secretary-General informed the Parties that,
pursuant to the Parties’ agreement, she had selected Prof. Gabrielle Kaufmann-Kohler out
of the candidates included in the list to act as President of the Tribunal. On 2 October 2018,
following appointment by the Secretary-General, Prof. Gabrielle Kaufmann-Kohler, a
national of Switzerland, accepted her appointment as presiding arbitrator, making certain
disclosures for the sake of transparency.
65. Accordingly, the Tribunal is composed of Prof. Gabrielle Kaufmann-Kohler, a national of

Switzerland, President, appointed by the Secretary-General pursuant to the Parties’
agreement; Mr. Baiju S. Vasani, a national of the United Kingdom and the United States of
America, appointed by the Claimants; and Prof. Marcelo G. Kohen, a national of Argentina,
appointed by the Respondent.
66. On 2 October 2018, the Secretary-General, in accordance with Rule 6(1) of the ICSID Rules
of Procedure for Arbitration Proceedings (the “Arbitration Rules”), notified the Parties that
all three arbitrators had accepted their appointments and that the Tribunal was therefore
deemed to have been constituted on that date. Ms. Marisa Planells-Valero, ICSID Legal
Counsel, was designated to serve as Secretary of the Tribunal.
67. On 13 November 2018, the ICSID Secretariat, acting on behalf of the Tribunal, sent the
Parties a draft Procedural Order No. 1 for their discussion. On that same date, the President
of the Tribunal proposed to appoint Mr. Rahul Donde of Lévy Kaufmann-Kohler as Assistant
to the Tribunal, whose tasks were described in the draft PO.
68. On 20 November 2018, the Parties submitted their joint comments regarding the draft
Procedural Order No. 1.
17
69. In accordance with ICSID Arbitration Rule 13(1), the Tribunal held a first session with the
Parties on 23 November 2018 by telephone conference
70. On 29 November 2018, the Tribunal issued Procedural Order No. 1 (“PO 1”) recording the
Parties’ agreements on various procedural matters. As the Parties’ agreed, Mr. Rahul Donde
was appointed as Assistant to the Tribunal. Procedural Order No. 1 also set out a schedule
for the proceeding and stated that the transparency regime applicable to the proceeding
would be addressed in a separate procedural order. At the Parties’ request, the procedural
calendar contained in PO 1 was amended on 19 December 2018.
B. Written Phase
71. On 17 January 2019, the Claimants filed a Memorial on the Merits dated 16 January 2019
(the “Claimants’ Memorial”), 77 with exhibits CE-119 to CE-374 and legal authorities CLA-21
to CLA-57. The pleading was also accompanied by three witness statements and three
experts reports, as follows: (i) Second Witness Statement of Igor Markićević dated
16 January 2019 (“Markićević WS II”); (ii) Second Witness Statement of Erinn Broshko
dated 16 January 2019 (“Broshko WS II”); (iii) Witness Statement of Aksel Azrac dated
16 January 2019 (“Azrac WS I”); (iv) Expert Report of Miloš V. Milošević dated 16 January
2019 (“Milošević ER I”); (v) Expert Report of Dr. Richard Hern dated 16 January 2019 (“Hern
ER I”); (vi) Expert Report of Agis Georgiades dated 16 January 2019 (“Georgiades ER I”).
72. On 12 February 2019, the Tribunal issued Procedural Order No. 2 concerning the
transparency regime applicable to the proceeding and attaching a draft Transparency Order
and Draft Transparency Rules for the Parties’ comments. A dissenting opinion by
Prof. Marcelo Kohen was also attached to the Order.
73. On 22 February 2019, each Party filed observations on the draft Transparency Order.
Together with their comments, the Claimants included a new legal authority CLA-58.
74. On 5 March 2019, the Tribunal advised the Parties that, on the basis of the record at the
time, the Tribunal considered appropriate to reserve its decision on the transparency
regime(s) applicable to this proceeding until after the filing of the Respondent’s Counter-
Memorial due on 19 April 2019.
77 A corrected version of the Memorial was submitted on 21 January 2019.
18
75. On 19 April 2019, the Respondent filed its Counter-Memorial on the Merits (the “Counter-
Memorial” or “C-Mem.”) with a Request for Bifurcation of the proceeding (the “Request for
Bifurcation”), together with exhibits RE-1 to RE-194 and legal authorities RLA-1 to RLA-30.
The pleading was also accompanied by one witness statement and three expert reports, as
follows: (i) Witness Statement of Vladislav Cvetkovic dated 4 April 2019 (“Cvetkovic WS I”);
(ii) Expert Report of Sandy Cowan dated 19 April 2019 (“Cowan ER I”); (ii) Expert Report of
Thomas Papadopoulos dated 18 April 2019 (“Papadopoulos ER I”); and (iii) Expert Report
of Professor Mirjana Radović dated 19 April 2019 (“Radović ER I”).
76. On 23 April 2019, the Tribunal and the Parties were informed that the Secretary of the
Tribunal would be taking temporary leave, and that Ms. Anna Toubiana, ICSID Legal
Counsel, would serve as Secretary of the Tribunal during her absence.
77. On 26 April 2019, the Tribunal invited the Parties to submit any additional comments on the
question of the applicable transparency regime in this proceeding by 3 May 2019. On
30 April 2019, the Respondent indicated that it did not have further comments. On 3 May
2019, the Claimants submitted a further communication on the matter.
78. On 17 May 2019, the Claimants filed their Reply to the Request for Bifurcation, with legal
authorities CLA-59 to CLA-68.
79. On 31 May 2019, the Tribunal, by majority, denied the Request for Bifurcation and indicated
that, in view of this decision, the Parties were to follow the non-bifurcated scenario under
item 1(b) in the Revised Annex A to Procedural Order No. 1. The Parties were also advised
that the reasons for the decision as well as a dissenting opinion by Prof. Kohen would be
conveyed shortly.
80. On 24 June 2019, the Tribunal issued Procedural Order No. 3 concerning its decision on
the Respondent’s request for bifurcation. The dissenting opinion of Prof. Kohen was also
appended to the Order.
81. By letter of 11 July 2019, the Claimants informed the Tribunal of Serbia’s alleged efforts to
intimidate Mr. Igor Markićević, one of the Claimants’ main witnesses in this arbitration. The
Claimants’ letter was accompanied by exhibits CE-375 and CE-376. On 22 July 2019, the
Respondent submitted comments to the Claimants’ letter of 11 July 2019. The Respondent’s
letter was accompanied by exhibits RE-195 to RE-196 and legal authority RLA-131.
19
82. On 23 July 2019, the Claimants requested leave from the Tribunal to submit a reply to the
Respondent’s communication of 22 July 2019. On 24 July 2019, the Respondent opposed
the Claimants’ request.
83. On 25 July 2019, the Tribunal denied the Claimants’ request of 23 July 2019, noting the
content of the Parties’ communications on the matter and indicating that it trusted that the
Parties would avoid actions contrary to their duty of good faith not to aggravate the dispute
and not to affect the integrity of the arbitration.
84. On 26 July 2019, the Parties sent their respective document production requests for the
Tribunal’s decision. The Claimants’ request was accompanied by exhibit CE-377 and the
Respondent’s request was accompanied by exhibits RE-197 to RE-199. On 29 July 2019,
the Claimants submitted a further communication regarding the Respondent’s submission
of 26 July 2019.
85. On 7 August 2019, the Tribunal issued Procedural Order No. 4 ruling on the Parties’
respective requests for document production.
86. On 15 August 2019, the Respondent informed the Tribunal of its efforts to locate certain
documents requested by the Claimants.
87. On 20 August 2019, the Claimants informed the Tribunal of certain disagreements regarding
a draft non-disclosure agreement (“NDA”) negotiated by the Parties for document production
purposes in accordance with Procedural Order No. 4. The Claimants shared the draft NDA
with the Tribunal. Additional comments on the NDA were submitted by the Respondent on
23 August 2019 and by the Claimants on 26 August 2019.
88. On 28 August 2019, the Tribunal resolved most of the disputed issues regarding the NDA
and made additional proposals for the Parties’ review on the outstanding matters.
89. On 29 August 2019, the Tribunal, by majority, issued Procedural Order No. 5, concerning
the transparency regime applicable in this proceeding, and providing that this arbitration
would be conducted under the Transparency Rules attached to the Order. A dissenting
opinion by Prof. Kohen was attached to the Order.
90. Additional communications regarding the wording of the NDA were received from the
Respondent on 30 August 2019 and from the Claimants on 2 September 2019. On 6
20
September 2019 the Tribunal suggested additional wording regarding the NDA to the
Parties. A further communication on the matter was received from the Respondent on
7 September 2019.
91. On 12 September 2019, the Tribunal confirmed that, as agreed by the Parties, the language
of the arbitration clause in the Parties’ NDA was to be read as set out in the Respondent’s
communication of 7 September 2019.
92. On 13 September 2019, the Respondent submitted its proposed redactions to the
Claimants’ Request for Arbitration, the Claimants’ Memorial, the Consolidated List of
Claimants’ Documents dated 16 January 2019, the Second Markićević Statement, and the
Respondent’s Counter-Memorial. The Respondent also proposed complete exclusion from
publication of the First Hern Report and the First Cowan Report.
93. On 16 September 2019, the Tribunal noted that, pursuant to the Transparency Rules, the
Claimants had a 15-day period to make reasoned objections, if any, to the Respondent’s
proposed redactions. By this same communication, the Tribunal conveyed a Transparency
Schedule for future use, if necessary.
94. On 27 September 2019, the Respondent submitted its request for redaction of certain parts
of Annex A to Procedural Order No. 4.
95. On 30 September 2019, the Claimants opposed Serbia’s proposed redactions of

13 September 2019. The Claimants’ communication was accompanied by exhibits
CE-378 and CE-379.
96. On 1 October 2019, the Tribunal invited the Claimants to comment on the Respondent’s
proposed redactions of 27 September 2019 to Annex A of Procedural Order No. 4 by
14 October 2019.
97. On 4 October 2019, the Claimants’ filed a Reply on the Merits and Counter-Memorial on
Jurisdiction (“Reply”), 78 with exhibits CE-380 to CE-796 and legal authorities CLA-69 to
CLA-152. The pleading was also accompanied by five witness statements and seven expert
report, as follows: (i) First Witness Statement of Robert Jennings dated 3 October 2019
(“Jennings WS I”); (ii) Second Witness Statement of William Rand dated 3 October 2019
78 A corrected version of the Reply was submitted on 9 October 2019.
21
(“Rand WS II”); (iii) Second Witness Statement of Djura Obradović dated 3 October 2019
(“Obradović WS II”); (iv) Third Witness Statement of Erinn Broshko dated 3 October 2019
(“Broshko WS III”); (v) Third Witness Statement of Igor Markićević dated 3 October 2019
(“Markićević WS III”); (vi) Expert Report of Bojana Tomić Brkušanin dated 3 October 2019
(“Brkušanin ER”); (vi) Expert Report of Krzystof Grzesik dated 3 October 2019 (“Grzesik
ER”); (vii) Expert Report of Robert J.C. Deane dated 3 October 2019 (“Deane ER”); (viii)
Expert Report of Uglješa Grušić dated 3 October 2019 (“Grušić ER”); (ix) Second Expert
Report of Miloš V. Milošević dated 3 October 2019 (“Milošević ER II”); (x) Second Expert
Report of Agis Georgiades dated 3 October 2019 (“Georgiades ER II”); (xi) Second Expert
Report of Richard Hern dated 3 October 2019 (“Hern ER II”).
98. On 14 October 2019, the Claimants opposed Serbia’s request for redaction of certain parts
of Annex A to Procedural Order No. 4.
99. On 19 October 2019, the Respondent proposed certain redactions to the Claimants’ Reply
and accompanying documentation.
100. On 21 October 2019, the Tribunal invited (i) the Respondent to comment on the Claimants’
objections to the Respondent’s proposed redactions by 28 October 2019; and (ii) the
Claimants to respond by 4 November 2019 in the form of the Transparency Schedule.
101. On 28 October 2019, the Respondent submitted its response to the Claimants’ objections
to its proposed redactions of 13 and 27 September and 19 October 2019 (the “Proposed
Redactions”).
102. On 3 November 2019, the Claimants responded to the Respondent’s additional comments
in connection with the Proposed Redactions. The Claimants’ communication was
accompanied by exhibits CE-797 to CE-803 and corrected exhibits CE-419 and CE-593.
103. On 5 November 2019, the Tribunal and the Parties were informed that Ms. Planells-Valero
had reassumed her functions as Secretary of the Tribunal.
104. On 13 January 2020, the Tribunal issued Procedural Order No. 6, by which it denied the
Respondent’s Proposed Redactions. The Tribunal advised that, in accordance with Article
20 of the Transparency Rules, the Respondent had the option to withdraw from the record
all or part of the information that it sought to protect from publication and, in that case, to
submit these documents without the respective information. Once this process was
22
completed, the Tribunal would order ICSID to publish the documents mentioned in Article 8
of the Transparency Rules. A declaration by Prof. Kohen was appended to the Order.
105. On 24 January 2020, the Respondent filed a Rejoinder on the Merits and a Reply on
Jurisdiction (“Respondent’s Rejoinder” or “Rej.”), 79 with exhibits RE-200 to RE-565 and legal
authorities RLA-132 to RLA-200. The pleading was also accompanied by three witness
statements and five expert reports, as follows: (i) Witness Statement of Ms. Julijana
Vuckovic dated 22 January 2020 (“Vuckovic WS”); (ii) Witness Statement of Mr. Dragan
Stevanovic dated 23 January 2020 (“Stevanovic WS”); (iii) Witness Statement of Ms. Branka
Radović Jankovic dated 24 January 2020 (“Radović WS”); (iv) Second Expert Report of
Mr. Sandy Cowan dated 24 January 2020 (“Cowan ER II”); (v) Second Expert Report of
Dr. Thomas Papadopoulos dated 24 January 2020 (“Papadopoulos ER II”); (vi) Second
Expert Report of Prof. Mirjana Radović dated 24 January 2020 (“Radović ER II”); (vii) Expert
Report of Ms. Danijela Ilic dated 23 January 2020 (“Ilic ER”); and (viii) Expert Report of
Achilles C. Emilianides dated 23 January 2020 (“Emilianides ER”).
106. On 11 February 2020, the Claimants requested that the Tribunal strike from the record
certain new factual and legal defenses on jurisdiction, merits and quantum allegedly
presented for the first time by Serbia in its Rejoinder, in the Ilic Report, and in the Second
Cowan Report (the “Respondent’s New Arguments”). In the alternative, the Claimants
proposed that they file an additional submission and an additional expert report by Dr. Hern
together with their Rejoinder on Jurisdiction due on 6 March 2020.
107. On 17 February 2017, the Respondent requested that the Tribunal dismiss the Claimants’
application of 11 February 2020. In the alternative, the Respondent asked to be granted the
right to file an additional submission.
108. On 20 February 2020, the Tribunal granted the Claimants request to address the
Respondent’s New Arguments in their Rejoinder on Jurisdiction and to file an additional
expert report of Dr. Richard Hern with supporting evidence by 6 March 2020. The Tribunal
also granted the Respondent the opportunity to respond by 16 March 2020. In addition, the
Tribunal advised the Parties that they would have an opportunity to make further
submissions at the hearing and/or in their post-hearing submissions, if any. On 24 February
79 A corrected version of the Rejoinder was submitted on 29 January 2020.
23
2020, the Claimants sought clarification from the Tribunal regarding Serbia’s response due
by 16 March 2020, which the Tribunal provided on the same day.
109. On 2 March 2020, the Tribunal sent the Parties a draft Procedural Order on the organization
of the hearing scheduled to take place between 30 March and 4 April 2020 in Geneva
(Switzerland) and invited their comments. The Tribunal also indicated that during the pre-
hearing teleconference (“PHTC”) scheduled to take place on 16 March 2020, it wished to
discuss with the Parties whether any measures needed to be taken for the organization of
the hearing as a result of the coronavirus outbreak.
110. On 7 March 2020, the Claimants filed their Rejoinder on Jurisdiction (“Rejoinder on
Jurisdiction” or “Rej. J.”), 80 with exhibits CE-804 to CE-899 and legal authorities CLA-153
to CLA-173. The pleading was accompanied by four witness statements and five expert
reports as follows: (i) Third Witness Statement of Mr. William Archibald Rand of 5 March
2020 (“Rand WS III”); (ii) Third Witness Statement of Mr. Djura Obradović of 5 March 2020
(“Obradović WS III”); (iii) Fourth Witness Statement of Mr. Erinn Bernard Broshko of 5 March
2020 (“Broshko WS IV”); (iv) Fourth Witness Statement of Mr. Igor Markićević of 5 March
2020 (“Markićević WS IV”); (v) Second Expert Report of Ms. Bojana Tomić Brkušanin of
5 March 2020 (“Brkušanin ER 2”); (vi) Second Expert Report of Dr. Uglješa Grušić of
5 March 2020 (“Grušić ER 2”); (vii) Third Expert Report of Dr. Richard Hern of 6 March 2020
(“Hern ER III”); (viii) Third Expert Report of Mr. Miloš Milošević of 5 March 2020 (“Milošević
ER III”), and (ix) Third Expert Report of Mr. Agis Georgiades of 5 March 2020 (“Georgiades
ER III”).
111. On 11 March 2020, the Claimants sought the Tribunal’s assistance regarding Serbia’s
conduct in connection with an ongoing investigation involving Mr. Djura Obradović. The
Claimants informed the Tribunal that in December 2015 a criminal court in Serbia decided
to withhold Mr. Obradović’s passport preventing him from any international travel. The
Claimants requested that the Tribunal order Serbia to use its best efforts to release
Mr. Obradović’s passport to make his appearance at the hearing in Geneva possible and
reserved the right to ask the Tribunal to draw adverse inferences against Serbia if
Mr. Obradović was prevented from attending the hearing.
80 A corrected version of the Rejoinder on Jurisdiction was submitted on 12 March 2020.
24
112. On 11 March 2020, in view of the uncertainty created by the coronavirus outbreak, the
Respondent requested a postponement of the hearing. On the next day, the Claimants
agreed with this request.
113. On 12 March 2020, the Tribunal confirmed the postponement of the hearing and invited the
Parties to discuss the rescheduling of the hearing and the remaining procedural steps at the
PHTC.
114. At the PHTC of 16 March 2020 and in subsequent correspondence, the Tribunal and the
Parties discussed possible new dates for the hearing.
115. Also on 16 March 2020, the Respondent filed its additional submission on quantum
(“Respondent’s Additional Submission on Quantum”), with exhibits RE-567 to RE-655. 81
The pleading was accompanied by the Second Expert Report of Ms. Danijela Ilic of
16 March 2020 (“Second Ilic Report”) and the Third Expert Report of Mr. Sandy Cowan of
16 March 2020 (“Third Cowan Report”).
116. Further communications regarding the potential new hearing dates were received from the
Claimants on 18 and 24 March and on 7 April 2020, and from the Respondent on 19, and
24 March and 8 April 2020.
117. On 9 April 2020, the Tribunal confirmed that the hearing would take place from 28 October
to 1 November 2020, with 2 November 2020 held in reserve.
118. On 20 April 2020, the Tribunal issued Procedural Order No. 7 containing a revised
procedural calendar.
119. On 29 April 2020, the Claimants requested the Tribunal to strike from the record certain new
arguments and new valuations set out in the Respondent’s Additional Submission on
Quantum, as well as certain parts of the Second Ilic Report and the Third Cowan Report
(the “Contested Issues and New Valuations”).
120. On 4 May 2020, the Tribunal informed the Parties that the Meeting Center at the Graduate
Institute in Geneva was unavailable during the new hearing dates, that it had contacted
other arbitral institutions in Europe to find an alternative venue, and that the Permanent
81 A corrected version of exhibit RE-652 was submitted on 31 March 2020.
25
Court of Arbitration (PCA) in The Hague had confirmed availability during the hearing dates.
The Tribunal invited the Parties’ views regarding this hearing venue as well as on the
possibility of holding the hearing virtually.
121. On 8 May 2020, the Respondent commented on the Claimants’ application of 29 April 2020
regarding the Contested Issues and New Valuations.
122. By communications of the same date, the Parties reiterated their strong preference for an
in-person hearing, indicating that they had no objection with respect to the PCA as a
potential choice. The Parties also expressed concerns regarding the possibility of holding
the hearing virtually.
123. On 1 June 2020, the Tribunal denied the Claimants’ application of 29 April 2020 as it
considered, inter alia, that both the Contested Issues and New Valuations responded to
argument made in the Claimants’ Rejoinder on Jurisdiction.
124. On 2 June 2020, the President of the Tribunal disclosed, for the sake of transparency, that
Dr. Silja Schaffstein, a counsel at Lévy Kaufmann-Kohler, had been asked to act as legal
expert for a party in a commercial arbitration represented by Squire Patton Boggs.
125. On 3 June 2020, the Tribunal noted the Parties’ reservations regarding the possibility of
holding a virtual hearing, informed the Parties of the costs of a potential in-person hearing
and the safety measures put in place by the PCA, and indicated its intention to monitor the
situation closely and revisit the matter closer to the hearing dates taking into account the
prevailing travel restrictions at the time.
126. Also on 3 June 2020, the Respondent requested further information regarding the disclosure
made on 2 June 2021 by the President of the Tribunal which she provided by the next day.
On 5 June 2020, the Respondent objected to the appointment of Dr. Silja Schaffstein by
Squire Patton Boggs. On 8 June 2020, the President of the Tribunal informed the Parties
that, in view of the Respondent’s objection, Dr. Schaffstein had refused the proposed
assignment as legal expert.
127. On 21 August 2020, given the evolution of the coronavirus pandemic and the perspectives
for the fall, the Tribunal proposed to the Parties a contingency plan for conducting the
hearing virtually, if need be. It also proposed to conduct the hearing in two parts to allow for
sufficient time and hold the second part in January 2021.
26
128. On 28 August 2020, the Parties provided their comments regarding the contingency plan
proposed by the Tribunal. The Parties emphasized their strong preference for an in-person
hearing and their willingness to revisit the matter closer to the hearing dates in light of the
then prevailing travel restrictions.
129. On 14 September 2020, in accordance with the procedural calendar in Procedural Order
No. 7, the Parties proposed a draft Joint Hearing Schedule contemplating an in-person
hearing.
130. On 24 September 2020, the Government of Canada advised the Tribunal of its intention to
exercise its right to attend the hearing in accordance with Article 29.2 of the Serbia-Canada
BIT.
131. On 27 September 2020, the Tribunal wrote to the Parties noting that the COVID-19
pandemic was worse in some States than it was when it first wrote to the Parties about it.
As a result, it remained concerned about the health and safety of the hearing participants,
who would be gathered in the same room for long days and would need to travel to the
hearing venue, some of them on long haul flights. Further, it could not be ruled out that one
or more of the participants would eventually be unable to attend the hearing due to travel
restrictions or health reasons, which could jeopardize the hearing and cause a last-minute
postponement or require an additional hearing, neither of which would be time or cost
efficient. The Tribunal also noted that the draft Joint Hearing Schedule proposed by the
Parties would be difficult to put into practice, because the time actually available for the
Parties each day (after deducting procedural issues, breaks, and Tribunal questions) was
insufficient to complete the examinations as planned.
132. The Tribunal proposed to review these matters during the forthcoming PHTC, including
discussing the two alternative proposals earlier prepared by the Tribunal to address the
uncertainty and risks caused by the pandemic and to accommodate the Parties’ proposed
draft Joint Hearing Schedule.
133. On 30 September 2020, the Tribunal held a PHTC with the Parties.
134. On 2 October 2020, the Tribunal confirmed that, on the basis of the Claimants’ request and
the Respondent’s consent at the PHTC, the hearing was postponed to 12 to 20 July 2021,
with Sunday, 18 July 2021 being a day off and Tuesday, 20 July 2021 being a reserve day.
27
On that same date, the ICSID Secretariat informed the Government of Canada of the revised
hearing dates.
135. On 13 October 2020, the Tribunal confirmed that the potential new in-person hearing was
to be held on the premises of the PCA in The Hague. On 22 October 2020, the Claimants
inquired about the schedule for the steps preceding the hearing, namely the dates for
submission of the hearing schedule and pre-hearing conference call.
136. On 3 November 2020, following the Parties’ confirmation of their availability for a PHTC on
7 June 2021, the Tribunal issued Procedural Order No. 8 containing the revised procedural
calendar.
137. On 15 January 2021, the Claimants submitted a request to file new documents into the
record (the “Request to File New Evidence”) and a request for assistance to obtain certain
documents (the “Request for Assistance”).
138. On the same day, the Claimants made a request for provisional measures with respect to a
criminal investigation allegedly initiated by the Respondent against Mr. Obradović, the
former nominal owner of BD Agro and a witness in this arbitration (the “Request for
Provisional Measures”) with factual exhibits CE-901 to CE-902 and legal authorities CLA-
174 to CLA-182. They also sought an order from the Tribunal directing the Respondent not
to use documents from the criminal investigation in the arbitration, including in the
Respondent’s submissions on the Request for Provisional Measures, until the Tribunal
decided on that request.
139. On 19 January 2021, the Tribunal invited the Respondent to comment on these requests. It
also instructed the Respondent to label the documents obtained through the criminal
proceedings appended to its response, if any, and indicated that its decision regarding the
admissibility of such documents would be reserved for a later determination. Finally, the
Tribunal invited the Parties to reserve a date for a hearing by videoconference on the
Request for Provisional Measures in the event the Tribunal found such a hearing useful after
reviewing the Parties’ submissions.
140. On 26 January 2021, following receipt of the Claimants’ communications of 20 and

26 January 2021 and the Respondent’s communication of 25 January 2021 regarding their
availability for a hearing on the Claimants’ Request for Provisional Measures, the Tribunal
28
informed the Parties that it had decided to reserve 16 February 2021 for a hearing by
videoconference on the Request for Provisional Measures, for the event that it deemed it
helpful after having reviewed the Parties’ submissions. The Tribunal also indicated that it
would advise after 5 February 2021 whether the hearing on Provisional Measures would
take place.
141. On 5 February 2021, the Respondent submitted its Response to the Claimants’ Request to
File New Evidence and the Request for Assistance, together with Annexes 1 to 15. On that
same date, the Respondent also filed its response to the Claimants’ Request for Provisional
Measures with factual exhibits RE-656 to RE-673 and legal authorities RLA-201 to RLA-
208.
142. On 9 February 2021, the Parties were advised that the Tribunal preferred to hear the Parties
orally on the Request for Provisional Measures and confirmed that the hearing on
Provisional Measures was to take place on 16 February 2021 via Zoom.
143. On the same day, the Claimants informed the Tribunal that nine documents submitted by
the Respondent along with its Response (Exhibits RE-657, RE-658, RE-660-662, RE-667-
670) had not been labelled in accordance with the Tribunal’s ruling of 19 January 2021. The
Claimants also requested leave to file one more document, namely an announcement
published by BD Agro’s bankruptcy trustee in respect of the sale of BD Agro’s land.
144. On 9 February 2021, the Tribunal circulated the agenda for the hearing on Provisional
Measures. A modified agenda was circulated on 11 February 2021.
145. Also on 9 February 2021, the Claimants submitted additional communications regarding the
Respondent’s responses of 5 February 2021 to the Claimants’ Request to File New
Evidence and Request for Assistance.
146. On 11 February 2021, the Tribunal invited the Respondent to comment on the Claimants’
communications of 9 February 2021 and advised the Parties that it would decide at a later
stage on the admissibility of the nine documents submitted by the Respondent with its
Response, along with Exhibits RE-671-673. Further, if the Parties intended to refer to the
content of these documents at the forthcoming hearing on Provisional Measures, they were
requested to advise the Tribunal by 15 February 2021 to allow the Tribunal to give directions
in this respect prior to the hearing.
29
147. On 14 February 2021, the Tribunal noted that, in accordance with Section IV of the
Transparency Rules of 29 August 2019, the hearing on Provisional Measures was to be
made public. It further indicated that the hearing would be video recorded, and the video
recording would be streamed on the ICSID website as soon as possible after the conclusion
of the hearing.
148. On 15 February 2021, the Respondent commented on the Claimants’ communications of

9 February 2021. The Respondent advised the Tribunal that it intended to rely on the
exhibits submitted with its Response in the course of its oral argument at the Hearing and
objected to the Claimants’ request for leave to file the public announcement concerning the
sale of BD Agro’s land. On the same day, the Tribunal ruled that the Respondent had not
mislabelled the nine exhibits as alleged by the Claimants. The Tribunal also confirmed that
Exhibits RE-657-658, 660-662, 667-673 were to be part of the record of the arbitration, and
that the Parties could rely on those exhibits at the hearing on provisional measures. A further
communication on this matter was received from the Claimants on 16 February 2021 stating,
inter alia, that they did not wish to rely on exhibits CE-901 and CE-902 during the hearing
on provisional measures.
149. On 16 February 2021, at the Tribunal and the Parties held a hearing on the Request for
Provisional Measures.
150. On 18 February 2021, the Tribunal provided further instructions to the Parties regarding the
corrections to the hearing transcripts and confirmed the publication of the video recordings
of the hearing on the ICSID Website. On 25 and 26 February 2021, the Parties informed the
Tribunal of their agreed corrections to the transcripts.
151. On 12 March 2021, the Tribunal issued Procedural Order No. 9 denying the Claimant’s
Request for Provisional Measures. By this same order, the Tribunal granted in part the
Request to File New Evidence and denied the request for Assistance to acquire certain
documents. On 19 March 2021, pursuant to the Tribunal’s instructions, the Claimants
submitted Exhibit CE-903 to the record.
152. On 9 April 2021, the Claimants requested the Tribunal to direct the Respondent to produce
a valuation report of 28 May 2020 prepared or commissioned by the Serbian Tax Authority
relating to certain land plots located in Dobanovci (the “Request to Produce”). They also
requested the Tribunal to reconsider a part of its rulings in Procedural Order No. 9 (the
30
“Request for Reconsideration”). On 12 April 2021, the Tribunal invited the Respondent to
comment on the Request to Produce and the Request for Reconsideration, which Serbia
did on 22 April together with Annexes 1 to 8. The Claimants commented on the
Respondent’s submission on 24 April 2021, and the Respondent replied on 28 April 2021.
153. On 26 April 2021, considering the uncertainties related to the COVID-19 pandemic, the
Tribunal invited the Parties to confer on the way they wished to proceed in relation to the
hearing scheduled to take place from 12 to 20 July 2021 (the “Hearing”).
154. On 5 May 2021, the Parties informed the Tribunal of their continued strong preference for
an in-person hearing. The Parties also indicated that they were discussing several
alternative venues for the hearing in Europe. The Parties proposed to report to the Tribunal
about their efforts to find a suitable venue for the Hearing by the end of May 2021.
155. On 10 May 2021, the Parties proposed two alternative hearing schedules for an in-person
hearing. The Parties further indicated that given the number of witnesses and experts to be
cross-examined during the Hearing, the Parties had a strong preference to adopt the first
scenario, where Tuesday 20 July 2021 was used for examination of the witnesses rather
than kept in reserve.
156. On 12 May 2021, the Tribunal noted, inter alia, that it remained open to consider the
possibility on an in-person hearing if less restrictive rules for travel and gathering were to be
implemented in Europe before the hearing and invited the Parties to advise of their efforts
to find a suitable venue for the Hearing by 28 May 2021.
157. On 21 May 2021, the Tribunal issued Procedural Order No. 10 denying the Claimants’
Request to Produce and the Request for Reconsideration of 9 April 2021.
158. On 29 May 2021, the Parties reaffirmed their strong preference for an in-person hearing in
Europe and asked the Tribunal to postpone the decision on the place and format of the
hearing until 11 June 2021. The Parties also informed the Tribunal about the witnesses and
experts that would need to attend a potential in-person hearing remotely. On 3 June 2021,
the Tribunal granted the Parties’ request.
159. On 11 June 2021, the Parties indicated that, given the continuously improving situation
regarding the COVID-19 pandemic all over Europe, it should be possible to hold the July
hearing in-person. The Parties also noted, inter alia, that The Hague, in The Netherlands,
31
appeared to be a convenient location for the hearing because all hearing participants could
be exempt from travel restrictions and quarantine requirements.
160. On 17 June 2021, the Tribunal informed the Parties that in view of their strong preference
for an in-person hearing, the improved health situation in Continental Europe, the absence
of health risks for all those who were vaccinated, it had decided that the hearing would take
place in person on the premises of the PCA in The Hague. On that same day, the Tribunal
circulated the draft of a procedural order addressing the organization of the forthcoming
hearing for the Parties’ comments.
161. On 18 June 2021, the Tribunal invited the Government of Canada to indicate whether it
wished to attend the hearing in-person or remotely via Zoom.
162. On 22 June 2021, the Tribunal and the Parties held a PHC to discuss the organization of
the hearing.
163. Also on 22 June 2021, the Government of Canada responded to the Tribunal’s invitation of
18 June 2021 indicating that its representatives would attend the hearing via Zoom.
164. On 1 July 2021, the Tribunal issued Procedural Order No. 11 on the organization of the
hearing.
C. Hearing on Merits, Liability and Quantum
165. A hearing on jurisdiction, merits and quantum was held from 12 to 20 July 2021 on the
premises of the Permanent Court of Arbitration in The Hague. The following persons were
present at the hearing:
Tribunal:
Prof. Gabrielle Kaufmann-Kohler President
Mr. Baiju S. Vasani Arbitrator
Prof. Marcelo G. Kohen Arbitrator
ICSID Secretariat:
Ms. Marisa Planells-Valero Secretary of the Tribunal
Assistant to the Tribunal

Mr. Raul Donde 82 Assistant to the Tribunal
82 Participated remotely via Zoom.
32
For the Claimants:
Counsel
Mr. Rostislav Pekař Squire Patton Boggs
Mr. Stephen Anway Squire Patton Boggs
Mr. Luka Misetic Squire Patton Boggs
Mr. Matej Pustay Squire Patton Boggs
Mr. David Seidl Squire Patton Boggs
Mr. Nenad Stanković Stankovic & Partners (NSTLAW)
Ms. Sara Pendjer Stankovic & Partners (NSTLAW)
Party Representatives and Witnesses

Mr. William Rand
Mr. Erinn Broshko Rand Investments Ltd.
Ms. Li-Jeen Broshko Ms. Kathleen Elizabeth Rand, Ms. Allison
Ruth Rand, Mr. Robert Harry Leander
Rand
Mr. Igor Markićević Sembi Investment Limited
Witnesses
Mr. Djura Obradović
Mr. Aksel Azrac 1875 FINANCE
Mr. Robert Jennings 83 The Ahola Family Trust
Experts
Dr. Richard Hern NERA Economic Consulting
Ms. Zuzana Janečková NERA Economic Consulting
Mr. Agis Georgiades Christos Georgiades & Associates LLC
Mr. Miloš Milošević Živković|Samardžić Law office
Ms. Bojana Tomić-Brkušanin Foreign Investors Council
Mr. Krzysztof Grzesik Polish Properties Sp z o.o.
Mr. Uglješa Grušić University College London
Mr. Robert J.C. Deane 84 Borden Ladner Gervais LLP
For the Respondent:

Counsel
Ms. Senka Mihaj Mihaj, Ilic & Milanovic
Mr. Vladimir Djeric Mikijelj, Jankovic & Bogdanovic
Mr. Petar Djundic Faculty of Law, University of Novi Sad
Ms. Bojana Bilankov Mihaj, Ilic & Milanovic
Mr. Nemanja Galic Mihaj, Ilic & Milanovic
Ms. Milica Volarev Mihaj, Ilic & Milanovic
Ms. Lena Petrovic Mikijelj, Jankovic & Bogdanovic
Ms. Ivana Vukcevic Mikijelj, Jankovic & Bogdanovic

33
Party Representatives
Ms. Olivera Stanimirovic State Attorney Office of the Republic of
Serbia
Ms. Ksenija Maksic State Attorney Office of the Republic of
Serbia
Mr. Marinko Cobanin State Attorney Office of the Republic of
Serbia
Witnesses
Mr. Vladislav Cvetkovic Director and Markets Leader at PwC
Belgrade Advisory Services, former
director of the Privatization Agency of the
Republic of Serbia
Mr. Dragan Stevanovic State Secretary in the Ministry of
Economy of the Republic of Serbia
Ms. Julijana Vuckovic Chief of Department for Control of
Performance of Agreements and
Supervision of Capital Representative’s
Work, within the Sector for Privatization,
Bankruptcy and Industrial Development
within the Ministry of Economy; former
director of the Center for Control of
Performance of Agreements on Sale of
Capital and Property within the
Privatization Agency of the Republic of
Serbia
Ms. Branka Radovic Jankovic Former deputy director of the
Privatization Agency of the Republic of
Serbia; former special legal advisor and
specific legal advisor to the Director of
the Privatization Agency of the Republic
of Serbia
Experts
Mr. Sandy Cowan Partner at Mazars, former Director at
Grant Thornton UK LLP; Fellow of the
Institute of Chartered Accountants in
England and Wales
Dr. Thomas Papadopoulos 85 Lecturer at the University of Cyprus
Prof. Mirjana Radović Professor at the Faculty of Law,
University of Belgrade
Ms. Danijela Ilic Licensed valuator, employed by Sarufo
d.o.o. and Millennial Consultancy d.o.o.
Prof. Achilles C. Emilianides 86 Professor at the University of Nicosia;
practicing advocate with A&E C.
Emilianides, C. Katsaros and Associates
LLC
85
Participated remotely via Zoom.
34
Government Of Canada Representatives:
Mr. Scott Little Director and General Counsel
Trade Law Bureau
Ms. Heather Squires Deputy Director and Senior Counsel
Trade Law Bureau
Ms. Maria Cristina Harris Counsel
Trade Law Bureau
Court Reporter(s):
Ms. Claire Hill 87
Interpreters:
Ms. Milena Maric,
Ms. Sanja Rasovic
Ms. Vesna Bulatovic
166. During the hearing, the Tribunal heard opening submissions by counsel, asked questions to
the Parties, and heard evidence from the following witnesses and experts:
On behalf of the Claimants:

Mr. William Rand
Mr. Igor Markićević
Mr. Djura Obradović
Mr. Erinn Broshko
Mr. Aksel Azrac
Mr. Robert Jennings
Mr. Miloš V. Milošević
Dr. Richard Hern
Mr. Agis Georgiades Christos Georgiades & Associates LLC
Ms. Bojana Tomić Brkušanin
Mr. Krzystof Grzesik Polish Properties
Mr. Robert J.C. Deane Borden Ladner Gervais LLP
Dr. Uglješa Grušić
On behalf of the Respondent:

Mr. Vladislav Cvetkovic
Ms. Julijana Vuckovic
Mr. Dragan Stevanovic
Ms. Branka Radović Jankovic
Mr. Sandy Cowan Grant Thornton UK LLP
Dr. Thomas Papadopoulos
Prof. Mirjana Radović
Ms. Danijela Ilic
Dr. Achilles C. Emilianides
35
D. Post-Hearing Phase
167. On 30 July 2021, the Tribunal issued Procedural Order No. 12 addressing the post-hearing
matters discussed at the hearing including the Parties post-hearing submissions, transcript
corrections and cost submissions.
168. On 27 August 2021, the Respondent requested leave to submit new documents into the
record. On 6 September 2021, the Claimants opposed the Respondent’s request and
offered to produce additional evidence responsive to the Respondent’s request. On 17
September 2021, the Tribunal granted in part the Respondent’s request and invited the
Claimants to produce the additional evidence offered in their letter of 6 September 2021.
Accordingly, on 20 September 2021, the Respondent filed Exhibits RE-674 to RE-675 and
the Claimants filed Exhibits CE-904 to CE-906.
169. On 21 September 2021, the Claimants requested leave from the Tribunal to introduced five
new documents into the record. On 23 September 2021, the Respondent objected to the
Claimants’ request.
170. On 23 September 2021, the Claimants requested leave from the Tribunal to file two further
documents into the record stating that the Respondent did not oppose their request. On 24
September 2021, in view of the absence of objection against the Claimants‘ request of 23
September 2021, the Tribunal admitted the two new documents.
171. On 24 September 2021, the Claimants requested leave from the Tribunal to introduce a new
document into the record and withdrew their request to submit one of the documents
identified in their request of 21 September 2021. On the same day, the Tribunal invited the
Respondent to provide comments on the Claimants’ request of 24 September 2021 and
denied the Claimants’ request of 21 September 2021, as amended on 24 September 2021.
172. Still on the same day, the Respondent confirmed that it did not object to the Claimants’
request of 24 September 2021. It also indicated that, together with its post-hearing brief, it
would file additional translations of Exhibits RE-13, RE-18, RE-19 and RE-223.
173. On 26 September 2021, pursuant to the Tribunal’s instructions of 24 September 2022, the
Claimants filed Exhibits CE-907 and CE-908. They also confirmed that they did not oppose
the Respondent’s request to introduce additional translations of certain exhibits as long as
those translations were not used to raise new arguments in the post-hearing briefs.
36
174. On 27 September 2021, the Parties filed their respective post-hearing briefs. The Claimants’
Post-Hearing Brief (“C-PHB 1”) was accompanied by Exhibit CE-909, and the Respondent’s
Post-Hearing Brief (“R-PHB 1”) was accompanied by additional translations of Exhibits RE-
13, RE-18, RE-19 and RE-223.
175. On 8 October 2021, the Claimants sought the Tribunal’s leave to admit still further
documents into the record, which the Respondent opposed on 14 October 2021. On 18
October 2021, the Tribunal granted the Claimants’ request following which the latter filed
Exhibits CE-910 and CE-911 on 19 October 2021.
176. On 22 October 2021, the Parties filed their second post-hearing briefs (“C-PHB 2” and “R-
PHB 2”).
177. On 12 November 2021, each Party filed a statement on costs.
178. On 27 November 2021 and 29 November 2021, the Parties submitted their respective
requests for redaction of certain parts of their statement of costs. In view of the Parties’
agreement, the Tribunal instructed the Secretariat to publish the documents as redacted by
the Parties on 1 December 2021.
179. On 23 March 2023, the Claimants amended their request for relief regarding Mr. Rand’s
receivables against BD Agro. On 27 March 2023, the Tribunal invited the Respondent to
submit comments, if any, regarding the Claimants’ communication by 31 March 2023. No
comments were received from the Respondent.
180. On 2 June 2023, the Tribunal declared the proceeding closed.
IV. REQUESTS FOR RELIEF
A. Claimants' Request for Relief
181. In their first post-hearing submission, the Claimants sought the following relief:
“The Claimants request that the Tribunal issues an award:
a. declaring that Serbia has breached the Serbia-Cyprus BIT;
b. ordering Serbia to pay compensation to Sembi of no less than EUR 87.5 million;
37
c. declaring that Serbia has breached the Canada-Serbia BIT;
d. in the alternative to request b. above, ordering Serbia to pay compensation to:
(i) Rand Investments of no less than EUR 16.5 million;

(ii) Ms. Kathleen Elizabeth Rand of no less than EUR 23.7 million, plus a gross-
up of 33.2% on that amount;
(iii) Ms. Allison Ruth Rand of no less than EUR 23.7 million, plus a gross-up of
33.2% on that amount; and
(iv) Mr. Robert Harry Leander Rand of no less than EUR 23.7 million, plus a
gross-up of 33.2% on that amount;
e. in the alternative to request d.(i) above, ordering Serbia to pay compensation to

Mr. William Rand of no less than EUR 16.5 million.
f. in the alternative to requests d.(i) and e., and/or d(ii), d(iii) and d(iv) above,
ordering Serbia to pay compensation to Mr. William Rand of no less than EUR
87.5 million.
g. ordering Serbia to pay compensation to Mr. William Rand:
(i) no less than EUR 3.9 million for loss of value of Mr. Rand’s Indirect
Shareholding; and
(ii) no less than EUR 3.31 million for loss of value of Mr. Rand’s receivables
against BD Agro; 88
h. ordering Serbia to pay interest on any amounts awarded at the rate of Serbian
statutory default interest rate (currently 8%) from 27 September 2021 until
payment in full;
i. ordering Serbia to pay the costs of this proceeding, including costs of legal
representation; and
j. ordering such other relief as the Tribunal may deem appropriate in the
circumstances.” 89
182. These requests remained unchanged thereafter.
B. Respondent's Request for Relief
183. In its reply post-hearing submission, the Respondent sought the following relief:
“Respondent requests the Arbitral Tribunal to
(1) dismiss all Claimants’ claims for the lack of jurisdiction, in eventu, dismiss all
Claimants’ claims for the lack of merit,
88 As modified by the Claimants’ communication of 23 March 2023. See §179 above.

89 C-PHB 1, §353.
38
(2) order Claimants to reimburse Respondent all its costs of the proceedings, with
interest.” 90
184. These requests remained unchanged.
V. PRELIMINARY MATTERS
185. At the outset, the Tribunal wishes to note that, for the reasons set out in his dissenting
opinion, Professor Kohen disagrees with the decisions, as well with the supporting fact
findings and legal analysis dealing with the Tribunal’s jurisdiction over Mr. Rand (§715 (a),
first part), the admissibility of Mr. Rand’s claims (§715(a), second part), the breach of Article
6(1) of the Canada-Serbia BIT (§715 (c)) and, by way of consequence, the award of
damages (§715 (d)). These decisions are thus made by majority.
186. Prior to considering the merits of the Parties’ positions, the Tribunal will address the scope
of this Award (A); the maxim iura novit curia (B); the relevance of previous decisions or
awards (C); and transparency (D).
A. Scope of this Award
187. This Award deals with jurisdiction and with the merits of the claims over which the Tribunal
has jurisdiction.
B. /ura Novit Arbiter
188. When applying the governing law, the Tribunal is not bound by the arguments or sources
invoked by the Parties. Under the maxim iura novit curia – or, better, iura novit arbiter – the
Tribunal is required to apply the law on its own motion, provided always that it gives the
Parties an opportunity to comment if it intends to base its decision on a legal theory that was
not addressed and that the Parties could not reasonably anticipate. 91
90R-PHB 2, §125.
91 Daimler Financial Services A.G. v. Argentine Republic, ICSID Case No. ARB/05/1, Decision on
Annulment, 7 January 2015, § 295 (“[…] an arbitral tribunal is not limited to referring to or relying upon only
the authorities cited by the parties. It can, sua sponte, rely on other publicly available authorities, even if
they have not been cited by the parties, provided that the issue has been raised before the tribunal and the
parties were provided an opportunity to address it”); Albert Jan Oostergetel and Theodora Laurentius v.
The Slovak Republic, UNCITRAL Case (“Oostergetel”), Award, 23 April 2012, § 141; Exh. RLA-161, Metal-
Tech Ltd. v. Republic of Uzbekistan, ICSID Case No. ARB/10/3, Award, 4 October 2013, § 287.
39
C. Relevance of Previous Decisions and Awards
189. In support of their positions, the Parties have relied on previous decisions or awards, either
to conclude that the same or similar approaches or solutions should be adopted in the
present case, or to explain why this Tribunal should depart from an approach or a solution
reached by another tribunal.
190. The Tribunal considers that it is not bound by previous decisions. At the same time, it is of
the opinion that it should pay due consideration to earlier decisions of international tribunals.
It believes that, subject to compelling contrary grounds, it should be respectful of the
reasoning and solutions established in a series of consistent cases. It also believes that,
subject to the circumstances of an actual case, it has a duty to seek to contribute to the
harmonious development of investment law and thereby to meet the legitimate expectations
of the community of States and investors towards certainty of the rule of law.
D. Transparency
191. The Canada-Serbia BIT that applies to Claimants 1 to 5 requires the publication of the
award. 92 By contrast, the Cyprus-Serbia BIT that applies to Claimant 6 contains no rules on
transparency. In Procedural Order No. 5, the Tribunal recalled that Serbia had conditionally
agreed to the publication of the award under the Cyprus-Serbia BIT as well. 93 It went on to
determine that the rules governing transparency in this arbitration would be identical for
claims under both BITs. 94 Those rules were provided in the Transparency Rules annexed
to Procedural Order No. 5.
192. Accordingly, this award shall be made available to the public. Pursuant to the Transparency
Rules, the Parties can notify the Tribunal within 15 days from the issuance of the award if
92 Exh. CLA-1, Agreement between Canada and the Republic of Serbia for the Promotion and Protection
of Investments, Art. 31(1) (“A Tribunal award under this Section shall be publicly available, subject to the
redaction of confidential information. All other documents submitted to, or issued by, the Tribunal shall be
publicly available unless the disputing parties otherwise agree, subject to the redaction of confidential
information.”).
93 PO 5, §25.
94 PO 5, §29. Prof. Kohen’s dissent to PO 5 was appended to that Order.
40
they seek protection of any confidential information in the award. 95 The other Party may then
reply within 15 days, after which the Tribunal will rule.
193. As a result, the Tribunal will remain in office until it has resolved any transparency objections
that the Parties may raise.
194. Finally, the video recordings of the hearings and all documents referred to in Section III of
the Transparency Rules shall, upon completion of the case, continue to be made available
to the public on the ICSID website.
VI. JURISDICTION
195. The Claimants have initiated this ICSID arbitration under two Treaties, the Canada-Serbia
BIT for the Canadian Claimants and the Cyprus-Serbia BIT for the Cypriot Claimant. It is not
disputed that all Claimants must meet the requirements of the ICSID Convention. Further,
the Canadian Claimants must meet the requirements of the Canada-Serbia BIT and the
Cypriot Claimant must meet the requirements of the Cyprus-Serbia BIT.
196. The Tribunal first determines its jurisdiction under the ICSID Convention (A) after which it
reviews its jurisdiction under the BITs (B).
A. Jurisdiction under the ICSID Convention
197. Article 25(1) of the ICSID Convention, which provides for the jurisdiction of the Centre, reads
as follows:
"The jurisdiction of the Centre shall extend to any legal dispute arising directly
out of an investment, between a Contracting State (or any constituent
subdivision or agency of a Contracting State designated to the Centre by that
State) and a national of another Contracting State, which the parties to the
dispute consent in writing to submit to the Centre. […].”
198. Article 25 (1) prescribes four requirements for a tribunal to have jurisdiction under the
Convention: (i) the arbitration must be between a Contracting State and a national of another
Contracting State, (ii) there must be a legal dispute (iii) arising directly out of an investment,
and (iv) the Contracting State and the investor must have consented in writing to ICSID
95 PO 5, Transparency Rules, §16.
41
arbitration. In addition, of course, the ICSID Convention must have been applicable at the
relevant time.
199. Serbia does not dispute that the first requirement related to nationality is satisfied, and rightly
so. This dispute opposes nationals of Canada and of Cyprus, on the one hand, and Serbia,
on the other hand. Serbia, Canada and Cyprus are all Contracting States to the ICSID
Convention. 96
200. Neither does Serbia challenge the second requirement of a legal dispute, again rightly so,
as the dispute concerns Serbia’s alleged breaches of its obligations under the Treaties owed
to the Claimants, which is a legal dispute.
201. By contrast, Serbia does contest the fulfilment of the third and fourth requirements, i.e. that
the Claimants have an investment within the meaning of the ICSID Convention (1); and that
Serbia has consented to ICSID arbitration (2). Serbia also challenges the Claimants’
standing under the ICSID Convention (3).These objections are considered in turn below,
before the Tribunal reaches its conclusion (4).
1. Investment under the ICSID Convention
202. According to the Claimants, their investments in Serbia consist of:
a. For the Canadian Claimants:
a. their beneficial ownership over the Beneficially Owned Shares;
b. their control over BD Agro;
c. their indirect interest in Sembi’s rights under the Sembi Agreement;
d. Mr. Rand’s Indirect Shareholding; and
e. Mr. Rand’s direct payments to BD Agro’s Canadian suppliers for the

purchase and transport of heifers and other payments and loans for
the benefit of BD Agro. 97
96 Exh. CE-104, List of Contracting States to the ICSID Convention, 2018.

97 Rej. J., §III.A; C-PHB 1, §14.
42
b. For the Cypriot Claimant:
a. “Sembi’s rights stemming from the Sembi Agreement.” 98
203. In its review, the Tribunal will group the first three items together (items (a)-(c) above), as
they all relate to the Canadian Claimants’ interest in the Beneficially Owned Shares. With
this clarification, it will examine each of the alleged investments below.
a. Interest in the Beneficially Owned Shares
(1) Respondent’s Position
204. The Respondent argues that the definition of investment under Article 25(1) of the ICSID
Convention is based on four elements contained in the Salini test: the existence of a
substantial contribution by the investor; a certain duration; the assumption of risk, and a
contribution to the host State’s development. It submits that the Claimants’ investments do
not satisfy these requirements. 99
(i) Contribution
205. The Respondent notes that the Claimants’ contributions for the interest they allegedly
acquired in BD Agro through the Beneficially Owned Shares would include (a) the payment
of the EUR 5,549,000 purchase price for the Privatized Shares and (b) the EUR 2 million
additional investment in BD Agro.
206. On (a), i.e. the payment of the purchase price of EUR 5,549,000 for the Privatized Shares,
the Respondent asserts that there is no evidence that such funds were committed by the
Claimants. The money used by Mr. Obradović to pay the purchase price and to invest in BD
Agro was not provided by any of the Claimants. There are no documents such as wire
transfer records or bank account statements that would suggest that the funds used to
purchase BD Agro originated from Mr. Rand, MDH or Sembi. It was Mr. Obradović who
obtained the necessary funds through loans taken from the Lundin Family and paid all of
the instalments of the purchase price.
Rej. J., §454.

98
99C-Mem., §492 relying on Exh. CLA-20, Salini Costruttori S.p.A. and Italstrade S.p.A. v. Kingdom of
Morocco [I], ICSID Case No. ARB/00/4, Decision on Jurisdiction, 31 July 2001, §52.
43
207. Serbia points out that Mr. Rand cannot be considered as an investor simply because he
allegedly “arranged” the loans which Mr. Obradović received from the Lundins. The
Claimants have not explained precisely what Mr. Rand did in this context. Neither have they
furnished any documents despite Serbia’s request. The funds that the Lundins extended to
Mr. Obradović were not Mr. Rand’s funds. Mr. Rand did not even guarantee the repayment
of the loans granted by the Lundins – it was only the 2008 Lundin Agreement that made Mr.
Rand and Mr. Obradović jointly liable for borrowed funds.
208. Serbia further points out that Mr. Obradović paid for the initial instalment of the purchase
price for BD Agro’s acquisition, just as he did for all the other instalments. The first instalment
was paid in October 2005, before Mr. Obradović started receiving funds from the Lundins.
While the Claimants insist that the initial payment was made from funds transferred by the
Lundins to MDH’s bank account in Serbia in September 2005, they have offered no proof of
this allegation. Neither have they tendered any evidence to support their contention that
Mr. Obradović had access to MDH’s account or that he was authorized to use it, let alone
evidence establishing that he actually withdrew funds from that account. The only
“reasonable explanation” says Serbia is that Mr. Obradović used his own money to make
the payment.
209. For Serbia, the repayment of Mr. Obradović’s debts under the 2008 Lundin Agreement
cannot be treated as payment of the purchase price for BD Agro either. It explains its position
as follows: “[t]ransfers that Mr. Rand effectuated through Sembi were the result of his
assumption of Mr. Obradović ’s debt under Article 1 of the 2008 Lundin Agreement. The
purchase price was paid by Mr. Obradović, using funds apparently originating from the
Lundins. Repayment of funds previously borrowed by Mr. Obradović also did not lead to the
injection of new capital in BD Agro or serve to further its business in any way.” 100
210. On (b), i.e. the EUR 2 million additional investment in BD Agro, the Respondent stresses
the absence of evidence in support of the Claimants’ assertion that this contribution was
made by them. The Claimants have not proven that this payment was actually made nor
that it was made by them.
211. Serbia also argues that the Claimants have failed to explain the Lundins’ role in securing
the financing for the Claimants’ investments. The precise role of Mr. Rand is not established
100 R-PHB 1, §157.
44
either. For instance, in the absence of the terms of the financial arrangement between
Mr. Rand, the Lundin Family and Mr. Obradović, it is unclear whether Mr. Rand’s repayment
of Mr. Obradović’s debt to the Lundin Family in 2008 and 2010 should be treated as the
Claimants’ payment of the purchase price for BD Agro on behalf of Mr. Obradović or not. In
any event, funds which Mr. Obradović obtained through the loan from the Lundin Family
were not used to pay the acquisition of BD Agro, and Mr. Rand’s settlement of Mr.
Obradović’s debt cannot be treated as payment of the purchase price. Additionally, the
transfer of money from Mr. Rand to the Lundin Family and their companies is irrelevant
since it did not lead to the acquisition of Mr. Obradović’s shares in BD Agro by Sembi and
the funds were not used for the purpose of furthering BD Agro’s business.
212. Serbia further challenges the Claimants’ view that the monetary contribution of one of them
should count as contribution of each and every Claimant. For instance, they admit that
Sembi’s bank account was used to transfer funds that were “ultimately committed” by
Mr. Rand to the Lundins. The Claimants then claim that the same contribution gives investor
status to Mr. Rand under the Canada–Serbia BIT and to Sembi under the Cyprus–Serbia
BIT. To be investors, both Mr. Rand and Sembi must prove that each of them made a
separate contribution, which is not the case.
213. Serbia adds that Sembi has made no contribution of capital to BD Agro. The repayment of
Mr. Obradović’s loan was effected with funds committed by Mr. Rand. There is no evidence
that Sembi ever paid the remaining instalments of the purchase price under the Sembi
Agreement. Even if it was accepted that Sembi owned the shares in BD Agro, mere
ownership cannot constitute a contribution.
(ii) Duration
214. Serbia submits that the Claimants have not obtained any asset that could be deemed an
“investment” under the two BITs or the ICSID Convention, with the result that there can be
no question of a duration.
(iii) Risk
215. Serbia contends that Mr. Obradović acquired and managed BD Agro, not any of the
Claimants. The funds required for BD Agro’s acquisition were obtained by Mr. Obradović. It
is clear that Mr. Rand’s three children made no commitment of capital or other resources to
45
BD Agro. In the circumstances, in absence of a contribution, the risk that would follow from
the investment does not exist.
(iv) Contribution to development
216. Serbia contends that BD Agro was de facto bankrupt since March 2013 when the company’s
bank account was blocked by its creditors. This was not a result of any actions or omissions
of Respondent, but a consequence of Mr. Obradović’s management. BD Agro generated
losses in almost every year it was managed by Mr. Obradović. In the circumstances, the
Claimants’ “investment” did not contribute to the development of the Republic of Serbia.
This is all the more so as Mr. Obradović’s activities related to BD Agro were illegal and
resulted in criminal prosecution.
217. In addition to the requirements just mentioned, in reliance on Phoenix Action v Czech
Republic, Serbia adds that “it is generally established that access to protection under the
ICSID Convention itself is also restricted by an implicit legality requirement.” 101 It says that
this requirement is not met either in this case.
(2) Claimants’ Position
218. The Claimants insist that this Tribunal should follow the approach of numerous ICSID
Tribunals and conclude, from the absence of a definition of “investment” in the ICSID
Convention, that the ICSID Convention does not impose any jurisdictional requirements
ratione materiae additional to those set forth in the Treaties. However, should the Tribunal
choose not to follow this approach, the Claimants contend that their investments satisfy
even the “broadest of tests” for an investment put forth by any tribunal.
(i) Contribution
219. The Claimants submit that they have made “long-term substantial contributions” to BD Agro
and the Serbian economy including (a) the EUR 5,549,000 purchase price for the
Beneficially Owned Shares, and (b) the EUR 2 million additional investment in BD Agro.
220. According to the Claimants, Serbia’s argument that the purchase price cannot be regarded
as a contribution because Mr. Obradović made payments with loans proceeds from the
101 Rej., §775 relying on Exh. RLA-5, Phoenix Action, Ltd. v. The Czech Republic, ICSID Case No.
ARB/06/5, Award, 15 April 2009.
46
Lundins is ill-conceived. The Lundins started to provide funding on 15 September 2005
when they wired EUR 3.3 million to MDH’s account in Serbia. Mr. Obradović had access to
that account and used part of these funds to pay the first instalment of the purchase price.
Mr. Rand’s assumption, through Sembi, of Mr. Obradović’s EUR 13.8 million debt to the
Lundins and its subsequent repayment (up to EUR 5.6 million) constitutes Mr. Rand’s
contribution. Further, the Privatization Agency expressly confirmed the making of the
additional EUR 2 million investment, and the Claimants have shown that this additional
investment was also financed from the money loaned by the Lundins.
221. The Claimants further submit that, in any event, as Sembi’s direct and indirect co-owners,
all of the Canadian Claimants can benefit from Sembi’s contributions, including those made
prior to Mr. Rand’s children becoming the indirect co-owners of Sembi. An indirect owner of
an investment cannot be excluded from investment protection simply because the
investment in the host country had been made by the holding company before the indirect
owner acquired an interest in the holding company.
222. The Claimants oppose Serbia’s theory that the transfer of money from Mr. Rand to the
Lundin Family and their companies is irrelevant since it did not lead to the acquisition of
Mr. Obradović’s shares in BD Agro by Sembi and the funds were not used for the purpose
of furthering the BD Agro’s business. They point out that if that theory were to be accepted,
an investor buying an existing investment would never be able to satisfy the “contribution”
criterion of the Salini test.
223. The Claimants equally rebut Serbia’s submission that the same contribution cannot count
for both Mr. Rand and Sembi. The channelling of investments through holding companies,
such as Sembi, is commonplace. The contribution made by the holding company is also a
contribution by its shareholder.
(ii) Duration
224. The Claimants contend that the duration of the Claimants’ investment was ten years with
respect to Mr. Rand and seven years for the remaining Claimants. This amply satisfies the
duration requirement.
47
(iii) Risk
225. The Claimants submit that their investment in BD Agro involved not only risks inherent to
the volatile agricultural business, but also significant risks connected with the unpredictable
legal and business environment in Serbia. This suffices to fulfil the “risk” condition.
(iv) Contribution to development
226. The Claimants submit that BD Agro substantially contributed to Serbia’s development. It
was praised by politicians in Serbia and Canada, business partners, and the media, for such
achievement.
(3) Analysis
227. The ICSID Convention does not define the term “investment.” For Serbia, the Tribunal
should ascribe an “objective” definition to that term, while the Claimants consider that the
Tribunal should limit itself to applying the definition of investment contained in the Treaties.
228. To resolve this disagreement, the Tribunal turns to the rules of interpretation of treaties
contained in Articles 31 and 32 of the Vienna Convention on the Law of Treaties (“Vienna
Convention”). Applying those rules, the Tribunal must interpret the term “investment” in
Article 25(1) by giving the term its ordinary meaning, in its context and in light of the object
and purpose of the Treaty. As held by many investment awards, in the ordinary meaning of
the term, an investment is (i) a contribution or allocation of resources, (ii) made for a
duration; and (iii) involving risk, which includes the expectation of a profit (albeit not
necessarily fulfilled). As noted by the tribunal in Saba Fakes, these components “are both
necessary and sufficient to define an investment within the framework of the ICSID
Convention.” 102 The development of the host State’s economy is a consequence of a
successful investment, not a self-standing condition of the latter’s existence. As such, it is
not a component of an investment, an opinion shared by a number of prior investment
awards. 103
102 Exh. CLA-90, Mr. Saba Fakes v. Republic of Turkey, ICSID Case No. ARB/07/20, Award, 14 July 2010,
§§108-110.
103 See, for instance, Exh. CLA-90, Mr. Saba Fakes v. Republic of Turkey, ICSID Case No. ARB/07/20,
Award, 14 July 2010, §111; Exh. RLA-024, Quiborax S.A., Non Metallic Minerals S.A. and Allan Fosk
Kaplún v. Plurinational State of Bolivia, ICSID Case No. ARB/06/2, Decision on Jurisdiction, 27 September
2012, §§224-25; Exh. RLA-095, KT Asia Investment Group B.V. v. Republic of Kazakhstan, ICSID Case
48
229. The Tribunal does not share the view expressed for instance by the Phoenix tribunal
pursuant to which compliance with the laws of the host State and respect of good faith are
elements of the objective definition of investment under Article 25(1) of the ICSID
Convention. Contracting Parties to an investment treaty are free to include these
requirements in their investment treaties, and many do so. This does not mean, however,
that requirements of lawfulness and compliance with good faith are part of the definition of
investment and should thus be implied into Article 25(1) of the Convention, as several
tribunals have observed.
230. In Saba Fakes, for example, the tribunal explained:
“As far as the legality of investments is concerned, this question does not relate
to the definition of ‘investment’ provided in Article 25(1) of the ICSID Convention
and in Article 1(b) of the BIT. In the Tribunal's opinion, while the ICSID Convention
remains neutral on this issue, bilateral investment treaties are at liberty to
condition their application and the whole protection they afford, including consent
to arbitration, to a legality requirement of one form or another.” 104
231. Similarly, the Metal-Tech tribunal held:
“[…] the Contracting Parties to an investment treaty may limit the protections of
the treaty to investments made in accordance with the laws and regulations of the
host State. Depending on the wording of the investment treaty, this limitation may
be a bar to jurisdiction, i.e. to the procedural protections under the BIT, or a
defense on the merits, i.e. to the application of the substantive treaty guarantees.
Similarly, a breach of the general prohibition of abuse of right, which is a
manifestation of the principle of good faith, may give rise to an objection to
jurisdiction or to a defense on the merits.” 105
232. In conclusion, Article 25(1) of the Convention contains no such requirements, and the
Tribunal sees no legal justification for reading them into the Convention. As a consequence,
the Tribunal therefore turns to determine whether the three elements of the objective
definition of investment identified above (§228) are met in this case.
No. ARB/09/8, Award, 17 October 2013, §§171-73; Exh. CLA-067, Deutsche Bank AG v. Democratic
Socialist Republic of Sri Lanka, ICSID Case No. ARB/09/2, Award, 31 October 2012, §295; Exh. CLA-032,
Vestey Group Ltd. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/06/4, Award, 15 April 2016,
§187.
104 Exh. CLA-90, Saba Fakes v. Republic of Turkey, ICSID Case No. ARB/07/20, Award, 14 July 2010,
§114.
105 Exh. RLA-161, Metal-Tech Ltd. v. Republic of Uzbekistan, ICSID Case No. ARB/10/3, Award, 4 October
2013, §127.
49
(i) Contribution
233. The Claimants insist that their contribution towards their investment in Serbia being the
interest they acquired in BD Agro through the Beneficially Owned Shares is the payment of
the EUR 5.5 million purchase price for the Beneficially Owned Shares as well as the EUR 2
million additional investment in BD Agro. Serbia argues to the contrary that these payments
cannot be considered as the Claimants’ contribution because they were made by Mr.
Obradović from loans he had obtained from the Lundins.
234. In the context of the assessment of the existence of a contribution as a prerequisite for an
investment, investment tribunals have long held that contributions to the host State can take
several forms, 106 that the origin of capital is irrelevant, 107 and that the reality of the
contribution is to be assessed taking into account the totality of the circumstances and the
elements of the economic goal pursued. 108
235. In Caratube v. Kazakhstan, 109 for instance, the tribunal observed:
“The Tribunal agrees with Claimant that, subject to express provisions to the
contrary, the origin of capital used to make an investment is immaterial for
jurisdiction purposes. However, there still needs to be some economic link
between that capital and the purported investor that enables the Tribunal to find
that a given investment is an investment of that particular investor.”
236. That tribunal further explained:
106 Exh. RLA-171, Christian Doutremepuich and Antoine Doutremepuich v. Republic of Mauritius, PCA
Case No. 2018-37, Award on Jurisdiction, 23 August 2019, §125 (“Contributions to the host State can take
several forms, not only financial.”). See also, Exh. CLA-67, Deutsche Bank AG v. Democratic Socialist
Republic of Sri Lanka, ICSID Case No. ARB/09/02, Award, 31 October 2012, §297 (“[a] contribution can
take any form [and] […] is not limited to financial terms but also includes know-how, equipment, personnel
and services.”); Bayindir Insaat Turizm Ticaret Ve Sanayi A.S. v. Islamic Republic of Pakistan, ICSID Case
No. ARB/03/29, Decision on Jurisdiction, 14 November 2005, §131.
107 Tradex Hellas S. A. v. Republic of Albania, ICSID Case No. ARB/94/2, Award, 29 April 1999; Exh. CLA-
152, Wena Hotels Limited v. Arab Republic of Egypt, ICSID Case No. ARB/98/4, Award, 8 December 2000;
Exh. RLA-72, Tokios Tokeles v. Ukraine, ICSID Case No. ARB/02/18, Decision on Jurisdiction, 29 April
2004; Saipem S.p.A. v. People’s Republic of Bangladesh, ICSID Case No. ARB/05/7, Decision on
Jurisdiction and Recommendation on Provisional Measures, 21 March 2007; Waguih Elie George Siag and
Clorinda Vecchi v. Arab Republic of Egypt, ICSID Case No. ARB/05/15, Decision on Jurisdiction, 11 April
2007.
Case No. 2018-37, Award on Jurisdiction, 23 August 2019, §125.

109 Exh. CLA-28, Caratube International Oil Company LLP v. Republic of Kazakhstan, ICSID Case No.
ARB/08/12, Award, 5 June 2012, §355.
50
“The capital can come from the investor’s own funds located in any country, from
its subsidiaries or affiliates located in any country, from loan, credit or other
arrangements.”
237. There must thus be an economic link between the funds and the investor which is such that
the contribution made with the funds is that of the investor. What matters is the economic
reality of the contribution in consideration of all the relevant circumstances, not the formal
arrangements used. An investor could very well borrow money from third parties to make
an investment. What matters is that the investor is the one ultimately bearing the financial
burden of the contribution.
238. Here, the facts ranging from the commencement of the privatization process until the
termination of the Privatization Agreement show that Mr. Rand was the one bearing the
financial burden of the investment:
• The MDH Agreement, which was concluded between MDH, Mr. Rand’s
company, and Mr. Obradović on 19 September 2005, gave the former the right
to cause Mr. Obradović to exercise the voting rights attached to the shares of
BD Agro as instructed by Mr. Rand through MDH:
“The Seller [Mr. Obradović] agrees to execute any documents from

time to time in order to acknowledge the claims of the Purchaser herein
and agrees to vote any Shares held by him from time to time at any
Shareholders Meeting of the Company in accordance with instructions
received from the Purchaser [MDH].” 110
• The Board of Directors of BD Agro was to be composed of Mr. Rand’s

nominees:
“The Seller further agrees to cause the Board of Directors of the

Company to consist of those parties nominated or agreed to by the
Purchaser [MDH].” 111
• BD Agro was to be managed in accordance with MDH’s, i.e. Mr. Rand’s,

instructions:
110 Exh. CE-15, Share Purchase Agreement, 19 September 2005, Art.5.

51
“The Seller shall follow the instructions of the Purchaser with regard to
the management of the Company and shall use his best efforts at all
times to enhance the value and income of the Property.” 112
• On the day on which Mr. Obradović acquired the shares of BD Agro through
the privatization process, the Assistant Minister of Economy, Mr. Jovanović,
congratulated Mr. Rand for the “farm acquisition”:
“Dear Bill,
I presume that George has already informed that you all succeeded in
farm acquisition! […] I will coordinate with George our presence at the
farm!” 113
• After the privatization, Mr. Rand was appointed to BD Agro’s Board and
exercised control over its operations. This included receiving financial reports
and discussing BD Agro’s financing needs with senior management, 114
receiving reports on a number of other issues affecting BD Agro, 115 visiting BD
Agro himself to control its operations 116 and communicating with external
consultants and business partners 117 towards whom he presented himself as

113 Exh. CE-16, E-mail from Mr. Ljubiša Jovanović to Mr. William Rand, 29 September 2005. The email
appears to have been sent from Mr. Jovanović’s official email address and signed by him with his official
title (“Assistant Minister, Republic of Serbia, Ministry of Economy”). That Mr. Jovanović was later appointed
as BD Agro’s CEO does not alter these facts.
114 Exhs.CE-622 to CE-637, CE-443, Email from Marine Drive Holdings Inc. to W. Rand and P. Bagnara,
29 December 2006, CE-413, Email from K. Lutz to D. Obradović, 16 November 2006.

115 Exhs. CE-598, Email from BD Agro to W. Rand, 10 January 2008, CE-608, Email from A. Janicić (BD
Agro) to K. Lutz, 20 December 2007, CE-609, Email from Marine Drive Holdings Inc. to W. Rand, 10
January 2008, CE-610, Email from W. Rand to Marine Drive Holdings Inc., 15 February 2006, CE-611,
Email communication between W. Rand and BD Agro, 26 July 2006, CE-605, Email communication
between W. Rand and A. Jorga, 10 August 2006, CE-612, Email from Marine Drive Holdings Inc. to W.
Rand re Sokolac, 10 January 2008, CE-613, Email from L. Jovanović to W. Rand, 27 February 2006, CE-
601, Email from L. Jovanović to W. Rand, 1 June 2006, CE-614, Email from A. Jorga to W. Rand, 1 August
2006, CE-620, Email from A. Jorga to W. Rand, 30 June 2006, CE-608, Email from A. Janicić (BD Agro) to
K. Lutz, 20 December 2007.
116 Exhs. CE-638, Email communication between W. Rand and L. Jovanović, 31 March 2006, CE-414,
Email from W. Rand to D. Obradović et al., 1 September 2006 (“BD Agro is a much more complicated
situation and I will be discussing the financial information and statements with George and Ljubisa when I
get there […] also would like to review, for each company, their financial performance, staffing levels,
business prospects and projected cash flow numbers for the balance of 2006 and for calendar 2007. I also
want to get a complete inventory schedule including book and fair values, a list of all employees, their job
and their salary and a detailed list of all non-current accounts payable and an explanation of their history.”).
117 Exhs. CE-641 to CE-647. See also Exh. CE-649, Email communication between W. Rand and R.
Kovaćević, 19 November 2006 (“have asked my agent in Serbia, Mr. George Obradović, to give you a call
to discuss the business proposals in your letter.”).
52
the owner or operator of BD Agro. 118 This evidence also shows that Mr. Rand
often controlled BD Agro’s operations directly without any involvement from Mr.
Obradović.
• On 22 February 2008, Mr. Obradović and Sembi concluded the Sembi

Agreement in the circumstances described above (§23), Mr. Rand signing the
Agreement on Sembi’s behalf. The Agreement provided that, as of that date,
Mr. Obradović assigned all of his rights, title and interest in the Privatization
Agreement to Sembi. 119 Mr. Rand was always in full control of Sembi120 and
continued to control BD Agro through Sembi. For instance, over the course of
2008-2010, the Board of Directors of Sembi repeatedly discussed BD Agro
matters, 121 including issues such as progress on farm construction work and
118 Exhs. CE-696, Email communication between W. Rand and A. King (EBRD), 10 June 2008, CE-701,
Email communication between W. Rand and L. Rougeau, 16 September 2008, CE-698, Email
communication between W. Rand and T. Smith (Dairy Strategies), 28 July 2008, CE-700, Email from V.
Nedeljković to W. Rand, 22 August 2010.
119 Exh. CE-29, Agreement between Dj. Obradović and Sembi, 22 February 2008, Art. 4 (“Mr. Obradović,
in consideration for [Sembi] assuming such obligations, has agreed to transfer to the Purchaser all his right,
title and interest in and to the [the Privatization Agreement].”).
120 Serbia does not deny that Mr. Rand controlled Sembi. Mr. Markićević, one of Sembi’s directors testified
that he would follow Mr. Rand’s directions when acting as a director of Sembi. See Markićević WS II, §12
(“I agreed with Mr. Rand to always follow his directions when acting as a director of Sembi.”). Mr. Obradović,
another of Sembi’s directors said the same. See Obradović WS II, §39 (“[I] […] agreed that, as director of
Sembi, I would always follow Mr. Rand’s orders.”). See also Mr. Rand’s contemporaneous communications
at Exh. CE-7, Instructions Letter from Rand Investments to HLB Axfentiou Limited, 31 December 2007
(“[A]ll instructions regarding [Sembi] should be accepted only if given by myself, acting /signing singly […]”).
Sembi’s two shareholders are Rand Investments Ltd., a company solely owned by Mr. Rand, and the Ahola
Family Trust, the beneficiaries of which are Mr. Rand’s children. Mr. Rand had an oral control agreement
with Mr. Jennings, the sole trustee of the Ahola Family Trust (see Jennings WS 1, §7 (“My appointment as
trustee was conditioned upon an agreement (the “Control Agreement”) that I had with Mr. Rand that I would,
so long as I was trustee, seek and follow instructions from him in respect of all matters involving the Trust.
I consider this agreement to be enforceable by Mr. Rand against me and I have at all times acted consistent
with this agreement and sought and followed all instructions from Mr. Rand in respect of the Trust.”; see
also Tr., Hearing on Jurisdiction and Merits, Day 2, 123:01-05). While Serbia points out that the Trust
Indenture (Exh. CE-8, The Ahola Family Trust Indenture, 6 March 1995) does not mention Mr. Rand, this
does not change the fact that Mr. Jennings sought and followed Mr. Rand’s directions pursuant to their oral
control agreement. Serbia has not cogently contested the validity of this agreement.
121 Exh. CE-422, Minutes of a meeting of the Board of Directors of Sembi Investment Limited, 12 May 2008,
pp. 1-2; Exh. CE-423, Minutes of a meeting of the Board of Directors of Sembi Investment Limited, 28
November 2008, pp. 1-2; Exh. CE-425, Minutes of a meeting of the Board of Directors of Sembi Investment
Limited, 11 May 2009, pp. 1-2; Exh. CE-426, Minutes of a meeting of the Board of Directors of Sembi
Investment Limited, 27 November 2009; Exh. CE-427, Minutes of a meeting of the Board of Directors of
Sembi Investment Limited, 7 May 2010, p. 1; Exh. CE-191, Minutes of a meeting of the Board of Directors
of Sembi Investment Limited, 12 October 2010, p. 2.
53
the status of BD Agro’s herd and crops. 122 It approved strategic decisions,
including the sale of BD Agro’s land, the acquisition and reconstruction of the
Sokolac farm, and the reconstruction of BD Agro’s premises. 123
• Later in 2008, Mr. Rand paid EUR 2.2 million directly to Canadian suppliers
and vendors for the purchase and transport of heifers from Canada to BD
Agro. 124
• Over the course of 2008 to 2010, Mr. Rand forwarded funds to Sembi that were
then used for partial repayment of Sembi’s debts under the Lundin
Agreement. 125 That Agreement recognizes that, if any payment under that
Agreement was delayed for more than three months, Mr. Obradović and Sembi
(controlled by Mr. Rand) would immediately list BD Agro for sale. 126
• In March 2013, Mr. Rand advised BD Agro’s management, including Messrs.

Obradović, Jovanović, Markićević and Broshko, that Mr. Wood would arrive to
Belgrade in the upcoming week “to take over supervision of cattle and farm
operations and assist [Mr. Jovanović] with all other farm issues” and instructed
them to make appropriate logistical arrangements. 127
pp. 1-2; Exh. CE-423, Minutes of a meeting of the Board of Directors of Sembi Investment Limited, 28
November 2008, pp. 1-2; Exh. CE-425, Minutes of a meeting of the Board of Directors of Sembi Investment
Limited, 11 May 2009, pp. 1-2; Exh. CE-426, Minutes of a meeting of the Board of Directors of Sembi
Investment Limited, 27 November 2009; Exh. CE-427, Minutes of a meeting of the Board of Directors of
Sembi Investment Limited, 7 May 2010, p. 1; Exh. CE-191, Minutes of a meeting of the Board of Directors
of Sembi Investment Limited, 12 October 2010, p. 2.
pp. 1-2.
124 Exh. CE-21, Confirmation of wire transfer from William Rand to Wiljill Farms Inc. for CAD 175,000.00
executed on 3 April 2008; Confirmation of wire transfer from William Rand to Wiljill Farms Inc. for CAD 607,
759.00 executed on 21 October 2008; Confirmation of wire transfer from William Rand to Wiljill Farms Inc.
for CAD 199,816.00 executed on 22 December 2008; Confirmation of wire transfer from William Rand to
Wiljill Farms Inc. for CAD 460,216.00 executed on 24 December 2008.
125 See for e.g., Exhs. CE-57, Confirmation of wire transfer from Sembi to Mr. Ian Lundin for
EUR 1,200,000.00, 16 July 2008, CE-58, Confirmation of wire transfer from Sembi to FBT Avocats for
EUR 2,400,000.00 executed, 16 July 2008, CE-60, Confirmation of EUR 3,610,000.00 wire transfer from
William Rand to Sembi, 3 August 2008, CE-61, Confirmation of EUR 2.010.000.00 wire transfer from
Indonesian Developments Co. Ltd. to Sembi, 13 October 2010. Rand WS I, §33; Azrac WS I, §16.
126 Exh. CE-28, Agreement between Mr. Djura Obradović, The Lundin Family, Mr. William Rand and Sembi,
22 February 2008, Art. 2.

127 Exh. CE-429, Email from W. Rand to BD Agro, 29 March 2013.
54
• In April 2013, Mr. Rand sent BD Agro’s management including Messrs.
Obradović, Jovanović, Markićević and Wood, the agenda for an upcoming
meeting of BD Agro’s Management Board, which included important matters
such as the appointment of Mr. Wood as a member and of Mr. Markićević as
Chairman of BD Agro’s Management Board. 128
• In 2013, Mr. Rand, who was not sitting on BD Agro’s Board at the time, 129
instructed Mr. Obradović to step away from the management of BD Agro.

Further, he caused Mr. Igor Markićević to be appointed as Chairman 130 and
Mr. David Wood as member of the Board of Directors. 131
• In 2013, Mr. Rand directed Mr. Obradović to assign the Privatization

Agreement to Coropi Holdings Limited, 132 a Cypriot company nominally owned
by Mr. Jennings as trustee of the Ahola Family Trust. 133 There was no link
between Mr. Obradović and Coropi, except through Mr. Rand, who was in
control of the Ahola Family Trust.
• In 2014, in the course of BD Agro’s bankruptcy, Serbian state agencies were

informed that BD Agro’s owner was Canadian and that his representative
would like to discuss the pre-pack reorganization plan which was then being
considered. 134
128 Exh.CE-428, Email from W. Rand to L. Jovanović et al., 10 April 2013.

129 Mr. Rand left BD Agro’s Management Board nine months earlier, on 9 July 2012. See Exh. CE-72,
Confirmation of the Serbian Business Register Agency on the Members of Management Board and Board
of Directors of BD Agro, 23 August 2017, p. 4 (pdf).
130 Markićević WS I, §15; WS II §§6-7, Broshko WS II, §§6-12. See also Exh. CE-428, Email from Mr. Rand
to Mr. Obradović, 10 April 2013 (“This will confirm our discussions of this morning that a BD Agro board
meeting will be held at the offices of Crveni Signal tomorrow at 10 am local time. The agreed agenda is as
follows: 1. David Wood is appointed a director to fill the vacancy. 2. Igor Markicevic is appointed Chairman
of the Board of Directors.”).
131 Markićević WS II, §§6-7, 21; Broshko WS II, §§6-12.
132 Rand WS I, §45; Obradović WS I, §37.
133 Exh. CE-83, Certificate of Shareholders in Coropi Holdings Limited, 15 July 2013.
134 Exh. CE-289, Email from Mr. Markićević to Mr. Ristović, 22 April 2014 (“Representative of the owner
from Canada is arriving in Belgrade today and the plan is for him to meet all key creditors whose support
we need to adopt the PPRP.”).
55
239. For the Tribunal, the evidence just reviewed unequivocally demonstrates that Mr. Rand was
the investor involved in BD Agro’s acquisition and operation. Serbia too was aware of
Mr. Rand’s involvement:
• Prior to the privatization of BD Agro, Mr. Rand corresponded with senior

Serbian government officials 135 inter alia indicating his interest in
purchasing BD Agro. 136
• As already mentioned, on the day when Mr. Obradović succeeded in

acquiring the shares of BD Agro through the privatization process, the
Deputy Minister of Economy, Mr. Jovanović, 137 wrote to Mr. Rand to
congratulate him on the acquisition of the farm.
• In 2013, the then Minister of Economy was asked to arrange a meeting with
Mr. Broshko “the representative of the owner of the company BD Agro
Dobanovci from Canada”, for furthering the development plan of BD Agro
and informing Mr. Rand, “who is a majority owner of PD BD Agro.” 138
• At a meeting held on 15 December 2014 with representatives of the

Ministry of Economy 139 and the Privatization Agency 140 to discuss BD
Agro’s breaches of the Privatization Agreement, Messrs. Broshko and
Markićević were recognized as “representatives” of BD Agro not as
representatives of Coropi or of Mr. Obradović. 141 At the time, Mr. Broshko
135 Exh. CE-13, Email from L. Jovanović to W. Rand, 16 May 2005; CE-816; Email from L. Jovanović to W.
Rand, 13 May 2005; Exh. CE-16, E-mail from L. Jovanović to W. Rand, 29 September 2005.
136 Exh. CE-14, Email from W. Rand to P. Bubalo, 4 June 2005 (“While in Belgrade I made two visits to see
the ‘Buducnost’, Dobanovci agricultural operation. […] I would be interested in participating in the auction
sale of the company […].”).
137 Exh. CE-16, E-mail from L. Jovanović to W. Rand, 29 September 2005.
138 Exh. CE-769, Email communication between M. Kostić, S. Radulović and V. Milenković, 18 December
2013, pp. 1-3.

139 Exh. RE-38, Dragan Stevanovic, State Secretary, Ministry of Economy, Neda Galic, Ministry of
Economy, Andrijana Stojkovic, Ministry of Economy, Jasmina Rankovic, Ministry of Economy. See Minutes
of the meeting at the Ministry of Economy, 15 December 2014, p. 1.
140 Exh. RE-38 Branka Radovic Jankovic, Privatization Agency, Julijana Vuckovic, Privatization Agency and
Mira Kostic, Privatization Agency. See Minutes of the meeting at the Ministry of Economy, 15 December
2014, p. 1.
141 Exh. RE-38, Minutes of the meeting at the Ministry of Economy, 15 December 2014, p. 1. While the
English translation of this document uses the word “representative” in singular, at the hearing it was clarified
56
was Executive Director of Rand Investments. More significantly, before the
meeting even began, Ministry officials asked Mr. Obradović – not Rand
Investments’ representative, Mr. Broshko - to leave the room and the
meeting was then held without his presence with Messrs. Broshko and
Markićević.
• As was previously noted, in the course of BD Agro’s bankruptcy, competent

Serbian state agencies were informed that BD Agro’s owner was Canadian
and that his representatives intended to address the pre-pack
reorganization plan then in discussion. 142
240. It is equally clear to the Tribunal that the funds for the acquisition of the Beneficially Owned
Shares came from Mr. Rand. Indeed, it is not disputed that the purchase price of EUR 5.5
million was fully paid. 143 Mr. Obradović did not have funds to finance the acquisition of the
Beneficially Owned Shares himself, 144 and took loans from the Lundin family for the same. 145
Mr. Rand arranged these loans, 146 Mr. Obradović receiving approximately EUR 13.8 million
that the Serbian original uses the word “representatives” in plural. See Tr., Hearing on Jurisdiction and
Merits, Day 4, 12:9-24.
142 Exh. CE-289, Email from Mr. Markićević to Mr. Ristović, 22 April 2014 (“Representative of the owner
from Canada is arriving in Belgrade today and the plan is for him to meet all key creditors whose support
we need to adopt the PPRP.”). For the sake of completeness, the Tribunal notes that some exhibits in the
record might be understood as showing that certain state officials did not know that Mr. Rand controlled BD
Agro (Exhs. CE-320, Letter from BD Agro to the Ministry of Economy and Privatization Agency, 5 November
2014, CE-48, Letter from Mr. Djura Obradović to Privatization Agency, 8 September 2015, and CE-907,
Decision of the Court of Appeal in Belgrade, 26 May 2021). Having reviewed them, it finds that they are
insufficient to displace the evidence just referred to, not to speak of the fact that there is no requirement of
knowledge on the part of the Host State under the Canada-Serbia BIT.
6 January 2012.
144 Obradović WS II, §§7, 19-20.
145 Exh. CE-28, Agreement between Mr. Djura Obradović, The Lundin Family, W. Rand and Sembi, 22
February 2008. The Respondent agrees. See C-Mem, §498. (“The purpose of the [Sembi Agreement] was
to settle [Mr. Obradović’s] debts towards the Lundin Family and it clearly implies that those debts were
acquired in the process of BD Agro’s acquisition.”).
146 Serbia recognizes this. See Respondent’s Opening Presentation, pp. 10,12. See also Rand WS II, §§13,
27, 52, 57; Obradović WS II, §§19-20; Azrac WS I, §12.
57
from the Lundins. 147 Mr. Rand, 148 Mr. Azrac 149 and Mr. Obradović 150 all testify that these
loans were used to fund BD Agro’s privatization. This is also clear from the fact that Mr.
Lundin, a second-generation billionaire, was on BD Agro’s Management Board and the
Lundins’ had an option to convert their receivables into equity. 151 Mr. Rand was liable to
repay the loans 152 and did so by October 2010, 153 after which the sixth instalment of the
purchase price was paid in April 2011. 154 Interest that had accrued because of the delay in
payments of the purchase price was paid even later on 30 December 2011, 155 long after the
Lundins indicated their interest to exit from the project in 2008. 156 Further, under the Sembi
Agreement, Sembi was to make the additional EUR 2 million investment required by the
Privatization Agreement. 157 While Serbia does question whether this payment was made,
the record shows that it was. 158 Monies paid by Sembi were “ultimately committed” by Mr.
Rand, who also personally guaranteed all of Sembi’s and Mr. Obradović’s obligations to the
Lundins. 159 Thus, while Mr. Obradović formally paid the purchase price, he did so with
money originating from a loan that Mr. Rand arranged and was liable to repay. There is thus
a clear economic link between the funds and Mr. Rand, the circumstances showing that the
147 Rej. J., fn. 39. Serbia agrees that “foreign payments” were made to Mr. Obradović’s personal bank
accounts. Rej., §§ 327-328.
148 Rand WS I, §§16-17, §§30-33.
149 Azrac WS I, §§9-16.
150 Obradović WS II, §§19-20 (“[A]ll of the funds used for the acquisition of the Privatized Shares and for
further investment in BD Agro, were secured by Mr. Rand. They were provided to me through loans from
the Lundin family […].”). See also, Obradović WS II, §48.
151 Tr., Hearing on Jurisdiction and Merits, Day 2, 65:5-12 (Azrac). See also Azrac WS, §13; Rand WS I,
§16; Rand WS II, §13.

152 See, for instance, the 2008 Lundin Agreement, which makes Mr. Rand liable for the loans taken from
the Lundins. Exh. CE-28, Agreement between Mr. Djura Obradović, The Lundin Family, W. Rand and
Sembi, 22 February 2008.
153 Rand WS I, §33; Azrac WS I, §16.
154 Exh. RE-33, Banking excerpts confirming payment of installments of purchase price by Mr. Obradović,
15 October 2015.
155 Exh. RE-33, Banking excerpts confirming payment of installments of purchase price by Mr. Obradović,
15 October 2015.
156 Exh. CE-28, Agreement between Mr. Djura Obradović, The Lundin Family, W. Rand and Sembi, 22
February 2008.
157 Exh. CE-29, Agreement between Dj. Obradović and Sembi, 22 February 2008, §3.
158 Exh. CE-18, Confirmation of the Privatization Agency of the Completion of Investment, 10 October 2006.
159 Exh. CE-28, Agreement between Mr. Djura Obradović, the Lundin Family, W. Rand and Sembi, 22
February 2008.
58
payment of the purchase price was his contribution, not that of Mr. Obradović or the
Lundins. 160
241. For the same reasons, the Tribunal rejects Serbia’s argument that the “Claimants have not
adduced contemporaneous evidence that the Lundins’, the Claimants’ and/or Mr.
Obradović’s money was in fact used to finance the Privatization of BD Agro.” 161 The
evidence just reviewed shows that the Lundins’ and then Mr. Rand’s funds were used to
fund BD Agro’s privatization, in exchange for which Mr. Rand acquired an interest in the
Beneficially Owned Shares and exercised control over BD Agro’s operation and
management.
242. The Tribunal also rejects Serbia’s argument that the first instalment of the purchase price of
EUR 2.1 million, made on 15 October 2005, must have been paid with Mr. Obradović’s own
funds because he allegedly received the first payment from the Lundins only on 2 January
2006. The record shown that the Lundins started providing funding on 15 September 2005
when they wired EUR 3.3 million to MDH’s account in Serbia. 162 Mr. Obradović had access
to that account and used a part of these funds to pay the first instalment of the purchase
price. 163 As already explained, Mr. Rand arranged for this loan and later assumed
Mr. Obradović’s entire debt to the Lundins.
243. The Tribunal equally rejects Serbia’s challenges to the payment of four of the remaining five
instalments of the purchase price. To the extent Serbia contests whether these payments
came from the Lundins/Mr. Rand’s monies, this has just been addressed. To the extent that
Serbia also contests that these instalments were paid out of money siphoned out of BD
Agro, this argument is addressed below in the context of Serbia’s legality objections (§§348
et seq.) to the extent necessary.
244. The Respondent appears to question Mr. Rand’s involvement in BD Agro on the basis that
Mr. Obradović concluded certain transactions without the former’s knowledge, pointing
specifically to the land assignment transaction or the loans to Inex and Crveni Signal. At its
February 2008; Rand WS I, §§16-17, §§30-33; Azrac WS I, §§9-16. See also documentary evidence
mentioned at Reply, fn.748.
161 Rej. §327.
162 Exh. CE-384, Confirmation of transfer of EUR 3,312,740 from Mr. Lundin to Marine Drive Holding, 15
September 2005.
163 Rej. J., §476.
59
height, BD Agro was one of the largest dairy farms in the region, with numerous operations.
It would be unreasonable to expect Mr. Rand, the ultimate controller of the farm to be aware
of each of Mr. Obradović’s dealings. That Mr. Rand was unaware of some BD Agro’s
operations does not overcome the wealth of evidence of Mr. Rand’s involvement or his
financial contribution set out above. Mr. Obradović’s testimony that Mr. Rand gave him “a
lot of leeway” in the operations of BD Agro only confirms Mr. Rand’s involvement. 164
245. Neither does the Tribunal see the relevance of Mr. Obradović’s motivation to operate BD
Agro at Mr. Rand’s behest 165 or Mr. Jovanovic’s statement holding Mr. Obradović out as
owner of BD Agro. 166 What matters for the present purposes is that contemporaneous
evidence shows that Mr. Rand was involved in BD Agro, either directly or through Mr.
Obradović, for which he contributed.
246. The Respondent also emphasizes that there is no evidence of any written instructions from
Mr. Rand to Mr. Obradović concerning BD Agro. In this respect, the Tribunal recalls
Mr. Rand’s testimony at the hearing that he gave oral instructions to Mr. Obradović. 167 In
any event, there is evidence of written instructions as well. 168 Anyhow, the absence of written
instructions would not alter the evidence examined above, all of which points to Mr. Rand’s
involvement.
247. Furthermore, Serbia objects that it had no knowledge of Mr. Rand’s control of BD Agro,
which was not disclosed by Mr. Rand, Mr. Obradović or other BD Agro representatives. In
this connection, the Tribunal notes that the BIT does not require that the host State have
knowledge of the foreign nature of an investment and of the identity of the investor at the
164 Tr., Hearing on Jurisdiction and Merits, Day 2, 102:16-19 (Obradović)

165 In this context, the Tribunal recalls that Mr. Obradović testified that he worked for Mr. Rand based on a
success fee which would be paid if Mr. Rand’s investments became profitable. Mr. Rand also advanced
funds to Mr. Obradović’s personal expenses (Obradović WS I, §7; Obradović WS II, §7; Obradović WS III,
§8; Tr., Hearing on Jurisdiction and Merits, Day 2, 85:21-86:21).
166 Rej., §30.
167 Tr., Hearing on Jurisdiction and Merits, Day 2, 6:10-7:13.
168 Tr., Hearing on Jurisdiction and Merits, Day 2, 6:10-7:13. Mr. Rand confirmed that he sent instructions
by email to Mr. Obradović’s address president@bdagro.com. See also Exh. CE- 428, E-mail from Mr. Rand
to Messrs. Markićević, Jovanović, Broshko, and Obradović, 10 April 2013; Exh. CE-429, E-mail from Mr.
Rand to BD Agro, 29 March 2013; Exh. CE-649, Email communication between W. Rand and R. Kovaćević,
19 November 2006 (“have asked my agent in Serbia, Mr. George Obradović, to give you a call to discuss
the business proposals in your letter.”).
60
time of a breach. In any event, as was seen above, the evidence on record shows that
Serbia was aware of Mr. Rand’s control over BD Agro.
248. Similarly, the Tribunal is unconvinced by Serbia’s submission that Mr. Rand’s involvement
in BD Agro’s affairs can be explained away because he was a director and indirectly held a
minority stake in BD Agro. The fact that Mr. Rand was appointed to BD Agro’s board on 9
December 2005 itself suggests that he exercised an element of control over BD Agro. 169 It
is true that Mr. Rand stepped down from the board on 9 July 2012. However, the evidence
examined above demonstrates that he continued to exercise control over BD Agro well after
that date and that his control exceeded the powers of a minority shareholder. For the same
reasons, the Respondent’s speculation that “it is perfectly conceivable that the ultimate de
facto owner or controller of BD Agro was not Mr. Rand but some member of the Lundin
family” 170 does not appear plausible.
249. Finally, Serbia also questions the Lundins’ motives in funding the acquisition of BD Agro, 171
as well as the fact that they decided to abandon the project in 2008. 172 Neither of these
arguments are pertinent to assess the existence of a contribution.
250. The Tribunal thus concludes that Mr. Rand did indeed contribute towards the acquisition of
an interest in BD Agro through investments in Serbia.
251. The contributions of the remaining Claimants are less clear.
252. As far as Claimant 1 is concerned, the Claimants do not allege that Rand Investments
contributed towards the acquisition of an interest in BD Agro through the Beneficially Owned
Shares separately from Mr. Rand’s contributions. 173 For the reasons set out below, the
Tribunal regards this contribution as Mr. Rand’s contribution, not as a separate contribution
of Rand Investment Ltd.
169 He only commenced to acquire the 3.9% stake held through MDH in October 2008.
170 Tr., Hearing on Jurisdiction and Merits, Day 1, 171:23-25.
171 R-PHB 1, §24.
172 R-PHB 1, §§24, 35.
173 Rej. J., §481 et seq.
61
253. For Claimants 3, 4 and 5, i.e. Mr. Rand’s children, the Claimants admit that their
contributions depend entirely on the contributions of (i) Mr. Rand and (ii) Sembi. 174
254. For (i), relying on the decision in Renée Rose Levy de Levi v. Peru, the Claimants contend
that Mr. Rand’s children can rely on contributions made by Mr. Rand. 175 However, the facts
of that case significantly differ from those of the present dispute. The initial investment in
that case was made by the claimant’s relatives and was later transferred to Ms. Levy de
Levi. Neither her father nor any other relative brought claims in the arbitration. By contrast,
here, the Claimants argue that both Mr. Rand and his children made an investment based
on the same contribution. However, the analysis above makes clear that the contribution
was not made by his children or out of the children’s money, which, as mentioned, the
Claimants also accept. Therefore, that contribution cannot be credited to the children. This
may have been different if Mr. Rand and his children had made the contribution jointly.
However, there is no indication on record to this effect. Here, Mr. Rand’s contribution cannot
be used to open access to arbitration to the other claimants who made no contribution.
255. As for (ii), i.e. whether the children can rely on Sembi’s contribution, the preliminary question
that arises is whether Sembi has at all contributed.
256. The Claimants insist that Claimant 6, i.e. Sembi, “made a substantial contribution because
it repaid Mr. Obradović’s loans to the Lundins.” 176 They admit, however, that Mr. Rand
controlled Sembi since February 2008 177 and that it was Mr. Rand, not Sembi, who repaid
174 Reply, §§677-679 (“The remaining Canadian Claimants—Ms. Kathleen Elizabeth Rand, Ms. Allison Ruth
Rand and Mr. Robert Harry Leander Rand—were not required to make any independent contribution. First,
as the beneficiaries of the Ahola Trust (which owned shares in Sembi), Mr. Rand’s children can rely on the
contribution made by Sembi. […] Second, as his children, they can rely on contributions made by Mr.
Rand.”).
175 Reply, §679.
176 Reply, §676.
177 See, for e.g., C-PHB 2, §30 (“Mr. Rand has controlled Sembi at all times since February 2008.”). Mr.
Markićević testified that he would follow Mr. Rand’s directions when acting as a director of Sembi. See
Markićević WS II, §12 (“I agreed with Mr. Rand to always follow his directions when acting as a director of
Sembi.”) and Jennings WS I, §14 (“I have left the management of and control over both Sembi and Coropi
to Mr. Rand”). Mr. Obradović said the same. See Obradović WS II, §39 (“[I] agreed that, as the director of
Sembi, I would always follow Mr. Rand’s orders.”). See also Mr. Rand’s contemporaneous communications
at Exh. CE-7, Instructions Letter from Rand Investments to HLB Axfentiou Limited, 31 December 2007
(“[A]ll instructions regarding [Sembi] should be accepted only if given by myself, acting/signing singly […].”).
62
these loans. 178 All funds paid by Sembi towards the BD Agro project were “ultimately
committed” by Mr. Rand, 179 with Sembi’s bank accounts merely acting as a conduit for such
payments. While Sembi agreed to repay the Lundins in exchange for the latter extinguishing
any claims they may have towards the Privatization Agreement and BD Agro, it was Mr.
Rand who personally guaranteed all of Sembi’s and Mr. Obradović’s obligations to the
Lundins 180 and committed funds for repaying the loans. 181 It was Mr. Rand who was involved
in BD Agro’s acquisition and operation. Sembi has not made any expenditure for the benefit
of BD Agro’s activities nor did it direct or manage BD Agro in any way. It was not involved
in the acquisition of the Beneficially Owned Shares other than through Mr. Rand’s
involvement. In effect, Mr. Rand and Sembi seek protection under two investment treaties
based on one and the same allocation of resources. They both claim that allocation as their
contribution, 182 without proving that it is a joint contribution nor apportioning one part of the
contribution to one and another part to the other or otherwise sharing the allocation. In the
Tribunal’s view, the contribution was either made by one Claimant or by another. 183
257. A similar situation arose in KT Asia v Kazakhstan. There Mr. Ablyazov, a Kazakh national,
acted via a number of foreign intermediaries, unofficially owning and controlling a majority
178 See, for instance, Reply, §625 (“Sembi committed capital in Serbia by repaying the loans of Mr.
Obradović (a Serbian national), owed by him to the Lundin Family for the acquisition of shares in, and
further investment to, BD Agro (a Serbian company). The funds for repaying such loans were provided to
Sembi, and thus ultimately committed, by Mr. Rand.”); C-PHB 2, §3(q) (“In 2008 - 2010, Mr. Rand forwarded
to Sembi the funds that Sembi used for partial repayment of its debts under the Lundins Agreement.”);
Mem., §93.
Sembi, and thus ultimately committed, by Mr. Rand.”).
February 2008.
Sembi, and thus ultimately committed, by Mr. Rand.”); C-PHB 2, §3(q) (“In 2008 - 2010, Mr. Rand forwarded
to Sembi the funds that Sembi used for partial repayment of its debts under the Lundins Agreement.”);
Mem., §93.
182 See, for instance, C-PHB 2, §§74-75 (“Serbia also cannot seriously claim that this contribution [being
“Sembi’s assumption of Mr. Obradović’s EUR 13.8 million debt to the Lundins and its subsequent partial
repayment (up to EUR 5.6 million)”], made by Sembi with funds provided by Mr. Rand, cannot count for
both Sembi and its owners.”). See also Rej. J., §676.
183 While the Claimants insist “the contribution made by the holding company also counts as a contribution
by all of its shareholders” it has advanced no authority in support of its position. C-PHB 2, §75. See also
Rej. J., fn.566 (“This is completely different from a shareholder making a contribution through the holding
company. In such a vertical structure, both the shareholder and the holding company make a contribution.”).
63
interest in the Kazakh BTA Bank. In its analysis, the tribunal first noted that to establish
jurisdiction, KT Asia was attempting to rely on the contribution made by its ultimate beneficial
owner Mr. Ablyazov:
“[T]he real issue is whether KT Asia can at all rely on Mr. Ablyazov’s original
contribution in support of the argument that it itself made an investment. In other
words, the question is whether the Claimant must itself have made a contribution
or whether it can benefit from a contribution made by someone else, here its
ultimate beneficial owner. On this point, the Respondent insists that the
contribution behind the BTA shares was made long ago by entities other than and
unrelated to the Claimant, which did not contribute anything upon acquiring or
while holding these shares.” 184
258. It then went on:
“There may be nothing unlawful in Mr. Ablyazov treating the assets of companies
formally owned by other persons as his personal property. However, he cannot
do so and at the same time argue that the companies should be treated as a
conventional commercial group when it comes to claiming treaty protection. In a
sense, by seeking credit for Mr. Ablyazov's initial contribution, the Claimant [KT
Asia] disavows the separate personality which it invoked previously for purposes
of nationality.” 185
259. Like in KT Asia, here too, Sembi is seeking credit for Mr. Rand’s contribution, thereby
disavowing the separate personality which it invokes for seeking protection under the
Cyprus-Serbia BIT. This cannot be allowed.
260. A parallel can also be drawn with Doutremepuich v. Mauritius. There, the tribunal found that
the payment of EUR 300,000 into the account of a holding company owned jointly by two
claimants were made solely by the first claimant, Christian Doutremepuich. As the second
claimant, Antoine Doutremepuich, had not made a separate contribution, the tribunal
determined that he had not made an investment under the France-Mauritius BIT. 186
184 Exh. RLA-95, KT Asia Investment Group B.V. v. Republic of Kazakhstan, ICSID Case No. ARB/09/8,
Award, 17 October 2013, §192.

Case No. 2018-37, Award on Jurisdiction, 23 August 2019, §§13, 128-130. Although this determination was
made under the France-Mauritius BIT, there too, the tribunal gave the term “investment” in Article 1(1) of
the France-Mauritius BIT the same objective meaning as this Tribunal has given the term “investment” in
Article 25(1) of the ICSID Convention i.e. (i) a contribution to the host State; (ii) of a certain duration; (iii)
that entails participating in the risks of the operation (§§117-118).
64
261. Yet another parallel can be drawn with Orascom v. Algeria. 187 There the tribunal observed
that an investor who controls several entities in a vertical chain could commit an abuse of
right if he impugned the same measures for the same harm relying on different investment
treaties concluded by the same state, as that was contrary to the purpose of investment
treaties. 188 It is true that, unlike in this dispute, in Orascom v. Algeria the entities had brought
separate arbitrations and that the objection turned on abuse of right and admissibility, as
opposed to contribution and jurisdiction. However, there are also multiple similarities and
the ratio underlying Orascom is equally applicable in the present circumstances.
262. Like in Orascom, here too, (i) the group of entities of which the Claimants form part are
organized as a vertical chain; (ii) the entities in the chain were under the control of Mr. Rand,
the ultimate beneficial owner; (iii) the measures complained of by the various entities,
particularly by Mr. Rand and Sembi, are the same; and (iv) the damage claimed by the
various entities is, in its economic essence, the same. While there is no question of an
abuse, it remains that investment tribunals have long guarded against entities in a vertical
chain like the one in the present dispute filing claims under different investment treaties and
counting (or double-counting) the contribution of one entity as that of another in the chain,
in an attempt to confer jurisdiction on several claimants.
263. Here, Mr. Rand’s contribution towards the investment being an interest in BD Agro through
the Beneficially Owned Shares is clear. His contribution confers ratione materiae jurisdiction
on this ICSID tribunal to determine his claims under the Canada-Serbia BIT, provided the
other jurisdictional requirements are met.
264. By contrast, Sembi has made no separate contribution towards this investment and, hence,
cannot claim to have an investment of its own. It follows that, in respect of Sembi, one of
the elements of the definition of investment under Article 25(1) of the ICSID Convention is
not satisfied. Therefore, Sembi has no investment and, therefore, the Tribunal has no
jurisdiction over Sembi’s claims under the Cyprus-Serbia BIT. It does not have jurisdiction
over the claims of Claimants 1, 3, 4 and 5 either. Indeed, as mentioned, these Claimants
187 Exh. CLA-111, Orascom TMT Investments S.à r.l. v. People’s Democratic Republic of Algeria, ICSID
Case No. ARB/12/35, Final Award, 31 May 2017.
Case No. ARB/12/35, Final Award, 31 May 2017, §§542-543.
65
only contributed through Sembi or through Mr. Rand. However, Mr. Rand’s contribution
cannot count as the contribution of every other Claimant.
265. The Tribunal’s conclusion is not affected by the Claimants’ later submission that Sembi
made “another contribution” because Mr. Obradović paid most of the remaining instalments
of the purchase price using funds obtained from BD Agro’s repayment of the shareholder
loans to BD Agro, which loans he had assigned to Sembi under the Sembi Agreement. 189
The Tribunal does not understand this to be a contribution different from the one already
reviewed above concerning the payments of the purchase price. As already explained, while
payments were formally made by Mr. Obradović, he did so with money originating from a
loan that Mr. Rand arranged and was liable to repay. There is a clear economic link between
the funds and Mr. Rand, the circumstances showing that the payment of the purchase price
was his contribution, not that of Mr. Obradović, the Lundins or Sembi.
(ii) Duration
266. As described above, Mr. Rand acquired an interest in BD Agro through the Beneficially
Owned Shares in 2005 when he arranged loans from the Lundin family for Mr. Obradović to
pay the initial instalment of the purchase price. Later, through the Lundin Agreement of
2008, Mr. Rand personally guaranteed all of Sembi’s and Mr. Obradović’s obligations to the
Lundins 190 and subsequently repaid them. 191 The sixth instalment of the Purchase Price was
paid thereafter, as was the interest payable because of late payment of the instalments of
the Purchase Price. Mr. Rand’s involvement continued until 2015 when the Privatization
Agreement was terminated, and the Beneficially Owned Shares were seized. This clearly
meets the duration required under Article 25(1) of the Convention.
267. Serbia argues that the Claimants’ investment lacked a duration because they had not
acquired any assets in Serbia. The argument that the Claimants had no assets in Serbia
has already been rejected above and has thus no bearing in the present context.
189 Rej. J., §482.

190 Exh. CE-28, Agreement between Mr. Djura Obradović, the Lundin Family, W. Rand and Sembi,
22 February 2008.
191 Rand WS I, §33; Azrac WS I, §16.
66
(iii) Risk
268. Mr. Rand’s investment faced the usual business risks involved in investing in a foreign
country. The Tribunal is satisfied that by acquiring an interest in BD Agro through the
Beneficially Owned Shares, Mr. Rand bore the risk inherent in such an investment, namely
the risk that the value of BD Agro might decline. This suffices to fulfil the risk requirement
included in the objective definition of investment under Article 25(1) of the Convention.
269. The Respondent submits that the Claimants bore no risk because they had made no
contribution. Of course, if an investor makes no contribution, it incurs no risk of losing such
(inexistent) contribution. 192 Here, however, the Tribunal has found that Mr. Rand did make
a contribution (§250). He bore the risks associated with that contribution, which, as just
mentioned, meets the requirements of the objective definition of investment under Article
25(1) of the Convention.
b. Mr. Rand’s Indirect Shareholding in BD Agro through MDH Serbia
270. The Claimants contend that they paid EUR 0.2 million to buy Mr. Rand’s Indirect
Shareholding in BD Agro through MDH Serbia between October 2008 and October 2012. 193
Serbia does not dispute that Mr. Rand indirectly owns 3.9% of BD Agro through MDH Serbia.
It does, however, challenge that Mr. Rand paid EUR 0.2 million for this indirect ownership. 194
271. It is well-accepted that the Claimants bear the burden of proving their contribution. 195 It is
also well-accepted that the mere ownership of an asset is no proof of an allocation of
resources. For instance, the tribunal in Quiborax stressed that “mere ownership of a share
is, in and of itself, insufficient to prove a contribution of money or assets.” 196
193 Reply, §673(c).
194 See, for instance, R-PHB 1, §15. (“[S]ome of Claimants’ alleged expenditures still remain undocumented
and unproven. This is, for example, the case […] with the price of EUR 200,000 allegedly paid for MDH
Serbia’s 3.9 % stock in BD Agro.”). See also Rej., §1028 (“is unclear exactly how did Claimants come up
with the price of 200,000 EUR allegedly paid for the shares. No evidence of such payment has ever been
submitted. Since the owner of shares was Mr. Rand’s Serbian company (MDH Serbia), it can be inferred
that it was MDH Serbia that paid for the acquisition of those shares.”).
195 See, for instance, Raymond Charles Eyre and Montrose Developments Limited v. Democratic Socialist
Republic of Sri Lanka, ICSID Case No. ARB/16/25, Award, 5 March 2020, §§298-300.
196 Exh. RLA-24, Quiborax S.A., Non Metallic Minerals S.A. and Allan Fosk Kaplún v. Pliurinational State of
Bolivia, ICSID Case No. ARB/06/2, Decision on Jurisdiction, 27 September 2012, §233.
67
272. Similarly, the Caratube tribunal observed that even if it were assumed that the claimant
Hourani owned the asset in question, the tribunal would still lack jurisdiction as no evidence
of a contribution of any kind was presented:
“[E]ven if Devincci Hourani acquired formal ownership and nominal control over
CIOC, no plausible economic motive was given to explain the negligible purchase
price he paid for the shares and any other kind of interest and to explain his
investment in CIOC. No evidence was presented of a contribution of any kind or
any risk undertaken by Devincci Hourani. There was no capital flow between him
and CIOC that contributed anything to the business venture operated by CIOC.
[…]
Claimant […] insisted that the origin of capital used in investments is immaterial.
This is correct, however, the capital must still be linked to the person purporting
to have made an investment. In this case there is not even evidence of such a
link.” 197
273. The Claimants have proffered no evidence whatsoever of Mr. Rand’s alleged contribution
of EUR 0.2 million to acquire MDH Serbia’s 3.9% stake in BD Agro. Therefore, the Tribunal
must conclude that Mr. Rand’s contribution towards the indirect shareholding in BD Agro is
not established, with the consequence that an element of the definition of the term
investment in Article 25(1) of the ICSID Convention is not met. The Tribunal thus lacks
ratione materiae jurisdiction over this alleged investment.
c. Payments for the benefit of BD Agro
274. The Claimants allege that Mr. Rand made payments of approximately EUR 2.2 million for
the replacement of BD Agro’s herd. In addition, through Rand Investments, Mr. Rand also
paid approximately EUR 160,000 to remunerate the services provided to BD Agro by herd
management experts Messrs. Wood and Calin. The Tribunal is not convinced that these
payments satisfy the duration criteria of the objective definition of investment in Article 25(1)
of the Convention. For instance, the payment of consulting fees by Rand Investments does
not have a significant duration, and the Claimants have not established the contrary.
275. As one of the elements of the objective definition of investment under Article 25(1) of the
ICSID Convention is not met, the Tribunal does not have ratione materiae jurisdiction to
197 Exh. CLA-28, Caratube International Oil Company LLP and Mr. Devincci Salah Hourani v. Republic of
Kazakhstan, ICSID Case No. ARB/13/13, Award, 27 September 2017, §§ 675, 678.
68
entertain claims arising out of these payments. In addition, as seen below, these payments
do not qualify as investments under the Canada-Serbia BIT (§333 et seq.).
d. Sembi’s rights stemming from the Sembi Agreement
276. Mr. Rand and Sembi claim to have made one and the same investment being Sembi’s
acquisition of an interest in the Beneficially Owned Shares. For this investment, they
allocated the same resources as their contribution. 198 As explained above, this contribution
is to be considered as Mr. Rand’s contribution. Sembi, in fact, has made no contribution of
its own. It follows that one of the elements of the definition of investment under Article 25(1)
of the ICSID Convention is not met. The Tribunal thus does not have ratione materiae
jurisdiction to determine Sembi’s claims.
e. Conclusion on the existence of an investment under the ICSID

Convention
277. It follows from the foregoing discussion that the Tribunal has jurisdiction ratione materiae
under the ICSID Convention over the claims brought by Mr. Rand under the Canada-Serbia
BIT in respect of his interest in the Beneficially Owned Shares but lacks jurisdiction over his
claims in respect of his payments for the benefit of BD Agro and his indirect shareholding in
BD Agro. It also lacks jurisdiction under the ICSID Convention over the claims of Claimants
1, 3, 4 and 5 brought under the Canada-Serbia BIT. Finally, the Tribunal lacks jurisdiction
under the ICSID Convention over the claims brought by Sembi under the Cyprus-Serbia
BIT.
2. Consent
278. It is undisputed that Serbia has agreed to arbitrate disputes arising under the Canada-Serbia
BIT. However, Serbia contests having given its consent to arbitrate this specific dispute
pursuant to that Treaty, which the Tribunal examines below (§§348 et seq.).
198 See, for instance, C-PHB 2, §§74-75 (“Serbia also cannot seriously claim that this contribution [being
“Sembi’s assumption of Mr. Obradović’s EUR 13.8 million debt to the Lundins and its subsequent partial
repayment (up to EUR 5.6 million)”], made by Sembi with funds provided by Mr. Rand, cannot count for
both Sembi and its owners.”). See also Rej. J., §676.
69
3. Standing under the ICSID Convention
279. Serbia contends that “[i]n order to have ius standi under the ICSID Convention, Claimants
must own an investment which would be a basis of jurisdiction of an ICSID tribunal.” 199
Additionally, it points out that all claims raised in this arbitration are based on the incorrect
assumption that the Privatization Agency illegally terminated the Privatization Agreement.
That Agreement was concluded with Mr. Obradović, not with Mr. Rand. Therefore, relying
on LESI-Dipenta, Serbia argues that the “Claimants do not have jus standi to advance those
claims before the Tribunal, since the Tribunal ‘cannot go into the substance of a claim if that
claim is submitted to the Tribunal by a legal entity that is not bound by the Contract on which
the claim is based.’” 200
280. The Tribunal has trouble following this argument. The ICSID Convention does not require
an investor to be a party to all contracts relevant to the dispute. Mr. Rand invokes breaches
of the Privatization Agreement only to the extent they constitute or evidence a breach of the
Canada-Serbia BIT. It is a different question whether Mr. Rand holds substantive rights
which Serbia has infringed. That is a question for the merits.
4. Conclusion on jurisdiction under the ICSID Convention
281. It follows from the foregoing that this Tribunal only has jurisdiction under the ICSID
Convention over the claims brought by Mr. Rand pursuant to the Canada-Serbia BIT in
respect of his interest in the Beneficially Owned Shares. Accordingly, in the following
sections, the Tribunal only discusses Serbia’s jurisdictional arguments relevant to these
claims.
B. Jurisdiction under the Canada-Serbia BIT
282. The Tribunal first sets out the legal framework relevant to its jurisdiction under the Canada-
Serbia BIT (1) after which it examines Serbia’s jurisdictional objections ((2)-(5)).
199C-Mem., §482.
200Rej., §1039 quoting Exh. RLA-98, Consortium Groupement L.E.S.I.- DIPENTA v. République algérienne
démocratique et populaire, ICSID Case No. ARB/03/08, Sentence, 10 January 2005, part II, §41 (English
Translation from ICSID website), part II, §37(iv).
70
1. Legal Framework
283. Article 2 of the Canada-Serbia BIT addresses the scope of application of the Treaty in the
following terms:
“1. This Agreement shall apply to measures adopted or maintained by a Party

relating to:
(a) an investor of the other Party; and

(b) a covered investment.
2. The obligations in Section B apply to a person of a Party when it exercises a

regulatory, administrative or other governmental authority delegated to it by that
Party.”
284. Serbia’s consent to arbitrate disputes with Canadian nationals is included in Article 24(1)(a)
of the Canada-Serbia BIT:
“1. An investor that meets the conditions precedent in Article 22 may submit a
claim to arbitration under: (a) the ICSID Convention, provided that both Parties
are parties to the ICSID Convention […].”
285. Article 22 of the Canada-Serbia BIT, to which the dispute resolution clause just quoted refers
contains several “conditions precedent” to arbitration and reads as follows:
“Conditions Precedent to Submission of a Claim to Arbitration
1. The disputing parties shall hold consultations and attempt to settle a claim
amicably before an investor may submit a claim to arbitration. Unless the
disputing parties agree to a longer period, consultations shall be held within 60
days of the submission of the notice of intent to submit a claim to arbitration
under subparagraph 2(c). The place of consultation shall be the capital of the
respondent Party, unless the disputing parties otherwise agree.
2. An investor may submit a claim to arbitration under Article 21 only if:
(a) the investor and, where a claim is made under Article 21(2), the
enterprise, consent to arbitration in accordance with the procedures set out
in this Agreement;
(b) at least six months have elapsed since the events giving rise to the
claim;
(c) the investor has delivered to the respondent Party a written notice of its
intent to submit a claim to arbitration at least 90 days prior to submitting the
claim, which notice shall specify:
(i) the name and address of the investor and, where a claim is made
under Article 21(2), the name and address of the enterprise,
71
(ii) the provisions of this Agreement alleged to have been breached
and any other relevant provisions,
(iii) the legal and the factual basis for the claim, including the
measures at issue, and
(iv) the relief sought and the approximate amount of damages
claimed;
(d) the investor has delivered evidence establishing that it is an investor of

the other Party with its notice of intent to submit a claim to arbitration under
subparagraph 2(c);
(e) in the case of a claim submitted under Article 21(1):
(i) not more than three years have elapsed from the date on which
the investor first acquired, or should have first acquired, knowledge
of the alleged breach and knowledge that the investor has incurred
loss or damage thereby,
(ii) the investor waives its right to initiate or continue before an
administrative tribunal or court under the domestic law of a Party, or
other dispute settlement procedures, proceedings with respect to the
measure of the respondent Party that is alleged to be a breach
referred to in Article 21, and
(iii) if the claim is for loss or damage to an interest in an enterprise of
the respondent Party that is a juridical person that the investor owns
or controls directly or indirectly, the enterprise waives the right
referred to under subparagraph (ii);
[…]
4. The disputing investor or the enterprise shall deliver the consent and waiver
required under paragraph 2 to the respondent Party and the investor shall
include them in the submission of a claim to arbitration. A waiver from the
enterprise under subparagraphs 2(e)(iii) or 2(f)(ii) is not required if the
respondent Party has deprived the investor of control of the enterprise.”
286. Accordingly, as a first condition, Article 22(2)(a) requires that the investor “consent to
arbitration in accordance with procedures set out in this agreement.” Serbia does not contest
that by filing their Request for Arbitration, the Canadian Claimants consented to arbitration
in accordance with the Canada-Serbia BIT.
287. Second, Article 22(2)(b) requires that six months have elapsed since the events giving rise
to the claim. In addition, Article 22(2)(e) stipulates that not more than three years must have
elapsed from the date on which the investor first acquired, or should have first acquired,
knowledge of the alleged breach and knowledge that the investor has incurred loss or
72
damage thereby. Serbia challenges the Tribunal’s “ratione temporis” jurisdiction on this
basis. 201
288. Third, Article 22(2)(c) of the Canada-Serbia BIT provides that the investor must deliver a
notice of intent to resort to arbitration at least 90 days prior to submitting the claim. Pursuant
to Article 22(2)(d), such notice must include evidence that the investor is an “investor of the
other Party.” Serbia does not put into question that the Notice of Dispute served on Serbia
on 8 August 2017 met this condition.
289. Before examining the “ratione temporis” objection just identified ((4) below), the Tribunal first
examines Serbia’s challenges the Tribunal’s jurisdiction “ratione materiae” ((2) below) and
“ratione voluntatis” ((3) below). In reviewing these objections, the Tribunal has borne in mind
the Claimants’ investment structure reproduced above (§21).
2. Investment
290. For the reasons mentioned above, only Mr. Rand’s investments related to the Beneficially
Owned Shares ((a) below) and his payments for the benefit of BD Agro ((b) below) remain
to be considered. Serbia’s objections to the Tribunal’s ratione materiae jurisdiction in respect
of these alleged investments are considered below.
a. Interest in the Beneficially Owned Shares
291. Relying on Article 1 of the Canada-Serbia BIT, Serbia contends that the Tribunal’s
jurisdiction depends on the Claimants’ ability to prove that it held an investment as defined
in Article 1 of the Treaty. In addition, the Claimants must show that they owned or controlled
that investment. Here, says Serbia, the Claimants have failed on both counts.
292. Serbia opposes the Claimants’ view that their investment falls under multiple categories of
investments listed in the Treaty’s definition of “investment” under (a) to (j), in particular (a)
(enterprise), (b) (share or other equity participation), (f) (interest in an enterprise), and (h)
(interest arising from a commitment of resources). In respect of the Claimants’ submission
201 See, for instance, C-Mem., §377 (“Respondent respectfully submits two separate ratione temporis
objections. The first ratione temporis objection is based on Article 22 of the Canada – Serbia BIT. The
second is based on the general principle of non-retroactivity envisaged by general international law and
Article 28 of the Vienna Convention on the Law of Treaties (VCLT) in relation to Article 42 of the BIT.”).
73
that their investment falls within Article 1(h), Serbia contends that the Canadian Claimants
did not acquire any “indirect interest” in Sembi’s rights under the Sembi Agreement, and that
it is not clear how these Claimants could have acquired such rights without having any title
on BD Agro’s shares. Further, the Claimants have not explained to which precise interests
they refer. Contractual rights and obligations obviously belong to the contract parties. The
Canadian Claimants were not parties to the Sembi Agreement and acquired no contract
rights thereunder which could be regarded as an investment under Article 1. In any event,
even if the Canadian Claimants acquired “indirect” contract interests in the Sembi
Agreement, such acquisition would naturally depend on the validity of the Agreement. As
explained below, the Sembi Agreement was null and void and therefore, could not be the
basis of a transfer of interest from Mr. Obradović to Sembi.
293. Serbia further submits that even if the Sembi Agreement were considered lawful and could
give rise to rights for Sembi (quod non), it remains that the Canadian Claimants would still
not be entitled to make a direct claim based on Sembi’s contract rights. Investment tribunals
have repeatedly held that investors do not have standing to assert claims based on the host
State’s treatment of the contracts and assets of the company in which the investor holds
shares. 202
294. Moreover, Serbia argues that the Sembi Agreement, which purported to transfer Mr.
Obradović’s shares in BD Agro to Sembi is invalid as it contravenes the Privatization
Agreement. Indeed, Article 5.3.1 of the Privatization Agreement precludes Mr. Obradović
from selling, assigning or otherwise alienating his shares in BD Agro for two years from the
date of the Agreement. The provision prohibits all kinds of disposition of shares. It does not
allow Mr. Obradović to alienate the attributes of ownership, merely keep nominal title to the
shares.
295. Serbia also contends that the Sembi Agreement breaches the Law on Privatization,
specifically Article 41(ž), which prohibits any assignment without the prior authorization of
the Privatization Agency. It denies the Claimants’ argument that Article 41(ž) is inapplicable
because the Sembi Agreement does not include the Agency as a contracting party. In
Serbia’s submission, this argument is “plainly absurd” as it would mean that no assignment
would be covered by Article 41(ž), as long as the assignment contract did not mention the
202 Rej., §738, citing Exh. RLA-79, ST-AD GmbH v. Republic of Bulgaria (UNCITRAL), PCA Case No. 2011-
06, Award on Jurisdiction, §278.
74
Agency or the requirement for prior authorization from the Agency. The Claimants also assert
that the purpose of the Sembi Agreement was to transfer Mr. Obradović’s rights and
obligations under the Privatization Agreement without assigning the Privatization Agreement
itself. For the Respondent, this interpretation according to which any contract right and
obligation is freely assignable as long as the nominal position of a contract party remains
unchanged is “downright preposterous.” Article 41(ž) would be meaningless if it were read
to prohibit only an assignment of nominal title.
296. Furthermore, the Respondent contends that the Claimants’ argument that Sembi Agreement
is both a contract for the sale of shares and an assignment cannot be accepted. The Sembi
Agreement “creatively” evolves from an assignment to a sale and back, in order to produce
the intended effects under Cypriot law and, at the same time, avoid any prohibition of
Serbian law. In any event, even if correct, this argument would not assist the Claimants. In
Serbian law, ownership in shares is acquired and transferred through the registration of the
new owner in the Central Securities Registry. Separate transfer of beneficial title is
impossible. The Sembi Agreement thus could not result in an ownership change. If the
Sembi Agreement were considered a sale of shares, it would still contradict mandatory
Serbian law that prohibits trade of shares of public joint stock companies outside the stock
exchange. In addition, the Agreement is invalid because of Article 359 of the 2011 Law on
Companies, pursuant to which the agreement of a shareholder to vote according to
instructions of a member of the board of directors is void.
297. Serbia also rejects the Claimants’ position that under Cypriot law a prohibited or restricted
assignment can still produce valid effects between the assignee and the assignor, if the
assignment is not void for reasons of illegality or public policy. It notes that, under Section
23 of Cypriot Contract Law, a contract with an object that is, it forbidden by law or would
defeat the law, is null and void and produces no effects. Since the Sembi Agreement violates
Article 41(z) of the Privatization Law, and, if allowed, would defeat the purpose of that norm,
is null and void. In any event, rights under a contract are assignable in equity under Cypriot
law only if the change in the identity of the obligor makes no difference to the obligee. This
is not the case here. For Serbia, “[t]he fact that the contract could have been concluded only
with Mr. Obradović as the winner of the public auction and that Mr. Obradović, based on his
Serbian citizenship, was given the option unavailable to the assignee (Sembi) – to pay the
purchase price in annual instalments – demonstrate [….] that personal characteristics of the
75
Agency’s counterparty were so important to the Agency as to prevent the assignment without
its consent.” 203
298. Moreover, Serbia disputes the Claimants’ interpretation that the Sembi Agreement
transferred legal title in rights and assets that could be transferred on the date of the
agreement and beneficial title to those rights and assets whose transfer required additional
steps or third-party consent. The word “together” used in Article 4 of the Sembi Agreement
connecting the transfer of the Privatization Agreement and that of other assets related to BD
Agro’s business held by Mr. Obradović shows that the transfer of such other assets was
meant to follow as a result of the transfer of the Privatization Agreement, and not separately
and independently.
299. The Claimants are wrong, so says Serbia, in relying on the subsequent conduct of Sembi
and Mr. Obradović to allege that they intended for the beneficial interest in the shares to
pass to Sembi immediately after the conclusion of the Agreement. First, Cypriot law does
not confirm that interpretation. Second and in any event, the documents on which the
Claimants rely, particularly its 2008 financial statements and 2008 income declaration are
questionable as evidence. Third, the Claimants and Mr. Obradović’s conduct indicates that
they considered the Sembi Agreement “nonexistent.” The Coropi Agreement of 2013
stipulates that Mr. Obradović’s shares in BD Agro would be transferred to Coropi, including
his “right of management, participation in profit, […] right to a part of the liquidation mass,
proportionately to the amount of purchased capital”, as well as “[t]he right to free disposal of
purchased capital […]”, entirely omitting to mention that Sembi (and not Mr. Obradović) was
the purported owner or beneficial owner of those shares. Fourth, Mr. Obradović continued
to act as BD Agro’s owner even after the Sembi Agreement. For instance, funds obtained
by Crveni Signal from the 2010 Loan were eventually transferred to Mr. Obradović’s
personal bank accounts in the period starting from December 2010, nearly three years after
the conclusion of the Sembi Agreement. Finally, there is no proof that Sembi ever fulfilled
its obligations under the Sembi Agreement, including taking over the EUR 4.8 million debt
of Mr. Obradović’s mentioned there.
203 R-PHB 1, §80.
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300. The Claimants insist that their investment falls within multiple categories of investment listed
in sub-articles (a) to (j), including sub-articles (a)(b)(f) and (h) of the Canada-Serbia BIT. 204
In the Claimants’ submission, they only need to establish that their alleged investments fall
within the ambit of any one asset listed in Article 1 of the Canada-Serbia BIT. 205 Further, as
the Canada-Serbia BIT expressly applies to investments “directly or indirectly owned or
controlled” by Canadian nationals, even those investments indirectly controlled by the
Canadian Claimants would fall within the scope of the Treaty.
301. The Claimants submit that the rights stemming from the Sembi Agreement qualify as an
investment under sub-article (h) of the Canada-Serbia BIT. Sembi committed capital in
Serbia by repaying the loans taken by Mr. Obradović from the Lundin family for the
acquisition of BD Agro’s shares and for investments in BD Agro’s operations. The funds for
repaying such loans were provided to Sembi, and thus ultimately committed by Mr. Rand.
302. The Claimants reject Serbia’s assertion that Serbian law governs the assignment of
equitable rights in the Beneficially Owned Shares. They argue that the parties to the Sembi
Agreement were free to choose the governing law and chose Cypriot law. The result is that
Cypriot law governs the relationship between Mr. Obradović and Sembi. Serbian law only
applies to the transfer of legal title in the Beneficially Owned Shares.
303. The Claimants also dispute Serbia’s allegation that the Sembi Agreement conflicts with
Article 41(ž) of the Law on Privatization and is thus null and void. Cypriot law, which is the
law of the contract, recognizes the transfer of interest as valid and enforceable. Even if
Article 41(ž) were considered mandatory and would thus override Cypriot law, the outcome
would be the same. Pursuant to Cypriot law, even if an assignment is not effective against
the debtor (Serbia), it produces effects between the assignee (the Claimants) and the
assignor (Mr. Obradović).
204See, for instance, Reply, §§625, 630, Rej. J., §446, C-PHB 1, §61.
205C-PHB 1, §14 (“The Claimants’ investments are protected in three distinct capacities: (i) their beneficial
ownership over the Beneficially Owned Shares, (ii) their control over BD Agro, and (iii) their interest in
Sembi’s rights under the Sembi Agreement. Even one would be sufficient to trigger the protections of the
BITs.”).
77
304. Further and again in any event, according to Serbian law, the notion of assignment is
narrower than under Cypriot law. It only denotes a transfer of legal title. Under the Sembi
Agreement, legal title to the assets which could be transferred to Sembi without the need
for additional documents, did vest in Sembi immediately upon conclusion. For those assets
for which additional steps were required, beneficial ownership passed immediately. Since
the immediate transfer contemplated in the Agreement does not qualify as an assignment
under Serbian law, it cannot trigger the application of Article 41(ž). In addition, the
Privatization Agreement was not “assigned” to Sembi, as Serbia would have it, because Mr.
Obradović remained the party to the Privatization Agreement. There was thus no need for
the Privatization Agency’s approval. When the Claimants intended to assign the
Privatization Agreement to Coropi, they indeed asked for the Agency’s approval (which was
arbitrarily withheld).
305. Fourth, the Respondent’s witnesses admitted that shares could be “alienated” separately
from the Privatization Agreement itself. Nothing prevented Mr. Obradović from transferring
the Beneficially Owned Shares to Sembi independently of the Privatization Agreement,
which is what he did through the Sembi Agreement.
306. The Claimants also challenge Serbia’s argument that contracts cannot be assigned to a
third party when the identity of the original party is of particular importance. It stresses that
Serbia has not cited any authority for this proposition. This is all the more revealing
considering that Serbia’s experts testified that, even when the identity of the contract party
matters, the economic benefit of the contract can be assigned to a third party. In any event,
even if such a requirement existed (quod non), senior officials in the Serbian government
and the Privatization Agency were aware of Mr. Rand’s involvement.
307. The Claimants further submit that both the terms of the Sembi Agreement and the Parties’
subsequent conduct confirm that they understood that the Sembi Agreement transferred
equitable rights over the Beneficially Owned Shares to Sembi. At the outset, the Claimants
submit that the terms of the Agreement, particularly Article 4, are “clear and unambiguous”
and cover the transfer of equitable rights over the Beneficial Owned Shares. There is thus
no need to look any further to determine the Parties’ intent. However, even if the Tribunal
were to do so, it would only confirm this position. The effective parties to the Sembi
Agreement, i.e. Messrs. Obradović and Rand, attest that they intended to transfer beneficial
ownership in the Beneficially Owned Shares through the Sembi Agreement. This fact is
78
evident from the conduct of the parties to the Sembi Agreement. Indeed, immediately after
signing the Sembi Agreement, Sembi became involved in BD Agro’s affairs and discussed
those affairs at meetings of the Board of Directors. Sembi also recorded its beneficial
ownership of the Beneficially Owned Shares in its 2008 financial statements.
(3) Analysis
308. Article 2 of the Canada-Serbia BIT reproduced above (§283) sets out that the Treaty applies
to measures adopted by a Party relating to an investor of the other Party and a covered
investment.
309. Article 1 of the Treaty defines a “covered investment” in the following terms: 206
“‘covered investment’ means, with respect to a Party, an investment in its

territory that is owned or controlled, directly or indirectly, by an investor of the
other Party existing on the date of entry into force of this Agreement, as well as
an investment made or acquired thereafter.”
310. The same BIT provision gives the following definition of an investment:
“‘investment’ means:
(a) an enterprise;
(b) a share, stock or other form of equity participation in an enterprise;
(c) bond, debenture or other debt instrument of an enterprise;
(d) a loan to an enterprise;
[…]
(f) an interest in an enterprise that entitles the owner to share in income or profits
of the enterprise;
(g) an interest in an enterprise that entitles the owner to share in the assets of
that enterprise on dissolution;
(h) an interest arising from the commitment of capital or other resources in the
territory of a Party to economic activity in that territory, such as under: […] (ii) a
contract where remuneration depends substantially on the production, revenues
or profits of an enterprise
[…].”
of Investments, 27 April 2015.
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311. The Tribunal will first examine whether Mr. Rand had an investment (i) under the Canada-
Serbia BIT, and, if so, whether it was a covered investment (ii).
(i) Investment
312. The Claimants argue that their investment falls within several categories of investment listed
in sub-articles (a) to (j), in particular sub-articles (a)(b)(f) and (h). 207 They insist that it is
sufficient for their investment to correspond to one of the categories mentioned in Article 1.
313. The Tribunal considers that Mr. Rand’s investment falls within the ambit of Article 1(h) of the
Treaty i.e. “an interest arising from the commitment of capital or other resources in the
territory of a Party to economic activity in that territory.” Indeed, each of the requirements of
Article 1(h) are satisfied in this case:
(a) Interest
314. To qualify as in investment under Article 1(h) of the Serbia-Canada BIT, there must first be
an “interest.” This term is undefined. As it appears in an international treaty, it must be
interpreted in accordance with the Vienna Convention by giving the term its ordinary
meaning, in its context and in light of the object and purpose of the Treaty. The term
“interest” has a wide range of meanings from “wanting to be involved with and to discover
more about something” to “something that brings advantages to or affects someone or
something” among others. 208 In an economic sense, “interest” is understood as “money that
is charged, esp. by a bank, when you borrow money, or money that is paid to you for the
use of your money” and “an involvement or a legal right, usually relating to a business or
possessions.” In the context of Article 1 and the definition of investment, it is this latter
connotation that is relevant. Any involvement or legal right would thus suffice to constitute
an “interest” in its ordinary meaning. That the term is to be interpreted broadly is also evident
from its context: items (i) and (ii) in sub-article (h) recognize that an interest can arise out of
a broad range of contracts (“contract involving the presence of an investor’s property in the
territory of the Party”; “contract where remuneration depends substantially on production,
revenues, or profits of an enterprise”). Moreover, Articles 1(k) and (l) recognize that all types
of investments listed in Articles 1(a)-(h) are “kinds of interests”, once again making clear
207 See, for instance, Reply, §§625, 630, Rej. J., §446, C-PHB 1, §61.
208 Cambridge Dictionary, available at https://dictionary.cambridge.org/dictionary/english/interest.
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that the term is to be understood broadly. 209 Thus, shares, bonds, loans, are all interests
that are protected by the Treaty as is any contractual right relating to a business. 210
315. Through the Privatization Agreement, Mr. Obradović acquired “70% of the socially owned
capital” of BD Agro, i.e. the Privatized Shares and later the New Shares 211 with “all rights
and obligations, pursuant to the law and provisions of this agreement.” 212 He then entered
into the Sembi Agreement, through which Sembi assumed all of his obligations, including
payments owing to the Privatization Agency and the repayment of the loans provided by the
Lundins. 213 On his part, Mr. Obradović agreed to assign “all his right, title and interest” in the
Privatization Agreement to Sembi, as referred in Article 4 of the Sembi Agreement:
“Mr. Obradović , in consideration for [Sembi] assuming such obligations, has

agreed to transfer to [Sembi] all his right, title and interest in and to the
[Privatization Agreement]. Mr. Obradović agrees to sign any such documents
of Investments, 27 April 2015, Art. 1 (“but ‘investment’ does not mean: (k) a claim to money that arises
solely from: (i) a commercial contract for the sale of a good or service by a national or enterprise in the
territory of a Party to an enterprise in the territory of the other Party, or (ii) the extension of credit in
connection with a commercial transaction, such as trade financing; or (l) any other claim to money; that
does not involve the kinds of interests set out in subparagraphs (a) to (j).”).
210 Arbitral tribunals have also recognized several different types of “interests” as investments. See, for
instance, Claimants’ Opening Presentation, pp. 182, 183 referring inter alia to Exh. CLA-5, Occidental
Petroleum Corporation and Occidental Exploration and Production Company v. The Republic of Ecuador,
ICSID Case No. ARB/06/11, Decision on Annulment of the Award, 2 November 2015, §272 (“[n]either the
international law principles nor the Committee’s decision imply that investors holding beneficial ownership
are left unprotected from interferences by host States. Such investors will enjoy protection granted under
the treaties which benefit their nationality.”). See also Exh. RLA-193, Venezuela Holdings, B.V., et al. (case
formerly known as Mobil Corporation, Venezuela Holdings, B.V., et al.) v. Bolivarian Republic of Venezuela,
ICSID Case No. ARB/07/27, Decision on Jurisdiction, 10 June 2010, §165 (“The definition of investment
given in Article 1 is very broad. It includes ‘every kind of assets’ and enumerates specific categories of
investments as examples. One of those categories consists of ‘shares, bonds or other kinds of interests in
companies and joint ventures.’ The plain meaning of this provision is that shares or other kind of interests
held by Dutch shareholders in a company or in a joint venture having made investment on Venezuelan
territory are protected under Article 1.”); Exh. CLA-153, Mohammad Ammar Al-Bahloul v. The Republic of
Tajikistan, SCC Case No. V (064/2008), Partial Award on Jurisdiction and Liability, 2 September 2009,
§§144-145 (beneficial ownership protected under the treaty in question). Promissory notes, hedging
agreements, sovereign bonds, contracts for the provision of services and arbitral awards crystallizing a
party's rights and obligations have all been recognized as protected investments. See Can Yeğinsu and
Calum Mulderrig, The Investment Treaty Arbitration Review: Covered Investment, available at
https://thelawreviews.co.uk/title/the-investment-treaty-arbitration-review/covered-investment#footnote-
034-backlink.
211 As mentioned above, on 29 August 2006, BD Agro’s General Assembly increased its capital by issuing
an additional 171,974 shares, all of which were issued to Mr. Obradović (the New Shares). Accordingly,
Mr. Obradović’s shareholding in BD Agro increased from 70% to 75.87%. The Privatized Shares and the
New Shares make up the Beneficially Owned Shares.
212 Exh. CE-17, Privatization Agreement, 4 October 2005, Art. 1.1.
213 Exh. CE-29, Agreement between D. Obradović and Sembi, 22 February 2008.
81
and do all such things as may be necessary to effect the transfer to [Sembi] of
the [Privatization Agreement] together with any other assets whatsoever held by
Mr. Obradović which are related to the business of BD Agro.” 214
316. In other words, through the Sembi Agreement, Sembi acquired a contractual “interest” in
the Privatization Agreement which, at least, included an interest in the Beneficially Owned
Shares.
317. Initially, the Claimants asserted that their interest was their “beneficial ownership” over the
Beneficially Owned Shares. Serbia objected inter alia that “beneficial ownership” was not
recognized in Serbia at the time of the Sembi Agreement. Later, the Claimants submitted
that, irrespective of beneficial ownership, they had a protected interest arising out of the
Sembi Agreement. 215 The Tribunal agrees. As just mentioned, through the Sembi
Agreement, Sembi acquired a contractual interest in the Beneficially Owned Shares. The
type of interest and whether it is recognized under domestic law is not determinative for
purposes of sub-section (h). What matters is that Sembi has an interest that falls within the
ambit of Article 1(h).
318. Serbia objects that no interest was transferred through the Sembi Agreement because the
Agreement itself is invalid. That objection is not well-founded. The Sembi Agreement
contains a choice of Cypriot law. The Parties’ experts agree, and rightly so, that Cypriot law
governs the relationship between Mr. Obradović and Sembi. 216 There is no indication that
the Sembi Agreement is invalid under the applicable law of Cyprus. At the hearing, Serbia’s
expert Professor Emilianides, admitted that interests in the Beneficially Owned Shares
transferred to Sembi immediately upon conclusion of the Sembi Agreement. 217 Thus, there
is no ground to argue that the Sembi Agreement did not give rise to a valid interest in
Sembi’s favour.
214 Exh. CE-29, Agreement between D. Obradović and Sembi, 22 February 2008.
215 See C-PHB 1, §90 (“[L]eaving aside beneficial ownership as a special category of ownership (i.e., leaving
aside the Occidental annulment decision), the Sembi Agreement created enforceable rights against Mr.
Obradović under Cypriot law (regardless of whether they are labelled as an assignment of beneficial
ownership of the Beneficially Owned Shares or not). Those rights constitute an ‘investment’ […]. It matters
not that the rights are only enforceable against Mr. Obradović; this is indeed normal for all contractual rights.
From the perspective of the Canada-Serbia BIT, the same rights would also create an indirectly owned/held
interest in BD Agro under Articles (f) and (h)(ii) of the definition of “investment” in Article 1 of the Canada-
Serbia BIT.”).
216 Georgiades ER II, §§3.5-3.6; Tr., Hearing on Jurisdiction and Merits, Day 6, 182:3-10 (Emilianides).
217 Tr., Hearing on Jurisdiction and Merits, Day 6, 184:24-185:25 (Emilianides).
82
319. The Respondent challenges the validity of the Sembi Agreement on the basis of Serbian
law. It argues that the Agreement is invalid because it violates Article 41(ž) of the
Privatization Law, which it contends applies despite the choice of Cypriot law because it is
mandatory. The Claimants do not appear to seriously contest that Article 41(ž) is mandatory
but contest its application in this case.
320. Pursuant to ordinary rules of conflict of laws, a mandatory norm of a legal system other than
the one applicable to a contract cannot displace the law of the contract unless it is a so-
called overriding mandatory rule, also called loi d’application immédiate or loi de police 218
Even assuming that Article 41(ž) of the Privatization Law is such an overriding mandatory
norm, an issue that the Tribunal can leave open, the Tribunal is of the opinion that it would
not nullify the Sembi Agreement.
321. Article 41(ž) of the Privatization Law reads: 219
“Subject to prior consent of the Agency, the buyer of the capital (hereinafter:
assignor) may assign the agreement on sale of the capital or property to a third
party (hereinafter: assignee) under the conditions stipulated by this law and the
law on obligations.
The assignee may be a person who meets the conditions prescribed for the
buyer of the capital or the propriety.
The assignor shall guarantee to the Agency that the assignee will meet his
obligations from the assigned agreement on sale of the capital or property.
After the assignment of agreement on sale of the capital or property, the
assignee shall attain all the rights and obligations from the agreement on sale.”
322. Article 41(ž) thus requires the Privatization Agency’s approval for the assignment of
privatization agreements. To the Tribunal, this provision does not apply in this instance.
Article 4 of the Sembi Agreement (reproduced above) contemplates two transfers: the
transfer of “right, title and interest” in the Privatization Agreement for which no further actions
are required, and the transfer of the Privatization Agreement itself for which Mr. Obradović
agreed to sign any documents and do any further acts required to effectuate the transfer of
the Agreement. These transfers could take place independently of each other, with only the
218 Ugljesa Grusic ER I, §§63, 76 (“Despite the fact that the [Serbian] Private International Law Act does
not mention the concept of overriding mandatory provisions, there is an agreement in legal theory that
Serbian private international law recognises this concept. The concept is known under the name of “norme
neposredne primene,” which is a literal translation of the French term “lois d’application immédiate,” or
under the name “prinudni propisi u međunarodnom smislu,” which can be translated into English as
“mandatory provisions in the international sense” […] Articles 41ž and 59 of the 2001 Law on Privatisation
[…] can be regarded as overriding mandatory provisions under Serbian private international law.”).
219 Exh. CE-220, 2001 Law on Privatization, Art. 41(ž).
83
latter requiring the approval of the Agency. The Claimants’ expert, Mr. Georgiades
confirmed this interpretation of the Agreement, 220 and his testimony was not convincingly
rebutted. As the Sembi Agreement does not immediately transfer the Privatization
Agreement itself but does transfer Mr. Obradović’s “interests” in the Privatization Agreement
to Sembi, the provisions of Article 41(ž) would not be attracted.
323. The Tribunal finds confirmation of this position in the text of the Privatization Agreement
itself: through Article 5.3.1, BD Agro’s shares could be sold, assigned, or alienated two years
after the conclusion of the Agreement without the approval of the Agency. 221 The Agreement
thus contemplates a transfer of shares (for which no approval is required) as an act distinct
from the transfer of the Privatization Agreement (for which approval is required). Ms. Julijana
Vučković, Director of the Privatization Agency’s Center for Control, admitted that it was
possible to “alienate” the interests in a privatization agreement (including the shares of the
privatized entity) separately from the privatization agreement itself:
“Mr. Misetic: Ms Vučković, the transcript says you said: “... we had as a clear
omission in our agreements ... where we allowed disposal of capital during the
validity of the agreement, we generally allowed shares to be alienated and we
were still monitoring the agreement which was a substantial problem.” That's
what you told the Commission, correct?
Ms. Vučković: Yes, that’s correct. It had to do exactly with this. You allow
alienation of the shares by removing the pledge, and you allow the buyer to
dispose of the shares, while the agreement is in force, and it's not been honoured,
so you have no further influence when it comes to the privatization
agreement.” 222
220 Georgiades ER II, §3.12 et. seq., particularly, §§3.21-3.23 (“In respect of the rights and assets, such as
the BD Agro Shares or the interest in the Privatization Agreement, whose legal title remained with Mr
Obradoviċ, transfer of legal title would have to be effected in accordance with the law applicable to such
rights. […] Therefore, even if Serbian law did not allow transfer of rights in the Privatization Agreement, this
would not defeat the equitable assignment of such rights under Cyprus law, by virtue of the Sembi
Agreement. In other words, the equitable assignment of these rights to Sembi is unaffected by Serbian law.
[…] The transfer of legal title to the BD Agro Shares from Mr Obradoviċ to Sembi had to be effected in
accordance with Serbian law. Nevertheless, under the Sembi Agreement, Sembi became the beneficial
owner of the BD Agro Shares regardless of any restrictions on the transfer of legal title to the BD Agro
Shares under Serbian law”).
221 Exh. CE-17, Privatization Agreement, 4 October 2005, Art. 5.3.1 (“5.3 Further obligations of the Buyer
[…] The Buyer undertakes that he will not perform or allow performance of the following actions, without
previous written approval by the Agency: 5.3.1 he will not sell, assign or otherwise alienate shares in the
period of 2 years as of the day of conclusion of the agreement.”).
222 Tr., Hearing on Jurisdiction and Merits, Day 4, 66:17-67:04. (Vučković).
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324. As a result, Serbia’s challenge to the validity of the Sembi Agreement based on of
Article 41(ž) of the Privatization Law cannot be sustained.
325. The Respondent also disputes the validity of the Sembi Agreement on the ground of another
mandatory Serbian law, the 2006 Securities Law, which prohibits the sale of shares in a
public joint stock company outside the organized share market. 223 The Claimants do not
appear to seriously contest that Article 52(2) is mandatory, 224 but dispute its application to
the present facts. However, this provision restricts the “trading” or sale of securities. 225 A
“sale” under Serbian law results in the change of the legal owner of an asset. 226 Thus, this
provision is only concerned with the transfer of legal title to shares, not the transfer of an
interest in shares. As a result, it would not apply in the present situation, which does not
contemplate a change in legal title to the Beneficially Owned Shares but only the creation
of an interest in those shares.
326. For the same reason, the Tribunal dismisses Serbia’s argument that “if Serbian law allows
for separate transfer of beneficial ownership in shares, rules regulating the market of
securities must apply to such transfer as well […]”, to which the Respondent adds that the
“Claimants’ interpretation would leave restrictive rules from national laws of the state parties
to the BITs without any purpose – those rules would be easily circumvented by simply
labeling investors’ rights as beneficial.” 227 As just explained, Article 52(2) does not prohibit
the transfer of interests in shares. It attaches to the transfer of legal title in shares, which
produces certain legal effects such as the registration in the Central Securities
Depository. 228 Sembi does not take advantage of those legal effects, circumventing the
restrictions of Serbian law. To the contrary, the Claimants admit that Sembi does not hold
legal title to the Beneficially Owned Shares. Sembi does, however, hold an interest in the
Beneficially Owned shares, which is not prohibited by Article 52(2).
223 Exh. RE-111, 2006 Law on Market in Securities and Other Financial Instruments, Art. 52(2).
224 Ugljesa Grusic ER I, §76 (“Article 52(2) of the 2006 Law on Market in Securities and Other Financial
Instruments can be regarded as overriding mandatory provisions under Serbian private international law”).
225 Exh. RE-111, 2006 Law on Market in Securities and Other Financial Instruments, Art. 52 (“Trade of
securities shall be performed exclusively in organized market in the Republic which includes stock
exchange and over-the-counter markets, unless otherwise determined by this Law. Trade of securities [just]
specified shall be performed exclusively in compliance with the provisions of this Law, unless otherwise
determined by this Law.”).
226 Milošević ER II, §188.
227 R-PHB 2, §52.
228 See, for instances, Radović ER I, §71.
85
327. Furthermore, Serbia invokes the invalidity of the Sembi Agreement based on Article 295(1)
of the 2004 Law on Companies and Article 359 of the 2011 Law on Companies, which are
in essence identical:
“Agreement by which a shareholder or proxy undertakes obligation to vote

according to instructions of joint stock company or member of the board of
directors, director or member of executive board is null and void.”
328. The Tribunal recalls that Mr. Rand was not a party to the Sembi Agreement. The restriction
contained in Article 359 would thus not automatically apply, especially when Serbian law
provides that any restrictions on rights are to be interpreted narrowly. 229 Besides, Mr. Rand
ceased to be a member of BD Agro’s board on 9 July 2012. Thus, the breach, if any, of
Article 359 of the Law on Companies was cured on that date. Further still, it is not evident
that Article 359 would negate the entire Sembi Agreement or only the part thereof requiring
Mr. Obradović to vote as instructed by Sembi.
329. It follows from the analysis above that, through the Sembi Agreement, Sembi acquired a
contractual interest in the Beneficially Owned Shares. That interest was acquired through
the commitment of capital in Serbia. Indeed, as was already discussed, through Sembi,
Mr. Rand repaid to the Lundin Family the monies lent to Mr. Obradović for the acquisition of
shares in further investment in BD Agro.
(b) Capital or other resources committed in Serbia
330. In addition to an interest, Article 1(h) of the Canada-Serbia BIT requires that the interest be
acquired through the commitment of capital in Serbia. This requirement is satisfied too.
Indeed, funds lent by the Lundins, for which Mr. Rand bore the financial burden, were
transferred to bank accounts in Serbia for use in the country, as is clear from the
corresponding payment confirmations. 230
(c) Economic activity in Serbia
331. The commitment of capital and other resources was made towards the activity of the BD
Agro farm, which is economic in nature. At the time of Mr. Rand’s initial investment in 2005,
Milošević ER III, §57.

229
See, for e.g., Exh. CE-384, Confirmation of transfer of EUR 3,312,740 from Mr. Lundin to Marine Drive
230
Holding, 15 September 2005.
86
BD Agro was in a poor condition. 231 During his involvement, it became one of the most
modern dairy farms in Europe. 232 It is therefore clear that the contribution of resources at
issue was made towards an economic activity in Serbia in the meaning of Article 1(h) of the
BIT.
332. The Tribunal thus concludes that Sembi’s contractual interest in the Beneficially Owned
Shares is an investment falling within the meaning of Article 1(h) of the Canada-Serbia BIT.
(ii) Covered investment
According to the Treaty definition reproduced above, a “covered investment” is an

investment in the territory of a Contracting Party that is owned or controlled, directly or
indirectly by an investor of the other Contracting Party. Serbia does not challenge the fact
that, as a Canadian national, Mr. Rand is an investor. 233 Neither does it dispute that Mr.
Rand controlled Sembi. Instead, it relies on such control to argue that Sembi does not have
a seat in Cyprus. 234 As Mr. Rand controls Sembi’s contractual interest in the Beneficially
Owned Shares, his investment is a covered investment, which is protected by the Treaty.
b. Payments for the benefit of BD Agro
333. For the reasons mentioned above, the Tribunal does not have ratione materiae jurisdiction
under the ICSID Convention to consider claims arising out of these alleged investments
(§§274 et seq.). As a result, the Tribunal could dispense with examining whether jurisdiction
exists in accordance with the Canada-Serbia BIT. However, in particular because the
Claimants have not addressed this issue in the context of the ICSID Convention, the
Tribunal will also examine Serbia’s jurisdictional objections under the Canada-Serbia BIT.
231 Tr., Hearing on Jurisdiction and Merits, Day 2, 3:15-4:17 (Rand).

232 Tr., Hearing on Jurisdiction and Merits, Day 2, 4:18-5:9 (Rand). Exh. CE-26, News Article “Where cows
listen to Beethoven” published on 27 November 2010, Exh. CE-33, Letter from the Ministry of Economy to
the Privatization Agency, 30 May 2012.
of Investments, 27 April 2015, (“Canada-Serbia BIT”), Art. 1: “‘investor of a Party” means a Party, or a
national or an enterprise of a Party, that seeks to make, is making or has made an investment. For greater
certainty, it is understood that an investor seeks to make an investment only when the investor has taken
concrete steps necessary to make the said investment, such as when the investor has made an application
for permit or licence authorising the establishment of an investment.”
234 See, for e.g. Rej., §1001 quoting Reply, §105.
87
334. Serbia argues that Mr. Rand’s payments for the benefit of BD Agro do not qualify as
investments under the Canada-Serbia BIT. Although the Claimants characterize these
payments as “loans to an enterprise” under Article 1(d) of the BIT, their submissions are
unclear as to whether the payments are loans or rather expenses aimed at securing the
continuity of BD Agro’s business operations. As observed in Inmaris v. Ukraine, payments
made in furtherance of an investment are not investments themselves. Thus, if the
Claimants were the owners of BD Agro, the payments made and expenses incurred in the
day-to-day operations of BD Agro could not be regarded as a separate investment under
the Canada-Serbia BIT.
335. The Respondent further submits that not all monetary claims fall within the scope of the
Canada-Serbia BIT. In reality, most of such claims are expressly excluded. Thus, payments
made for the benefit of BD Agro could give rise to a monetary claim by Mr. Rand against the
company but would not constitute investments under the Canada-Serbia BIT.
336. Moreover, Serbia alleges that there are no documents on record that establish the so-called
“loans” granted by Mr. Rand to BD Agro. For example, the majority of Mr. Rand’s payments
– nearly EUR 2.2 million – were made for the purchase and transport of heifers to BD Agro.
Those payments were recorded as claims of Mr. Rand against BD Agro in the bankruptcy
proceedings. However, the Commercial Court in Belgrade held that Mr. Rand had not made
such payments and the payments for the purchase of livestock were recorded in the
bankruptcy as “unofficial uncommanded agency under Article 220 of the Law on Contracts
and Torts [Law on Obligations].” As a result, they must be treated as “any other claim to
money”, which are expressly excluded from the protection offered by the Canada-Serbia
BIT. The same applies to the payments made to BD Agro’s consultants.
337. Serbia adds that, even if the payments in question were considered as loans, they would
not be part of the definition of investment under the Canada-Serbia BIT, which does not
cover “the extension of credit in connection with a commercial transaction, such as trade
financing” (Article 1(k)(ii)). The negotiating history of the BIT confirms that it was the Parties’
intention to exclude loans for the purchase of goods and services from the ambit of the
Treaty.
88
338. The Claimants submit that Mr. Rand made payments of approximately EUR 2.2 million for
the replacement of BD Agro’s herd. Through Rand Investments, Mr. Rand also paid
approximately EUR 160,000 for the services provided to BD Agro by herd management
experts Messrs. Wood and Calin. These payments were loans to an enterprise, qualifying
as investment under Article 1(d) of the Canada-Serbia BIT.
339. The Claimants reject Serbia’s argument that, if they really were the owners of BD Agro,
these payments cannot constitute loans, because monies expended towards day to day
operations are not separate investments. That argument assumes that a shareholder cannot
grant a loan to a company, which is obviously wrong. Moreover, “shares” and “loans” are
separate categories of “investment” in the Canada-Serbia BIT and must be treated as such.
340. The Claimants equally dispute Serbia’s view that they have not furnished evidence of Mr.
Rand’s loans. The Canada-Serbia BIT does not require that a loan be based on a written
contract to constitute an investment.
341. In respect of Serbia’s assertion that some of Mr. Rand’s payments cannot constitute an
investment because they are in the nature of a “claim to money that arises solely from […]
the extension of credit in connection with a commercial transaction, such as trade financing”,
the Claimants emphasize that payments for the replacement of BD Agro’s herd did not
constitute trade financing, because they were linked to Mr. Rand’s beneficial ownership of
BD Agro.
(3) Analysis
342. The Claimants submit that Mr. Rand made payments of approximately EUR 2.2 million for
the replacement of BD Agro’s herd and that he paid approximately EUR 160,000 for the
services that the herd management experts Messrs. Wood and Calin provided to BD Agro.
The Claimants insist that these payments were “loans” to BD Agro and thus “loans to an
enterprise”, qualifying as an investment under Article 1(d) of the Canada-Serbia BIT.
343. The evidence on record shows that, in 2008, Mr. Rand paid EUR 2.2 million directly to
Canadian suppliers and vendors for the purchase of heifers and for their transport from
89
Canada to BD Agro. 235 It also shows that Mr. Rand made payments to Messrs. Wood and
Calin. 236 However, except for Mr. Rand’s testimony, there is no evidence on record that
these payments were loans granted by Mr. Rand to BD Agro. 237
344. In the circumstances, all that Mr. Rand had in respect of the EUR 2.2 million and the
EUR 160,000 payments, was a claim to money. This is all the more evident for the EUR 2.2
million payments as, in BD Agro’s bankruptcy, these purchases were registered as
“unofficial uncommanded agency in accordance with Article 220 of the Law on Contracts
and Torts [Law on Obligations].” 238 Such claims are expressly excluded under Articles 1(k)
and (l) of the Canada-Serbia BIT, which provide that “investment” does not mean:
“(k) a claim to money that arises solely from: (i) a commercial contract for the
sale of a good or service by a national or enterprise in the territory of a Party to
an enterprise in the territory of the other Party, or (ii) the extension of credit in
connection with a commercial transaction, such as trade financing; or
(l) any other claim to money; that does not involve the kinds of interests set out
in subparagraphs (a) to (j).”
345. In any event, even if the payments for the purchases of livestock and services were deemed
to be loans, they would still be excluded under the Treaty. As was just seen, Article 1 (k)(ii)
excepts from the definition of investment “the extension of credit in connection with a
235 Exh. CE-21, Confirmation of wire transfer from William Rand to Wiljill Farms Inc. for CAD 175,000.00
executed on 3 April 2008; Confirmation of wire transfer from William Rand to Wiljill Farms Inc. for CAD 607,
759.00 executed on 21 October 2008; Confirmation of wire transfer from William Rand to Wiljill Farms Inc.
for CAD 199,816.00 executed on 22 December 2008; Confirmation of wire transfer from William Rand to
Wiljill Farms Inc. for CAD 460,216.00 executed on 24 December 2008; Exh. CE-22, Confirmation of wire
transfer from William Rand to Sea Air International Forwarders of CAD 695,030.90 executed on 21 October
2008; Confirmation of wire transfer from William Rand to Sea Air International Forwarders of CAD 124,100
executed on 9 December 2008, Confirmation of wire transfer from William Rand to Sea Air International
Forwarders of CAD 309,415 executed on 22 December 2008; Exh. CE-23, Confirmation of wire transfer
from William Rand to Trudeau International Farms for CAD 443,080.00 executed on 21 October 2008; Exh.
CE-24, Confirmation of wire transfer from William Rand to BD Agro for EUR 219,000.00 executed on 5
December 2008.
236 Exh. CE-62, Overview of Payments to Mr. David Wood; Exh. CE-68, Overview of Payments to Mr. Gligor
Calin. See also, Rand WS I, §§40, 44.

237 The Tribunal recalls that the Commercial Court in Belgrade examined Mr. Rand’s claim of EUR 2.2
million in the course of BD Agro’s bankruptcy proceedings and found that those payments were not made
in accordance with an agreement: “[t]he Creditor [Mr. Rand] did not make payments on grounds of an
agreement concluded with the bankruptcy debtor [BD Agro].” See Exh. CE-136, Commercial Court in
Belgrade Decision number 9. St-321/2015, 30 March 2018, Decision on the List of Determined and
Contested Claims, p. 2 (English translation). The Claimants have supplied no evidence to the contrary.
238 Exh. CE-136, Commercial Court in Belgrade Decision number 9. St-321/2015,30 March 2018, Decision
on the List of Determined and Contested Claims, p. 2 (English translation).
90
commercial transaction, such as trade financing.” The meaning of “commercial transaction”
is evident from Article 1 (k)(i), which describes a commercial contract as a “contract for the
sale of a good or service by a national or enterprise in the territory of a Party to an enterprise
in the territory of the other Party.” The purchase and transport of heifers as well as the
provision of management services thus fall within the notion of “commercial transaction.”
346. In its post-hearing submission, Serbia articulated a separate jurisdictional challenge,

according to which this Tribunal does not have ratione materiae jurisdiction under the
Canada-Serbia BIT, because the impugned measures do not relate to the Canadian
Claimants as required by Article 2 of the BIT. 239 The Tribunal does not agree. Article 2 of
the Treaty specifies that it applies to measures of a Party relating to an investor of the other
Party who holds a covered investment. 240 These requirements are met in this case. Mr.
Rand is an investor under the Canada-Serbia BIT having a protected investment. The
impugned measures, including the Agency’s failure to release the pledge, termination of the
Privatization Agreement, and seizure of the Beneficially Owned Shares, all relate to
Mr. Rand’s investment.
c. Conclusion
347. It follows from the discussion above that Mr. Rand’s control over Sembi’s contractual interest
in the Beneficially Owned Shares is a covered investment satisfying the requirements of
Article 1 of the Canada-Serbia BIT. Accordingly, the Tribunal has ratione materiae
jurisdiction in respect of claims arising out of that investment.
3. Illegality
348. Serbia submits that the Claimants have shown “utter disrespect” to Serbian law and that
their purported investment is tainted with “unlawfulness, fraud and deceit”, making it
“unworthy of protection.” In particular, Serbia contends that Mr. Rand’s investment is
unlawful “due to illicit and deceitful conduct” in the participation in the public auction for BD
Agro and conclusion of the Privatization Agreement; payment of the purchase price;
fulfilment of investment obligations; disposal of BD Agro’s land; and overall asset extraction
scheme applied against BD Agro. Serbia alleges that Mr. Obradović violated Serbian law by
breaching regulations governing the trading of securities (the “Securities Law Objection”);
239 R-PHB I, §112 et seq.
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failing to disclose Mr. Rand’s beneficial ownership to the Privatization Agency (the “Non-
Disclosure Objection”); misappropriating funds from BD Agro’s bank accounts (the
“Siphoning Objection”); and illegally disposing of BD Agro’s land (the “Land Machination
Objection”) (the latter three objections are referred to together as the “New Illegality
Objections”).
a. Respondent’s Position
(1) Admissibility of the new illegality objections
349. The Respondent opposes the Claimants’ challenge to the admissibility of the New Illegality
Objections on the basis that the objections are not new. According to Serbia, these
objections were mentioned in the Counter-Memorial and Rejoinder and arise out of issues
and facts discussed by the Parties in their submissions. In any event, the illegality
complained of is of such a character that the Tribunal must review it at its own discretion.
(2) Scope of the illegality objections
350. Serbia contends that the legality requirement is not limited to a breach of national laws and
regulations, but also relates to the breach of general international legal principles, such as
the principle of good faith. Further, the Tribunal should not focus only on one aspect of the
investment but assess the investor’s conduct comprehensively throughout the relevant
period. This is especially so as the Claimants’ purported investment was not a “one-time act
conducted on a single day”, but rather consisted in a complex set of transactions starting
with the initial privatization process and continuing throughout the following years. For the
Respondent, while illegality at the time of making the investment deprives the Tribunal of
jurisdiction, illegality during the performance of the investment is equally relevant as it
defeats claims as a matter of merits.
351. The Respondent refutes the Claimants’ position that the objections are not concerned with
the “making” of the Claimants’ investment. It insists that the illegality analysis must continue
at least until 8 April 2011, which is the date on which the last instalment of the purchase
price was paid. The Securities Law Objection is concerned with the making of the Claimants’
investment as it is based on breaches of rules on trading in securities. Similarly, the Non-
Disclosure Objection relates to deceitful conduct in obtaining BD Agro’s capital, and the
Siphoning and Land Machination Objections address how monies to pay the purchase price
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of BD Agro were obtained. Therefore, all these objections deal with establishing or making
the investment.
(3) Merits of the illegality objections
352. In any event, according to Serbia, even if the Tribunal were not to follow the submissions
above, it would nevertheless have to sustain Serbia’s illegality objections on their merits.
(i) The Securities Law Objection
353. Serbia alleges that the MDH and Sembi Agreements were both contracts that contemplated
the transfer of shares in a joint stock company outside the stock exchange. They thus
contravened the 2002 and 2006 Securities Laws, pursuant to which securities can only be
traded over the Belgrade Stock Exchange. The Sembi Agreement additionally violated
Article 41(ž) of the Privatization Law.
354. Serbia further submits that Mr. Rand’s acquisition of 3.9% shareholding in BD Agro through
MDH Serbia triggered an obligation on Mr. Obradović, Mr. Rand, MDH, Sembi and MDH
Serbia to issue a mandatory takeover bid for the BD Agro shares held by others. Had their
failure to do so been discovered by the Serbian authorities, Messrs. Obradović and Rand
would have lost control over BD Agro. 241 For Serbia, the indirect acquisition of 3.9% of BD
Agro’s equity by Mr. Rand through MDH Serbia was illegal as it breached mandatory rules
of Serbian law.
(ii) The Non-Disclosure Objection
355. For Serbia, Mr. Rand misled the Agency during the Privatization and obtained his investment
through “misrepresentation”, “deceitful conduct”, 242 “fraud”, “breaching Serbian laws and by
taking unlawful advantage over other participants at the auction for Privatization.” 243 Serbia’s
legislation at the time of BD Agro’s auction allowed an individual or an entity to participate
in an auction through an agent. If so, the agent was to submit a certified power of attorney
before the auction. However, Mr. Obradović appeared at the auction acting in his own name
and on his own behalf and there was no mention whatsoever of Mr. Rand.
241 Rej., §823.

242 Rej., §12.
243 Rej., §808.
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356. Serbia further contends that Mr. Rand did not disclose that he was the actual buyer of BD
Agro and presented Mr. Obradović as such because, unlike a foreign national, a Serbian
citizen would benefit from the possibility to pay the purchase price in instalments. It adds
that “Mr. Rand effectively had a grace period of one year following the auction, after which
he had to pay the remaining Purchase Price in five equal annual instalments, with no
interest.” Another reason for Mr. Rand’s non-disclosure, says Serbia, was an “evasion of
liability” 244: the arrangement with Mr. Obradović would make it impossible to determine the
actual owner of the investment. For Serbia, “[i]n the event that the illegalities were to be
discovered by the authorities, any criminal prosecution would be directed towards the
“nominal” controlling owner and manager of the company.” 245 Serbia adds that the
Claimants have not furnished any credible explanation of Mr. Obradović’s motives to
participate in this arrangement with Mr. Rand.
(iii) Siphoning Objection
357. Serbia claims that the payment of the purchase price was the obligation of the buyer, i.e.
Mr. Obradović. Therefore, using funds of the privatized company itself to pay the purchase
price constituted fraud. In this context, the Respondent alleges that most of the instalments
of the purchase price were settled with BD Agro funds:
• The third instalment was paid out of a loan transferred from NLB Bank to BD Agro and
forwarded on that same day from BD Agro’s account to Mr. Obradović’s account;
• The fourth instalment was paid out of the proceeds of the sale of BD Agro’s land as well
as loans from Agrobanka and Banka Intesa to BD Agro, which were transferred to
Mr. Obradović’s account;
• The fifth instalment was paid out of a loan from Agrobanka to BD Agro, and forwarded
on that same day to Mr. Obradović; and
• The sixth instalment and late interest was paid out of funds transferred from BD Agro’s
account to Inex’s and Mr. Obradović’s accounts.
244 Rej., §804.

245 Rej., §803.
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358. For the Respondent, the record evidences that Mr. Obradović’s business model consisted
in BD Agro borrowing money from banks and transferring it to Mr. Obradović to pay the
purchase price to the Agency. This was only possible, says Serbia, because the
Privatization Agency was tricked into believing that it provided the option of payment in
instalments to a person entitled to this incentive, which turned out not to be the case.
359. In response to the Claimants’ argument that Serbia has not considered transactions outside
those reflected in BD Agro’s bank accounts, Serbia contends that even if such transactions
are considered, Mr. Obradović extracted at least EUR 0.5 million from BD Agro, as the
Claimants’ own expert confirmed. Moreover, while the Claimants complain about Serbia’s
reliance on the descriptions of the transaction listed in the BD Agro’s bank statements, they
have not explained why those descriptions were wrong.
3. Land Machination Objection
360. Serbia contends that Mr. Obradović fraudulently extracted between EUR 1.4 to 3.3 million
for himself and his associates through “land machinations.” For example, land which was
nominally assigned to Mr. Obradović for EUR 400,000 was resold by him in a matter of
months for EUR 1,417,000, and then later for EUR 3.3 million (the “Land Swap Case”). The
value of the land was thus 3.5 to 8 times higher than the amount of the shareholder loan
that it was supposed to settle. There was still another attempt to extract an even higher
amount through other disposals of BD Agro’s land, which was, however, successfully
prevented by the Agency.
361. Mr. Obradović’s acquittal in the Land Swap Case, says the Respondent, does not support
the Claimant’s case. The appellate court did not conclude that Mr. Obradović did not engage
in any illegal conduct; it merely found that his actions did not reach the requisite level to
trigger criminal liability. The judgment actually confirms that the land swap transaction was
unlawful. It also notes that BD Agro acted in bad faith. In addition, the court found that Mr.
Obradović was the majority owner who controlled BD Agro.
b. Claimants’ Position
362. The Claimants stress that Serbia only raised the Securities Law Objection in its Counter-
Memorial and added the New Illegality Objections in its Rejoinder. For the Claimants, (a)
the New Illegality Objections are belated and thus inadmissible; (b) the scope of the illegality
objections is limited; and (c) all the illegality objections are without merit.
95
(1) Inadmissibility of the New Illegality Objections
363. The Claimants point out that Article 41(1) of the ICSID Arbitration Rules prescribes that
jurisdictional objections must be raised “as early as possible” and at the latest in the Counter-
Memorial. The New Illegality Objections do not comply with this rule, because they were
presented in the Rejoinder. They are therefore inadmissible.
364. The Claimants accept that the New Illegality Objections could be admissible if they were
based on facts that Serbia could not reasonably have known on or before 19 April 2019,
when it filed its Counter-Memorial. However, that exception does not apply here.
365. The Non-Disclosure Objection, the first New Illegality Objection, is based on an assertion
that Mr. Obradović violated Serbian law by failing to formally disclose Mr. Rand’s beneficial
ownership to the Privatization Agency. It is undisputed that Serbia knew of the Claimants’
beneficial ownership at the latest since August 2017, when it received the Claimants’ Notice
of Dispute (“NoD”). The NoD contained a detailed description of the Claimants’ ownership
structure and their acquisition and subsequent beneficial ownership and control. In spite of
this knowledge, Serbia did not raise the Non-Disclosure Objection in time. It should not be
permitted to do so now.
366. The Money Siphoning Objection, the second New Illegality Objection, is founded on
allegations that Mr. Obradović used funds from BD Agro’s accounts to purchase the
Beneficially Owned Shares. These allegations were made in 2009 already, when the
representatives of BD Agro’s minority shareholders and employees complained to various
Serbian authorities, including to the Privatization Agency, about suspicious transfers from
BD Agro’s accounts. The Claimants submit that “while these allegations form the bedrock
of Serbia’s Rejoinder, they were not even hinted at in the Counter-Memorial.” As a result,
this objection is also untimely and must be denied.
367. The Land Machination Objection, the third New Illegality Objection, arises from assertions
that Mr. Obradović stripped BD Agro of some of its land, extracting millions from BD Agro,
and used BD Agro land for an illegal land swap with the Ministry of Agriculture. The
Claimants stress that these “machinations” have been the subject of criminal complaints
and investigations since at least 2015 and, in the case of the land swap, of ongoing criminal
proceedings. The State Attorney’s Office that represents Serbia in this arbitration became
aware of the land swap matter in 2010. Accordingly, this objection is also untimely.
96
368. The Claimants further submit that the Tribunal should not exercise its power under Article
41(2) of the ICSID Arbitration Rules to hear the New Illegality Objections ex officio. They
insist that “Serbia’s strategic choice to only raise the New Illegality Objections in its
Rejoinder was obviously premised on a gamble that the Tribunal would exercise its
discretionary powers and would entertain the New Illegality Objections despite their
belatedness and despite all the difficulties that their belated filing caused to the Claimants,
who only had six weeks to address them.” 246
369. The Claimants concede that, under certain circumstances, the illegality of an investment
may deprive an arbitral tribunal of jurisdiction. However, they emphasize that international
law imposes strict limitations on illegality objections. Most importantly, illegality only affects
jurisdiction if the illegal conduct occurs at the time when the investment is made. Here, the
investment in the Beneficially Owned Shares was made on 4 October 2005 when Mr.
Obradović entered into the Privatization Agreement, which formed the legal basis of
Mr. Obradović‘s and thus also the Claimants’ acquisition of the Beneficially Owned Shares.
The only two objections that could thus fall within the required temporal scope are the
Securities Law Objection and the Non-Disclosure Objection. The Siphoning and Land
Machination Objections arise from allegations that Mr. Obradović and the Claimants took
improper advantage of the Beneficially Owned Shares. These objections do not relate to the
making of the investment and, therefore, cannot impact the Tribunal’s jurisdiction.
370. The Claimants oppose Serbia’s argument that the “making” of the investment covers the
entire period from the conclusion of the Privatization Agreement until full payment of the
purchase price on 8 April 2011. As investment tribunals have observed, the legality
requirement applies only to the “making” of an investment and not its implementation and
operation. Here, the relevant date is 4 October 2005, when Mr. Obradović executed the
Privatization Agreement.
371. The Claimants further submit that only “fundamental violations” of legal rules that apply to
the making of an investment deprive a tribunal of jurisdiction. None of Serbia’s allegations
meet this requirement.
246 Rej. J., §520.
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372. In any event, according to the Claimants, even if the Tribunal were not to follow their
submissions above, it would reach the conclusion that the illegality objections are
unfounded.
(i) The Securities Law Objection
373. The Claimants submit that the Securities Law Objection incorporates by reference the
arguments presented in the Respondent’s ratione materiae objections. Such arguments
cannot be accepted for the reasons mentioned earlier. Particularly, the provisions which the
Respondent contends have been breached – Article 59 of the 2001 Law on Privatization,
Article 52(1) of the 2002 Law on Capital Markets and its equivalent Article 52(2) of the 2006
Law on Capital Markets – do not apply to transfers of beneficial ownership; they only relate
to transfers of legal title to shares in public companies. Restrictions on trading with shares
of public companies are thus irrelevant to the Tribunal’s jurisdiction.
374. The only additional argument, so say the Claimants, relates to Mr. Rand’s Indirect
Shareholding, which was acquired by MDH Serbia between October 2008 and October
2012, and allegedly triggered the obligation for Mr. Obradović, Mr. Rand, MDH, Sembi and
MDH Serbia to bid for the BD Agro shares which they did not hold. Serbia’s argument that
had this failure been discovered by Serbian authorities, Messrs. Obradović and Rand would
completely lose control over BD Agro does not withstand scrutiny. The Serbian Securities
Commission could only have imposed (i) the temporary suspension of MDH Serbia’s right
to vote the 3.9% shareholding; (ii) a misdemeanor fine; and (iii) an obligation to launch a
mandatory takeover bid. For the Claimants, an omission to make a takeover bid would not
affect the Tribunal’s jurisdiction, because it does not affect any “fundamental legal principle
of Serbian law.”
(ii) The Non-Disclosure Objection
375. The Claimants deny Serbia’s allegation that Mr. Rand deceived the Serbian authorities
when he allegedly failed to disclose his beneficial ownership during the auction for the
Beneficially Owned Shares or thereafter.
376. First, the Claimants stress that Serbia has not identified any provision of the Canada-Serbia
BIT that requires Mr. Obradović and/or Mr. Rand to formally disclose their beneficial
98
ownership arrangement. 247 Indeed, the Treaty does not require an investment to be
disclosed to the host State. Moreover, Serbia has failed to identify a provision of Serbian
law which would contain a disclosure obligation. Even if Article 2 of the Law on Privatization
contained such an obligation as Serbia alleges (quod non), that provision would only apply
to the public entities involved in the privatization process, and not to the buyers. Further,
there is no sanction for failure to comply with Article 2. Nor has Serbia cited any decision of
a Serbian body sanctioning a private entity for breach of Article 2. Moreover, even if Serbian
law required a formal disclosure of beneficial ownership (quod non), and even if the
beneficial ownership was not disclosed, Serbia is estopped from relying on the lack of
disclosure due to the Agency’s acquiescence to, and lack of interest in, the Claimants’
beneficial ownership of BD Agro. Finally, the Claimants notes that the Agency did not require
the disclosure of beneficial ownership in BD Agro’s privatization, although it did request
disclosures in other privatizations, such as “Vranje” and Beopetrol.
377. Second and in any event, the Claimants repeatedly disclosed their beneficial ownership to
the Serbian authorities, including the Privatization Agency. 248 Mr. Rand’s beneficial
ownership of BD Agro was widely known, as is, for instance, evident from the following facts:
• In May 2005, Mr. Rand visited BD Agro and met with various Government officials
to discuss his potential investment. These officials included Mr. Predrag Bubalo,
the then Minister of Economy, Mr. Ljubiša Jovanović, the then Assistant (Deputy)
Minister of Economy, Mr. Mladjan Dinkić, the then Minister of Finance, and Mr.
Danilo Golubović, the then Deputy Minister of Agriculture, Forestry and Water
Management;
• On 16 May 2005, Mr. Jovanović, Assistant Deputy Minister of Economy sent an

email to Mr. Rand, in which he summarized the status and economic condition of
BD Agro, the improvements that could be made and the reasons “WHY TO
INVEST IN DOBANOVCI”, including the fact that, as a result of its location, the
value of BD Agro’s land would be “permanently increasing”;
• On 4 June 2005, i.e. approximately three weeks after Mr. Jovanović sent him the
information about BD Agro, Mr. Rand wrote to Minister Bubalo to thank him for his
247 Rej. J., §§108 et seq.

248 Rej. J., §§126 et seq. and §§185 et seq.
99
hospitality during his visit to Belgrade and to inform him that he was interested in
participating in the public auction of BD Agro;
• When Mr. Obradović submitted the winning bid at the public auction on
29 September 2005, Mr. Jovanović immediately reported the outcome of the
auction to Mr. Rand. He sent the email from his official email account at the Ministry
of Economy, stating that he “presume[d] that [Mr. Obradović] ha[d] already
informed that you all succeeded in farm acquisition!”
378. The Claimants challenge Serbia’s conjectures about the motivation for investing through
Mr. Obradović. They explain that the reason for proceeding through Mr. Obradović was
“purely practical”: Mr. Rand lives in Vancouver and does not speak Serbian. He was thus
unable to attend to various matters pertaining to his Serbian companies that required the
owner’s local attention. Mr. Obradović becoming the nominal owner was thus the most
practical solution to address these concerns. As the nominal owner, Mr. Obradović was able
to act upon Mr. Rand’s informal instructions because he did not need to prove his authority
vis-à-vis third parties. The nominal ownership also gave Mr. Obradović more credibility in
Serbia.
379. As for the questions which Serbia raises about Mr. Obradović’s motives, they are “entirely
irrelevant”, say the Claimants. Whatever they were, Mr. Rand and Sembi had beneficial
ownership of and control over BD Agro. In any event, Mr. Obradović’s motivations are not
questionable: he worked for Mr. Rand based on a success fee payable if and when
Mr. Rand’s investments became profitable. Mr. Rand also advanced funds to cover Mr.
Obradović’s expenses, including, among other things, the purchase of an apartment in
Belgrade and his daughter’s tuition fees in the United States.
(iii) The Siphoning Objection
380. The Claimants submit that Serbia has failed to demonstrate any impropriety with respect to
the money transfers between Mr. Obradović and BD Agro or between BD Agro,
Mr. Obradović and other Serbian companies beneficially owned by Mr. Rand. This is, in
particular, evidenced by the absence of criminal proceedings against Mr. Obradović in
relation to these transfers.
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381. In any event, the Claimants dispute Serbia’s claim that Mr. Obradović owed any monies to
Sembi. They contend that, if all relevant transactions are taken into consideration, the net
balance of payments between BD Agro, on one side, and Mr. Obradović together with
Mr. Rand and his Serbian companies, on the other side, is in favour of BD Agro.
382. The Claimants also challenge the analysis of the transactions on which Serbia relies for its
Siphoning Objection. First, some of the transactions that created a financial benefit for BD
Agro were not reflected in BD Agro’s bank accounts. Second, Serbia’s review was based
on descriptions of transactions included in BD Agro’s bank statements. These descriptions
were in part incorrect or inconclusive. For example, several transactions which were labelled
as purchase of goods and therefore excluded from Serbia’s analysis were in reality
shareholder loans.
(iv) The Land Machination Objection
383. The Claimants argue that the Land Machination Objection relates to the performance of the
Privatization Agreement rather than its conclusion and thus can have no bearing on the
Tribunal’s jurisdiction. In any event, the objection is ill-founded, since all of the impugned
transactions involving BD Agro’s land were legitimate. Although Serbia now raises an
objection, the Privatization Agency never complained at the time that these transactions
breached the Privatization Agreement. Additionally, the Belgrade Court of Appeal acquitted
Mr. Obradović in the Land Swap case.
c. Analysis
384. The Tribunal examines the admissibility of the New Illegality Objections (a), before reviewing
the scope of all of Serbia’s illegality objections (b) and the merits of those objections (c).
(1) Admissibility of the New illegality Objections
385. The Claimants contest the admissibility of the New Illegality Objections as they were
advanced for the first time in Serbia’s Rejoinder. Serbia disagrees, contending that these
objections were “presented” in its Counter-Memorial and “further developed” in its Rejoinder.
Pursuant to Article 41(2) of the ICSID Arbitration Rules, the Tribunal has the power to review
its jurisdiction ex officio. Hence, the Tribunal can dispense with deciding the Claimants’
admissibility objection and allow the New Illegality Objections ex officio, which it does. It is
satisfied that the Claimants had the opportunity to address the Tribunal on these objections.
They did so orally at the hearing and in writing both before and after the hearing.
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386. Serbia raises four objections to the Tribunal’s jurisdiction “ratione voluntatis”: the Securities
Law Objection, the Disclosure Objection, the Siphoning Objection and the Land Machination
Objection. Serbia acknowledges that the Canada-Serbia BIT does not contain an express
legality requirement but insists that the Treaty implicitly requires legality.
387. Contracting Parties to an investment treaty are free to introduce a legality requirement, i.e.
to limit the protections of the treaty to investments made in accordance with the laws and
regulations of the host State. Depending on the language used in the investment treaty, this
limitation may be a bar to jurisdiction, i.e. to the procedural protection under the treaty, or a
defense on the merits, i.e. to the application of the substantive treaty guarantees. Here, the
Contracting Parties to the Canada-Serbia BIT did not include any such limitation into the
text of BIT. The definitions of “investment” and “covered investment” in Article 1 of the BIT
and the dispute settlement clause in Article 22 do not require investments under the BIT to
be made in accordance with host State law. In application of the treaty interpretation rules
codified in the Vienna Convention, the Tribunal does not find it correct to read into the Treaty
to introduce a requirement that the Contracting Parties have not provided, especially in
circumstances where other provisions in the BIT expressly refer to domestic law. 249 Serbia
has advanced no reason why the Tribunal should do so.
388. In the circumstances, the Tribunal dismisses the Respondent’s “ratione voluntatis”
jurisdictional objections.
389. Additionally, even if the Tribunal were to review these objections, it would also dismiss them.
390. The first issue arising in implying a legality requirement into a treaty turns on the time at
which the requirement must be met. With an express requirement, the answer is likely to lie
in the treaty wording. Here, the Tribunal will simply adopt the same view as the majority of
investment tribunals and opt for the time when the investment is established, i.e. when it is
249 E.g. Exh. CLA-1, Agreement between Canada and the Republic of Serbia for the Promotion and
Protection of Investments, 27 April 2015, Art. 1 (“‘confidential information’ means confidential business
information or information that is privileged or otherwise protected from disclosure under the law of a Party”;
“enterprise” means an entity constituted or organized under applicable law […]”).
102
made, not when it is operated. 250 In this context, it notes that Article 12 of the Privatization
Agreement provides that the Buyer will acquire ownership rights over BD Agro in proportion
to the instalments paid. 251 Thus, the “making” of the investment, i.e. Mr. Rand’s indirect
acquisition of interest in the Beneficially Owned Shares lasted throughout the period when
payment instalments were paid, ending on 8 April 2011 with the last instalment. Further, it
is common ground between the Parties, and rightly so, that only violations of fundamental
rules of law would deprive a tribunal of jurisdiction. 252
(i) Securities Law Objection
391. Serbia’s Securities Law Objection is presented in two parts. First, Serbia alleges that, as the
MDH Agreement and the Sembi Agreement contemplated a transfer of shares in a joint
stock company outside the Belgrade Stock Exchange, they violated Serbian Securities
Laws. Serbia further alleges that the Sembi Agreement also contravened Article 41(ž) of the
Privatization Law. As mentioned above, the investment in this case is Mr. Rand’s control
over Sembi’s contractual interest in the Beneficially Owned Shares. Sembi’s contractual
interest arises through the Sembi Agreement, not the MDH Agreement. The latter
Agreement is thus irrelevant for the present purposes. The Tribunal has already reviewed
and dismissed the objections in relation to the Sembi Agreement above (§§320 et seq.).
392. Second, Serbia submits that Mr. Rand’s acquisition of 3.9% of BD Agro’s equity through
MDH Serbia starting in 2008 required Mr. Obradović, Mr. Rand, MDH, Sembi and MDH
Serbia to make a bid to take over BD Agro’s shares still in the hands of third parties, and
that they failed to do. Serbia asserts that, had this failure been discovered,
250 See, for instance, Exh. RLA-123, Oxus Gold plc v. Republic of Uzbekistan, UNCITRAL, Final Award, 17
December 2015, §707; Exh. CLA-169, Teinver S.A., Transportes de Cercanías S.A. and Autobuses
Urbanos del Sur S.A. v. The Argentine Republic, ICSID Case No. ARB/09/1, Decision on Jurisdiction, 21
December 2012, §327.
251 Exh. CE-17, Privatization Agreement, 4 October 2005, Art. 12: “With conclusion of this agreement, which
has the effect of the articles of incorporation of the subject, the buyer acquires the right of management,
participation in profit and the right to a part of the liquidation mass, proportionately to the amount of
purchased capital. The right to free disposal of purchased capital is acquired by the buyer pursuant to the
provisions of Article 456 of the Company Law and provisions of the agreement, and in proportion to paid
value of sale and purchase price.”
252 Exh. CLA-170, Liman Caspian Oil BV and NCL Dutch Investments v. Republic of Kazakhstan, ICSID
Case No. ARB/07/14, Award, 22 June 2010 (excerpts), §187; Exh. CLA-171, Peter A. Allard v. Government
of Barbados, PCA Case No. 2012-06, Award on Jurisdiction, 13 June 2014, §94.
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Messrs. Obradović and Rand would lose their voting rights in BD Agro pursuant to Article
37 of the Takeover Law.
393. The Tribunal does not agree. The Claimants’ omission to issue a takeover bid would not
automatically trigger the loss of Messrs. Obradović and Rand’s voting rights. It is not evident
that the sanction in Article 37, which came into force in 2012, would apply to an alleged
breach that occurred in 2008 when MDH Serbia first acquired BD Agro’s shares. Indeed,
the testimony of the Claimants’ expert Ms. Tomić Brkušanin according to which Article 37
could not be applied retroactively was not cogently rebutted. 253 Moreover and in any event,
as observed, only violations of fundamental rules would deprive a tribunal of its jurisdiction
and Serbia has not established that the failure to issue a takeover bid would affect a
fundamental principle of Serbian law. The contrary rather emerges from the fact that a failure
to issue a takeover bid does not affect the validity of the transfer of shares, nor the ownership
of the newly acquired shares. 254
394. As a result, the Tribunal dismisses this Objection.
(ii) Non-Disclosure Objection
395. Serbia contends that Mr. Obradović violated Serbian law by failing to formally disclose Mr.
Rand’s beneficial ownership to the Privatization Agency. There is no rule under Serbian law
that required Mr. Rand to disclose his investment structure. Article 2 of the Law on
Privatization, on which Serbia relies, does not contain such an obligation, 255 and Serbia has
pointed to no decisions of any Serbian authority sanctioning a private entity for the breach
of the principle of transparency under Article 2. Article 19 of the Decree on Sale of Capital
and Assets by Public Auction, another provision on which Serbia relies, does not provide
either for a disclosure of the kind alleged by Serbia. 256 Further, the Tribunal recalls that the
Agency did not require the disclosure of beneficial ownership in BD Agro’s privatization,
although it did request disclosures in other privatizations. 257 Further and in any event, even
253 Tr., Hearing on Jurisdiction and Merits, Day 4, 186:12-190:05.

254 Ms. Brkušanin ER 1 §114 The Respondent’s expert Dr. Radovic did not contest this evidence.
255 Exh. CE-220, Law on Privatization, Art. 2: “Privatization is based on the following principles: 1) Creation
of conditions for economic development and social stability; 2) Transparency; 3) Flexibility; 4) Establishing
of sale price in accordance with market conditions.”
256 Exh. RE-218, Regulation on the Sale of Capital and Property at a Public Auction (52/2005), Art. 19.
257 In the public invitations for tender in respect of Duvanska Industrija “Vranje” (2003), the Agency expressly
asked for the disclosure of beneficial ownership structures. See Exh. CE-890, Public Invitation for
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if disclosure was required, for the reasons mentioned above, the Tribunal has determined
that Serbian government officials were well aware of Mr. Rand’s control over BD Agro.
396. In respect of Serbia’s allegations that Mr. Rand acted abusively by “hiding behind” Mr.
Obradović, it is true that only Serbian natural persons were permitted to pay for privatized
companies in instalments. 258 However, it remains that nothing prevents non-Serbian
nationals from participating in privatizations. Therefore, by participating indirectly in BD
Agro’s privatization through Mr. Obradović, Mr. Rand did not create for himself an
opportunity that otherwise he would have lacked. He could have bought BD Agro directly.
By acting through Mr. Obradović, Mr. Rand did, of course, receive the benefit of paying the
purchase price in instalments and it is true, that Mr. Obradovic effectively paid the purchase
price in 11 instead of six instalments. However, these facts in and of themselves do not
meet the high threshold set for an abuse, especially in circumstances where Mr. Rand
advanced good reasons for involving Mr. Obradović, 259 and interest was paid on the overdue
instalments, which monies the Agency accepted without protest. 260 Further and in any event,
as already explained, Serbia was well aware of Mr. Rand’s involvement in BD Agro from the
very beginning (§239), and cannot now be heard to complain about Mr. Rand acting through
Mr. Obradović.
397. In the circumstances, the Tribunal dismisses this Objection.
(iii) Siphoning Objection
398. The Siphoning Objection is principally based on allegations that Mr. Obradović used funds
from BD Agro’s accounts to pay the purchase price for the Beneficially Owned Shares, to
fulfil his investment obligations under the Privatization Agreement, and for his personal
enrichment. The Respondent submits that the allegedly improper money transfers
amounted to fraud under Serbian law.
participation in a public tender process for the sale of socially owned capital of Duvanska industrija “Vranje”
a.d., p. 2 (pdf). It did the same in the public invitation for Beopetrol a.d. (2003). See Exh. CE-891, Public
Invitation for participation in a public tender process for the acquisition of a controlling interest in Beopetrol
a.d. Beograd, p. 2 (pdf).
258 Exh. RE-218, Regulation on the Sale of Capital and Property at a Public Auction (52/2005), Art. 39(1).
259 Rand WS III, §§11-14.
260 Exh. RE-33, Banking excerpts confirming payment of installments of purchase price by Mr. Obradovic,
15 October 2015.
105
399. Serbia has not cogently explained which rules have been breached and how. There are no
criminal proceedings pending against Mr. Obradović regarding any such alleged fraud,
despite similar allegations being made against him in 2009 when the representatives of BD
Agro’s minority shareholders and employees complained to various Serbian bodies,
including the Privatization Agency, of the alleged “suspicious transactions from BD Agro’s
accounts.” 261 This is all the more surprising as Serbia was in control of BD Agro from
21 October 2015. Yet, no claim of financial or other irregularity has been made against
Mr. Obradović. It also remains that, as BD Agro was a publicly traded company, its financial
statements, which form the bases of Serbia’s allegations, were audited by three different
auditors, including PricewaterhouseCoopers, that found no irregularity. 262 Mr. Rand’s own
accountant, who visited BD Agro on a quarterly basis and reviewed the financial documents
of the company, did not raise any issues either. 263 Finally, Serbia’s expert, Mr. Sandy
Cowan, on whom Serbia relied to make this objection, admitted that he had not considered
certain transactions in his analysis, 264 and that his analysis was based on descriptions of
transactions used in BD Agro’s bank statements, which could be incorrect or inconclusive. 265
400. Therefore, the Tribunal concludes that this objection is not well-founded and dismisses it.
(iv) Land Machination Objection
401. The Land Machination Objection is grounded on allegations that Mr. Obradović stripped BD
Agro of some of its land and thereby extracted large sums from BD Agro. Serbia also alleges
that Mr. Obradović committed some of BD Agro’s land to an illegal land swap with the
Ministry of Agriculture.
402. While Serbia complains of “machinations” in respect of a number of transactions, and while
there might have been some irregularities in some transactions, here again, Serbia has not
cogently explained which rules have been breached and how. Serbia’s allegations are not
supported by domestic proceedings against Mr. Obradović in respect of these transactions,
despite BD Agro being within Serbia’s control since 2015. For instance, there are no court
decisions against Mr. Obradović for the transfer of land to Calpro or the transfer to
261 C-Mem., §179; Rej., §515.

262 Obradović WS III, §52.
263 Obradović WS III, §52; Rand WS III, §48.
264 Tr., Hearing on Jurisdiction and Merits, Day 8, 164:11-165:10 (Cowan).
265 Tr., Hearing on Jurisdiction and Merits, Day 8, 163:13-164:6 (Cowan).
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Ms. Nedeljkovic. Although the contract in the Land Swap Case was declared null and void,
it remains that such contract was concluded on a recommendation from the cadaster
office 266 and on the express approval of the Ministry of Agriculture. 267 It also noted that, the
Court of Appeal in Belgrade acquitted Mr. Obradović in that case. 268 For these reasons, the
Tribunal denies this objection.
d. Conclusion
403. It follows from the discussion above that the Tribunal has “ratione voluntatis” jurisdiction in
respect of claims arising out of Mr. Rand’s investment in Serbia.
4. Non-Retroactivity and Time Bar
404. The Respondent addresses two legally distinct issues under the heading of temporal
jurisdiction (items (b) and (c) below). First, however, it opposes the Claimants’
characterization of the factual basis of their claims (item (a) below).
(1) Characterization of the factual basis of the claims
405. The Respondent recalls that the Tribunal joined jurisdiction to the merits in Procedural Order
No. 3. This “incontrovertibly” showed that the Tribunal considered that the facts underlying
jurisdiction were “such as to necessitate full consideration which may only be achieved by
hearing both parties – and decidedly not by merely relying on what the Claimants allege.” 269
Moreover, the Claimants’ themselves argued that the factual basis of most of the
Respondent’s jurisdictional objections were “inextricably intertwined” with the merits. 270
406. While in a treaty arbitration it is for the claimant to allege the facts which in its view constitute
treaty breaches, a respondent has the right to dispute those facts and their characterization
as treaty breaches.
266 Exh. RE-395, Letter from the Cadaster Office to BD Agro, 8 February 2008.
267 Exh. CE-762, Decision of Ministry of Agriculture, 4 January 2010.
268 Exh. CE-907, Decision of the Court of Appeal in Belgrade, 26 May 2021.
269 Rej., §949.
270 Rej., §951 relying on Claimants’ Reply to the Request for Bifurcation, §7.
107
(2) Non-retroactivity
407. Serbia submits that the principle of non-retroactivity according to which legal obligations
arising under an international agreement cannot bind parties with respect to acts committed
before the legal obligation came into existence deprives the Tribunal of jurisdiction over
claims based on acts and facts preceding the entry into force of the Canada-Serbia BIT.
More specifically, the Respondent argues, all the claims raised in this arbitration arise from
acts and facts which were committed or were in existence before the Treaty’s entry into
force or were the direct result of Mr. Obradović’s breach of the Privatization Agreement that
also occurred prior to the entry into force. These claims are therefore precluded by the
principle of non-retroactivity.
408. The Respondent insists that the alleged breaches are “deeply and inseparably rooted” in
the Respondent’s pre-BIT conduct. For Serbia, “it is impossible to divorce termination of the
contract from its breach, or to divide the retention of pledge from the performance under the
contract, or equally to delineate breaches of contract and interests of BD Agro’s employees
and minority shareholders initiating the procedure with the Ombudsman.” 271 The Claimants’
argument that the breaches are based on the formal act of termination is “artificial” and
“purposefully tailored” to overcome the temporal limitation. Serbia adds that, once the
breach was declared and remedies suggested, there were only two possible options:
termination by the Agency or performance by Mr. Obradović. It is true that the Agreement
was formally terminated after the BIT’s effective date, but this was only because Mr.
Obradović made “false promises” that the breaches would be remedied. 272 He “misled” the
Agency causing the postponement of the termination and the Claimants now seek
international protection on that basis. 273
409. Serbia also stresses that the Claimants admitted that the dispute arose prior to the entry
into force of the Canada-Serbia BIT. Indeed, they conceded that Sembi found the Agency’s
refusal to release the pledge to be a violation of the Cyprus-Serbia BIT before it became a
violation of the Canada-Serbia BIT. Sembi’s owners are Canadian nationals who appear in
this arbitration as Claimants in their own right. It therefore follows, so says the Respondent,
271 Rej., §939.

272 Rej., §929.
273 Rej., §929.
108
that a dispute arose between the Parties prior to the effective date of the Canada-Serbia
BIT, which deprives the Tribunal of jurisdiction over the claims of the Canadian Claimants.
(3) Time bar
410. Serbia submits that Article 22 of the Canada-Serbia BIT sets forth an unconditional
preclusive three-year limitation period within which an investor/enterprise must submit a
claim from the date on which they first acquired, or should have first acquired, knowledge of
the alleged breach and knowledge that they had incurred loss or damage. These are
“imperative conditions”, without the satisfaction of which the Tribunal cannot exercise
jurisdiction.
411. According to Serbia, since the Request for Arbitration was received by the ICSID Secretariat
on 14 February 2018, the cut-off date is 14 February 2015 (the “Cut-Off-Date”). Therefore,
Mr. Rand must have acquired actual or constructive knowledge of a breach causing loss not
earlier than 14 February 2015. If he acquired knowledge before that date, the claim is time
barred.
(i) Knowledge of breach
412. For the Respondent, Mr. Rand was well aware of all circumstances leading to the alleged
breaches and loss as he was familiar with all the facts constituting the cause of action well
before the Cut-Off Date. In particular, from the moment when Mr. Obradović received the
First Notice dated 25 February 2011 (which the Claimants received on 1 March 2011), he
must have known about the potential loss.
413. Serbia challenges the Claimants’ argument according to which Mr. Rand could not possibly
know on 1 March 2011 or at any time prior to the Cut-Off Date that the Privatization
Agreement would be terminated due to a substantial breach of the contract. The First Notice
sets out several breaches of the Privatization Agreement and multiple violations of its Article
5.3.4. It provides reasons and evidence seeking to establish these breaches. It also grants
60 days to remedy the breaches of Articles 5.3.3 and 5.3.4 and specifies the consequences
of a failure to remedy.
414. Serbia notes that, while it was possible to avoid termination by remedying the breach of
Article 5.3.4, i.e. by reinstating the funds that were unlawfully lent to third parties,
remediation was entirely within Mr. Obradović’s control, as opposed to Serbia’s. Further,
109
there were six other notices of breach before the Cut-Off Date and several meetings during
which Mr. Obradović or representatives of BD Agro were advised that the existence of an
unremedied breach was the main issue pending between the contract parties.
415. Serbia contends that it is “suspicious” that Mr. Obradović never challenged the retention of
the pledge as a contractual breach before the forum chosen in the Privatization Agreement.
Equally suspicious is the Claimants’ submission that they could not “realistically foresee”
the termination of the Agreement despite the numerous notices of the breach of Articles
5.3.3 and 5.3.4. 274 It is “simply impossible” that dozens of warnings did not alert Mr.
Obradović and that argument illustrates how the Claimants built their case to overcome the
ratione temporis hurdle. 275
416. According to the Respondent, the Agency’s refusal to release the pledge (1), as well as the
Ombudsman’s intervention, (2) and the termination of the Privatization Agreement and the
seizure of the Beneficially Owned Shares (3) are time barred.
(a) Refusal to release the pledge
417. Serbia observes that the Privatization Agency clearly communicated the reason for not
releasing the pledge in 2014, which was an “imminent and direct consequence” of the
breach of Article 5.3.4 of the Privatization Agreement. During a meeting held on 4 February
2014, the Privatization Agency informed Mr. Obradović that it could not release the pledge
over the shares because of the breach. Therefore, Mr. Obradović was aware of the Agency’s
refusal to release the pledge already in February 2014, much before the Cut-Off Date.
418. Serbia rejects the argument that its refusal to release the pledge over BD Agro’s shares on
the Cut-Off Date and subsequently was a wrongful “continuous act.” The Agency was
contractually entitled to retain the pledge and “[a] [c]ontractual act is not in itself a wrongful
act and as such cannot qualify for a continuing wrongful act under international law.” 276 The
Respondent adds that “the continuing act, in terms of the retention of the pledge as a
security for the performance under the contract, has never come into existence under
international law as it has never reached the threshold of an internationally wrongful
274 Rej., §912.

275 Rej., §912.
276 Rej., §914.
110
continuing act.” 277 It also notes that the Claimants failed to challenge such act before the
Commercial Court in Belgrade in accordance with the choice of forum clause in the
Privatization Agreement. Moreover, argues Serbia, the Claimants should not be allowed to
rely on their own failures. Mr. Obradović’s failure to remedy the alleged breach of Article
5.3.4, together with his “manipulative promises” to the Privatization Agency, cannot be used
to overcome the time bar of the Canada-Serbia BIT
(b) Ombudsman’s intervention
419. Serbia points out that the Ombudsman commenced his investigation into BD Agro in late
2014 based on complaints received from BD Agro’s employees. Thus, says Serbia, “the
concern of the employees/stockholders over their status and property rights that gave rise
to their complaint to the Ombudsman did exist before [14 February 2015].” 278
(c) Termination of the Privatization Agreement and

seizure of the Beneficially Owned Shares
420. Serbia submits that the events following the breach of the Privatization Agreement were
foreseeable and inevitably led to the termination of the Privatization Agreement.
Foreseeability arises, so says Serbia, from numerous letters exchanged between
Mr. Obradović and the Agency, the existing legal framework, and Mr. Obradović’s prior
experience with the privatization process in Serbia. 279
(ii) Knowledge of loss
421. The Respondent submits that knowledge of possible loss is sufficient to trigger the limitation
period under the Treaty. The investor need not have suffered actual loss. Here, the
Claimants should be regarded as having knowledge of their alleged loss or damage on the
date of the First Notice which was given on 1 March 2011. The three-year period thus
expired on 1 March 2014, well before the Cut-Off Date.
277 Rej., §914.

278 Rej., §922.
279 Rej., §927.
111
422. The Claimants contend that it is for them, not for Serbia, to formulate their claims and identify
the measures that they deem to constitute breaches of the Canada-Serbia BIT. The Tribunal
must assess its jurisdiction based on the Claimants’ characterization of their claims. Serbia’s
attempts to mischaracterize the factual matrix of the claims should not be followed. The
Respondent cannot be allowed to recast the claims to its advantage thereby manufacturing
a ratione temporis objection.
423. In their submission, the Claimants have made it “abundantly clear” that they impugn three
instances of Serbia’s conduct: “(i) the continuous refusal to release the pledge over the
Privatized Shares; (ii) the unjustified and arbitrary investigation of BD Agro by the
Ombudsman and the unlawful issuance of his ‘recommendations’; and (iii) the unlawful
termination of the Privatization Agreement and the subsequent unlawful seizure of the
Beneficially Owned Shares.” Contrary to the Respondent’s suggestions, the Claimants have
never argued that the Privatization Agency’s finding of a purported violation of the
Privatization Agreement, which was notified to Mr. Obradović for the first time in March 2011,
constituted the basis of their claims.
(2) Non-Retroactivity
424. In the Claimants’ submission, the claims under the Canada-Serbia BIT are not precluded by
the principle of non-retroactivity of international treaties because they are based on conduct
that occurred after the Treaty’s entry into force.
425. The Claimants emphasize that the Privatization Agency was in continuous breach of its
obligation to release the pledge over the Beneficially Owned Shares from its first refusal on
8 April 2011 until the shares were expropriated on 21 October 2015. From the time when
the Canada-Serbia BIT entered into force on 27 April 2015, this conduct fell within the scope
of the BIT and there is no violation of the principle of non-retroactivity.
426. The Claimants further submit that while the Ombudsman initiated his unlawful investigation
of BD Agro in late 2014, he pursued it until he issued his recommendation on 23 June 2015.
Hence, the claims based on the investigations which were ongoing at the time of the Treaty’s
entry into force and on the later recommendations comply with the principle of non-
retroactivity.
112
427. Further still, the Claimants underline that the Privatization Agency terminated the
Privatization Agreement on 28 September 2015 and transferred the Beneficially Owned
Shares on 21 October 2015. Once again, both measures occurred when the Treaty was in
effect and there is thus no violation of the principle of non-retroactivity.
428. Moreover, say the Claimants, Serbia’s argument that the present “dispute” arose before the
Treaty’s entry into force is misguided. It is irrelevant when a dispute arises. What matters is
that the Claimants bring claims for breaches of the Canada-Serbia BIT. In any event, the
present dispute arose after the Treaty’s into force. The First Notice is not the source of this
dispute. At that time, the Claimants could not have known that Serbia would expropriate
their investment more than four years later. In addition, the notices of contract breach which
the Respondent invokes show at best that the termination of the Privatization Agreement
and the expropriation were neither automatic nor unavoidable. For the Claimants, the
relevant date to determine whether the claims respect the principle of non-retroactivity is
that of the expropriation, not those of the first and later notices.
(3) Time-bar
429. The Claimants insist that their claims fall within the Tribunal’s jurisdiction because they
became aware of the breaches and resulting loss on or after the Cut-Off-Date, at a time
when the Canada-Serbia BIT was in force. Contrary to the Respondent’s assertion, neither
the First Notice nor the Privatization Agency’s subsequent notices could have possibly
triggered the three-year time limit because the Canada-Serbia BIT was not in force at that
time.
(i) Knowledge of breach
430. The Claimants insist that none of their claims described above, be it the refusal to release
the pledge (1), the intervention of the Ombudsman (2), or the unlawful termination of the
Privatization Agreement (3), are time-barred.
(a) Refusal to release the pledge
431. As mentioned above, the Claimants became aware of the breach perpetrated through the
continuous refusal to release the pledge, which lasted until the expropriation of the
Claimants’ investment, on 27 April 2015. In response to Serbia’s challenge of the wrongful
and continuous nature of that action, they argue that it does not matter whether conduct is
113
contractual or not to determine whether it is continuous. 280 In SGS v. Philippines, for
instance, the tribunal recognized that non-performance of a contract may constitute a
continuous breach under international law.
432. The Claimants equally dispute Serbia’s argument linked to the lack of challenge in local
courts. They assert that international claims are not predicated on the exhaustion of local
remedies and add that the expropriation was the result of the conduct of the Privatization
Agency. Had the Privatization Agency released the pledge, there would have been no
seizure of the Beneficially Owned Shares, with the result that “the Claimants are absolutely
not required to have sought redress before the courts in order to assert a claim of Serbia’s
breach of its international obligations on the basis of the Privatization Agency’s refusal to
release the pledge.” 281
433. Finally, the Claimants reject Serbia’s conclusion that the above factors, taken together with
Mr. Obradović’s “indolence” to remedy the alleged breaches amount to an “impermissible
[…] modification” of the Cut-Off-Date. More specifically, they explain that “Mr. Obradović’s
alleged ‘indolence to remedy the alleged breaches’ could not have possibly amounted to
any ‘tolling’ of the time limitation period for submitting a claim to arbitration under the
Canada-Serbia BIT because the Claimants did not even have a claim to arbitrate at the time
of that alleged conduct.” 282
(b) Ombudsman’s intervention
434. The Claimants submit that one of the reasons why Serbia breached the Canada-Serbia BIT
lies in the Ombudsman starting an unjustified, heavily publicized and politically-motivated
investigation of BD Agro that culminated in the issuance of unlawful “recommendations” and
prompted the termination of the Privatization Agreement and the expropriation of the
investment. The Claimants became aware of the Ombudsman’s unlawful investigation and
of his “recommendations” on 23 June 2015, i.e. after the Cut-Off-Date.
280 Rej. J., §621.

281 Rej. J., §629.
282 Rej. J., §630.
114
(c) Termination of the Privatization Agreement and
seizure of the Beneficially Owned Shares
435. The Claimants also assert a breach of the Canada-Serbia BIT due to the Agency’s unlawful
termination of the Privatization Agreement on 28 September 2015 and the subsequent
unlawful order to transfer the Beneficially Owned Shares on 21 October 2015. These events
occurred after the Cut-Off-Date and, therefore, the related breaches cannot be time barred.
(ii) Knowledge of loss
436. The Claimants stress that the limitation is only triggered once the investor has become
aware of the “loss or damage” inflicted by the breach. For the claims to be time barred,
Serbia must thus prove that the Claimants acquired knowledge that they suffered loss as a
result of Serbia’s breach of the Canada-Serbia BIT more than three years before initiating
this arbitration, which is obviously impossible.
437. The Claimants insist that they became aware of the loss caused by Serbia’s violations of
the Treaty only on 21 October 2015 when the Beneficially Owned Shares were seized, and
the Claimants were thus definitively deprived of their investment. This was after the Cut-Off-
Date. Even if the Claimants could be said to have acquired knowledge of the loss due to the
failure to release the pledge and the Ombudsman’s unlawful interference on 27 April 2015
and 23 June 2015, respectively, both these dates would also fall after the Cut-Off-Date.
438. According to the Claimants, it is incorrect that the termination of the Privatization Agreement
and subsequent seizure of the Beneficially Owned Shares are mere consequences of the
first notice, of which the Claimants should have been aware upon receipt of that first notice
long before the Cut-Off-Date. While Article 22(2)(e)(i) of the Canada-Serbia BIT
contemplates two forms of knowledge of breach and loss, i.e. actual knowledge (what the
claimant did in fact know) and constructive knowledge (what the claimant should have
known), very few investment tribunals have enquired whether the claimant had constructive
knowledge of the alleged breach and loss. Further, constructive knowledge does not mean
that the investor is required to anticipate before the Cut-Off-Date, what the State’s conduct
will be thereafter, with the result that the investor would be deemed to have knowledge of
the State’s conduct before it actually occurred.
115
c. Analysis
439. The Tribunal first examines the Parties’ submissions on the characterization of the factual
basis of the claims (a). Then, it reviews the two legally distinct issues of temporal scope of
application of the Treaty and non-retroactivity (b). Finally, it discusses the time bar or statute
of limitation of claims (c).
440. At the outset, the Parties diverge when it comes to the basis on which the Tribunal must
assess its temporal jurisdiction. The Respondent argues that the Tribunal should adopt its
own characterization of the alleged breaches, whereas the Claimants submit that it must
accept the claims as pled.
441. The Tribunal tends to agree with the Claimants. Article 22(2)(e)(i) of the Canada-Serbia BIT
reproduced above provides that an investor may submit a claim to arbitration if not more
than three years have elapsed from the date on which the investor first acquired, or should
have first acquired, knowledge of the alleged breach. The use of the word “alleged” to qualify
the breach suggests that the Tribunal must assess its jurisdiction on the basis of the claims
as pled. Other tribunals, interpreting similarly worded investment agreements, have reached
the same conclusion. 283 Serbia advances no convincing explanation why this reasoning
should be different in respect of non-retroactivity.
(2) Non-retroactivity
442. As a matter of principle and subject to a contrary agreement which is not at issue here, only
a treaty that is in force binds the Contracting States. 284 As a corollary, acts carried out at a
time when the treaty had not yet entered into force are not subject to the treaty rules. In
other words, a treaty does not have retroactive effect, it does not capture acts or omissions
283 See, for instance, Exh. CLA-103, Infinito Gold Ltd. v. Republic of Costa Rica, ICSID Case No. ARB/14/5,
Decision on Jurisdiction, 4 December 2017, §§186, 187 (“at the jurisdictional stage, a tribunal must be
guided by the case as put forward by the claimant in order to avoid breaching the claimant's due process
rights. To proceed otherwise is to incur the risk of dismissing the case based on arguments not put forward
by the claimant, at a great procedural cost for that party. […] [T]he Tribunal must assess the case before it
focusing on the measures that the Claimant has deemed fit to challenge, and determine its jurisdiction, the
admissibility of these claims and, if appropriate, the prima facie existence of rights to be protected at the
merits phase, on that basis.”). See also, Exh. RLA-127, Glamis Gold, Ltd. v. The United States of America,
UNCITRAL, Award, 8 June 2009, §349; Exh. RLA-128, Eli Lilly and Company v. The Government of
Canada, UNCITRAL, ICSID Case No. UNCT/14/2, Award, 16 March 2017, §§163-165.
284 RLA-44, Vienna Convention on the Law of Treaties (“VCLT”), Art. 26.
116
predating its effectiveness. 285 There are exceptions to the non-retroactivity principle, but the
Parties have not invoked any such exception, and rightly so, continuing acts that are ongoing
on the date of entry into force of the treaty fall within the temporal scope of application of
the treaty for the period that follows the entry into force. As observed in Société Générale v.
Dominican Republic, prior acts may only be taken into consideration for “‘purposes of
understanding the background, the causes, or scope of the violations of the BIT that
occurred after the entry into force’ or the relevance of prior events to breaches taking place
after the treaty’s entry into force.” 286
443. The Canada-Serbia BIT implements these principles, in particular, in Article 21(1) of the BIT,
which provides that investors may only assert claims in respect of a host state’s breach of
the Treaty, implying that there can be no breach if the Treaty is not effective:
“1. An investor of a Party may submit to arbitration under this Section a claim
that:
(a) the respondent Party has breached an obligation under Section B, other than
an obligation under Articles 8(3), 12, 15 or 16; […].”
444. As the Canada-Serbia BIT entered into force on 27 April 2015, the Tribunal can only assert
jurisdiction over measures which were adopted (or ongoing) on or after that date, 287 which
is the case of all the claims put forward:
i. Termination of the Privatization Agreement and seizure of the Beneficially Owned

Shares: The “heart” of the Claimants’ case – so say the Claimants – is Serbia’s
allegedly unlawful termination of the Privatization Agreement and subsequent
285 RLA-44, VCLT, Art. 28. See also Exh. RLA-74, Generation Ukraine, Inc. v. Ukraine, ICSID Case No.
ARB/00/9, Award, 16 September 2003, §11.2; Exh. RLA-38, Tradex Hellas S.A. v. Republic of Albania,
ICSID Case No. ARB/94/2, Decision on Jurisdiction, 24 December 1996, pp. 179-180; Exh. RLA-39,
Mondev International Ltd. v. United States of America, ICSID Case No. ARB(AF)/99/2, 11 October 2002,
§§57-75; Exh. RLA-33, Impregilo S.p.A v. Islamic Republic of Pakistan, ICSID, Case No. ARB/03/3,
Decision on Jurisdiction, 22 April 2005; Exh. RLA-36, Sergei Paushok, CJSC Golden East Company and
CJSC Vostokneftegaz Company v. The Government of Mongolia, UNCITRAL, Award on Jurisdiction and
Liability, 28 April 2011, §431; Exh. RLA-34, M.C.I. Power Group L.C. and New Turbine, Inc. v. Republic of
Ecuador, ICSID Case No. ARB/03/6, Award, 31 July 2007; Exh. RLA-29, Marvin Roy Feldman Karpa v.
United Mexican States, ICSID Case No. ARB(AF)/99/1, Award, 16 December 2002, §§61-62.
286 Exh. CLA-106, Société Générale In respect of DR Energy Holdings Limited and Empresa Distribuidora
de Electricidad del Este, S.A. v. The Dominican Republic, UNCITRAL, LCIA Case No. UN 7927, Award on
Preliminary Objections to Jurisdiction, 19 September 2008, §§73, 87, 90-92.
287 Exh. RLA-31, Aaron C. Berkowitz, Brett E. Berkowitz and Trevor B. Berkowitz (formerly Spence
International Investments and others) v. Republic of Costa Rica, ICSID Case No. UNCT/13/2, Interim Award
of the Tribunal (Corrected), 30 May 2017, §220.
117
seizure of the Beneficially Owned Shares. 288 The Agreement was terminated on
28 September 2015. 289 The Beneficially Owned Shares were seized on 21 October
2015. 290 Both measures post-date the Treaty’s entry into force on 27 April 2015;
ii. Refusal to release the pledge: The Claimants challenge the Privatization Agency’s
“continuous refusal” to release the pledge over the Beneficially Owned Shares. The
Agency first refused to release the pledge at a meeting with Mr. Obradović on
4 February 2014 291 before the Treaty’s entry into force. However, it repeated its
refusal on several occasions thereafter, including after 27 April 2015. 292 In the
circumstances, this claim falls within the temporal scope of the Canada-Serbia BIT
in respect of the period post-dating 27 April 2015.
iii. Ombudsman’s intervention: The Claimants also contest the “unjustified and arbitrary
investigation” of BD Agro by the Ombudsman and the unlawful issuance of his
“recommendations.” 293 The Ombudsman’s investigation started in late 2014, was
“ongoing” when the Treaty entered into force on 27 April 2015, became known to Mr.
Rand on 23 June 2015, 294 the “recommendations” being issued four days later on
27 June 2015. Claims arising from these measures thus also fall within the temporal
scope of the Canada-Serbia BIT with respect to the time following 27 April 2015.
(3) Time bar
445. The second issue that the Parties have addressed under the title of “temporal jurisdiction”
refers to the three year time bar found in Article 22(ii)(e)(i) of the Canada-Serbia BIT. That
provision only applies to claims that are within the temporal scope of the Treaty, as
discussed in section (b) above.
288 Rej. J., §593.

289 Exh. CE-50, Notice on Termination of the Privatization Agreement, p. 3.
2015.
291 Exh. RE-36, Minutes from meeting held at the Privatization Agency, 4 February 2014.
292 See, for instance, Exh. CE-767, Audio recording from meeting of the Commission for Control, 23 April
2015; Exh. CE-768, Transcript of the audio recording from meeting of the Commission for Control, 23 April
2015.
293 Rej. J., §598.
294 Reply, §799; Exh. CE-45, The Ombudsman’s On-Line Statement, 23 June 2015.
118
446. Article 22(ii)(e)(i) of the BIT prescribes that an investor cannot bring claims if more than
three years have elapsed from the time when the investor first acquired, or should have first
acquired, knowledge of the alleged breach and loss:
“Conditions Precedent to Submission of a Claim to Arbitration

[…]
2. An investor may submit a claim to arbitration under Article 21 only if:
[…]
(e) in the case of a claim submitted under Article 21(1):
[…]
(i) not more than three years have elapsed from the date on which the investor
first acquired, or should have first acquired, knowledge of the alleged breach and
knowledge that the investor has incurred loss or damage thereby
[…]”
447. The Parties agree that the relevant Cut-Off-Date is 14 February 2015, i.e. three years before
the Claimants initiated the present arbitration. They similarly concur that knowledge can be
actual or constructive and that what matters is first knowledge. 295 It appears further
undisputed that continuing acts that are ongoing on the Cut-Off Date are within the ambit of
the Treaty for the period that follows the Cut-Off Date. 296 Finally, pursuant to the wording of
the Treaty, the three-year time limit is only triggered if the investor not only has knowledge
of a breach of the treaty but also of the damage caused by that breach. 297
448. Applying these principles, the Tribunal finds that the none of the claims are time-barred.
(i) Refusal to release the pledge
449. As noted in the context of non-retroactivity, the Claimants challenge the Privatization
Agency’s “continuous refusal” to release the pledge of the shares. Here again, Mr. Rand
acquired knowledge of breach after the cut-off date of 14 February 2015.
295 See, for e.g., Rej., §896.

296 Rej., §936 (“Respondent does not contest the existence of the concept of internationally wrongful acts
of a continuous character nor Article 14 of the ILC Draft Articles.”). The Commentaries to the ILC Draft
Articles clarify that a course of conduct, which has started before the underlying treaty entered into force,
can give rise to a continuing wrongful act in the present (“In cases where the relevant obligation did not
exist at the beginning of the course of conduct but came into being thereafter, the ‘first’ of the actions or
omissions of the series for the purposes of State responsibility will be the first occurring after the obligation
came into existence.”). Exh. CLA-024, ILC Draft Articles, pp. 63-64.
297 See also, for instance, Exh. RLA-31, Aaron C. Berkowitz, Brett E. Berkowitz and Trevor B. Berkowitz
(formerly Spence International Investments and others) v. Republic of Costa Rica, ICSID Case No.
UNCT/13/2, Interim Award of the Tribunal (Corrected), 30 May 2017, §211; Exh. RLA-028, Corona
Materials LLC v. Dominican Republic, ICSID Case No. ARB(AF)/14/3, Award, 31 May 2016, §194.
119
(ii) Ombudsman’s intervention
450. The Claimants contest the “unjustified and arbitrary investigation” of BD Agro by the
Ombudsman and the unlawful issuance of his “recommendations.” 298 As was already noted,
the Ombudsman’s “recommendations” were issued on 27 June 2015, after the Cut-Off Date.
The Claimants also allege that the Ombudsman “prompted” the seizure of the Beneficially
Owned Shares, in which case, Mr. Rand could only acquire the relevant knowledge after
the shares were seized i.e. after 21 October 2015, again well after the cut-off date.
(iii) Termination of the Privatization Agreement and seizure of

the Beneficially Owned Shares
451. The “heart” of the Claimants’ case is Serbia’s allegedly unlawful termination of the
Privatization Agreement and subsequent seizure of the Beneficially Owned Shares. 299 The
Agreement was terminated on 28 September 2015 300 and the Beneficially Owned Shares
were seized on 21 October 2015. 301 Hence, neither of these events pre-date the Cut-Off
Date of 14 February 2015.
452. This being so, Serbia argues the Claimants must have been aware that the Agreement could
be terminated, and they could incur a loss as soon as on 1 March 2011 when BD Agro
received the First Notice dated 25 February 2011. However, the breach alleged by the
Claimants arises out of the termination of the Agreement not of the First Notice or any
subsequent ones. 302
d. Conclusion
453. It follows from the foregoing discussion, that the Treaty’s temporal scope of application and
the statute of limitation are no bar to the Tribunal’s jurisdiction.
298 Rej. J., §598.

299 Rej. J., §593.
300 Exh. CE-50, Notice on Termination of the Privatization Agreement, p. 3.
2015.
302 Rej. J., §§599-600 (“Nowhere in their submissions did the Claimants ever argue that the Privatization
Agency’s finding of the purported violation of the Privatization Agreement, which was notified to Mr.
Obradović for the first time in March 2011, constituted the basis of their claims […] the Claimants obviously
mention in their submissions the Privatization Agency’s notifications as well as the Privatization Agency’s
other problematic actions that also predate the Canada-Serbia BIT. The Claimants, however, do not refer
to these pre-treaty facts because they would consider such facts to constitute Serbia’s breaches of the
Canada-Serbia BIT.”).
120
5. Abuse of Process
454. The Respondent also objects to the Tribunal’s jurisdiction on the ground of abuse of
process. The Claimants do not take issue with the characterization of this objection as a
matter of jurisdiction rather than admissibility. As this distinction makes no difference to the
outcome reached below, the Tribunal will review this objection in the present context.
455. The Respondent submits that the “Claimants’ conduct represents an abuse of the arbitration
mechanism” with the consequence that their investment should be denied protection. It first
contends that Mr. Rand’s conduct is abusive because he initiated this arbitration “fully
cognizant of the fact that [he] did not acquire a property right that was recognized and
protected under the laws of the host State.” 303
456. The arbitration is also abusive, says Serbia, because it arises out of a domestic investment,
and essentially concerns whether the Privatization Agency validly terminated the contract it
had concluded with Mr. Obradović, a Serbian national and the buyer of BD Agro. The
initiation of the present arbitration is thus “nothing more than an attempt of Claimants to
internationalize [a] domestic dispute and to misuse the ICSID System for purposes it was
not intended, in contravention with the principle of good faith.” 304
457. Serbia also considers that Mr. Rand’s “fabricated” his beneficial ownership of BD Agro to
“circumvent” jurisdictional requirements. It emphasizes that Sembi’s 2008 financial
statements that allegedly record the beneficial ownership were filed with the Cypriot
Registrar of Companies as late as August 2014, at a time when the dispute with the Agency
was foreseeable. For Serbia, this shows Mr. Rand’s intention to “deceive” the Respondent
and “manipulate” the Tribunal and constitutes an “abuse of the arbitration mechanism.” 305
458. The Respondent adds that, between 2013-2015, Mr. Rand attempted to transfer the
Privatization Agreement to Mr. Rand’s Cypriot company, Coropi, knowing fully well that the
Agency’s consent was required for the transfer. That attempt failed. Yet, Mr. Rand
nevertheless commenced this arbitration, based on his alleged beneficial ownership,
303 Rej., §1047.

304 Rej., §1045.
305 R-PHB 1, §169.
121
effectively acting as if the transfer had taken place. For the Respondent, this claim is not in
good faith and should thus be dismissed as such.
459. Finally, the Respondent contends that Mr. Rand intends to use this arbitration to collect
EUR 2.7 million that Mr. Obradović admitted owning to Sembi, trying to settle this business
issues in a manner that constitutes an abuse of process. 306
460. The Claimants put forward that this objection rests entirely on the incorrect premise that
treaties only protect property rights that were “recognized and protected under the laws of
the host state.” They recall that, international investment law protects not only proprietary
rights, but also rights in personam and rights of beneficial ownership. According to them,
numerous international tribunals and scholars share this view.
461. For the Claimants, Serbia’s contention that “the beneficial ownership theory was fabricated
in order to circumvent jurisdictional obstacles” is contradicted by several facts which
occurred years before the dispute arose. For instance, the MDH Agreement through which
beneficial ownership was transferred to MDH was concluded in 2005, which shows that
Messrs. Rand and Obradović both intended that Mr. Rand become the beneficial owner of
BD Agro upon its privatization. In 2008, on the basis of the Sembi Agreement, Sembi
recorded its beneficial ownership of the Beneficially Owned Shares in its annual returns,
which were filed in 2009. Still in 2008, Mr. Rand paid EUR 2.2. million for the purchase and
transport of heifers from Canada to BD Agro. He would not have made these payments if
he had not been the beneficial owner of BD Agro.
462. Similarly, the Claimants find “disingenuous” Serbia’s portrayal of the Claimants’ efforts to
obtain nominal ownership of BD Agro in 2013-2015 as an attempt to restructure the
investment to gain international protection for a foreseeable dispute. When Mr. Rand first
sought to assign the Privatization Agreement to Coropi in 2013, the termination of the
Privatization Agreement, let alone the subsequent seizure of the Beneficially Owned
Shares, was not foreseeable.
463. The Claimants also oppose Serbia’s submission that the claims are abusive because they
are motivated by an attempt to collect EUR 2.7 million from Mr. Obradović. For one, this
306 R-PHB 1, §168.
122
allegation was raised belatedly. Further, even if true, this would not constitute an abuse of
process as it does not involve fictitious transactions or the restructuring of an investment
after the impugned breach. Further still, Mr. Obradović does not owe EUR 2.7 million to
Sembi. Under the Sembi Agreement, Sembi acquired receivables against BD Agro of EUR
4.7 million, arising under loans that Mr. Obradović had granted to BD Agro from the Lundins’
funds. BD Agro later repaid these loans to Mr. Obradović. Sembi directed Mr. Obradović to
use EUR 2 million to pay the last two instalments of the purchase price of BD Agro. The
remaining EUR 2.7 million were used for other purposes, unrelated to BD Agro. It is on the
ground of accounting rules that Sembi records these amounts as owed by Mr. Obradović.
c. Analysis
464. The doctrine of abuse of right is a general principle of law that “prohibits the exercise of a
right for purposes other than those for which the right was established.” 307 Abuse of process
is a subcategory of abuse of right focusing on the misuse of a procedural right and especially
of the right to arbitrate. For instance, a corporate restructuring to benefit from treaty
jurisdiction over a foreseeable dispute has been found to constitute an abuse of process. 308
It is well-settled that the threshold for finding an abuse of right or process is high. 309
465. In the circumstances of this dispute, the Tribunal does not discern an abuse.
466. Serbia’s position that Mr. Rand started this arbitration knowing that he had no rights and
seeking to “internationalize” a domestic dispute is misconceived. The foregoing analysis has
shown that the dispute has connections with more than one national legal system and is
thus international in nature.
467. Similarly, there is no evidence to support the assertion that Mr. Rand fabricated transactions
to benefit from the arbitration clause in the Canada-Serbia BIT. The Tribunal’s jurisdiction
under the Treaty arises out of the contractual interest Mr. Rand acquired in the Beneficially
Case No. ARB/12/35, Final Award, 31 May 2017, §540.
308 Exh. RLA-188, Philip Morris Asia Limited v. The Commonwealth of Australia, UNCITRAL, PCA Case
No. 2012-12, Award on Jurisdiction and Admissibility, 17 December 2015, §554. See also Exh. CLA-28,
Caratube International Oil Company LLP and Devincci Salah Hourani v. Republic of Kazakhstan, ICSID
Case No. ARB/13/13, Award, 27 September 2017, §376, where the Claimants commence an arbitration to
gain a benefit which is inconsistent with the purpose of international arbitration.
309 See, for instance, Exh. RLA-188, Philip Morris Asia Limited v. The Commonwealth of Australia,
UNCITRAL, PCA Case No. 2012-12, Award on Jurisdiction and Admissibility, 17 December 2015, §539.
123
Owned Shares through the Sembi Agreement. Serbia does not allege that that Agreement
was forged or fictitious. It only challenges whether and, if so, when Sembi’s 2008 financial
statements were filed with the Cyprus Registrar of Companies. Yet, other contemporaneous
documents prove that Sembi’s relationship with BD Agro commenced in 2008. 310 Neither
does Serbia contend that the dispute with the Agency was foreseeable at the time Messrs.
Rand and Obradović entered into the Sembi Agreement in 2008.
468. In the same vein, the Respondent’s argumentation in connection with the assignment to
Coropi is unfounded. The Tribunal’s assessment of the record does not confirm Serbia’s
views. As explained earlier, in 2008, through the Sembi Agreement, Mr. Obradović
transferred certain interests to Sembi. The Agency’s approval was not required for the
transfer as the Privatization Agreement itself was not transferred. In 2013, when the
Claimants intended to assign the Agreement as such to Coropi, they asked for the Agency’s
approval. That attempt was unsuccessful. Mr. Rand initiated the present arbitration in 2019
based on the interests he had indirectly acquired through the Sembi Agreement, not based
on the assignment of the Agreement.
469. Finally, Serbia’s contention with respect to Mr. Rand’s attempted collection of a
EUR 2,7 million debt of Mr. Obradović cannot be given more credit. It is entirely speculative;
Serbia produces no evidence whatsoever in support. Moreover, either Serbia is responsible
for breaching the Canada-Serbia BIT in which event it will have to compensate Mr. Rand or
it is not. Whatever the outcome, there will be no collection of Mr. Obradović’s alleged debt.
Further, even if the facts underlying Serbia’s argument were accepted, the Tribunal does
not consider that they show an abuse of process.
470. For the foregoing reasons, the Tribunal dismisses Serbia’s abuse of process objection.
d. Conclusion on Jurisdiction
471. On the basis of the foregoing, the Tribunal concludes that it has jurisdiction over Mr. Rand’s
claims under the ICSID Convention and the Canada-Serbia BIT in respect of his interest in
the Beneficially Owned Shares but lacks jurisdiction over his claims in respect of his
payments for the benefit of BD Agro and his indirect shareholding in BD Agro. It also does
not have jurisdiction over the claims of the other Claimants under the Canada-Serbia BIT,
310 See C-PHB 2, §33(e) and Exh. CE-911, Sembi’s Income Declaration for 2008 filed with Cyprus Income
Tax Office, 7 June 2010.
124
nor does it have jurisdiction over Sembi under the Cyprus-Serbia BIT. Accordingly, in the
liability section below the Tribunal will only review the alleged breaches of the Canada-
Serbia BIT.
VII. LIABILITY
472. The Tribunal will first address the Parties’ arguments on attribution ((A) below), the general
defense based on the exercise of sovereign powers invoked by Serbia ((B) below), and then
the Parties’ positions on each alleged breach ((C) and (D) below) followed by a discussion
of the exception under Article 18(1) of the Canada-Serbia BIT ((E) below).
A. Attribution
1. Claimants’ Position
473. The Claimants submit that the Privatization Agency was structurally and functionally part of
the Serbian administration and, thus, represented a de facto organ of Serbia under Article
4 of the ILC Articles. Specifically, it points to the following elements:
• The Serbian Government appointed the Agency’s Board of Directors, the

Management Board as well as the Director of the Agency;
• The Commission for Control, the body that decided upon the termination of the
Privatization Agreement, was established by the Ministry of Economy;
• The Agency was supervised by the Ministry of Economy and the Serbian
Government. For instance, the Agency’s own representatives confirmed that the
entire privatization process was supervised by the Ministry of Economy and the
Council of Ministers. The Agency also had to report to the Ministry of Economy at
least twice a year;
• “Most of the money” earned by the Agency from the sale of privatized assets was
forwarded to the state budget. These funds were then put to Government use in
accordance with the national investment plan;
• The European Court for Human Rights “repeatedly and unequivocally” confirmed
that the Agency was a “state body.”
125
474. In the alternative, the Claimants argue that the conduct of the Agency is attributable to
Serbia under Article 5 of the ILC Articles. For them, the fact that the Agency exercises
governmental authority is evident from the following facts:
• Privatization agreements, which fell within the Agency’s purview, are not ordinary
commercial agreements. They are deemed sui generis contracts pursuing a specific
aim of promoting economic development and social security;
• The Agency was a “holder of public powers” under Article 46 of the Law on State
Administration. The Agency exercised such public powers when concluding,
performing and terminating the Privatization Agreement. This was also confirmed in
arbitral proceedings involving the Agency, including the Uniworld arbitration;
• The Notice of Termination and the Decision on Transfer of Capital have

characteristics of administrative acts. In addition, the unilateral seizure and transfer
of the Beneficially Owned Shares by the Agency was an exercise of governmental
authority. No private party could have done so, and Serbia does not argue to the
contrary.
475. In the further alternative, the Claimants contend that the impugned actions of the Agency
were directed and controlled by Serbia within the meaning of Article 8 of the ILC Articles.
They observe that the Agency always acted under binding instructions given by the Ministry
of Economy. In fact, the Agency’s representatives referred to the Ministry’s instructions as
“orders” and considered themselves bound to follow such orders. They further note that the
Agency refused to take any decision regarding the Privatization Agreement before it
received the Ministry’s conclusions from the latter’s supervision procedure. When it received
those conclusions, it followed them and terminated the Agreement “in line with the Report
of the Ministry of Economy.” 311
2. Respondent’s Position
476. Serbia submits that a “closer look” at the relevant authorities including the ILC Articles
reveals that the Privatization Agency’s conduct in the present case cannot be attributed to
it.
311 Exh. CE-50, Notice on Termination of the Privatization Agreement.
126
477. Serbia denies that the Agency is a de facto organ under Article 4 of the ILC Article, noting
that the Agency has a separate legal personality which, it says, creates a “strong
presumption” against the existence of a de facto organ. 312 This conclusion is all the more
certain as the Agency does not act in “complete dependence” on the State. Quite the
opposite, the Agency has an independent budget and autonomous management, and
engages in commercial activities. Contrary to the Claimants’ suggestion, the fact that the
Agency is an organ of the State from a “functional perspective” is irrelevant. Several arbitral
tribunals have held that the fact that an entity carries out public activities is not determinative
of its status as a state organ, if it is not structurally an organ. 313
478. Serbia equally disputes that the Agency’s conduct can be attributed to it under Article 5 of
the ILC Articles. The Claimants’ position that the Agency acted as an “agent” of Serbia in
administering the sale of socially and State-owned assets is irrelevant. Only those acts that
are the subject-matter of the Claimants’ complaints are of relevance. These acts, including
the Agency’s refusal to release the pledge over the Privatized Shares and to consent to the
assignment of the Privatization Agreement, and the termination of such agreement are
commercial in nature. They can be undertaken by any party to a commercial contract, with
the result that they would not fall within the ambit of Article 5 of the ILC Articles. Further, the
transfer of the Agency’s functions to the Ministry of Economy following the dissolution of the
Agency cannot as such make these functions governmental in nature. 314
479. Serbia also challenges the Claimants’ allegation that the Agency’s conduct is attributable on
the basis of Article 8 of the ILC Articles. It emphasizes that conduct can only be attributed
to the state on this ground if instructions, direction and control are established with respect
to specific conduct of a person or group of persons. Here, the Claimants have failed to
establish the specific conduct by the Agency that violated their rights, nor have they shown
that such conduct was exercised on the instructions of, or under the direction or control of
Serbia. For instance, while the Claimants insist that the Agency’s decision to terminate the
Privatization Agreement “had been imposed” by the Ministry of Economy, the record
contains no such instruction. 315 Similarly, although the Claimants argue that the Agency
312 C-Mem., §542.

313 C-Mem., §§542 et seq.
314 C-Mem., §§572.
315 C-Mem., §585.
127
acted on the instructions of the Ombudsman in terminating the Privatization Agreement, the
Ombudsman’s recommendations are not binding.
3. Analysis
480. The Claimants submit that the acts of the Ministry of Economy, the Ombudsman and the
Privatization Agency are attributable to Serbia under Articles 4, 5 or 8 of the ILC Articles.
Serbia does not contest the application of the ILC Articles, nor that the actions of the Ministry
of Economy and the Ombudsman are attributable to it, since both are its organs under
Serbian law. 316 It does, however, dispute that the conduct of the Agency is attributable to
the State.
a. Article 4 of the ILC Articles
481. Article 4 of the ILC Articles sets out the basic rule that the conduct of a State organ is an act
of the State and is thus attributed to the State:
“Article 4 - Conduct of organs of a State
1. The conduct of any State organ shall be considered an act of that State
under international law, whether the organ exercises legislative, executive,
judicial or any other functions, whatever position it holds in the organization of
the State, and whatever its character as an organ of the central Government
or of a territorial unit of the State.
2. An organ includes any person or entity which has that status in accordance
with the internal law of the State.”
482. The Claimants appear to have abandoned their claim that the Privatization Agency is a de
jure organ of Serbia under Article 4 of the ILC Articles. 317 They are right to have done so.
The starting point for characterizing an entity as a state organ is the internal law of the State
in question 318 and the fact that an entity has separate legal personality creates a
316 C-Mem., §§537, 539 (“It is not in dispute between the Parties that [the ILC Articles] should govern the
question of attribution to Respondent […] Claimants also contend that the conduct of the Ministry of
Economy and the Ombudsman should be attributed to Respondent, which is not in dispute, since both are
Respondent’s organs under Serbian law.”).
317 See Mem., p. 94 (“The Privatization Agency was an organ of the Republic of Serbia within the meaning
of Article 4 of the ILC Articles”) and Reply, §940 (“Although the Privatization Agency is not explicitly
described as a State organ under Serbian law,”); C-PHB 1, §171.
318 See Exh. CLA-24, Draft Articles on Responsibility of States for Internationally Wrongful Acts with
commentaries, p. 42, §11. See also Exh. RLA-83, Jan de Nul N.V. and Dredging International N.V. v. Arab
Republic of Egypt, ICSID Case No. ARB/04/13, Award, 6 November 2008, §160 (“[t]o determine whether
an entity is a State organ, one must first look to domestic law.”).
128
presumption that it is not a state organ within the meaning of Article 4. 319 Here, according to
the Law on Privatization Agency, the Agency has independent legal personality. 320
483. This being so, Article 4 specifies that an organ “includes” a person or entity which has that
status under domestic law. The use of the word “include” shows that a body which acts as
an organ but does not qualify as such under the internal law of the State may nevertheless
be deemed an organ under Article 4 (ILC Commentary 11 ad Article 4). 321 On this basis, the
International Court of Justice has developed the notion of de facto organ in the context of
the attribution of activities of paramilitary groups. 322 Persons or groups may thus be equated
to a de jure organ if they act “in ‘complete dependence’ on the State, of which they are
ultimately merely the instrument.” 323 This is not the case here. The Agency was not
“completely dependent” on the State. It had its own independent means of financing
(commission from sales), 324 its own bank account, 325 and was independent in disposing of
its budget. 326 Further, the Agency’s activities were largely commercial, including, for
instance, selling certain types of publicly held shares and stock. 327 This, of itself suffices to
dispel the notion that the Agency is a de facto organ of the State, 328 not to speak of the lack
of “complete dependence” from the State.
319 Exh. RLA-85, Kristian Almås and Geir Almås v. The Republic of Poland, PCA Case No. 2015-13, Award,
27 June 2016, §209; Exh. RLA-83, Jan de Nul N.V. and Dredging International N.V. v. Arab Republic of
Egypt, ICSID Case No. ARB/04/13, Award, 6 November 2008, §§160-161; Exh. RLA-84, Bayindir Insaat
Turizm Ticaret Ve Sanayi A.S. v. Islamic Republic of Pakistan, ICSID Case No. ARB/03/29, Award,
27 August 2009, §119.
320 Exh. CE-238, Law on Privatization Agency, Art. 2 (“[t]he Agency has the capacity of a legal entity, with
rights, obligations and responsibilities defined by this law and the statute.”).
321 See Exh. CLA-24, Draft Articles on Responsibility of States for Internationally Wrongful Acts with
commentaries, p.40 (Commentary on Article 4).

322 Exh. RLA-9, Case concerning the Military and Paramilitary Activities in and against Nicaragua
(Nicaragua v. United States of America) (Merits), ICJ, Judgment of 27 June 1986 p. 52, §109; Exh. RLA-
86, Case concerning Application of the Convention on the Prevention and Punishment of the Crime of
Genocide (Bosnia and Herzegovina v. Serbia and Montenegro), ICJ, Judgement of 26 February 2007,
§392.
323 Exh. RLA-86, Case concerning Application of the Convention on the Prevention and Punishment of the
Crime of Genocide (Bosnia and Herzegovina v. Serbia and Montenegro), ICJ, Judgement of 26 February
2007, §392.
324 Exh. CE-238, Law on Privatization Agency, Art. 5, § 2(1) & (2a).
325 Exh. CE-238, Law on Privatization Agency, Art. 2 (“[t]he Agency has a bank account.”).
326 Cvetkovic WS I, § 4.
327 Exh. CE-238, Law on Privatization Agency, Art. 6(2).
328 See, for e.g., Exh. RLA-85, Kristian Almås and Geir Almås v. The Republic of Poland, PCA Case No.
2015-13, Award, 27 June 2016, §210 (“The ILC’s commentary to Article 4 suggests that ‘the conduct of
129
484. In the circumstances, the Tribunal finds that the Agency was not an organ of the State under
Article 4 of the ILC Articles. The fact that the Agency carried out “public services”, that
members from Serbian ministries sat on Commissions set up within the Agency, or that the
Agency had to advise the Ministry Economy on its activities twice a year does not change
the fact that, structurally, the Agency is not an organ of Serbia. Neither does the fact that
the European Court of Human Rights characterized the Agency as a “state body” lead to a
different conclusion. All of these factors might, however, be relevant for the Tribunal’s
examination of whether the acts of the Agency can be attributed to Serbia under Articles 5
or 8 of the ILC Articles, to which the Tribunal now turns.
b. Article 5 of the ILC Articles
485. Article 5 of the ILC Articles provides that the acts of entities which are not organs but
exercise governmental authority may be attributable to the State if they are carried out in
that capacity:
“Article 5 - Conduct of persons or entities exercising elements of governmental

authority
The conduct of a person or entity which is not an organ of the State under
article 4 but which is empowered by the law of that State to exercise elements
of the governmental authority shall be considered an act of the State under
international law, provided the person or entity is acting in that capacity in the
particular instance.”
486. For an act to be attributed to a State under Article 5, two conditions have to be fulfilled
cumulatively: first, the impugned act must be performed by an entity empowered to exercise
elements of governmental authority; and second, the act itself must be performed in the
exercise of governmental authority. 329
487. The first requirement that the Agency be empowered to exercise elements of governmental
authority does not appear to be in dispute between the Parties, and correctly so. The
Privatization Agency was empowered by the Law on Privatization Agency 330 and the
certain institutions performing public functions and exercising public powers (e.g. the police) is attributed to
the State even if those institutions are regarded in internal law as autonomous and independent of the
executive government’. By contrast, where an entity engages on its own account in commercial
transactions, even if these are important to the national economy, this inference will not be drawn.”).
329 See Exh. RLA-83, Jan de Nul N.V. and Dredging International N.V. v. Arab Republic of Egypt, ICSID
Case No. ARB/04/13, Award, 6 November 2008, §163.

330 Exh. CE-238, Law on Privatization Agency, Art. 6.
130
Privatization Law 331 to exercise certain tasks and assume certain responsibilities that
originally belonged to the Ministry of Economy 332 in the process of privatization of State or
socially-owned assets. The privatization process itself, which the Agency implemented and
controlled, was entirely non-commercial, which the Supreme Court of Cassation of Serbia
recognized as well. 333 The Privatization Agency itself recognized that, when performing its
tasks under the Law on Privatization Agency and the Privatization Law, it was “not [acting]
as a contract party but as the holder of public powers.” 334 The Ministry of Economy justified
its supervision of the work of the Agency by referring to Article 46 of the Law on State
Administration, 335 which provision entitled the Ministry of Economy to supervise “holders of
public authorities while performing delegated state administration tasks.” 336 The
Ombudsman too can review the activities of an entity only when it has acted as a public
authority. 337
488. By contrast, the Parties are in disagreement on the second requirement according to which
the impugned acts must have been performed in the exercise of governmental authority.
489. The term “governmental authority” is not defined in the ILC Articles. In the context of ILC
Article 5, the tribunal in Jan de Nul held that “governmental authority” meant the use of
“prérogatives de puissance publique”, 338 an interpretation that has since been followed by a
number of tribunals. Not every act of an entity empowered to exercise governmental
331 Exh. CE-220, 2001 Law on Privatization, Art. 5.

332 Milošević ER I, §§35, 41.
333 Exh. CE-253, Judgment of the Supreme Court of Cassation of the Republic Serbia, Prev 104/2013,
19 June 2014.
334 Exh. CE-252, Uniworld v. Privatization Agency and Srbija-Turist A.D., ICC Case
No. 14361/AVB/CCO/JRF/GZ, Award, 30 May 2011, §295.
335 Exh. CE-98, Report of Ministry of Economy on the Control over the Privatization Agency, 7 April 2015,
p. 2 (pdf).
336 Exh CE-98, Report of Ministry of Economy on the Control over the Privatization Agency, 7 April 2015,
p. 2 (pdf).
337 Tr., Hearing on Jurisdiction and Merits, Day 6, 78:20-79:2 (Radović) (“Mr. Pekař: I am sorry, I don't --
maybe you answered my question and I did not realise that. My question was: is the Ombudsman
authorised to review all activities of holders of public authority, or only their activities that constitute
delegated state administration tasks? Prof. Radović: Not all activities, only activities where the public
authority acts as an authority.”).
338 Exh. RLA-83, Jan de Nul N.V. and Dredging International N.V. v. Arab Republic of Egypt, ICSID Case
No. ARB/04/13, Award, 6 November 2008, §170; Exh RLA-115, Gustav F W Hamester GmbH & Co KG v.
Republic of Ghana, ICSID Case No. ARB/07/24, Award, 18 June 2010, §202 (“[i]t is not enough for an act
of a public entity to have been performed in the general fulfilment of some general interest, mission or
purpose to qualify as an attributable act.”).
131
authority is attributable to the state: the commentary to the ILC Articles clarifies that “the
conduct of an entity must […] concern governmental activity and not other private or
commercial activity in which the entity may engage.” 339 Thus, if the conduct in question was
one that could be undertaken by a private counterparty, 340 then that would not satisfy the
second limb of Article 5, and that conduct would not be attributable to the state.
490. As discussed below, the Agency’s seizure of the Beneficially Owned Shares deprived
Mr. Rand of the entirety of his investment. No further harm could be suffered by him. As a
result, the Tribunal focuses its analysis on whether the seizure of the Beneficially Owned
Shares was performed in the exercise of governmental authority or whether the Agency
acted in a commercial or private capacity when it seized the Shares.
491. There can be no doubt that the seizure of the Beneficially Owned Shares involved the
exercise of governmental authority. Article 41(2) of the 2014 Privatization Law provided that
the capital acquired by the buyer on the basis of a privatization agreement would be
transferred to the Privatization Agency upon termination. 341 After it terminated the
Agreement, through its Decision on Transfer of Capital, the Agency seized all the
Beneficially Owned Shares. No private party could have done so. Serbia does not appear
to challenge that a private entity cannot seize shares from a buyer without first securing its
consent or prevailing in litigation before a competent court or tribunal.
492. Serbia’s objection that the seizure is an “automatic consequence” 342 of the termination of
the Privatization Agreement does not change the assessment. If anything, it would rather
reinforce it. The Agency’s power to unilaterally appropriate for itself the ownership of the
Beneficially Owned Shares is sovereign in nature, whether or not it is the consequence of
another act.
339 Exh. CLA-24, Draft Articles on Responsibility of States for International Wrongful Acts with
commentaries, p. 43, §5.
340 See Exh. RLA-83, Jan de Nul N.V. and Dredging International N.V. v. Arab Republic of Egypt, ICSID
Case No. ARB/04/13, Award, 6 November 2008, §170 (“[a]ny private contract partner could have acted in
a similar manner.”).
341 Exh. CE-223, Article 41(2) of the 2014 Privatization Law: “In case of termination of the agreement on
sale of the capital, the entire capital referred to in paragraph 1 of this Article, including own shares acquired
based on the capital increase through new stakes, shall be transferred to the Agency.” An analogous
provision was contained in Article 41(5) of the 2001 Law on Privatization, in effect on the date the
Privatization Agreement was concluded, Exh. CE-220, 2001 Law on Privatization.
342 C-Mem., §571.
132
493. Therefore, the Tribunal concludes that the Agency’s seizure of the Beneficially Owned Share
is attributable to Serbia. Having reached this conclusion, the Tribunal can dispense with
reviewing the third basis for attribution under Article 8 of the ILC Articles.
B. Exercise of Sovereign Powers
494. The Claimants contend that the Respondent’s “primary defense” to its “clear” Treaty
breaches is that the Agency purportedly acted as a regular commercial party and its
conduct, therefore, cannot violate international law. They stress that this defense lacks
merits for the reasons explained in the context of attribution as well as for other reasons.
495. First, so argue the Claimants, there is no “firm requirement” that any treaty breach must
involve the exercise of sovereign powers. Several investment tribunals have held that every
act of a sovereign State can be characterized as a “sovereign act”, including the breach or
termination of a contract to which the State is a party. For the Claimants, there is no reason
to allow a State to escape its liability under an investment treaty merely because its
relationship with an investor is contractual. The formalism advocated by the Respondent
would enable States to pursue sovereign objectives with impunity under the “guise” of a
contractual relationship. 343
496. The Claimants’ second argument is that several investment awards have confirmed that
privatization per se is governmental, not commercial in nature. Here, the privatization
process was an “inherently governmental process” pursuing “governmental interests.” 344
The public policy goals underlying the privatization of BD Agro can be seen from the
Privatization Agreement itself. No ordinary share purchase agreement would require the
buyer to invest in the target company, maintain its business operations and set forth a
comprehensive social program, as the Privatization Agreement did. The fact that aspects of
the Privatization Agreement were governed by private law is without relevance. Investment
tribunals have found that the application of private law to elements of the activity of state
agencies does not change the governmental nature of the other acts of that agency. In
343 Reply, §1018.

344 Reply, §§1021-1024.
133
addition, the legal framework of the Agreement “substantially differed” from regular private
law contracts. 345
497. In third place, the Claimants assess that it is obvious that the Agency was vested with and
exercised sovereign powers unavailable to any commercial party. The Agency benefited
from “special powers” under the Law on Privatization. In the present case, the Agency’s
conduct had “nothing to do with an ordinary commercial conduct.” 346 For instance,
commercial parties cannot seize shares from their counterparts without first securing their
consent or prevailing in litigation before a competent court. For the Claimants, the
termination of the Privatization Agreement and the subsequent seizure of the Beneficially
Owned Shares were sovereign acts “par excellence.” Serbian law confirms that the conduct
of the Agency in connection with the performance and termination of the Privatization
Agreement was the conduct of “holders of public authorities while performing delegated
state administration tasks” within the meaning of Article 46 of the Law on State
Administration. Further, the Claimants emphasize that the termination produced legal
effects that “no ordinary commercial legal relationship could conceivably have had.” 347
498. Fourth, say the Claimants, the termination of the Privatization Agreement and the seizure of
the Beneficially Owned Shares were sovereign acts because they were not motivated by
any commercial consideration. They represented abuses of governmental power motivated
by a desire to maintain the Privatized Shares within the Agency’s reach for “impending
seizure.” 348
499. The Claimants’ fifth and last argument is that the termination and seizure resulted from, and
implemented, the Ombudsman’s unlawful investigation and his recommendations, which
were sovereign acts. Further, the Agency “sought and received instructions” from the
Ministry of Economy in respect of the termination. 349 Investment awards have concluded
that the termination of a contract involved a State’s sovereign powers because it was based
on the intervention of State bodies, which was clearly the case here.
345 Reply, §§1028-1029.

346 Rely, §§1006-1007.
347 Reply, §1039.
348 Reply, §1032; see also Reply, §§ 213 ff. and Mem., §146.
349 Reply, §§1034-1035 and 1043-1046.
134
500. The Respondent submits that, even if the Agency’s conduct in relation to the Agreement
were unlawful, such conduct could not trigger Serbia’s liability under the BITs because the
Agency did not exercise sovereign powers. 350 The relevant test to determine whether an
entity exercised sovereign powers is whether the complained conduct was a “conduct any
contract party could adopt.” 351 The Tribunal must assess and distinguish, on the one hand,
“ordinary commercial contractual practice” and, on the other hand, “exercise of […] state
functions.” 352
501. The Respondent disputes the Claimants’ argument that the “sovereign objectives” behind
the Agreement necessarily lead to the conclusion that the Agency exercised sovereign
powers. 353 In the same vein, Serbia challenges the Claimants’ argument that the “inherently
governmental” nature of the Agreement characterizes the Agency’s acts as sovereign. It
stresses that the “broader social purpose” of privatization is beside the point. What matters,
says the Respondent, is the use of “prérogatives de puissance publique” or “governmental
authority”, which is clearly missing here. Further, the exercise of governmental authority
must be established in each specific instance of impugned conduct and “cannot be drawn
from generalizations about the nature of the process” 354. The Agency’s refusal to release
the pledge and assign the Agreement and the termination were “normal”, “lawful”
“reasonable” and “commercial” acts of a “contracting party.” 355
502. Further, the Respondent objects to the Claimants’ argument that the termination and
transfer of shares were sovereign acts because they were not motivated by any commercial
considerations. It considers that the argument starts from a “wrong premise”, because it
assumes that, for an act to be governmental in nature, it cannot be motivated by commercial
considerations. Yet, what matters is the substance of an act, not its motivation. Investment
tribunals have not looked into the reasons behind an act but into whether the act itself was
350 C-Mem., §§591-623; Rej., §§1132-1154.

351 C-Mem., §§592-598, referring to Exh. CLA-37, Duke Energy Electroquil Partners and Electroquil S.A. v.
Republic of Ecuador, ICSID Case No. ARB/04/19, Award, 18 August 2008, §348.
352 C-Mem., §595; see also Rej., §1154.
353 Rej., §1137.
354 R-PHB 2, §72.
355 C-Mem., §§599-602.
135
an exercise of governmental authority irrespective of the reasons for which it was
undertaken.
503. Serbia also counters the Claimants’ argument that the Privatization Agency acted in a
sovereign capacity when terminating the Agreement because it had received instructions on
termination from the Ministry. For the Respondent, the Ministry supervised the Agency’s
control over the performance of the Agreement and provided instructions in this regard but
did not address termination itself. In any case, even if there were instructions to the Agency
to terminate the Privatization Agreement (quod non), this still would not make the termination
an exercise of governmental powers. The involvement of state organs is insufficient to
transform a commercial act into an exercise of governmental powers.
504. The Respondent also disputes that the legal consequences of the termination and especially
the transfer of the Privatized Shares confer “public character” to the Agency’s acts. While it
is correct that the legal framework governing the Agency is different from general contract
law, it “remains firmly in the field of private law” and within the jurisdiction of civil courts as
opposed to administrative courts. 356
505. The Respondent also disputes the Claimants’ position that, since the Agency terminated the
Agreement in reliance not on its Article 7 but on the Law on Privatization, the termination
constituted an exercise of governmental powers. The grounds for termination in Article 7 of
the Privatization Agreement supplement the grounds in Article 41a of the Law on
Privatization. They were all part of the commercial relationship “entered freely” by the Buyer
and the Agency. Moreover, the Respondent insists that the reason for the termination was
the violation of a contract provision, which is a commercial reason that has “nothing to do”
with exercise of governmental powers.
3. Analysis
506. Serbia insists that none of the impugned acts involve the exercise of sovereign power, with
the result that the Tribunal must dismiss all of the claims. By contrast, the Claimants stress
that the Treaty contains no such requirement, which should thus not be imposed by the
Tribunal. They also emphasize that in any event each of the acts complained of involved
sovereign power.
356 C-Mem., §622; see also Rej., §§1150 and 1152.
136
507. The Canada-Serbia BIT does not expressly require that the measures alleged as breaches
must have been carried out by a State in its sovereign capacity. There is no question,
however, that the international responsibility of a State under a treaty can only be engaged
357
in the exercise of sovereign powers for acts not as a party to a contract. Indeed, the
substantive standards of investment treaties are intended to protect foreign investors from
unlawful measures taken by the host State in its capacity as sovereign. 358 Therefore, save
possibly for certain umbrella clause claims, treaty breaches can only result from actions
performed by the State as a sovereign.
508. For the reasons previously mentioned, the Tribunal will focus its analysis on the seizure of
the Beneficially Owned Shares (§490). In other words, it will review whether the Agency
exercised sovereign prerogatives in seizing the Beneficially Owned Shares. Attribution in
and of itself is not sufficient. As it is clear from ILC Articles 1 and 2, for the international
responsibility of a State to be engaged, it must have committed an internationally wrongful
act, i.e. an act that is attributable to that State under international law and that constitutes a
breach of an international obligation of that State. 359
509. The Tribunal recalls that Article 41(2) of the Privatization Law empowered the Agency to
seize the Beneficially Owned Shares automatically, without the intervention of a court or
tribunal and without returning the purchase price. Private contract parties do not have such
rights. The seizure is an authoritative decision of the Agency, which determines the rights
357 See, for instance Exh. RLA-116, Suez, Sociedad General de Aguas de Barcelona S.A., and Vivendi
Universal S.A. v. The Argentine Republic, ICSID Case No. ARB/03/19, Decision on Liability, 30 July 2010,
§§ 153, 154 (“[i]n investor-State arbitrations which involve breaches of contracts concluded between a
claimant and a host government, tribunals have made a distinction between acta iure imperii and acta iure
gestionis, that is to say, actions by a State in exercise of its sovereign powers and actions of a State as a
contracting party. It is the use by a State of its sovereign powers that gives rise to treaty breaches, while
actions as a contracting party merely give rise to contract claims not ordinarily covered by an investment
treaty.”). See also Exh. CLA-24, Draft Articles on Responsibility of States for Internationally Wrongful Acts
with commentaries.
358 Exh. CLA-37, Duke Energy Electroquil Partners and Electroquil S.A. v. Republic of Ecuador, ICSID Case
No. ARB/04/19, Award, 18 August 2008, §348 (holding that that there is no exercise of sovereign power if
the conduct in question is “conduct which any contract party could adopt.”).
359 See also for instance Exh. RLA-84, Bayindir Insaat Turizm Ticaret Ve Sanayi A.S. v. Islamic Republic
of Pakistan, ICSID Case No. ARB/03/29, Award, 27 August 2009, §129 (“finding of attribution does not
necessarily entail that the acts under review qualify as sovereign acts.”).
137
of the Buyer in a definitive manner and cannot be directly challenged. 360 On this basis, it is
clear that in seizing the shares, the Agency exercised sovereign powers.
C. Fair and Equitable Treatment
510. The Claimants submit that Serbia failed to accord them fair and equitable treatment (FET)
as required under the Canada-Serbia BIT. They argue that the Canada-Serbia BIT
envisages “essentially the same level of protection” 361 as the Cyprus-Serbia BIT and dispute
Serbia’s submission that Article 6(1) of the Canada-Serbia BIT is “less generous” than
Article 2(2) of the Cyprus-Serbia BIT as the former is linked to the international minimum
standard of treatment. 362 They also reject Serbia’s stand that the international minimum
standard of treatment is restricted to conduct that is “shocking or egregious” 363, and assert
that the Tribunal should apply the standard set in Waste Management II v. Mexico. 364
511. For the Claimants, the following measures breached the FET provision of the Canada-
Serbia BIT: (a) the termination of the Privatization Agreement; (b) the seizure of the
Beneficially Owned Shares; (c) the refusal to release the pledge; (d) the refusal to allow the
assignment of the Privatization Agreement; and (e) the Ombudsman’s interventions.
a. The Termination of the Privatization Agreement
512. The Claimants submit that the termination of the Privatization Agreement was unlawful.
First, the Privatization Agreement was not breached ((i) below). Even if it were, the alleged
breach was not a valid ground for termination ((ii) below). In any event, termination was in
bad faith ((iii) below) and disproportionate ((iv) below).
360 Serbia agrees. See Rej., §1118 (“[a]s the termination could be challenged by the buyer in a civil court,
the latter could also seek interim measure to prevent the Agency from further disposing with shares.”). See
also Mirjana Radović ER I, §54.
361 Reply, §§1205-1212.
362 Reply, §§1206-1207.
363 Reply, §1213.
364 Reply, §§1206-1222, also referring to Exh. RLA-39, Mondev International Ltd. v. United States of
America, ICSID Case No. ARB(AF)/99/2, Award, 11 October 2002, §125, Exh. CLA-132, Pope & Talbot v.
Government of Canada, UNCITRAL, Award in Respect of Damages, 31 May 2002, §§53-54 and 118,
Clayton v. Canada, Exh. CLA-139, §435, and Exh. CLA-134, Railroad Development Corporation v. Republic
of Guatemala, ICSID Case No. ARB/07/23, Award, 29 June 2012, §§218-219.
138
(1) The Privatization Agreement was not breached
513. It is the Claimants’ submission that Mr. Obradović did not breach Article 5.3.4 of the
Privatization Agreement when BD Agro took a loan of approximately EUR 2 million from
Agrobanka, secured it with a pledge on its land, and used the monies for the benefit of
Mr. Obradovic’s companies as described above, and re-lent part of the funds to Crveni
Signal and Inex.
514. First, the Claimants point out that Article 5.3.4 of the Privatization Agreement imposed
obligations solely on Mr. Obradović while the pledge that allegedly violated Article 5.3.4 was
established by BD Agro, not Mr. Obradović.
515. Second, Article 5.3.4 only precluded Mr. Obradović from pledging BD Agro’s assets as
security for loans taken by third parties. Here, BD Agro pledged its land to secure a loan
which it took for itself and used for the operation of its farm to a significant extent. For the
Claimants, re-lending money originally lent to BD Agro constitutes use of funds by BD Agro
and, therefore, cannot violate Article 5.3.4. They further stress that there was nothing
irregular in BD Agro’s use of the funds, as is evident from the fact that both Crveni Signal
and Inex partially repaid their debts to BD Agro.
516. The Claimants consider that Serbia’s assertion according to which Mr. Obradović also
breached Article 5.3.4 because BD Agro pledged its assets as security for the
EUR 0.6 million loan taken by Crveni Signal on 2 June 2010 is “irrelevant, baseless and
belated.” They submit that this argument was raised for the first time in the Respondent’s
post-hearing submission and was not mentioned in the Notice of Termination. Further, and
in any event, Serbia admitted that Crveni Signal’s June 2010 loan was repaid on
29 December 2010. While the pledge securing this loan remained registered thereafter, this
was due to the failure of the state-controlled Nova Agrobanka to provide the confirmations
necessary to remove the pledge. Yet, the pledge was no longer enforceable and could thus
not be in breach of the Privatization Agreement.
(2) There was no valid ground for termination
517. The Claimants submit that, even if there had been a breach, Article 5.3.4 is not among the
grounds for termination exhaustively listed in Article 7.1 of the Privatization Agreement. The
Agreement could not, therefore, be terminated for breach of Article 5.3.4, which Radović &
139
Ratković, the law firm engaged by the Agency, confirmed. Serbia’s contrary arguments
cannot be sustained for several reasons.
518. First, according to the Claimants, Serbia’s position that the Agency could terminate the
Privatization Agreement for any breach would render Article 7.1 useless. Serbia has not
explained why the Agency, which drafted the Privatization Agreement and had detailed
knowledge of the Law on Privatization, would include a meaningless provision in the
Agreement.
519. Second, so the Claimants submit, Article 41a(1)(3) of the Law on Privatization, which Serbia
also invokes, does not entitle the Agency to terminate the Agreement. Article 41a(1)(3) is a
“generic provision” that provides that a privatization agreement can be deemed terminated
if, within an additional period granted to a buyer, the buyer disposes of the property subject
to privatization in a manner contrary to the agreement. Article 41a(1)(3) cannot be read in
isolation; it must be considered in the context of an actual privatization agreement. Here,
Article 41a(1)(3) cannot override the Agreement and the choice of the Agency, as the sole
drafter of the Agreement, not to include the breach of Article 5.3.4 among the grounds for
termination under Article 7. Moreover, the Respondent’s interpretation is contrary to the
wording of Article 41a(1)(3) of the Law on Privatization, which refers to compliance with the
“provisions” (in plural) of a privatization agreement. Article 41a(1)(3) thus refers to both
Article 5.3.4 and Article 7.1 of the Privatization Agreement.
520. Their view, say the Claimants, is consistent with the opinion of Radović & Ratković, the law
firm retained by the Agency. That firm found that, pursuant to Article 7 of the Privatization
Agreement and Article 41a(1)(3) of the Law on Privatization, the Agency had no right to
terminate the Privatization Agreement for the alleged breach of Article 5.3.4. At the time of
the termination, the Agency was aware of its lawyers’ assessment of the legal position.
521. Third, for the Claimants, the alleged breach of Article 5.3.4 of the Agreement was minor and
did not concern an essential term of the Agreement. Under Article 131 of the Law on
Obligations, an agreement can only be terminated for the violation of an essential obligation,
provided that violation is not minor.
522. For the Claimants, the purported breach of Article 5.3.4 did not meet either of the conditions
set forth under Article 131. Article 5.3.4 is not an essential obligation because its breach
would not endanger the achievement of the main purpose of the Agreement. The provision
140
only secures the buyer’s performance of its other obligations in the Agreement. The
accessory character of the provision is further evidenced by the fact that it is not included in
the exhaustive list of termination grounds in Article 7.1. Additionally, even if Article 5.3.4
imposed an essential obligation (quod non), the alleged violation would be minor in a
quantitative sense because the pledge in question was “insignificant” compared to the value
of BD Agro’s assets. The violation would also be minor in a qualitative sense because the
violation would not affect the achievement of the remaining “main goal and purpose” of the
Agreement, which was the payment of the final instalment of the purchase price. In fact,
only four months after the alleged breach, the purchase price was paid in full and the
Privatization Agreement was consummated.
523. Fourth, the Claimants put forward that the Privatization Agreement could not be terminated
for the alleged violation of Article 5.3.4 after the obligations under Article 5.3.4 had expired
on their own terms, i.e. after the payment of the full purchase price.
524. Fifth and in any event, the purported breach was cured before the termination. The
Claimants point out that the 2010 Loan was repaid long before the Agency terminated the
Privatization Agreement. While the underlying pledges remained registered in the cadaster,
this was only because the state-controlled and managed Nova Agrobanka arbitrarily refused
to issue a confirmation necessary for their deletion.
525. Sixth, it is the Claimants’ position that under the Privatization Law, the Agency was only
entitled to monitor the buyer’s compliance with its obligations under the Privatization
Agreement. Unlike what it sought to do, it could not request any remedies that it deemed
appropriate. In any event, the remedies which the Agency pursued were unjustified and
unlawful:
• For instance, the alleged breach of Article 5.3.3 could not have been remedied; the
cows were culled and could not be risen from the dead. Moreover, the crux of the
allegation was that BD Agro had pledged its assets and used the borrowed funds for
the benefit of third parties. That alleged breach could have been cured by cancelling
the pledge or obtaining the return of the funds. Either one of these actions would have
been sufficient to remedy the alleged breach of Article 5.3.4. There was therefore no
justification for the Agency’s request that Mr. Obradović perform both.
141
• The Agency’s insistence that the pledge be deleted from the cadaster “served no
purpose.” Nova Agrobanka could not have exercised any rights under the pledge given
that the secured loan had been repaid. Moreover, Nova Agrobanka was controlled by
Serbia and Mr. Obradović could not be held accountable for the bank’s failure to take
action for the deletion of the pledge.
• The Agency repeated all of its requests without engaging with the factual evidence and
legal reasoning with which it was provided and which showed that no breach had
occurred; that had there been a breach, it had been cured; and that the Agency was
not entitled to terminate the Privatization Agreement. The Agency repeatedly
requested the same information, the information was provided, and then the Agency
requested it again.
526. The Claimants refute the Respondent’s position that the Agency was under an obligation to
determine whether a breach had been remedied. They emphasize that, after the
performance of the Agreement on 8 April 2011, the Agency was limited to ascertaining
whether the alleged breach was “still present”, which is different from assessing whether a
breach has been remedied. Indeed, a party can cease to be in breach not only when it
remedies the breach, but also when the breached obligation no longer applies. For the
Claimants, the latter is exactly what happened – the obligations arising out of Article 5.3.4
ceased to apply when the full purchase price was paid on 8 April 2011. As Mr. Obradović
had no further obligations under the Privatization Agreement after 8 April 2011, the
Privatization Agreement could not be terminated after that date.
527. The Claimants equally dispute the Respondent’s argument that a buyer’s duty to remedy a
pre-existing breach of an obligation survives the expiration of such an obligation, stating that
this argument finds no support in Article 41a(1)(3) of the Law on Privatization. Following the
Respondent’s view would mean that a buyer would be required to remedy a pre-existing
breach while at the same time it would be entitled to engage in the very same conduct that
led to the alleged breach in the first place (as the obligation baring such conduct had
expired). This would obviously be an absurd situation.
528. The Claimants strongly reject the Respondent’s argument that all issues with the
Privatization Agency would have been resolved had Inex and Crveni Signal repaid the funds
142
owed to BD Agro. This is clearly a “made-for-arbitration argument”, contrary to
contemporaneous documentary evidence and testimony of witnesses on both sides.
529. Finally, the Claimants underline that most of the practice and case law relied upon by the
Respondent in support of its arguments concern privatization agreements concluded before
Article 41a(1)(3) of the Law on Privatization was “substantially amended” in 2005. 365 The
Tribunal should therefore be cautious in relying on those authorities.
(3) Termination was in bad faith
530. The Claimants contend that the Agency acted in bad faith in terminating the Privatization
Agreement, which say the Claimants, is evident from the following facts:
• The Agency kept the Claimants “in limbo” for years refusing to finalize BD Agro’s
privatization. As explained below, it made several requests which it must have known
to be unlawful and not susceptible of being fulfilled. For instance, in April 2015, the
Agency requested that Mr. Obradović submit evidence that he had performed his
obligations under Article 5.3.3 and 5.3.4 “no later than” 8 April 2011. This request was
clearly unlawful because Article 41a(1)(3) of the Law on Privatization only entitles the
Agency to verify compliance at the end of the additional term for compliance, not in
the past;
• In October 2006, the Agency declared that Mr. Obradović had complied with Article
5.2.1 of the Agreement which required him to contribute approximately EUR 2 million
to BD Agro. Nevertheless, it continued to ask for evidence of compliance nine years
after its statement;
• The Agency also continued to request proof that Mr. Obradović had fulfilled his
obligations under Article 5.3.3 despite knowing that the alleged breach of Article 5.3.3,
i.e. the culling of cows could not be complied with as the cows had been culled long
before 8 April 2011. In addition, the culling represented a force majeure event which
the Agency acknowledged during internal meetings. In any event, despite the fact that
the culling of the cows obviously could not have been cured, the Agency continued to
365 Reply, §§407-408.
143
request evidence of compliance with Article 5.3.3 until the Privatization Agreement
was terminated;
• The Agency’s conduct was “procedurally abusive.” To take but one example, in the
last notice sent to Mr. Obradović, the Agency asked for performance of several
obligations within a five-day period, which was plainly impossible;
• When the Agency eventually proceeded to terminate the Privatization Agreement, it

did so even though it had opinions from the Ministry of Economy and its law firm
Radović & Ratković that there was neither an economic nor a legal justification for
termination;
• The Agency retained the pledge of the Beneficially Owned Shares after the payment
of the purchase price despite acknowledging that the pledge should have been lifted
once the price was paid.
(4) Termination was disproportionate
531. The Claimants also submit that the termination of the Privatization Agreement and the
subsequent transfer of the Beneficially Owned Shares was unlawful under Serbian law and
resulted in an unlawful expropriation of the Claimants’ investment. Even if the Tribunal held
that the termination and share transfer complied with the law, the expropriation would still
be unlawful, since Serbia’s acts were “completely disproportionate” under Serbian and
international law.
532. The Claimants argue that the constitutional principle of proportionality requires the
Privatization Agency, as a holder of public powers, to proceed with the termination of the
Privatization Agreement only if it is proportionate and necessary. Even if the Privatization
Agency were not found to hold public powers and its acts were examined on a mere
contractual level (quod non), those acts would constitute a violation of Articles 12 and 13 of
the Law on Obligations, which impose a duty of good faith and prohibit the abuse of a right.
533. According to the Claimants, the proportionality test under Serbian law is based on three
sequential questions: first, whether a measure was taken for legitimate reasons; second,
whether less obstructive alternatives were available; and, third, whether the benefits of the
measure outweigh its costs. The termination of the Privatization Agreement fails this test on
all counts:
144
• The termination did not serve any legitimate purpose as Mr. Obradović had complied
with his obligations under Article 5.3.4, and breaches of that provision were not valid
termination grounds pursuant to Article 7.1 of the Privatization Agreement;
• Even if Mr. Obradović had violated Article 5.3.4 of the Privatization Agreement, the
Agency should have provided him with a reasonable opportunity to remedy the
violation requesting the repayment of loans from third parties or the “non-exercise” of
the pledge on BD Agro’s assets. Instead, the Privatization Agency insisted on the
return of the funds as well as on the deletion of the pledge, ignoring the fact that Nova
Agrobanka could no longer exercise the pledge after BD Agro had fully repaid its
EUR 2 million loan on 22 June 2012. The Privatization Agency’s reactions to alleged
breaches of Article 5.3.4 of the Privatization Agreement were thus excessively
restrictive;
• The termination was disproportionate stricto sensu because the Privatization Agency’s
requests to remedy the alleged breach of Article 5.3.4 lost their purpose following the
full payment of the purchase price on 8 April 2011.
534. The Claimants further contend that the principle of proportionality is part of international law
and has been applied by several investment tribunals. The tribunal in Occidental v. Ecuador
for instance observed that the principle of proportionality meant that even if an investor has
violated its duties, any penalty imposed by the State must be proportionate to the violation
and its consequences.
535. For the Claimants, the termination of the Privatization Agreement was a disproportionate
response to the purported breach of Article 5.3.4. The pledge caused no damage: the
existence of the pledge did not impact on BD Agro’s value. The Ministry of Economy itself
recognized it when it considered in 2012 that there was no economic justification for
terminating the Privatization Agreement because Mr. Obradović had already paid the
purchase price and the encumbrances did not threaten the continuity of BD Agro’s business.
The lack of proportionality is also evident from the fact that the termination of the
Privatization Agreement and seizure of the Beneficially Owned Shares occurred over four
years after the full price for BD Agro was paid.
536. The Claimants dismiss the Respondent’s contention that the Agency had no option but to
terminate the Agreement. They note that the Respondent has not explained, for instance,
145
why the Agency could not issue a contractual penalty for the purported breach of Article
5.3.4. Neither has Serbia explained why the Agency could not waive a breach of the
Privatization Agreement. In fact, the Privatization Agreement suggests the contrary: under
Article 5.3.4, the Agency could give prior consent to a disposition that would otherwise
breach that provision. Thus, there is no reason why the Agency would lack the authority to
subsequently waive any breach based on such a disposition. Moreover, the Respondent’s
experts confirmed that privatization agreements cannot be terminated for minor breaches,
which can only mean that the Agency could waive minor breaches.
537. The Claimants also dispute Serbia’s argument that their proportionality challenge was
belated. Since the beginning of the arbitration, they have submitted that the termination of the
Privatization Agreement and the expropriation of the Beneficially Owned Shares was
disproportionate. Even if the claim had been raised at the Hearing, as Serbia argues, Serbia
would still suffer no prejudice. The claim was not based on new facts and Serbia had ample
opportunity to address it in its post-hearing briefs, which it actually did.
538. For the Claimants, Serbia’s submission that the Privatization Agreement was terminated
because the Privatization Agency needed to send a message that non-compliance would
not be tolerated shows that the Agency failed to weigh the seriousness of the alleged breach
and harm against the significance of the termination sanction. It simply imposed an
exemplary punishment, which was the “antithesis” of proportionality.
539. The Claimants finally challenge Serbia’s argument that the requested remedies were meant
to “protect the well-being of BD Agro” from Mr. Obradović’s mismanagement. They turned
BD Agro into one of the largest and most modern farms in Europe despite the enforced
slaughter of the original herd, the ban on cow imports, and the severe drought in 2012. By
contrast, under Serbia’s stewardship, BD Agro wound up in bankruptcy.
b. Seizure of the Beneficially Owned Shares
540. The Claimants submit that the seizure of the Beneficially Owned Shares pursuant to a
Decision on Transfer of Capital, by which the ownership of the shares passed to the
Privatization Agency through registration on the Agency’s account with the Central
Securities Depository, was in “willful disregard of the law.”
541. The Claimants also deny the Respondent’s argument that, because the transfer of shares
was an “automatic” consequence of termination under the Law on Privatization, it cannot be
146
wrongful. Such defence has no basis in international law. 366 Serbia bears liability for its
“individual volitional acts” as well as for acts which “automatically” result from the application
of its domestic legislation, as long as they impact the Claimants’ investment. Further, the
Respondent cannot rely on the “legal characteristics” of the measures under its own
domestic laws to escape its international liability. 367 Therefore, it is irrelevant whether the
transfer of the Beneficially Owned Shares automatically resulted from the termination of the
Privatization Agreement or not.
c. Refusal to release the pledge
542. The Claimants point out that the Privatization Agency was entitled to maintain the pledge
for a period of five years only, i.e. from the conclusion of the Privatization Agreement until
the payment of the full purchase price. Accordingly, the Agency should have released the
pledge immediately after Mr. Obradović’s payment of the last price instalment on 8 April
2011. Discussions within the Agency’s Commission of Control show that the Agency knew
that it had to release the pledge upon payment of the price. However, it did not do so, thereby
breaching the non-impairment clause.
543. The Claimants dispute that the Agency could lawfully maintain the pledge as long as it
considered Mr. Obradović to be in breach of any obligations under the Privatization
Agreement. First, the purpose of the pledge was to secure monetary receivables, not
Mr. Obradović’s compliance with all obligations under the Agreement, including those
arising under Article 5.3.4. As soon as the last instalment of the purchase price was paid,
the pledge should have been released. Second, even if the pledge had secured Mr.
Obradović’s obligations under Article 5.3.4 (quod non), the Privatization Agency would still
have been required to release the pledge on 8 April 2011, when the term of the Privatization
Agreement ended. Third, Article 2 of the Share Pledge Agreement is unambiguous in that it
does not allow the Agency to retain the pledge after payment in full. Even if there was an
ambiguity, it would have to be resolved in favor of Mr. Obradović as the non-drafting party.
d. Refusal to allow the assignment of the Privatization Agreement
544. The Claimants submit that the Agency’s “refusal to allow” the assignment of the Agreement
“significantly contributed to BD Agro’s insolvency” and “constituted an arbitrary and
366 Reply, §§1076-1079.

367 Reply, §1078.
147
unreasonable measure.” 368 They further contend that “Serbia had no problems with
approving of assignment of privatization agreements for other companies [Mr. Rand]
acquired in Serbia” and that “[t]he fact that the Agency refused to do so in the case of BD
Agro thus clearly demonstrate[d] the arbitrariness of its conduct.” 369
545. The Claimants dispute Serbia’s submission that the assignment could not be approved
because Mr. Obradović and Coropi did not provide the documents requested by the Agency.
Some documents – such as the confirmation of compliance with Article 12 of the
Privatization Agreement – simply could not be provided. The request for other documents,
such as the bank guarantee requested by Serbia in January 2015, a year and a half after
the Agency’s consent to the assignment was first sought, was “entirely unreasonable.” The
entire purchase price had been paid by then and the Agency was not entitled to any further
payments that the guarantee would have secured. At any rate, the Claimants stress that the
Respondent’s contentions are “at odds with reality” because the negotiations relating to the
assignment never progressed as the Agency acted in bad faith throughout the process. 370
546. The Claimants also dispute Serbia’s claim that the refusal to allow the assignment of the
Privatization Agreement did not impair the Claimants’ investments because it did not affect
Mr. Obradović’s rights under the Privatization Agreement. This contention is absurd, say the
Claimants, because “the purpose of the entire Privatization Agreement was to transfer the
ownership of the Beneficially Owned Shares to Mr. Obradović” and “[o]ne of the most
fundamental aspects of ownership is the owner’s ability to dispose with the property.” 371 On
this basis, the Claimants insist that the “Privatization Agency prevented Mr. Obradović from
transferring the nominal title to the Beneficially Owned Share [sic] not only by arbitrarily
refusing to release the pledge but also by rejecting without any legitimate reasons the
requests for the assignment of the Privatization Agreement to Coropi.” 372
368 Reply, §§1177-1180.

369 C-PHB 1, §272.
370 Reply, §1179, referring to Exh. CE-768 (transcript from Agency Control Commission Meeting of 23 April
2015), p. 9.
371 Reply, §1180.
372 Reply, §1180.
148
e. Ombudsman’s interventions
547. The Claimants submit that the Ombudsman’s “intervention” was grossly arbitrary and a
“patent example of an abuse of powers without any legitimate purpose.” 373 They insist that
the Ombudsman “blatantly overstepped” his legal mandate when he “pushed” for the
termination of the Privatization Agreement. Moreover, rather than protecting the rights of
Serbian citizens, the Ombudsman’s recommendations showed little concern for the rights
of BD Agro’s employees. His purported recommendations served as a pretext for his “willful
pressure” on the Ministry of Economy and the Privatization Agency to terminate the
Agreement. The latter terminated the Privatization Agreement only after the Ombudsman’s
unlawful intervention, which was arbitrary and unreasonable.
f. Other breaches
548. Serbia also breached the FET standard, argue the Claimants, by adopting measures against
the Claimants’ investment in bad faith. First, the Privatization Agency acted in bad faith when
it refused to release the pledge and refused to allow the assignment of the Privatization
Agreement. This was done with the sole aim of retaining the option to expropriate the
Claimants’ shares. Second, the Privatization Agency acted in bad faith when it terminated
the Privatization Agreement as it knew that the alleged violation of Article 5.3.4 was not a
valid ground for termination under Article 7.1 of the Privatization Agreement. For the
Claimants, Serbia’s bad faith alone suffices to constitute a breach of the FET standard.
549. The Claimants submit that still another breach of the FET standard occurred as a result of
Serbia’ actions that “amounted to a pattern of orchestrated wrongful conduct” 374 that
effectively destroyed the Claimants’ investment. Serbia “deliberately and consistently”
adopted measures aimed at destroying the Claimants’ investment in BD Agro, including by
refusing to release the pledge and approve the assignment of the Privatization Agreement.
Further, the actions of the Privatization Agency, the Ombudsman and the Ministry of
Economy, “completely deprived” the Claimants of all their interests in BD Agro. Moreover,
Serbia also failed “to pay any regard whatsoever to the protection of the Claimants’
interests.” 375
373 Reply, §1190-1199, in particular, §§1194 and 1198.

374 Reply, §1232.
375 Reply, §§1248, 1252-1253.
149
550. Finally, the Claimants argue that the Agency and the Ombudsman frustrated their legitimate
expectations by “blatantly disregard[ing]” the terms of the Agreement, 376 which constitutes
yet another breach of the FET standard. In particular, the Agency deceived the Claimants’
legitimate expectations (i) that the pledge over BD Agro’s shares would be released after
full payment of the purchase price and that the Claimants would be free to dispose of the
shares; (ii) that the Privatization Agreement would not be terminated for reasons not
stipulated therein; (iii) that the Claimants business would be conducted in a stable regulatory
framework, without undue government influence. They add that the Ombudsman also
breached the Claimants’ legitimate expectations by his unlawful interference with and
pressure on the Ministry of Economy and the Privatization Agency to terminate the
Privatization Agreement.
551. Serbia disputes that any of the measures identified by the Claimants were wrongful. It
submits that the relevant standard of treatment accorded under Article 6(1) of the Canada-
Serbia BIT is the “customary international law minimum standard”, which differs from
“autonomous” standards such as the one found in Article 2(2) of the Serbia-Cyprus BIT. 377
The Claimants’ submission that the two standards are essentially identical “blatantly
disregards” the wording of Article 6(1) of the Canada-Serbia BIT. 378 Autonomous standards
cannot be regarded as reflecting customary rules. 379
552. Serbia further contends that the applicable threshold to find a breach under customary
international law is “exceptionally high” and require “manifest” arbitrariness, 380 which the
Claimants have failed to prove. Moreover, it points out that a mere contractual breach cannot
be considered an arbitrary act in breach of FET, unless it is also shown that the State
committed an “outright and unjustified repudiation of the transaction” and prevented the
376 Reply, §§1255-1272, in particular, §1260.

377 Rej., §§1318-1320.
378 Rej., §§1321-1322, referring to Exh. RLA-136, Mesa Power Group, LLC v. Government of Canada,
UNCITRAL, PCA Case No. 2012-17, 24 March 2016, §503, and Exh. RLA-138, Grand River Enterprises
Six Nations, Ltd., et al. v. United States of America, UNCITRAL, Award, 12 January 2011, §176.
379 Rej., §1324, referring to Exh. CLA-129, Cargill Incorporated v. United Mexican States, ICSID Case No.
ARB(AF)/05/2, Award, 18 September 2009, §§271-273.

380 Rej., §§1329-1334, in particular §§1333 and 1334.
150
investor from resorting to any remedy to resolve the problem, or that the breach of contract
was “motivated by sectoral or local prejudice.”
a. Termination of the Privatization Agreement
(1) The Privatization Agreement was breached
553. The Respondent explains that, in principle, a breach of Article 5.3.4 could take two forms:
first, a loan taken by the buyer for which the privatized entity’s property is pledged as security
and second, a loan taken by the privatized entity itself against a pledge of its property as
security and the transfer of the borrowed funds to a third party. In both cases, there is a
pledge in favor of the lender on the privatized entity’s property, while the user of the
borrowed funds secured by the pledge is a third party, and there is a breach of Article 5.3.4.
Such breach can be remedied by deleting the pledge on the privatized entity’s property or
by the third party repaying the funds to the privatized entity. Neither happened in this case.
554. The Respondent points out that there were several breaches of Article 5.3.4 of the
Privatization Agreement. All of these breaches were remedied, but for the breach due to the
2010 Loan, as a result of which the Agreement was terminated.
555. Serbia insists that there was an “obvious” and “straightforward” breach of Article 5.3.4 of the
Agreement. 381 For the Respondent, it is clear that the transactions relating to the 2010 Loan
Agreement involving Crveni Signal and Inex were not part of BD Agro’s “regular business
activity.” 382 It would make “no sense” and “completely ignore […] the ordinary meaning” of
the wording of Article 5.3.4 of the Agreement if loans to third parties and the
assumption/repayment of third party debts were to qualify for the exception in Article 5.3.4
of the Agreement. 383
556. According to the Respondent, the Claimants’ position that the funds used to assume Crveni
Signal’s debt and to provide Inex with a loan were “used by” BD Agro within the meaning of
Article 5.3.4 of the Agreement leads to “absurd results.” 384 That position relies on an
“inaccurate translation” of Article 5.3.4 of the Agreement when the proper construction of
381 Rej., §§95 ff. and 116-125.

382 Rej., §§100-101.
383 Rej., §102.
384 Rej., §103.
151
the Serbian wording of the provision confirms that the exception envisaged therein is limited
to funds used “for the benefit of BD Agro and nobody else.” 385
557. Further, the Respondent challenges the Claimants’ argument according to which a pledge
under Article 5.3.4 should be interpreted so that the words “to be used by the subject”
encompass lending funds secured by a pledge to third persons. It submits that the
Claimants’ interpretation is wrong considering the text and purpose of Article 5.3.4 as well
as Serbian court practice. As far as the text is concerned, the Serbian original emphasizes
the end use of the funds by the privatized entity. As for the purpose of Article 5.3.4, it is clear
as well and consists in safeguarding the property of the privatized company and preventing
its use for the benefit of third persons. While the privatized company could give loans to third
persons, Article 5.3.4 prohibits loans given from funds obtained by pledging the company’s
assets as it “endanger[s] its very substance.” 386
(2) There was a valid ground for termination
558. The Respondent insists that the termination of the Privatization Agreement due to
Mr. Obradović’s breach of Article 5.3.4 was valid and in accordance with Serbian law. The
Privatization Agreement could be terminated for a breach of Article 5.3.4 even after the
purchase price was paid in full, as can be seen from the Agency’s consistent practice and
judicial decisions.
559. According to Serbia, the objective of privatization, as set out in Article 2 of the Law on
Privatization and interpreted by the Serbian Supreme Court, was not limited to the sale of
the entity being privatized, but included the development of the entity to promote overall
economic growth, the creation of stable business and social security conditions. 387 The
Supreme Court further observed that all obligations in a privatization agreement are equally
relevant for the achievement of the goal of privatization. Failure to perform any of the
contractual obligations obstructs the very purpose of privatization. Thus, says the
Respondent, a privatization agreement can be terminated on the ground of a Buyer’s failure
to perform any of its contractual obligations. This is exactly what happened here: the
385 Rej., §104, referring to the Radović ER II, §24.

386 R-PHB 1, §181.
387 R-PHB 1, §172, citing Exh. RE-165, Judgment of the Supreme Court of Cassation of the Republic Serbia,
Prev 129/2013, 19 June 2014, p. 2.
152
Privatization Agreement was rightfully terminated because Mr. Obradović breached Article
5.3.4 of the Agreement.
560. The Respondent stresses that the motive for Mr. Obradović’s breaches of Article 5.3.4 of
the Privatization Agreement is relevant. It points out that Mr. Obradović benefited from each
breach of Article 5.3.4. For instance, in June 2010, on the same day that Crveni Signal took
a loan from Agrobanka which was guaranteed by BD Agro, Crveni Signal also concluded a
loan agreement with Mr. Obradović through which it lent him RSD 65 million. Thus, the
money that Crveni Signal received from Agrobanka, which was secured by BD Agro’s
assets, was actually used to benefit Mr. Obradović. Similarly, the funds BD Agro received
from Agrobanka under the 2011 Loan that BD Agro later transferred to Inex, also eventually
ended up in Mr. Obradović’s personal bank account. Mr. Obradović then used part of that
money – received from Inex and Crveni Signal – to pay the last instalment of the purchase
price on 8 April 2011.
561. Serbia also challenges the Claimants’ submission that Mr. Obradović and others, including
Mr. Markićević, were unaware that the breach of Article 5.3.4 of the Privatization Agreement
could have been remedied by simply repaying the outstanding loans given to Crveni Signal
and Inex. It insists that the opposite is true. For instance, the letter which Mr. Markićević
sent as general manager of BD Agro on 2 July 2015, months before the termination,
recognized that the problem with the fulfilment of the Privatization Agreement was “in
relation to lending to third parties, namely Inex Nova Varos ad Nova Varos and Crveni signal
a.d. Beograd.” Mr. Markićević thus admitted that obligations under the Privatization
Agreement were not complied with in relation to Crveni Signal and Inex.
562. The Respondent also contests the Claimants’ argument that the Agreement could not be
terminated under Article 41a(1)(3) of the Privatization Law. The Claimants’ interpretation
presupposes that, when Article 41a(1)(3) refers to the Privatization Agreement, it refers to
its Article 7 only. This is not correct, since under Article 41a(1)(3) one must determine “what
kind of disposal of the property is contrary to the privatization agreement and not which
disposal represents the reason for termination according to privatization agreement
itself.” 388 A reference to the termination grounds listed in the privatization agreement is
388 R-PHB 1, §243.
153
required to apply a different provision, i.e. Article 41a(1)(7), which provides for termination
“in other cases provided for by the agreement.” 389
563. Furthermore, for Serbia, the Claimants’ interpretation would make Article 41a(1)(3)
redundant by limiting it to cases that are already covered by Article 41a(1)(7). Once the
parties to the Privatization Agreement stipulated a prohibition of certain dispositions in the
Agreement, a breach of that prohibition “automatically” became a reason for termination by
force of law under Article 41a(1)(3). This situation must be distinguished from the parties’
stipulating additional reasons for termination in the privatization agreement itself, which
would fall under Article 41a(1)(7). Serbian court decisions support this view.
564. The Respondent rejects the Claimants’ position that the termination of the Privatization
Agreement was illegal because the obligation under Article 5.3.4 had “ceased to exist” when
the purchase price was paid in full. It points out that the Agency has terminated other
privatization agreements after that time and that the Serbian courts have not held such
termination unlawful.
565. Moreover, Serbia rejects the Claimants’ contention that the termination was illegal because
Article 5.3.4 is not an “essential term” of the Privatization Agreement. Serbian law does not
recognize the concept of essential obligations. Article 131 of the Law on Obligations which
the Claimants invoke, does not contain these words. Further and in any event, says the
Respondent, the purported distinction between essential and non-essential obligations has
no place in the specific context of privatization. It would contradict the decisions of Serbian
courts that in a privatization all contractual obligations are equally important to achieve the
purpose of privatization.
566. In addition, the Respondent disputes the Claimants’ argument that the breach of Article 5.3.4
of the Privatization Agreement was “minor”, and as such did not allow a termination of the
Privatization Agreement. The funds borrowed in 2010 did not represent an insignificant part
of BD Agro’s assets. BD Agro’s purchase price was EUR 5.5 million. The funds that were
used for the benefit of Crveni Signal and Inex were EUR 959,719, approximately 17% of the
total purchase price, and 140% of the value of its one instalment. As failing to pay just one
instalment was a reason for termination, “the pertinent funds were obviously far from
389 R-PHB 1, §243.
154
minor.” 390 Second, the breach did threaten the main purpose of the Privatization Agreement.
As already observed, Serbian courts have repeatedly found that, in such respect, all
contractual obligations in a privatization process are equally relevant.
567. The Respondent further submits that the Claimants cannot now challenge the validity of the
termination as they “deliberately” chose not to repay the outstanding loans given to Crveni
Signal and Inex. 391 It emphasizes that BD Agro was overly indebted at the time and that its
bank accounts were blocked, which were likely the reasons for BD Agro’s failure to do so,
as it was “evident” that BD Agro’s creditors would collect any payments ending up in BD
Agro’s accounts.
568. It is the Respondent’s further submission that the Claimants’ allegation that they failed to
remedy the breach of the Privatization Agreement because the Agency was not clear in its
communications are wrong. The Agency repeatedly invited Mr. Obradović to remedy the
breach, but the Claimants made a “deliberate decision” that debts of Crveni Signal and Inex
would not be repaid. For the Respondent, “this situation is nothing else but a manifestation
of bad faith.” 392
569. Serbia also disagrees with the Claimants’ argument that the Agency “requested the
impossible” when it asked them to remedy the earlier breach of Article 5.3.3 of the
Privatization Agreement. The Agency did not require that Mr. Obradović retroactively cure
this breach, but simply asked for an audit report containing an unequivocal statement that
Article 5.3.3 of the Privatization Agreement had not been breached.
570. According to the Respondent, the Agency had no option other than to terminate the
Agreement. It could not claim damages, as the Claimants suggest, as it had not suffered
any damages due to the breach of Article 5.3.4. Neither could it waive the breach. Either the
privatization was successful, and all obligations were completed, or it was not. Judicial
decisions support this view. The Agency could either prolong the time limit for compliance
or terminate. As Mr. Obradović had repeatedly failed to remedy a breach, extending the
deadline for doing so would have been “pointless.” In addition, in September 2015, when
390 Rej., §222.

391 R-PHB 1, §§221-222.
392 R-PHB 1, §223.
155
Mr. Obradović threatened to sue the Agency, “it was obviously pointless and unreasonable
to grant him additional time to comply with Article 5.3.4.” 393
571. For Serbia, the Claimants’ submission that the payment of the last instalment of the
purchase price made the breach of Article 5.3.4 of the Agreement irrelevant, cannot be
sustained. Since a breach of Article 5.3.4 occurred and an additional period for compliance
was granted before the payment of the purchase price, Mr. Obradović’s obligations under
the Agreement “continue[d] to exist.” 394 Further, Mr. Obradović continued to pay interest for
late payment to the Agency until December 2011. 395 For the Respondent, the sequence of
events described above “shows that the breach was important and significant not only from
the perspective of the Privatization Agreement but also from the perspective of
Mr. Obradovic who paid the last instalment by committing the breach.” 396
572. The Respondent also argues that the Claimants wrongly assert that the pledges were
retained due to the state-owned Agrobanka’s failure to issue a necessary confirmation. The
refinancing agreement for the 2011 Loan explicitly retained the pertinent pledges. There
was thus no basis for them to be deleted. In addition, there was no evidence that the
Claimants had ever requested deletion, nor sought deletion in court.
573. Serbia essentially disagrees that the case law on which it relies is irrelevant as it relates to
the termination of privatization agreements concluded before the Law on Privatization was
amended in 2005. It points out that the relevant provisions of the Privatization Law have
remained unchanged. The import of the court judgments is not limited to the termination of
pre-2005 privatization agreements, and, the Claimants have not supplied a single decision
on the Law on Privatization before or after 2005 that contradicts the Respondent’s assertions.
(3) Termination was not in bad faith
574. The Respondent denies the Claimants’ contentions that termination of the Agreement was
declared in bad faith. Termination was the measure of last resort in response to
Mr. Obradović’s failure to remedy the breach after repeated notices of the Agency. BD
393 R-PHB 1, §262.

394 C-Mem., §§99, 101 and 104; Rej., §214
395 Rej., §214.
396 R-PHB 2, §78.
156
Agro’s bankruptcy, which was an unavoidable result from Mr. Obradović’s mismanagement,
does not change the purpose behind the termination, which was to protect the company.
575. Another equally important purpose behind the termination, says the Respondent, was to
“strengthen” compliance with third party privatization agreements. Indeed, “[w]hen the Buyer
is asked to remedy an already existing violation of Article 5.3.4, this sends a message to
thousands of other buyers that non-compliance has not been and will not be tolerated.” 397
This was especially important as the Agency was faced with having to terminate around 20-
30% of the privatization agreements. If the Agency had waived non-compliance, it would
have encouraged other buyers not to comply with their own obligations. It might even have
led to discrimination claims.
576. Further, for the Respondent, the Claimants are wrong in arguing that the Agency acted in
bad faith because it knew that the violation of Article 5.3.4 was not a valid ground for
termination under Article 7 of the Privatization Agreement. The transcript of the meeting of
the Commission for Control reveals that the Agency was aware that it could terminate on
the basis of Article 41a of the Law on Privatization irrespective of the content of the
Privatization Agreement. The Agency had, in fact, terminated privatization agreements on
the basis of Article 41a alone, even when the breach did not appear among the grounds of
termination in the agreement itself.
577. The Claimants are equally wrong, says Serbia, when they assert that the Agency continued
to ask Mr. Obradović to remedy the breaches of the Privatization Agreement, despite the
opinions of the Ministry and the Agency’s own external legal advisors. The Ministry did not
address the legal aspects of Mr. Obradović’s compliance with the Agreement. As far as the
external legal advisors, theirs was merely an opinion which did not bind the Agency. The
Agency considered different opinions and took its decision based on the law, which can
hardly be considered unreasonable, arbitrary or in bad faith.
578. Finally, the Respondent submits that the Agency was under an obligation to terminate the
Privatization Agreement in application of Article 41a(1)(3) of the Law on Privatization, if it
did not provide additional time for compliance. As many deadlines had passed without
Mr. Obradović remedying the breach, providing additional time would have been pointless.
397 R-PHB 1, §264.
157
(4) Termination was not disproportionate
579. The Respondent argues that the termination of the Privatization Agreement was
proportionate. While the Claimants argue that the “lack of proportionality” under Serbian law
was one of the reasons why the termination of the Privatization Agreement was unlawful,
Serbia states that proportionality is irrelevant as “the principle of proportionality in the
Constitution of Serbia applies to restrictions of human and minority rights, and has no place
in contractual relationships.” 398 For the Respondent, the “idea” of proportionality in a
contractual context is reflected in Article 131 of the Law on Obligations, which bars
termination of contracts in cases where only an insignificant part of the obligation remains
unfulfilled. For the reasons explained below, a violation of Article 5.3.4 was not a minor
breach, which confirms that the Agency’s termination was proportionate.
580. The Respondent further submits that the termination meets the Claimants’ own “made up”
test for proportionality under Serbian law. The termination pursued “legitimate aims” and
was the only viable option available to the Agency. The proportionality analysis must not
only balance the purpose to be achieved and the means employed from an economic point
of view, but also take into account the buyer’s “bad faith” and “recalcitrant attitude”, as well
as the general purpose of privatization. From this perspective, the termination was “clearly
proportional.”
581. The Respondent opposes the Claimants’ contention that the termination of the Privatization
Agreement breached the standard of proportionality applicable to all treaty standards under
general international law. This argument was raised at the hearing for the first time in “gross
violation” of the applicable procedural rules, putting the Respondent in a position of “gross
inequality”; it should thus be disregarded.
582. In any event, the Respondent submits that the proportionality argument should be rejected
because it is based on the wrong factual assumptions. For instance, while the Claimants
insist that it is undisputed that the purpose of Article 5.3.4 was to ensure that Serbia would
be paid the full purchase price, the purpose of that provision was not limited in this manner.
Rather, the purpose of Article 5.3.4 “was to ensure that BD Agro would be ‘a stable company
with a continuous, viable business activity’”, in order to secure the fulfilment of all the obligations
398 R-PHB 1, §294.
158
under the Privatization Agreement and “to secure a general public interest in the well-being of
privatized companies.”399
583. While the Claimants insist that upon the payment of the purchase price, the contract was
completed and Article 5.3.4 no longer had any purpose, the Respondent objects that the
Agency’s insistence on remedying the breach of Article 5.3.4 also sought to strengthen general
compliance with privatization agreements in a situation where there was widespread non-
compliance. It was particularly important not to turn a “blind eye” to the breach of the
Privatization Agreement as it would have encouraged non-performance by others. The Agency
could not tolerate contract breaches on the basis of their alleged minor significance, as the
Claimants suggest, because managing such differentiation would be difficult, if not impossible,
in an environment of extensive non-performance.
584. Serbia also argues that the Claimants’ argument that Serbia did not suffer harm as a result of
the breach of the Privatization Agreement such as to justify termination, is inaccurate as it
was the Agency, not the Respondent, that terminated the Privatization Agreement. In any
event, says Serbia, direct economic harm to the Agency was irrelevant. Considering the
purposes of Article 5.3.4, what was “economically relevant” was BD Agro’s “well-being”,
which was “clearly endangered.” 400 In addition, economic harm should not be a “decisive
consideration” with regard to termination of privatization agreements, since termination
served to induce general compliance, which is important to meet the goals of privatization.
585. Serbia also disputes the Claimants’ submission that the Agency took the most severe action
it possibly could when terminating the Agreement. As already discussed, the Agency had
only two options, either to set another time limit for compliance or to terminate. It obviously
could not issue a certificate of compliance, because there was no compliance. Neither could it
sue for damages, because the damage was not inflicted to the Agency but to BD Agro. For the
Respondent, in view of Mr. Obradović’s bad faith, as he attempted to deceive the Agency and
stated that he intended to sue the Agency, granting further extensions for compliance would
have served no purpose. Thus, the only “viable and reasonable” option was termination.
399 R-PHB §1, §280.

400 R-PHB §1, §280.
159
b. Seizure of the Beneficially Owned Shares
586. The Respondent submits that the fact that, after the termination, the Beneficially Owned
Shares were transferred to the Agency without compensation was an “automatic
consequence” of the termination provided by the Privatization Law to which Mr. Obradović
had consented when concluding the Privatization Agreement. 401 As such, the transfer of
shares represented the exercise of a contractual right of the Agency. It was not an act iure
imperii, entailing international responsibility.
587. According to Serbia, the physical taking of assets that occurred in this case, i.e. the transfer
of the Beneficially Owned Shares, cannot by itself represent an act of direct expropriation.
By entering into the Privatization Agreement, Mr. Obradović accepted all of the
consequences of a possible breach and termination of the Agreement. The Agency did not
invent the transfer of shares as a consequence of the termination. This possibility was well
known to Mr. Obradović at the time when he concluded the Agreement. The Respondent
insists that the Claimants cannot seriously dispute that Mr. Obradović accepted the
obligation to return the shares in case of termination.
588. The Respondent opposes the Claimants’ argument that the application of the Law on
Privatization as part of the contractual framework amounts to Serbia invoking national law
to escape liability under international law. For Serbia, Mr. Obradović accepted the
application of the Law on Privatization (including the provision on transfer of shares in case
of termination) when he entered into the Agreement. The Law on Privatization was
incorporated into the Privatization Agreement. It is thus wrong that the Agency’s use of its
contractual prerogatives would run against Serbia’s international obligations. The Claimants’
view that contract provisions are subject to an “international constitutionality” test cannot be
shared.
589. Finally, the Respondent rejects the Claimants’ contention that the Ombudsman’s
intervention lacked due process. As the Ombudsman did not conduct any proceedings that
could affect the Claimants’ rights, there is “no room” to resort to due process guarantees to
protect the Claimants.
401
C-Mem., §635.
160
c. Refusal to release the pledge
590. The Respondent notes that the Claimants only allege unlawfulness in respect of the
Agency’s refusal to release the pledge because, according to them, the refusal to release
the pledge was contrary to the Privatization Agreement and the Share Pledge Agreement,
and not because the Agency’s conduct contravened Serbian law. However, Serbian contract
law allowed the refusal to release the pledge. The purpose of the pledge was to ensure
compliance with all obligations under the Privatization Agreement. That purpose was not
exhausted by the payment of the full purchase price and therefore the Agency was under
no obligation to immediately release the pledge on payment of the last instalment. Further,
Article 122 of the Law on Obligations entitles the Agency to refuse to perform its obligations
to release the pledge until Mr. Obradović complied with his obligation under Article 5.3.4,
which meant that the Agency was right in refusing to release the pledge until Mr. Obradović
rectified his breaches of Article 5.3.4 of the Agreement.
591. In respect of the Claimants’ argument that the refusal to release the pledge was arbitrary
and unreasonable because the discussions within the Commission of Control show that the
Agency acted in bad faith, the Respondent submits that such commission retained the
pledge for the reason that the Agency had mentioned from the beginning, i.e. to ensure
Mr. Obradović’s compliance. There was nothing new in the Agency’s position which had not
been previously communicated to Mr. Obradović. The Agency had taken the same position
in other privatizations as well. For the Respondent, the evidence on record bears out that
the Commission did not act arbitrarily or unreasonably, “but engaged in rational decision
making, carefully weighing issues before it and then took a rational decision not to release
the pledge.” 402
592. As regards the Claimants’ submission that the pledge could only secure monetary
receivables and could thus not be retained to secure Mr. Obradović’s compliance with other
obligations, the Respondent points out that this is not supported by Serbian law. Relying on
its expert, the Respondent insists that “in case of privatization, the pledge secured the
Privatization Agency’s (future and conditional) right to claim shares back from the buyer in
402 R-PHB 1, §306.
161
case his potential breach of contract eventually led to termination of the privatization
agreement.” 403
d. Refusal to allow assignment of the Privatization Agreement
593. It is the Respondent’s submission that the Agency’s refusal to permit the assignment of the
Agreement did not affect Mr. Obradović’s rights under the Privatization Agreement. Further,
the Agency’s “insistence on proper documentation” to decide on the assignment was not
arbitrary. 404 The Agency did not, for instance, have to accept the security provided by Mr.
Obradović, especially when he had a “proven record of negligence.” Moreover, the Agency
was always clear that it could not take any decision with regard to BD Agro while the
Ministry’s Supervision Proceedings were ongoing. Therefore, the Agency’s conduct “clearly
shows” that there was no bad faith on its part.
e. Ombudsman’s interventions
594. Serbia disagrees that the Ombudsman’s investigations and recommendations influenced
the Agency’s decision to terminate the Agreement and notes that there is no evidence in the
record to this effect. 405 These recommendations were not binding and, in any event, the
Ombudsman did not ask for termination, only for a decision on the status of the Agreement.
f. Other breaches
595. In connection with other alleged breaches, Serbia considers that it did not breach FET on
the ground that the Agency acted in bad faith when it refused to release the pledge or to
consent to the assignment of the Privatization Agreement or when it terminated the
Privatization Agreement for breach of Article 5.3.4. Nor did the Agency know that it could
not do so under Article 7.1 of the Agreement. All these arguments have been addressed
above.
596. The Respondent equally disputes that there was a “pattern of orchestrated conduct” aimed
at destroying Claimants’ investment. For Serbia, this is simply a reiteration of the Claimants’
bad faith argument, which has already been addressed.
403 Rej., §1284.

404 Rej., §1303.
405 Rej., §§1252-1256.
162
597. According to the Respondent, it did not frustrate the Claimants’ legitimate expectations.
First, the minimum standard of treatment to be applied pursuant to the Canada-Serbia BIT
does not protect legitimate expectations as a stand-alone element of FET. Neither does it
protect the expectation of a stable regulatory framework. Further, contract violations, without
more such as a denial of justice or discrimination do not suffice to establish FET breaches.
Second and in any event, the Claimants could not possibly have held reasonable
expectations about the release of the pledge or the termination because neither Mr.
Obradović nor Mr. Rand sought professional legal advice with respect to these matters.
Further, both Messrs. Obradović and Markićević accepted that the Agreement had been
breached, so it is “absurd and double-faced” for the Claimants to assert now that they had
an expectation that is contrary to the one they actually held at the time. Third, the Agency’s
conduct was always in line with Serbian law and the Privatization Agreement and therefore
the Agency’s conduct could not be said to violate the Claimants’ legitimate expectations.
3. Analysis
598. The Claimants allege that Serbia has breached the FET guarantee which is contained in
Article 6 of the Canada-Serbia BIT and reads as:
“ARTICLE 6
Minimum Standard of Treatment

1. Each Party shall accord to a covered investment treatment in accordance with
the customary international law minimum standard of treatment of aliens,
including fair and equitable treatment and full protection and security.
2. The concepts of “fair and equitable treatment” and “full protection and security”
in paragraph 1 do not require treatment in addition to or beyond that which is
required by the customary international law minimum standard of treatment of
aliens.
3. A breach of another provision of this Agreement, or of a separate international

agreement, does not establish that there has been a breach of this Article.”
599. The wording just quoted unequivocally limits FET to the customary international law
minimum standard of treatment of aliens (“MST”). The Parties diverge on the content of
MST: the Claimants consider that it has evolved over time and is now equivalent to the so-
called “autonomous” FET standard found in other BITs, while Serbia holds a much narrower
view.
163
600. The decision of the U.S.-Mexico Claims Commission in Neer of 1926 adopted a restrictive
definition of the standard:
“[T]he treatment of an alien, in order to constitute an international delinquency,

should amount to an outrage, to bad faith, to willful neglect of duty, or to an
insufficiency of governmental action so far short of international standards that
every reasonable and impartial man would readily recognize its insufficiency.” 406
601. It is by now well accepted that such definition has evolved over the years and now offers
wider protection to foreign investors than that contemplated in Neer. 407 How has it evolved
and what is the contemporary scope of the protection? On the basis of the authorities cited
by the Parties, the Tribunal is of the opinion that the award in Waste Management II, which
interpreted Article 1105 of the NAFTA, a provision equivalent to Article 6 of the Canada-
Serbia BIT, correctly identified the content of the standard:
“[T]he minimum standard of treatment of fair and equitable treatment is infringed

by conduct attributable to the State and harmful to the claimant if the conduct is
arbitrary, grossly unfair, unjust or idiosyncratic, is discriminatory and exposes the
claimant to sectional or racial prejudice, or involves a lack of due process leading
to an outcome which offends judicial propriety – as might be the case with a
manifest failure of natural justice in judicial proceedings or a complete lack of
transparency and candour in an administrative process. In applying this standard
it is relevant that the treatment is in breach of representations made by the host
State which were reasonably relied on by the claimant. Evidently the standard is
to some extent a flexible one which must be adapted to the circumstances of each
case.” 408
602. Recently, the tribunal in Eco Oro, interpreting the MST provision of the 2008 Free Trade
Agreement between Canada and the Republic of Colombia, which is textually similar to
Article 6 of the Canada-Serbia BIT, 409 reached a similar conclusion:
406 Exh. CLA-133, LFH Neer and Pauline Neer (USA) v. United Mexican States (1926), §4.
407 Exh. RLA-136, Mesa Power Group, LLC v. Government of Canada, UNCITRAL, PCA Case No. 2012-
17, Award, 24 March 2016, §504; Exh. CLA-139, William Ralph Clayton and others v. Government of
Canada, PCA Case No. 2009-04, Award on Jurisdiction and Liability, 17 March 2015, §441; EXH. RLA-39,
Mondev International Ltd. v. United States of America, ICSID Case No. ARB(AF)/99/2, Award, 11 October
2002, §115 et seq.
408 Exh. RLA-93, Waste Management, Inc. v. United Mexican States (“Number 2”), ICSID Case No. ARB
(AF)/00/3, Award, 30 April 2004, §§98-99.

409 Article 805 of the 2008 Free Trade Agreement between Canada and the Republic of Colombia: “Each
Party shall accord to covered investments treatment in accordance with the customary international law
minimum standard of treatment of aliens, including fair and equitable treatment and full protection and
security. The concepts of ‘fair and equitable treatment’ and ‘full protection and security’ do not require
treatment in addition to or beyond that which is required by the customary international law minimum
standard of treatment of aliens.”
164
“Having reviewed the relevant decisions, whilst malicious intention, wilful neglect
of duty or bad faith are not requisite elements of MST under customary
international law, there must be some aggravating factor such that the acts
identified comprise more than a minor derogation from that which is deemed to
be internationally acceptable. The conduct in question must engender a sense of
outrage or shock, amount to gross unfairness or manifest arbitrariness falling
below acceptable standards, or there must have been a lack of due process which
has led to an outcome which offends a sense of judicial propriety. The treatment
complained of must therefore be unacceptable from an international perspective
whilst set against the high measure of deference that international law extends to
States to regulate matters within their own borders.” 410
603. The Mesa tribunal observed that the standard contained the following components:
“On this basis, the Tribunal considers that the following components can be said
to form part of Article 1105: arbitrariness; ’gross’ unfairness; discrimination;
‘complete’ lack of transparency and candor in an administrative process; lack of
due process ‘leading to an outcome which offends judicial propriety’; and
‘manifest failure’ of natural justice in judicial proceedings.[fn. omitted] Further, the
Tribunal shares the view held by a majority of NAFTA tribunals [fn. omitted] that
the failure to respect an investor's legitimate expectations in and of itself does not
constitute a breach of Article 1105, but is an element to take into account when
assessing whether other components of the standard are breached.” 411
604. Tribunals have also found that the threshold for breaching the customary international law
minimum standard of treatment is high. 412
605. In their submissions, the Claimants have argued that numerous measures breached
Article 6 of the Canada-Serbia BIT, including the Agency’s refusal to release the pledge over
the Beneficially Owned Shares, its termination of the Agreement, and the Ombudsman’s
interventions. For the reasons mentioned below, the Tribunal finds that the Agency’s
conduct in terminating the Agreement was unlawful and, therefore, the seizure of the
Beneficially Owned Shares breached Article 6 of the BIT. Having reached this conclusion,
for reasons of procedural economy, the Tribunal can dispense with reviewing whether the
other measures invoked were also taken in violation of Article 6. Indeed, even if they did,
410 Eco Oro Minerals Corp. v. Republic of Colombia, ICSID Case No. ARB/02/6, Decision on Jurisdiction,
Liability and Directions on Quantum, 9 September 2021, §755.

411 Exh. RLA-136, Mesa Power Group, LLC v. Government of Canada, UNCITRAL, PCA Case No. 2012-
17, Award, 24 March 2016, §502.

412 See, for instance, Exh. RLA-136, Mesa Power Group, LLC v. Government of Canada, UNCITRAL, PCA
Case No. 2012-17, Award, 24 March 2016, §504; Exh. CLA-95, International Thunderbird Gaming
Corporation v. The United Mexican States, UNCITRAL, Arbitral Award, 26 January 2006, §194.
165
Mr. Rand would not have incurred additional harm, as the seizure of the shares deprived
him of the entirety of his investment.
a. Seizure of the Beneficially Owned Shares
606. The Tribunal recalls that the Agency seized the Beneficially Owned Shares pursuant to its
Decision on the Transfer of BD Agro’s Capital of 21 October 2015, 413 which in relevant part
reads as follows:
“DECISION ON TRANSFER OF CAPITAL

of the subject of privatization BD Agro ad Dobanovci
1. The Privatization Agency is transferred the capital of the subject of

privatization BD Agro ad Dobanovci, Lole Ribara bb, registration number:
07054688.
[…]
Explanation
[…]
Since the Buyer failed to deliver evidence of compliance with the obligations
referred to in item 5.3.4 of the Agreement, within additionally granted term, and
pursuant to the auditor's reports of 2011, 2012 and 2015, as well as
documentations delivered along with auditor's reports, the obligation was not
performed, at its 22nd session held on September 28, 2015, the Commission for
control of performance of the obligations of the buyer or strategic investor from
concluded agreements in privatization procedure rendered the decision that the
Agreement on sale of socially owned capital through the method of public
auction of the subject of privatization Poljoprivredno prehrambeni kombinat
Buducnost Dobanovci (now: ad Bd Agro Dobanovci) of October 4, 2005 was
considered terminated due to default in accordance with Article 88, paragraph 3
of the Law on Privatization, and in regards to Article 41a, paragraph 1, item 3 of
the Law on Privatization (Official Gazette of the RS, no. 38/01, 18/03, 45/05,
123/07- other law, 30/10-other law, 93/12, 119/12, 51/14 and 52/14-CC) and
pursuant to the Report of the Ministry of Economy on performed control of the
work of the Privatization Agency of April 7, 2015.
Since the sale agreement was terminated, the Agency rendered the decision as
in the wording, pursuant to the provision of Article 41, paragraph 2 of the Law on
Privatization.”
2015 (emphasis added).
166
607. The decision just quoted makes it clear that the justification for the seizure of the shares of
BD Agro lied in the termination of the Agreement. Hence, if the termination turned out to be
invalid, the seizure would lack any justification and be invalid as well.
608. The Agreement was terminated pursuant to the Notice of Termination, which had the
following main content:
“In accordance with item 5.3.4 of the Agreement, the Buyer undertook not to
encumber with pledge the fixed assets of the subject during the term of the
Agreement, except for the purpose of securing claims towards the subject
accrued based on regular business activities of the subject, that is, except for
the purpose of acquiring of the funds to be used by the subject.
Having in mind that in the procedure for control of performance of the obligations
from the relevant Agreement it was concluded that the Buyer had not acted
pursuant to the stated contractual obligation, the Buyer was granted additional
terms for fulfillment, the last of which, by the Decision of the Commission for
Control of fulfilment of obligations of the buyer, or strategic investor from the
agreements concluded in the privatization procedure (hereinafter: Commission)
was dated April 23, 2015. The stated Decision, rendered in accordance with the
Report of the Ministry of Economy on performed supervision of the work of the
Privatization Agency of April 7, 2015, stipulated for the Buyer, inter alia, to
deliver, within additionally granted term of 90 days after the date of receipt of the
Notice, evidence of actions in compliance with the Notice regarding the
additionally granted term of November 9, 2012, and should, among other things,
perform the obligation referred to in Article 5.3.4 of the Agreement concluding
with [i.e. ending on] April 8, 2011, and deliver evidence that all encumbrances
have been deleted and all other security instruments for the obligations of third
parties have been returned, and all encumbrances which have been registered
on no grounds were deleted, as well as that all the loans given to third parties by
the Subject of privatization from loan amounts secured by encumbrances on the
property of the Subject have been returned and deliver auditor's report where
the auditor would declare on actions of the Buyer in line with all the items of the
Decision of the Agency granting additional term for the Buyer.
[…]
In respect of performance of the obligation referred to in item 5.3.4 of the

Agreement within additionally granted term, and pursuant to auditor's reports of
2011, 2012 and 2015, as well as documentation delivered along with auditor's
reports and subsequently, it was ascertained that the pledge was registered on
the immovable property of the Subject as security instrument for the loan of the
Subject in the amount of 221,000,000.00 dinars […], which the Subject received
from Agrobanka Belgrade. Part of that loan in the amount of 70,944,422.77 RSD
was used on the basis of the Guarantee Agreement no. J182/10-00 of June 2,
2010 (Subject is the guarantor), for settling of the obligations of the company AD
"Crveni signal" Belgrade towards Agrobanka, which the said company had on
the basis of the Short Term Loan Agreement 181/10-00 of June 2, 2010 in the
167
amount of 65,000,000.00 dinars. Subsequently, part of the stated loan in the
amount of 221,000,000.00 was used for issuing a loan to the company AD
"Ineks" Nova Varos, in the amount of 30,670,690.00 dinars. Pursuant to the
report of the auditor "Prva revizija" doo Belgrade of January 2015 delivered to
the Agency on April 30, 2015, BD Agro claimed the funds in the amount of
18,170,690.00 dinars from the company "Ineks" Nova Varos on the stated basis,
and the funds in the amount of 65,904,569.84 dinars from "Crveni signal".
[…]
Since the Buyer failed to provide evidence in the additionally granted term that
he had complied with the obligation referred to in item 5.3.4 of the Agreement,
and according to the auditor’s reports of 2011, 2012 and 2015, as well as
documentation submitted along with auditor’s reports, the obligation has not
been performed, we hereby inform you that, at its 22nd session held on
September 28, 2015, the Commission for control of fulfilment of obligations of
the buyer, or strategic investor from the agreements concluded in the
privatization procedure rendered the decision that the Agreement on sale of
socially owned capital through the method of public auction of the subject of
privatization […] BD Agro ad Dobanovci, concluded on October 4, 2005, is
considered terminated due to non - fulfillment, and in accordance with Article 88,
paragraph 3 of the Law on Privatization […] and in regards to Article 41a,
paragraph 1, item 3 of the Law on Privatization (….) in line with the Report of the
Ministry of Economy on performed supervision of the work of the Privatization
Agency of April 7, 2015.
[…]
In accordance with the stated Decision, the Decision on transfer of shares

acquired by the Buyer on the basis of the Agreement on sale of socially owned
capital through the method of public auction of the subject of privatization (BD
Agro ad Dobanovci) to the Privatization Agency will be rendered.” 414
609. The Agreement was thus terminated on 28 September 2015 for an alleged breach of
Article 5.3.4 of the Agreement, in respect of loans given to Crveni Signal and Inex in
December 2010, which Serbia confirms. 415 The other breaches of the Agreement alleged
by Serbia thus played no role in the termination. 416
610. Article 5.3.4 of the Agreement expressly limits the prohibition to pledge assets to the
duration of the Agreement:
414 Exh. CE-50, Notice on Termination of the Privatization Agreement (emphasis added).
415 C-Mem., §131.
416 In its first post-hearing brief, Serbia argued that Mr. Obradović breached Article 5.3.4 also because BD
Agro had pledged its assets as security for a EUR 0.6 million loan taken by Crveni Signal on 2 June 2010.
The Notice of Termination does not mention this, and the loan was repaid on 29 December 2010, which
Serbia admits. R-PHB 1, §199.
168
“5.3 Further obligations of the Buyer
The Buyer undertakes that he will not perform or allow performance of the
following actions without previous written approval by the Agency:
[…]
5.3.4 The Buyer will not encumber with pledge the fixed assets of the subject
during the term of the Agreement, except for the purpose of securing claims
towards the subject accrued based on regular business activities of the subject,
that is, except for the purpose of acquiring of the funds to be used by the
subject.” 417
611. Accordingly, a breach of Article 5.3.4 can only occur if BD Agro’s assets are encumbered
during the term of the Agreement. 418 The record shows that the term of the Agreement is
tied to the payment of the purchase price:
• The Share Pledge Agreement provided that the Agreement would

“conclude” on payment of the Purchase Price:
“Article 2
Confirmation of the shares referred to in Article 1 of this Agreement is
pledged with the Agency by the Pledgor for the period of 5 years as of the
day of conclusion of the sale and purchase agreement, that is, until final
payment of sale and purchase price.” 419
• The Agency’s Rulebook on Procedure for Control also required the release
of the share upon full payment of the purchase price:
“9.5. In the case of contracts for the sale via public auction of socially-owned
capital where pledges have been established on the sold
shares/shareholdings until the purchase price is paid in full, the project
manager or assistant manager at the Contract Compliance Centre, on foot
of an application by the buyer of the capital, accompanied by confirmation
from the Finance Centre that the purchase price for the entity being
privatised has been paid in full, shall draft a decision removing the pledge
from the shares/shareholdings.” 420
• On 25 February 2011, the Privatization Agency alleged certain violations

of the Privatization Agreement, particularly Articles 5.3.3 and 5.3.4. Doing
417 Exh. CE-17, Privatization Agreement, p. 4 (emphasis added).

418 The Claimants deny that Article 5.3.4 of the Agreement was breached, stating, for instance, that Article
5.3.4 does not apply to BD Agro as that provision only binds Mr. Obradović and that, in any event, Article
5.3.4 does not preclude re-lending money originally borrowed by BD Agro. The Tribunal need not examine
these arguments. Indeed, for the reasons mentioned below, the Tribunal concludes that even if there had
been a breach, it could not be invoked when the Agreement was terminated in September 2015.
419 Exh. CE-17, Privatization Agreement, 4 October 2005.
420 Exh. CE-763, Privatization Agency’s Rulebook on Procedure for Control, 20 May 2010.
169
so, it expressly confirmed that those provisions were in effect during the
term of the agreement, i.e. until the full payment of the purchase price:
“The last control was performed regarding the performance of obligations

of the Buyer referred to in items 5.3.3 and 5.3.4 of the Agreement, namely
the obligations which limit the disposal of the fixed assets of the Subject of
privatization (alienation and encumbering).
[…]
The above stated obligations are in effect during the term of the agreement
(October 04, 2010), which has been extended, since the Buyer failed to pay
the sixth instalment of the sale and purchase price, on which basis the third
and last additional term has been granted.” 421
• On 11 June 2013, the Agency’s lawyers, Radović Ratković, concluded

unequivocally that the term of the Agreement was until its “complete
fulfilment”, which occurred on 8 April 2011 when the full purchase price was
paid. At that time, BD Agro was fully privatized and all legal and contractual
prerogatives of the Agency ceased to exist. The Agreement could not be
terminated for breach of Article 5.3.4 after that date:
“Article 5.3.4 stipulates that the Buyer will not encumber with pledge the
fixed assets of the subject during the term of the Agreement, except for the
purpose of securing claims towards the subject accrued based on regular
business activities of the subject, that is, except for the purpose of acquiring
of the funds to be used by the subject. As per this Agreement and the Law
on Privatization, violation of this obligation is not sanctioned by termination
of agreement. The duration of this ban equals the term of the Agreement.
The term of the Agreement is the period until its complete fulfilment.
Fulfilment of the agreement occurred on April 8, 2011, when the buyer fully
paid the agreed purchase price, by which the socially owned capital which
was the subject of sale was completely privatized.
[…]
Based on the data available, we conclude that the Agreement on sale of

the socially owned capital of the subject “BD AGRO a.d.” was performed
and fulfilled as of April 8, 2011. After the payment of the sale and purchase
price, socially owned capital of the subject of privatization was finally
privatized and thus all contractual and legal control authorities of the
Privatization Agency ended […].” 422
612. The full purchase price was paid on 8 April 2011. As the obligation contained in Article 5.3.4
ceased on that date, it could not be breached thereafter. This is a matter of simple logic. It
also arises from the clear wording of Article 5.3.4, to which the Tribunal must give effect
421 Exh. C-30, Report of the Privatization Agency on Control of BD Agro, 25 February 2011.
422 Exh. CE-34, 2013 Legal Opinion, 11 June 2013 (emphasis added).
170
under Serbian law. The wording of Article 5.3.4 is clear in that it is limited to the term of the
agreement, which, in turn is linked to the payment of the purchase price. The purpose of
Article 5.3.4 also supports this interpretation: as the Serbian courts have observed, this
provision is meant to prevent buyers from reselling or encumbering the company’s assets
when they have not yet fully paid the purchase price. 423 Once a buyer has paid the purchase
price, the protection afforded by Article 5.3.4 becomes unnecessary.
613. The testimony of the Claimants’ Serbian law expert, Mr. Milošević that, after payment of the
purchase price on 8 April 2011, all essential obligations of the Agreement were performed,
the term of the Privatization Agreement lapsed, and the obligations under Article 5.3.4
expired because they were to last only “during the term of the [Privatization] Agreement” 424
was not cogently challenged. 425
614. On 21 September 2011, the Serbian Commercial Appellate Court confirmed that the
Privatization Agency had “limited capacity” to terminate a privatization agreement, and that,
once such an agreement was performed, it could not be terminated:
“The Privatization Agency holds time limited capacity to terminate the

privatization agreement for the period within which, in line with the provisions of
the privatization agreement, there is a determined obligation of the buyer of the
capital to comply with various obligations from the agreement. With expiration of
control deadline for performance of privatization agreement, the agreement is
performed in respect of the Agency as the seller of socially owned capital, and
in that case, there is no room for termination of performed agreement.” 426
423 Exh. CE-722, Judgment of the Commercial Appellate Court No. Pž 8687/2011, 18 December 2012 (“[t]he
goal of the provision of Article 5.3.4 is to protect the property of the subject of privatization and to safeguard
the material base of the business of the subject of privatization, without which the buyer, due to their nature
and the nature of the contract, cannot fulfill other contractual obligations, cannot secure continuity of
business operations of the enterprise and fulfillment of the agreed obligations.”).
424 Milošević ER II, §70.
425 Professor Radović’s oral testimony was not entirely clear on this issue. The Tribunal will avoid giving it
much weight, which is in any event not necessary considering the other elements in the record. This said,
the Tribunal understood that Professor Radović conceded that, after 8 April 2011, Mr. Obradović could not
commit new breaches of the Privatization Agreement. While she insisted that even after 8 April 2011, Mr.
Obradović was required to remedy the breach that had allegedly occurred, she later conceded that that
interpretation was not supported by the text of the Privatization Law and that all the Agency could do after
8 April 2011 was determine if an alleged breach that pre-existed the determination of the Agreement still
existed. See Tr., Hearing on Jurisdiction and Merits, Day 6, 21:1 et seq.
426 Exh. CE-49, Excerpt from the Judgment of the Commercial Appellate Court Pz. 11202/2010, 21
September 2011, p. 3.
171
615. In light of these elements, the Tribunal concludes that the Privatization Agreement could not
be terminated after 8 April 2011 for an alleged breach of Article 5.3.4 that had occurred
before that date. Therefore, the termination of the Agreement was unlawful.
616. It is true that Serbia argues that it could terminate the Agreement pursuant to Article 41(a)(3)
of the Privatization Law. However, that does not seem to be the case. Article 41(a)(3) of the
Privatization Law provides that a privatization agreement must be terminated for “non-
fulfillment” if, in spite of a grace period, the buyer disposes of the privatized assets in a
manner contrary to the agreement or for the grounds provided in the agreement:
“The agreement on sale of the capital or property shall be deemed terminated due to non-
fulfillment, if the buyer, even within an additionally granted term for fulfillment:
[…]
3) disposes of the property of the subject of privatization contrary to provisions of the
agreement;
[…]
7) in other cases provided for by the agreement.”
617. This provision is of little assistance to the Respondent. Once the Agreement had ended,
there was nothing left to be fulfilled, and hence no possible case of “non-fulfillment.” In
addition, as the Agreement specified that the obligation not to encumber assets was limited
to the term of the Agreement, which had expired, no disposition of property could be contrary
to the Agreement. Having thus concluded, the Tribunal need not examine the Claimants’
argument that the Agreement could only be terminated as stipulated in Article 7 thereof and
not Article 41(a)(3) of the Privatization Law. Indeed, even if Article 7 did not exclude Article
41(a)(3), the latter provision would not apply in this case.
618. Assuming that a contract that has ended could be terminated, Serbia would also be wrong
in relying on Article 41(a)(3) of the Privatization Law, because, pursuant to Article 131 of the
Law on Obligations, an agreement cannot be terminated for “non-performance of an
insignificant part of an obligation.” 427 The Parties’ Serbian law experts appear to agree that
a contract cannot be terminated for failure to perform a minor part of an obligation that does
not endanger the purpose of the contract. 428 Here, the purpose of the privatization contract
427 Exh CE-462, Certain provisions of the Law on Obligations, Art. 131: “[A]n agreement cannot be
terminated due to non-performance of an insignificant part of the obligation.”
428 Milošević ER II, §96; Radović ER I, §34. See also Exh. CE-714, B. Vizner, Komentar Zakona o obveznim
(obligacionim) odnosima [in English: Commentary on the Law on Contracts and Torts] (1978, Zagreb), p. 3
(“It follows that in cases of failure to fulfil a negligible part of an obligation, the court’s assessment takes a
172
could not be endangered as it had already materialized. As was mentioned earlier, with the
full payment of the price, the privatization was achieved.
619. Finally, Serbia invokes decisions of the Privatization Agency which allegedly represent a
“well established practice” according to which privatization agreements were regularly
terminated even after the full payment of the purchase price. Be this as it may, these
decisions do not relate to terminations after payment of the full purchase price based only
on a violation of the limitation on pledging the privatized company’s assets. Moreover, even
if such decisions existed, they would hardly allow the Tribunal to ignore the outcome of its
legal analysis.
620. In considering all the facts and circumstances that led to the (unlawful) termination of the
Agreement and the seizure of the Beneficially Owned Shares, the Tribunal finds it incumbent
to also consider the Agency’s own conduct. 429 Indeed, the record bears out that the Agency
well knew that on payment of the full purchase price on 8 April 2011, it was bound to release
the pledge. Had it done so, as it was contractually obligated to do, there would have been
no restriction on Mr. Obradović pledging or otherwise transferring BD Agro’s assets. The
restriction on pledging BD Agro’s assets contained in Article 5.3.4 no longer served any
purpose. Rather than releasing the pledge over the Beneficially Owned Shares however,
the Agency chose to retain it, 430 to then terminate the Agreement for breach of Article 5.3.4
of the Agreement and eventually to seize the Beneficially Owned Shares. The Agency thus
willfully breached the Agreement:
two-pronged approach: a subjective assessment - in relation to safeguarding the objective, purpose of the
concluded contract, and an objective assessment - in relation to obtaining the more significant benefit that
is usually obtained, having in mind, in particular, the interrelation between the scope of the fulfilled and
unfulfilled part of the contractual obligation.”).
429 See, for instance, Eco Oro, where the tribunal in assessing whether there had been a breach of Article
805 (similar to Article 6 of the Canada-Serbia BIT) observed that it was “necessary” to consider all the facts
and circumstances (Eco Oro Minerals Corp. v. Republic of Colombia, ICSID Case No. ARB/02/6, Decision
on Jurisdiction, Liability and Directions on Quantum (9 September 2021), §761). See also, Exh. RLA-118,
Gold Reserve Inc. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB(AF)/09/1, Award, 22
September 2014, §566, making reference to the fact that cumulative effects of State’s measures or conduct
as integrating a breach of the FET had been considered in El Paso Energy International Company v.
Argentine Republic, ICSID Case No. ARB/03/15, Award, 31 October 2011, §459.
430 The pledge over the Beneficially Owned Shares, could not cease to exist automatically. Under Serbian
law, a confirmation issued by the Privatization Agency was required in order for the pledge to be deleted.
See Milošević ER I, §130.
173
• On 25 February 2011, the Agency confirmed that the obligations under Article 5.3.4
were in effect only until the full payment of the purchase price, which was in line with
the Privatization Agreement, 431 the Share Pledge Agreement, 432 and the Agency’s
Rulebook; 433
• On 8 April 2011, the sixth instalment of the purchase price was paid. 434 The
Privatization Agency could arguably refuse the payment and, defer the expiry of the
Privatization Agreement. It chose not to do so;
• On 6 January 2012, the Privatization Agency confirmed that “the buyer, as of April 8,
2011, has settled his obligations in respect of the 1st, 2nd, 3rd, 4th, 5th and 6th
installment and thus paid the entire sale and purchase price.” 435 Thus, based on the
Agency’s own determinations above, the pledge should have been released on 8 April
2011;
• On 30 May 2012, the Ministry of Economy determined that there was “no economic
justification” for terminating the Agreement:
“We think that there is no economic justification to terminate the agreement of

sale of socially owned capital of the subject of privatization, having in mind:
- That the buyer paid the entire amount of the sale and purchase price,
- That he used the funds received from disposal of the property to comply with
the obligations of the subject of privatization towards the employees, state
creditors and commercial banks, mostly through assignation payments, since his
bank account was blocked,
431 Exh. CE-17, Privatization Agreement, 4 October 2005,Art. 3.1.2: “3.1.2 The Buyer and the Agency
conclude the share pledge agreement (confirmation of the shares) based on which the Buyer submits the
confirmation of the shares to the Agency, which is kept by the Agency until payment of sale and purchase
price.”
432 Exh. CE-17, Privatization Agreement, Schedule 1: Share Pledge Agreement, 4 October 2005, Art. 2:
“Confirmation of the shares referred to in Article 1 of this Agreement [Privatized Shares] is pledged with the
Agency by the Pledgor for the period of 5 years as of the day of conclusion of the sale and purchase
agreement, that is until final payment of the sale and purchase price.”
433 Exh. CE-763, Privatization Agency’s Rulebook on Procedure for Control, 20 May 2010, Rule 9.5: “In the
case of contracts for the sale via public auction of socially-owned capital where pledges have been
established on the sold shares/shareholdings until the purchase price is paid in full, the project manager or
assistant manager at the Contract Compliance Centre, on foot of an application by the buyer of the capital,
accompanied by confirmation from the Finance Centre that the purchase price for the entity being privatised
has been paid in full, shall draft a decision removing the pledge from the shares/shareholdings.”
6 January 2012.
6 January 2012.
174
- That the stated disposal of the property did not threaten the continuity of
business activities of this company,
- As well as that the buyer of the capital achieved the highest possible level of
organization of this type of primary agricultural production with the application of
the latest methods in the field of primary production.” 436
• In June 2012, BD Agro repaid the 2010 Loan that had caused the alleged breach; 437
• Despite these events, throughout 2012, the Agency continued to insist that the breach
of Article 5.3.4 be rectified; 438
• On 11 June 2013, the Agency’s lawyers, Radović Ratković concluded that the
Agreement could not be terminated for breach of Article 5.3.4, because “all significant
elements” of the contract had been performed by the buyer, 439 and that the “control
activities” of the “Agency after 8 April 2011 were irrelevant” as the Agreement had
ended by then. 440
• They also disagreed with the approach taken by the Agency that it could “keep alive”
a pre-existing breach by sending new notices with additional time limits for
performance:
“In our determination of the buyer’s deadline for meeting the obligations
stipulated by Articles 5.3.3 and 5.3.4 of the agreement, and having in mind the
fact that the buyer fully paid the sale and purchase price, we took into
consideration the opinion stated by the Center for Privatization [i.e. the Agency],
but we cannot agree with that opinion. The interpretation of the Center ‘that by
436 Exh. CE-33, Letter from the Ministry of Economy to the Privatization Agency, 30 May 2012 (emphasis
added).
437 Exh. CE-327, Report on Factual Findings from Prva Revizija, 12 January 2015, p. 5 (pdf).
438 See notices of 2 April 2012 (Exh. CE-77, Letter from Mr. Djura Obradović to the Ministry of Economy),
31 July 2012 (Exh. CE-78, Notice of the Privatization Agency on Additional Time Period) and 8 November
2012 (Exh. CE-79, Notice of the Privatization Agency on Additional Time Period).
439 Exh. CE-34, 2013 Legal Opinion, 11 June 2013.
440 Exh. CE-34, 2013 Legal Opinion, 11 June 2013 (“Based on the data available, we conclude that the
Agreement on sale of the socially owned capital of the subject ‘BD AGRO a.d.’ was performed and fulfilled
as of April 8, 2011. After the payment of the sale and purchase price, socially owned capital of the subject
of privatization was finally privatized and thus all contractual and legal control authorities of the Privatization
Agency ended, regardless of the fact that after fulfillment of the agreement, the Agency was sending notices
to the buyer about possible termination of the agreement, while setting additionally granted terms for
fulfillment. We specifically emphasize this since the notices of the Agency referred to fulfillment of the
buyer’s obligation that could not be used as the basis for the termination of the agreement. The Agency is
authorized to control fulfillment of contractual obligations until the date of execution of the contractual
obligation with the longest deadline stipulated. In accordance with this, we believe that control activities
taken by the Agency after April 8, 2011 were irrelevant, since it is impossible to terminate a completely
fulfilled agreement.”).
175
setting of an additionally granted term for fulfillment, the agreement stays in
force’ cannot be applied to this specific legal situation. Namely, in a situation
when the buyer fulfilled all obligations defined as significant elements of the
agreement and when the agreement was fully performed, one cannot set an
additionally granted term for fulfillment per which the agreement would stay in
force. The Agency’s action cannot ‘keep in force’ a legal matter that was
completely fulfilled and executed.” 441
• Despite these clear conclusions, the Agency repeatedly extended the time for
compliance apparently in an effort to keep the Agreement alive; 442
• Importantly, the Agency’s lawyers also come to the conclusion that, even though the
Agreement could not be terminated for breach of Article 5.3.4, the Buyer had in any
event, “undoubtedly” corrected all irregularities for which the Agency had sent notices:
“Regarding violation of the obligation of the buyer stipulated by Article 5.3.4 of

the Agreement, even though such violation does not result in termination of the
agreement, we state the following: Based on submitted auditor’s reports, it may
be undoubtedly concluded that the buyer of capital (even though he was not
obliged to) acted in line with the notices of the Privatization Agency even after
the full payment of the sale and purchase price, that is, after the end of control-
related authorizations of the Agency. The buyer primarily corrected all the
irregularities observed in the control process, the correction of which was
requested by the Agency. In the last auditor’s report, it is stated that all
encumbrances (pledges) were deleted from the subject’s movable property
(fixed assets). The only remaining one was the pledge on the real estate
registered in the land registry sheet 3229 at the Cadastral Municipality of
Ugrinovci, as a security instrument for loan obligation of ‘Crveni Signal a.d.’ from
Belgrade, for the amount of 65,000,000.00 dinars, as per the Loan Agreement
K-181/10-00 dated June 2, 2010. However, in 2012, the subject of privatization
and ‘Crveni Signal’ signed the agreement on restructuring (reprogramming) of
the loan, in which the company ‘Crveni Signal’, being guarantor, obliged itself to
pay due liabilities of ‘BD AGRO a.d.’, through payment of 20% of the sale and
purchase price of two immovable, of the assessed market value several times
higher than the liabilities of the subject of privatization. Thus, ‘Crveni Signal’ gave
significantly higher security instrument than the subject of privatization itself. In
addition, this disposal of the subject of privatization cannot be considered as
disposal of high value assets, having in mind its share in the total value of the
fixed assets of the subject.” 443

442 The Agency gave Mr. Obradović seven extensions of the deadline for remedying the breach of Article
5.3.4. over a period of five years. See Rej., Appendix.
176
• Here again, despite their own lawyer’s opinion, the Agency insisted that Mr. Obradovic
had breached his obligations under Article 5.3.4 of the Agreement; 444
• By 2013 therefore, i.e. two years after the payment of the Purchase Price and more
than a year after the Ministry’s conclusion that there was no economic reason to
terminate the agreement and the opinion of the Agency’s lawyers that there was no
legal basis for termination, the Agency still insisted that the so-called breaches of the
Agreement be rectified, failing which the Agreement would be terminated; 445
• On 23 December 2013, the Ministry of Economy initiated a “procedure for supervision

of the work of the Privatization Agency”; 446
• On 7 April 2015, the Ministry of Economy changed its position and instructed the
Agency to grant Mr. Obradović 90 days to act in accordance with the terms of the
Agreement. 447 This instruction was effectively a reversal of the position taken by the
Ministry in May 2012 when it found that there was no economic justification for the
termination. The reversal was all the more so surprising taking into account that in
June 2012 BD Agro had repaid the 2010 Loan that was alleged to breach Article 5.3.4;
• In a meeting held on 23 April 2015, members of the Agency’s Commission of Control

repeatedly recognized that the pledge should have been released on full payment of
the purchase price. The recording of the meeting also evidences the Commission’s
concern that Mr. Obradović may freely dispose of the shares once the price was paid
and the pledge lifted:
“Female voice 2: […] This is the first and the second is now the relation between
the agreement and the proposal of a decision regarding these… pledge against
shares, because, in accordance with the agreement, the pledge should be
deleted, practically, when [Mr. Obradović] pays the purchase price which [he] did
pay. On the other hand we have an uncertainty – what will [Mr. Obradović] do
with the entire property since [Mr. Obradović] would then be free to dispose of
444 Mr. Markićević testified that Ms. Julijana Vučković who was then the head of the Center for Control of
Performance of Agreements at the Agency, told him that the Agency’s staff had been asked to “forget”
about the legal opinion. Markićević WS III, §83. Although this statement is hearsay, finds support in the way
the Agency subsequently acted.
445 Rej., Appendix I.
446 Exh. CE-206, Decision of the Ministry of Economy, 23 December 2013.
447 Exh. CE-328, 2001 Law on Privatization Agency.
177
[his] shares. In that case there is no necessity in providing this term or anything,
because [Mr. Obradović] will do as [he] wants.
[…]
Julijana Vučković: Well because … So, the agreement prescribes that the pledge
is deleted once [Mr. Obradović] pays the purchase price, and not when [he] fulfils
its obligations.
[…]
Julijana Vučković: […] if the Agency was to render a decision on deletion of

pledge against shares to [Mr. Obradović] registered to his benefit,
[Mr. Obradović] would be free to dispose of them, which would be certain bearing
in mind [Mr. Obradović’s] request for assignment of the agreement. If the
disposal of shares is permitted, and [Mr. Obradović] is, I repeat, entitled to this
in accordance with the agreement, generally the Agency would no longer be in
a contractual relation with someone and you would no longer be able to take
measures against the contracting party, when the legal ground had generally
ceased with it, and [Mr. Obradović] would be free to dispose of its shares.
[…]
Julijana Vučković: That is right, [Mr. Obradović] violated one of the provisions of
the agreement; and the release of the pledge is not tied to the fulfilment of
contractual obligations, rather it is tied only to the payment of the purchase price,
which was clearly done carelessly in the agreement. Now, the new law rectifies
this somewhat and it prescribes that the certificate on deletion of the pledge and
fulfilment of contractual obligations is issued once all obligations are fulfilled, and
not only payment of the price. And that is it and we are now between a rock and
a hard place because on the one hand we have an obligation in accordance with
the agreement, and on the other hand the consequences of this is clear to
you.” 448
• Members of the Commission also observed that, despite the understanding that the
Agency was contractually bound to lift the pledge, they would not do so, thereby
compelling Mr. Obradović into suing them:
“Saša Novaković: And the agreement on purchase of capital, it stated that

[Mr. Obradović] can dispose of the shares, right? Freely?
Female voice 2: That it can once it had paid the purchase price. Which it did. But
if we were to decide like this, at least in my opinion, I would not be inclined to;
although I have a problem with the provision of the agreement such as it is, if we
were now to release this pledge [Mr. Obradović] would be free to dispose of the
448Exh. CE-767, Audio recording from meeting of the Commission for Control, 23 April 2015; Exh. CE-768,
Transcript of the audio recording from meeting of the Commission for Control, 23 April 2015, pp. 4, 6, 11
(emphasis added).
178
shares freely, but then it is a problem, so I would rather advocate that we
postpone deletion of pledge until execution, that is until expiry of this deadline
until which [Mr. Obradović] had not fulfilled [his] contractual obligations we have
ordered [him] to fulfil, that is, that is not us, but the minister ordered it. And we
will confirm such decision [laugh].
[…]
Saša Novaković: All right then, we can decide not to give [the pledge release] to
[Mr. Obradović] and then we are forcing him […] into suing us. This is…may the
court rule.” 449
• At a subsequent meeting on 19 June 2015, the Commission discussed a request

received from Mr. Obradović’s attorney to release the pledge. It stated that it has
debated this issue previously, and expressed relief that it would not have to decide the
issue as the attorney had not provided a valid power-of-attorney:
“Julijana Vučković: […] I also have to mention that we received, on Wednesday,

a new request from [Mr. Obradović’s] attorney in which he requests from the
Agency, in accordance with its contractual obligations, to issue a confirmation of
release of pledge against shares, because [he] completed the payment of the
purchase price.
Let me remind you, we have discussed on this request the previous time we
gave that additional deadline, when it was said that, practically, if we give this
confirmation to release the pledge from shares, he will have absolute freedom
to further sell its shares, whereby it did not fulfil obligations and we cannot
request fulfilment of these obligations. So we stated and rendered decision that
we will decide on this issue after rendering the final decision on fulfilment of these
obligations. Fortunately, the attorney did not submit a valid power of attorney, so
we will reply that we do not know who authorized him, and so forth… I am hoping
that by that time we will have an idea of what the buyer fulfilled and what it did
not.” 450
• The recordings of the 23 April 2015 and of the 19 June 2015 meetings show that the
Agency’s Commission for Control deliberately chose not to release the pledge on the
BD Agro shares despite knowing that were obligated to do so.
• On 28 September 2015, four years after the last instalment of the purchase price had
been paid, and several years after the Agency’s own determination that the pledge
449 Exh. CE-767, Audio recording from meeting of the Commission for Control, 23 April 2015; Exh. CE-768,
Transcript of the audio recording from meeting of the Commission for Control, 23 April 2015, pp. 10-11.
450 Exh. CE-770, Transcript of the audio recording from meeting of the Commission for Control, 19 June
2015, p. 4; Audio recording from meeting of the Commission for Control, 19 June 2015, CE-771.
179
should have been released on full payment of the purchase price, the Agency’s
Commission for Control decided to terminate the Agreement based on an alleged
violation of Article 5.3.4 alone, 451 which was done on that date and was followed by
the seizure of the shares. 452
621. To the Tribunal, the termination of the Agreement considered in the context of the Agency’s
conduct just described is undoubtedly unlawful.
622. As the Agreement could not be terminated for breach of Article 5.3.4, there is no reason to
review the Claimants’ arguments that termination of the Agreement was disproportionate
and declared in bad faith.
623. As the termination of the Agreement was unlawful, the seizure of the Beneficially Owned
Shares, which was the direct consequence of the termination and was carried out in the
exercise of sovereign powers, was wrongful as well and meets the threshold for finding a
breach of Article 6 of the Treaty.
b. Expropriation of the Beneficially Owned Shares
624. The Claimants contend that Serbia’s termination of the Privatization Agreement and the
seizure of the Beneficially Owned Shares are a “textbook” case of direct expropriation as
they deprived the Claimants of both the legal title and the economic enjoyment of the
shares, 453 which the Respondent disputes on multiple counts. Even if the Tribunal were to
sustain these claims, no additional damages would be payable to the Claimants in addition
to those due for the breach of FET, which resulted in the investors being fully deprived of
their investment. Therefore, for reasons of judicial economy, the Tribunal will dispense with
addressing this claim.
451 Exh. CE-117, Minutes of the Session of the Commission, 28 September 2015, p. 4.
452 Exh. CE-50, Notice of Termination, p. 3.
453 Reply, §§164 et seq.
180
D. General Exception
625. The Claimants submit that the General Exception under Article 18(1) of the Canada-Serbia
BIT is inapplicable in the present case. 454 Serbia has simply failed to prove its position that
the Agency’s conduct was either “designed” or “necessary” to secure compliance with Article
41a(1)(3) of the Law on Privatization. 455 On the contrary, it is clear that the Agency’s conduct
was unlawful under Serbian law and unjustified. 456
626. In the alternative, the Claimants argue that the Agency’s conduct was a “disguised
restriction” on the Claimants’ investment. 457 The reasons given for the Agency’s conduct
were only “pretext” and “plainly not genuine.” 458
627. In the event that the Tribunal concludes that the Agency’s conduct was not commercial and
can be attributed to the Respondent, the Respondent invokes the General Exception under
Article 18(1) of the Canada-Serbia BIT. 459 In particular, Serbia insists that the termination of
the Agreement, the refusal to release the pledge over the shares, and the refusal to consent
to the assignment of the Agreement were measures necessary to ensure compliance with
Serbian law, i.e. Article 41a(1)(3) of the Law on Privatization, thereby falling within the ambit
of Article 18(1)(a)(ii) of the Treaty. 460
628. The Respondent takes issue with the Claimants’ position that the measures in question, in
order to qualify for the General Exception, must be “designed” and “necessary” to ensure
compliance with domestic law. According to Serbia, all that is needed is that the measures
be “capable” of achieving the relevant goal, which they clearly were in this case. 461
454 Reply, §§1050-1063.

455 Reply, §1055, referring to Exh. CLA-113, Korea - Various Measures on Beef (WTO Appellate Body
Report), §157.
456 Reply, §§1056-1059.
457 Reply, §§1060-1062.
458 Reply, §1062.
459 C-Mem., §§624-630; Rej., §§1155-1166.
460 C-Mem., §627.
461 Rej., §1158, referring, in particular, to Exh. RLA-143, Indonesia –Measures Concerning the Importation
of Chicken Meat and Chicken Products (WTO Panel Report), §7.248.
181
629. The Respondent disputes the Claimants’ contention that the Agency’s conduct represented
a “disguised restriction” on the Claimants’ investment. 462 As already explained, the Agency’s
actions were in accordance with the Privatization Agreement and Serbian law.
3. Analysis
630. Article 18(1) of the Serbia-Canada BIT provides:
“1. For the purpose of this Agreement:

(a) a Party may adopt or enforce a measure necessary:
(i) to protect human, animal or plant life or health,
(ii) to ensure compliance with domestic law that is not inconsistent with this Agreement, or
(i) applied in a manner that constitutes arbitrary or unjustifiable discrimination between
investments or between investors, or
(ii) a disguised restriction on international trade or investment.”
631. For Article 18(1) to apply in this case, Serbia must establish that the seizure of the
Beneficially Owned Shares was “necessary” to comply with Article 41(a)(3) of the
Privatization Law. It has failed to do so. Quite to the contrary, as observed above, the seizure
of the Shares was contrary to the terms of the Privatization Agreement and Serbian law. In
the circumstances, Serbia cannot rely on Article 18(1) of the Canada-Serbia BIT to excuse
its conduct.
E. Conclusion on Liability
632. For the reasons mentioned above, the Tribunal concludes that Serbia breached Article 6(1)
of the Canada-Serbia BIT.
VIII. DAMAGES
633. The Tribunal having held that Serbia breached Article 6(1) of the Canada-Serbia BIT, turns
to examining the damages payable for this breach.
A. Claimants' Position
462 Rej., §1155.
182
1. Causation
634. The Claimants submit that, but for Serbia’s unlawful conduct, “BD Agro would have
implemented the […] reorganization plan and continued its operations […]” and that “Serbia
destroyed the agreement between BD Agro and its creditors and caused a collapse of the
company.” 463 The Claimants also state that the loss of Mr. Rand’s financial support was key
to the collapse. 464
635. The Claimants reject Serbia’s allegations that BD Agro’s bankruptcy was caused by
Mr. Markićević’s failure to comply with the decision of the Commercial Court ordering BD
Agro to make certain amendments to the amended pre-pack reorganization plan. They
contend that Mr. Markićević was under an obligation to seek the approval of the Privatization
Agency before submitting a new version of the pre-pack reorganization plan, and that such
approval was not forthcoming. They further argue that the amended pre-pack reorganization
plan envisaged additional financing from Mr. Rand, who was no longer willing to provide
such financing. Mr. Markićević therefore could not submit a new version of the pre-pack
reorganization plan without obtaining information from the Privatization Agency as to how it
intended to replace the funds that were to be provided by Mr. Rand.
2. Methodology
a. Dr. Hern’s valuation
636. The Claimants claim full reparation for Serbia’s breaches of the Canada-Serbia BIT, i.e. Mr.
Rand’s share of the fair market value of BD Agro at the time of the seizure of the Beneficially
Owned Shares on 21 October 2015 plus interest. 465
637. For determining the fair market value of BD Agro on 21 October 2015, the Claimants rely
on the Expert Report of Dr. Hern. Dr. Hern divides BD Agro’s assets into two categories: (i)
core assets required for BD Agro’s dairy production business, such as agricultural land, farm
buildings, equipment, herd and other current assets; and (ii) non-core assets, such as BD
Agro’s commercial and industrial land in Dobanovci. To value (i), he uses a combination of
463 Reply, §1291.

464 Reply, §§1292-1293.
465 Reply, §§1296-1297.
183
the Discount Cash Flow (“DCF”) and Ajusted Book Value methods 466 and to value (ii), he
only uses the second method, 467 adjusting the value of BD Agro’s assets reported in its 2015
financial statements to their fair market value based on contemporaneous market evidence.
Dr. Hern’s valuation of core and non-core assets of BD Agro’s amounts to EUR 121.2 million
(pre-tax). Subtracting liabilities, the total equity value of BD Agro as of 21 October 2015 was
EUR 78.2 million.
638. To calculate the value of Mr. Rand’s individual interest in BD Agro’s equity, the Claimants
use the upper bound valuations provided by Dr. Hern, resulting in an equity value of EUR
81 million at the valuation date. For the Claimants, Mr. Rand’s interest in the Beneficially
Owned Shares is indirect, deriving from his shareholding in Sembi. Therefore, Mr. Rand’s
share in the value of the Beneficially Owned Shares is equal to his share in the value of
Sembi. Together with interest to 27 September 2021 at the Serbian default interest rate, the
value of Mr. Rand’s indirect interest in BD Agro’s equity (post-tax) equals to EUR 87.5
million. 468
639. In the course of his analysis, Dr. Hern divides BD Agro’s land, i.e. its non-core assets into
three categories: (i) Construction Land in Zones A, B and C in Dobanovci (the “Construction
Land”); (ii) additional construction land in Dobanovci and Bečmen (the “Other Construction
Land”); and (iii) agricultural land in Ašanja, Deč, Ugrinovci and Dobanovci (the “Agricultural
Land”).
640. The Claimants stress that Dr. Hern’s valuations of BD Agro’s land resonate with the three
contemporaneous valuations carried out between December 2014 and February 2016,
according to which BD Agro was valued between EUR 56 million and EUR 71 million: 469
i. The Mrgud Valuation of December 2014: Mr. Mrgud’s valuation of BD

Agro as of 1 August 2014 was submitted to the Belgrade Commercial
Court with the amended pre-pack reorganization plan on 6 March 2015
466 See, for instance, Opening Presentation of of the Claimants’ expert, Dr. Hern, p.10 (“I value the farm at
[…] using discounted cash-flow (DCF) methodology. I also use an Adjusted Book Value approach.”).
467 See, for instance, Opening Presentation of the Claimants’ expert, Dr. Hern, p.7 (“I value Construction
Land in Zone A, B and C using Adjusted Book Valuation method i.e. adjusting the book value of assets to
their fair market value based on market evidence.”).
468 C-PHB 1, §353(f).
469 Reply, §§1298 and 1300.
184
(“Mrgud Valuation”). 470 It appraises the value of the Construction Land.
Taking the value of land calculated by Mr. Mrgud, the equity value of BD
Agro, say the Claimants, was more than EUR 71 million. The Mrgud
Valuation also finds support in the report of the Claimants’ real estate
valuation expert, Mr. Krzysztof Grzesik, who independently reviewed
evidence from (i) comparable transactions; (ii) contemporaneous
valuations by other valuators; (iii) contemporaneous valuations of tax
authorities; and (iv) valuations prepared by Dr. Hern and Mr. Cowan, to
value BD Agro’s commercial and industrial land;
ii. The First Confineks Valuation of 5 December 2015: This valuation of BD

Agro on 31 December 2014 (the “First Confineks Valuation”) 471 was
prepared at the behest of the Privatization Agency’s representative
Ms. Radmila Knežević, who was responsible for administering BD Agro
after the seizure of the Beneficially Owned Shares. BD Agro’s fair market
value, according to this valuation, calculated as the total value of its
assets less the total value of its liabilities as of 31 December 2014, was
EUR 57.2 million;
iii. The Second Confineks Valuation of 4 February 2016: Confineks was

asked to update the First Confineks Valuation as of 31 December 2015.
It did so on 4 February 2016 (the “Second Confineks Valuation”).
According to this valuation, BD Agro’s fair market value, calculated as the
total value of its assets less the total value of its liabilities as of
31 December 2015, was EUR 56.3 million. 472
641. The Claimants point out that the First and Second Confineks Valuations were accepted by
Serbia because their preparation was directed by the Privatization Agency and they were
used to draw up BD Agro’s financial statements for 2015 and the following years. In addition,
Ms. Knežević, who administered BD Agro for the Agency after the seizure, expressly relied
470 Exh. CE-175, Report on the valuation of the market value of construction land in the BD Agro complex
Zones A, B and C in the town of Dobanovci, December 2014.

471 Exh. CE-142, Report on the valuation of assets, liabilities and capital of BD Agro Dobanovci, December
2015.
472 Exh. CE-172, Report on the valuation of assets, liabilities and capital of BD Agro Dobanovci, January
2016.
185
on the Second Confineks Valuation in her letter to the Ministry of Economy of 17 February
2016, showing that the Agency agreed with that valuation. Finally, when BD Agro submitted
its 2016 pre-pack reorganization plan under the control of the Privatization Agency, the
Agency once again relied on the First Confineks Valuation to value BD Agro’s “assets,
liabilities and capital.”
642. The Claimants recognize that there were other contemporaneous valuations of BD Agro,
but none of them were endorsed by the Agency as was just described. For the Claimants,
the valuation prepared by Jones Lang LaSalle d.o.o. (“JLL”) in February 2015 (the “JLL
Valuation”) on which Serbia relies is “fundamentally flawed.” For instance, that valuation
uses a price for BD Agro’s land of 2 EUR/m2 for the construction land in Zone A and 1.5
EUR/m2 for the construction land in Zones B and C, which figures include a 50% discount.
However, say the Claimants, there is no “evidence from contemporaneous transactions that
would justify a valuation of BD Agro’s construction land as low as that presented in the [JLL
Valuation].” 473 Mr. Grzesik also concludes that the JLL Valuation does not provide any proof
for either its base price or the arbitrary 50% discount it applies to it. 474 The JLL Valuation
arrives at the lowest value of BD Agro’s land amongst all the contemporaneous reports
mentioned by Serbia.
b. Critique of Mr. Cowan’s Valuations
643. Dr. Hern criticizes the different valuation approaches taken by Serbia’s expert Mr. Cowan
on the following counts: 475
i. Mr. Cowan’s “maximum valuation” is flawed because it applies downward

adjustments to the value of assets mentioned in the Second Confineks
Report to reflect a distressed sale of assets in his “bankruptcy scenario.”
This approach is entirely inappropriate as fair market value, by definition,
excludes a distressed sale. Further, as of the expropriation date, BD Agro
was a going concern and not a bankrupt company. In any event, say the
Claimants, “the [bankruptcy] sale of BD Agro was conducted in a non-
473 Hern ER II, §103.

474 Grzesik ER, §§13.5-13.6.
475 Hern ER II, §§166, 170-203.
186
transparent and flawed manner that in no way could have led to BD Agro
being sold for its true market value”; 476
ii. Mr. Cowan’s “alternative” valuations do not reflect the fair market value of
BD Agro’s equity either. 477 Mr. Cowan’s valuation of BD Agro based on
the JLL Valuation must be dismissed as it does not refer to any relevant
evidence to support its conclusions on the value of BD Agro. The stock
market valuation, another alternative used by Mr. Cowan, deserves to be
dismissed as well as the Serbian stock market is highly illiquid and any
share trading information has to be treated with caution. Moreover, the
share price to which Mr. Cowan refers from the 2015 accounts relates to
the last trade of BD Agro’s stock which occurred in 2012. It does not,
therefore, accurately reflect the situation of the business on the date of
expropriation. 478
644. The Claimants and Dr. Hern also dispute the new valuations advanced by Mr. Cowan in
Serbia’s Rejoinder, not only because they disagree with the land valuations on which they
are based, but also because Mr. Cowan improperly lowers BD Agro’s valuation.
3. Size of the Construction Land
645. The Claimants assert that BD Agro’s most valuable asset was its land. In her first report, the
Respondent’s real estate expert Ms. Ilić stated that the size of the Construction Land was
279 hectares, with which Dr. Hern agrees. However, on instruction, she reduced this surface
to 169 hectares in her second report. For the Claimants, this reduction cannot be sustained
for several reasons:
i. The biggest part of the land area that was excluded represents land that
was subject to a court dispute with [ZZ] Buducnost Dobanovci. The claim
in that dispute was filed almost three years after the valuation date and it
was rejected by the court on 21 December 2018. Therefore, this land
should be considered in the valuation, which is further supported by the
476 Reply, §1389.

477 Hern ER II, §205.
478 Hern ER II, §§207-219.
187
fact that, while excluded in the first bankruptcy sale, the bankruptcy
trustee later included this land in the second sale that took place on
27 January 2021;
ii. No land should be excluded from BD Agro’s valuation based on the court
dispute between BD Agro and Serbia related to the land swapped
between Serbia’s Ministry of Agriculture and BD Agro pursuant to the
“Agreement on exchange of land between the Ministry of Agriculture,
Forestry and Water Management and BD Agro” of 4 January 2010 (the
“Land Swap Agreement”). 479 Court proceedings related to the land swap
agreement are still pending;
iii. No land should be excluded from BD Agro’s valuation based on the court
dispute which Inter Kop Sabac initiated on 31 January 2018 in respect of
the “Real Estate Purchase Agreement” of 30 April 2010 between the two
entities (the “Real Estate Agreement”). 480 Like the dispute initiated by [ZZ]
Buducnost Dobanovci, this dispute too commenced several years after
the valuation date. Further, the Real Estate Agreement provided that the
land would be paid by way of services that Inter Kop Sabac was to provide
to BD Agro. 481 The company did not provide any such services. It thus did
not acquire any rights to BD Agro’s land. This conclusion, say the
Claimants, is confirmed by the fact that Inter Kop Sabac never registered
its alleged ownership over the disputed land. In fact, it even voted in favor
of the pre-pack reorganization plan that includes the disputed land as an
asset of BD Agro;
iv. Land sold to Eko Elektrofrigo pursuant to the “Real Estate Purchase
Agreement” of 27 October 2008 and its Annex of 10 April 2010 should not
be excluded as doing so would effectively amount to double-counting.
479 Exh. RE-396, Agreement on exchange of land between the Ministry of Agriculture, Forestry and Water
Management and BD Agro, 4 January 2010.
480 Exh. RE-589, Real Estate Purchase Agreement between BD Agro and Inter kop Sabac, 30 April 2010.
481 Exh. RE-589, Real Estate Purchase Agreement between BD Agro and Inter kop Sabac, 30 April 2010,
Art. 3.
188
Indeed, Dr. Hern already excluded this land from the calculation of BD
Agro’s Construction Land, and there is no reason to exclude it again;
v. No land should be excluded from BD Agro’s valuation based on alleged

restitution claims made in respect of certain land plots in Novi Bečej, as
the Serbian Restitution Agency expressly confirmed that no restitution
was claimed with respect to BD Agro’s land. In any event, even if there
were any such claims, they could not lead to a restitution of BD Agro’s
land because, being a private entity, it was not obliged to restitute
property;
vi. No land should be excluded from BD Agro’s valuation based on the

“Purchase Agreement between BD Agro DB Dobanovci and Hypo Park
Dobanovci” of 11 June 2008 (the “Hypo Park Agreement”). BD Agro
owned the excluded land on the valuation date, which is confirmed by Ms.
Ilić’s calculation of the total area of BD Agro’s land contained in her first
report;
vii. Serbia has not furnished any good reasons for excluding other land
parcels.
646. The Claimants further submit that Serbia’s position is entirely based on the valuation report
prepared by Mr. Bodolo in January 2019 for the purposes of the bankruptcy sale of BD Agro
and a “List of BD Agro’s land which was not sold.” Neither of these documents refer to any
evidence showing that the excluded land was not owned by BD Agro or that its legal status
was at that time controversial, let alone on the valuation date.
4. Price per m2
647. Dr. Hern values the three categories of BD Agro’s land using the following evidence:
i. Construction Land: Dr. Hern analyzes (i) comparable transactions; (ii)

property tax information; (iii) the First and Second Confineks Valuation;
(iv) the Mrgud Valuation; and (v) other contemporaneous valuation
189
reports. 482 On this basis, Dr. Hern values the Construction Land between
EUR 62.9 million and EUR 82.9 million;
ii. The Other Construction Land: Dr. Hern reviews evidence from
comparable transactions and the First and Second Confineks Valuations,
and estimates the value of this land between EUR 1.1 million and EUR
3.4 million; 483
iii. The Agricultural Land: Dr. Hern again relies on data from comparable
transactions and the First and Second Confineks Valuations. Using these
inputs, he values the Agricultural Land between EUR 4 million and 15.5
million. 484
648. The Claimants’ real estate expert Mr. Grzesik largely concurs with Dr. Hern’s analysis. For
the Construction Land, he arrives at the total value of EUR 85.3 million, slightly higher than
the EUR 82.9 million upper range figure calculated by Dr. Hern. For the Other Construction
Land, his figure is EUR 3.6 million, and for the Agricultural Land his estimate is EUR 10
million.
649. Dr. Hern rejects Mr. Cowan’s criticism that BD Agro “encountered difficulties when it tried to
sell the land in the past.” He points out that Mr. Cowan refers to a single example of an
alleged sale of land below market value, i.e. the 2012 sale of agricultural land in Novi Bečej.
However, evidence shows that BD Agro made a profit on the sale. 485 Further, the conversion
rate applied by Mr. Cowan is incorrect. 486 Dr. Hern equally rejects Ms. Ilić’s criticism of his
report. All of the evidence on which he relies is consistent with the broad principles
underpinning the valuation standards, which Ms. Ilić also uses. 487
650. Dr. Hern also disagrees with Serbia and Mr. Cowan’s dismissal of the comparable land
transactions in Batajnica, according to which in 2013 and 2016 Serbia expropriated that land
for EUR 27/m2 (in 2013) and EUR 28/m2 to 37 (in 2016). The Batajnica land plots are
482 Hern ER I, §§62-87.

483 Hern ER I, §§102-103.
484 Hern ER I, §109.
485 Hern ER II, §119.
486 Reply, §§1369 et seq.
487 Hern ER III, §§31 et seq.
190
comparable to land plots in the Construction Land because they “are a similar distance from
Belgrade and the Belgrade airport; are close to a railway; have a similar intended use; have
a similar development potential; and have not been developed yet and are still used as
arable land.” 488
5. 30% Discount
651. Dr. Hern also rejects Serbia and Ms. Ilić’s approach in making downward adjustments for
the differences in size between the comparable transactions used by Ms. Ilić and BD Agro’s
land, as such discounts would contravene the purpose of determining fair market value.
According to him, if a higher value can be extracted by selling a large land plot in a number
of smaller pieces, that value should be reflected in the fair market valuation. There is no
basis to apply a size discount, given that the land does not need to be sold as a whole. 489
The Claimants also dismiss the other differences between Ms. Ilić’s comparable
transactions and BD Agro’s land to justify the 30% discount that she applies.
6. Bankruptcy sale discount
652. In Dr. Hern’s opinion, Mr. Cowan is wrong in applying a 50% bankruptcy sale discount. BD
Agro was not in bankruptcy on the valuation date of 21 October 2015. It was a going
concern, and had initiated reorganization proceedings, which culminated in the submission
and approval of the “credible and feasible” amended pre-pack reorganization plan. In
addition, such a discount would be contrary to the definition of fair market value applicable
in public international law.
7. Liabilities
653. Dr. Hern disagrees with Mr. Cowan’s deduction of certain liabilities in BD Agro’s valuation.
First, Mr. Cowan overstates the BD Agro’s liabilities. Second, he applies an unjustified
conversion fee. Third, he deducts EUR 200,000 for pending court proceedings, without
giving any reason. Fourth, he overstates the applicable capital gains tax as he did not make
necessary deductions. In fact, Mr. Cowan admits that he had not calculated this tax
correctly. Fifth, Mr. Cowan wrongly includes redundancy payments in BD Agro’s liabilities.
These should not be included as they represent a voluntary program adopted and financed
488 C-PHB 1, §297.

489 Hern ER III, §§40 et seq.
191
by Serbia and thus have no place in a fair market valuation of BD Agro. Finally, Mr. Cowan
inflates the bankruptcy costs by a significant margin of 1,400%.
8. Distress discount
654. Dr. Hern also opines that Mr. Cowan is wrong in applying a 30% distress discount. As
already mentioned, on the valuation date, BD Agro was a going concern and such a discount
is contrary to the definition of fair market.
9. Interest
655. The Claimants argue that pursuant to the preservation of rights clauses in Article 10 of the
Serbia-Cyprus BIT and Article 13(1) of the Qatar-Serbia BIT, which the Canadian Claimants
invoke under the most favored nation clause in Article 5 of the Canada-Serbia BIT, the more
favorable provisions of Serbian law prevail over the Treaties. The Claimants can thus claim
the most favorable statutory interest rate under Serbian law, which is “an annual rate […]
equal [to] the key interest rate of the European Central Bank for main refinancing operations
plus eight percentage points.” They thus claim interest at 6-month average EURIBOR + 2%,
compounded semi-annually.
B. Respondent's position
1. Causation
656. The Respondent points out that the Claimants are seeking damages on the basis that the
termination of the Privatization Agreement and the transfer of the Beneficially Owned Shares
to the Agency were expropriatory. The Claimants have not stated that they suffered damage
due to Serbia’s other alleged violations of the BITs.
657. Serbia also notes that the Claimants have not expressly alleged that the damages they claim
were caused by the termination. Instead, they connect their damages claim with the
bankruptcy of BD Agro, 490 arguing that their shareholding lost all value due to the termination
of the Privatization Agreement and seizure of BD Agro’s shares which prevented the
realization of the amended pre-pack reorganization plan and forced BD Agro into
bankruptcy. However, the termination of the Privatization Agreement and transfer of the
shares did not prevent the adoption of the pre-pack plan or the eventual bankruptcy of BD
490 Rej., §§1418 and 1421.
192
Agro. Indeed, the bankruptcy was caused by “long-term continuous insolvency of BD Agro”
and Mr. Markićević’s failures to follow court orders, which led to the initiation of the
bankruptcy proceedings. In any event, the Claimants have failed to sufficiently establish that
the reorganization plan would have worked. 491
2. Methodology
a. Mr. Cowan’s Valuation
658. Serbia relies on the reports of its expert Mr. Cowan to value BD Agro and to challenge Dr.
Hern’s valuation. Mr. Cowan values BD Agro adopting different approaches:
i. An asset based approach based on the Second Confineks Valuation, to

which he applies certain discounts and adjusts the book values to reflect
the bankruptcy scenario. He estimates a “maximum” value of EUR 4.4
million. Since the Claimants had 79.77% shareholding in BD Agro, this
means that the maximum value of their claim would be EUR 3.5 million plus
pre-award interest;
ii. A valuation based on the value of BD Agro’s land, taking into account the
JLL valuation. The latter was prepared for the purposes of obtaining a bank
loan, “which implies it reflects the value that the bank could realistically
extract from the land if it had to repossess and sell the business, i.e. if the
business was in a bankruptcy situation.” 492 JLL valued the land at
EUR 4.7 million. On the basis of JLL Valuation, BD Agro’s value would be
EUR nil, since the liabilities would significantly exceed the assets;
iii. An alternative valuation based on stock market data amounting to

EUR 4.4 million;
iv. An alternative valuation based on the auction of BD Agro’s assets in the

bankruptcy proceedings, which yields a value of zero.
659. In light of Serbia’s later determination that over 40% of BD Agro’s land was either not owned
by it or that its ownership was in dispute and should, therefore, be excluded from the
491 Rej., §1422.

492 Cowan ER I, §8.23.
193
valuation, Mr. Cowan was asked to prepare further alternative valuations, taking into
account the expert report of Serbia’s real estate expert, Ms. Ilić, as well as the report of
Mr. Badolo prepared in the course of the bankruptcy proceedings. Accordingly, Mr. Cowan
provided the following alternative valuations:
i. A valuation based on the value of all BD Agro’s land under the bankruptcy
scenario, applying a bankruptcy sales discount of 50% “to represent the
impact on value of undertaking a sales process of a distressed business”
and including bankruptcy costs at 20% of BD Agro's discounted asset
value. On this basis, Mr. Cowan values BD Agro at nil;
ii. A valuation based on the value of some of BD Agro’s land, taking into
account the findings of the reports of Mr. Badolo and Ms. Ilić concerning
the ownership over BD Agro’s land and accounting thus for only 164 ha,
under the bankruptcy scenario, which leads Mr. Cowan to a nil value;
iii. A valuation based on the value of all BD Agro’s land, under the going
concern scenario, applying an asset-based method, making a provisions
for pending court proceedings, and applying a 30% distress discount. On
this basis, Mr. Cowan values BD Agro at EUR 13.8 million;
iv. Two valuations based on the value of some of BD Agro’s land taking into
account the findings in the reports of Mr. Badolo and Ms. Ilić concerning
the ownership over the land, and accounting thus for 164 hectares of land.
In the bankruptcy scenario this results in BD Agro’s valuation being nil
and, in the going concern scenario, EUR 100,000. 493
660. The Respondent clarifies that “although these alternative calculations have been prepared
for the benefit of the Tribunal, its position is that only a bankruptcy scenario taking into
account the valuation of undisputed part of BD Agro’s land is the proper basis for
establishing the fair market value of the company.” 494
493 Rej. §1471 citing Cowan ER II, §2.8.

494 Rej., §1416.
194
b. Critique of Dr. Hern’s valuation
661. Mr. Cowan identifies the following main flaws in Dr. Hern’s approach:
i. Valuing BD Agro as a going concern: Dr. Hern is wrong in valuing BD

Agro as a going concern. Even if the Agency recognized that BD Agro
was a going concern in 2015, what is relevant is whether BD Agro was a
going concern on an objective basis. Objectively, BD Agro was not a
going concern. Indeed, BD Agro had submitted the pre-pack
reorganization plan as far back as November 2014. At the beginning of
2015, Banca Intesa requested opening of bankruptcy proceedings. Thus,
it was clear that BD Agro was unable to continue operations for the
foreseeable future. Moreover, BD Agro’s auditor’s report for 2013
emphasized that the company would not be able to continue operating as
a going concern unless it obtained additional operating capital, which had
not happened. Further, BD Agro’s bank accounts were blocked since 8
March 2013 and remained so until the valuation date;
ii. Applying the DCF method: Dr. Hern valued BD Agro based on the
Claimants’ plans for the future of the business, not as the business stood
on 21 October 2015. He ignored the business’ past performance. His cash
flow projections are thus unrealistic. On the valuation date, BD Agro was
not turning a profit. Neither was it earning any net positive cash flows.
Therefore, BD Agro should have been valued on an asset basis;
iii. Using an incorrect basis for the DCF calculation: Dr. Hern’s DCF
projection is based on a business plan that was similar to two previous
plans (providing for an increase of cows and volume of milk produced)
which did not succeed when implemented and turned out not to be
profitable. Dr. Hern has not explained why the plan would be successful
the third time;
iv. Applying an incorrect discount rate: Dr. Hern used an unreasonable

discount rate that does not take into account the risk of investing in a small
business in financial difficulty, with the result that he inflated BD Agro’s
value.
195
662. Serbia submits that there were eight valuations of BD Agro’s assets or land in the period
between November 2014 and March 2017, which varied considerably. For example, the
value of the Construction Land varied between EUR 4.7 million and EUR 87.1 million. The
Claimants and Dr. Hern have relied on the highest value valuation reports and in particular
have not mentioned the JLL Valuation that valued the Construction Land in February 2015
at the request of Banca Intesa at EUR 4.7 million. By contrast, the valuation prepared by
Mr. Mrgud, used by the Claimants, assessed the value of this land at EUR 87.1 million on
31 August 2014.
663. Serbia denies that it is “estopped” from contesting the First and Second Confineks
Valuations as the Claimants suggest. The Privatization Agency is a separate legal entity
from Respondent; its conduct cannot bind Serbia. Moreover, it would be absurd to consider
a party bound by a third party’s valuation merely because it commissioned the valuation.
Further, for the Respondent, the alleged acceptance of a financial report at a shareholders’
meeting cannot be viewed as an acceptance of all documents on which that financial report
was based.
664. Serbia contends that, in his valuation, Dr. Hern has included land that should be excluded
due to “contentious ownership”:
i. Although the land claim made by ZZ Buducnost Dobanovci was denied,

it was not decided on its merits. Nothing prevents the company from
bringing a new claim to establish its ownership rights;
ii. The Land Swap Agreement was found null and void by the Commercial
Court in Belgrade on 14 September 2017. This decision was final. As a
result, says Serbia “BD Agro will almost certainly have to return the land
it received from Serbia in the exchange to the land that it did not own and
will not receive compensation in return.” 495 This land should thus not be
considered for valuation purposes;
iii. In connection with the land claimed by Inter Kop Sabac, Serbia points out
that the Real Estate Agreement was concluded before the valuation date,
495 R-Submission on Quantum, §32.
196
which “represents sufficient ground for this land to be excluded from BD
Agro’s valuation.” 496 It also notes that Inter Kop Sabac and BD Agro
signed a “Declaration on set-off” and an “open item statement” in respect
of the former’s services to BD Agro in exchange for the latter’s land.
Finally, even though Inter Kop did not register the disputed land in its
name, it did continuously pay the related property taxes;
iv. Certain land plots in Novi Bečej should be excluded because there was a
possibility that restitution claims could be made in respect of those plots.
Mr. Rand did not raise this issue in BD Agro’s bankruptcy proceedings;
v. Land sold to Hypo Park must be excluded as the Hypo Park Agreement
predates the valuation date;
vi. There are good reasons for the exclusion of other land parcels, including
“the land distributed to the employees of BD Agro prior to the privatization,
land labeled as public roads and the land expropriated in 1991” 497 as well
as “the land conceded to the Municipality of Zemun and sold to
Galenika.” 498.
4. Price per m2
665. Serbia notes that the “major element” in the Claimants’ valuation is the value of the
Construction Land, which Dr. Hern assumes could be sold at high prices. This assumption
is unfounded:
i. The actual sales of BD Agro’s land were for amounts much lower than the
land’s estimated value. For example, in one transaction in 2012, land in
Novi Becej was sold at 55% of its estimated value, i.e. at EUR 7.4 million
out of an estimated EUR 13.5 million;
ii. Dr. Hern assumes too low a fee to convert of agricultural land to
Construction Land. While he assumes a fee of 50% of the value of
agricultural land, in fact the fee could be as high as 20% of the market

497 R-PHB 2, §98.
498 R-PHB 2, §98.
197
value for Construction Land. This alone could increase the conversion fee
to between EUR 7.7 million to EUR 10.6 million, in contrast to Dr. Hern’s
estimate of EUR 1.2 million to EUR 3.8 million. In addition, the conversion
could take years.
666. Serbia insists that the Batajnica transactions on which the Claimants rely are not an
appropriate comparator. First, there is no evidence that those transactions were actual
expropriations. Similarly, there is no evidence of the dates of the transactions or where a
date is mentioned, it is in 2016, i.e. after the valuation date, rendering those valuations
irrelevant. Further, the assessments on which the Claimants rely are based on recent
decisions of the tax authorities, which do not reflect a market valuation according to
international standards. Still further, the Batajnica land and the Construction Land are not
comparable. For instance, the former is close to a railway while the latter is not, the former
has direct access to roads while the latter does not. The Batajnica land was intended for
development of a major infrastructure project supported by the EU while the Construction
Land was to be developed for commercial purposes as a private initiative.
5. 30% Discount
667. Serbia contends that Ms. Ilić correctly applies a 30% discount to her estimated price of the
Construction Land based on her experience with the Serbian real estate market. It stresses
that the discount is also justified given the differences between the comparable transactions
used by Ms. Ilić (such as size, the existence of infrastructure and access roads) and BD
Agro’s land. Mr. Cowan then imports this discounted price into his valuation of BD Agro.
668. In his bankruptcy scenario, Mr. Cowan applies a bankruptcy sales discount of 50%, stating
that “it is typical to apply a discount to represent the impact on value of undertaking a sales
process of a distressed business.” 499 He adds that the choice of 50% is supported by the
actual discount applied to BD Agro’s assets in the bankruptcy sale in 2019 as well as by the
amended pre-pack reorganization plan.
499 Cowan ER II, §2.5.2.
198
7. Liabilities
669. Mr. Cowan submits that to ascertain BD Agro’s fair market value, liabilities must be deducted
from assets. He thus first deducts, relying on the Second Confineks Valuation and his own
assessment, total estimated liabilities, excluding deferred tax liabilities, of EUR 42.2m.
Second, he then deducts, based on Ms. Ilić’s expert report, a conversion fee of EUR 1.8m.
Third, he effects deductions for court expenses of EUR 200,000, capital gains tax of EUR
5.7m, and redundancy payments of EUR 700,000. Finally, in the bankruptcy scenario, he
deducts bankruptcy costs.
670. Mr. Cowan also provides for a distress discount. He and Serbia reject the Claimants’
objection about this discount as fair market value means that both buyer and seller are
reasonably informed about the characteristics of the asset being sold. A willing buyer would
thus know that BD Agro was going into bankruptcy.
9. Interest
671. Serbia disputes the Claimants’ position that interest is to be calculated according to Serbian
law, as the relevant treaty provisions only require the Tribunal to apply international law.
Further and in any event, the MFN clause in the Canada-Serbia BIT is limited in scope and
does not allow the importation of additional substantive standards like a preservation of
rights clause from other BITs. Finally, preservation of rights clauses do not extend to
compensation for treaty violations: the Claimants could ask for the 8% interest rate pursuant
to Serbian law for a lawful expropriation, but cannot do so in cases of unlawful expropriation.
Serbia contends that the appropriate interest rate would be a flat interbank rate
(LIBOR/EURIBOR). The 2% increase which the Claimants’ request should be rejected
“considering […] revelations about BD Agro's mismanagement by Mr. Obradovic.” 500
C. Analysis
672. It is undisputed – and rightly so – that, in case of a breach, Serbia must fully repair the harm
caused to the Claimants. 501 As the Tribunal has reached the conclusion that the seizure of
BD Agro’s shares breached Article 6 of the Serbia-Canada BIT, it must now assess
500 Rej., §§1477-1481.

501 Reply, §1296; C-Mem., §764.
199
damages. To this effect, it will first deal with causation ((1) below) and will then assess the
proper valuation methodology ((2) below) and review the different valuation elements on
which the Parties diverge ((3) to (9) below) before reaching its conclusion ((10) below).
1. Causation
673. It is common ground between the Parties that “payment of compensation presupposes a
causal link between a treaty breach and the injury suffered for which compensation is
sought.” 502 Serbia argues that no such link exists because BD Agro’s bankruptcy was not
caused by the Agency’s termination of the Agreement and seizure of the Beneficially Owned
Shares but rather by BD Agro’s “long-term” insolvency and Mr. Markićević’s failure to comply
with the relevant court procedures.
674. To assess the submissions, the Tribunal recalls the facts and chronology as they emerge
from the record:
• On 25 November 2014, BD Agro filed a pre-pack reorganization plan with the

Commercial Court in Belgrade to improve the financial situation of the company. 503
An amended plan was filed on 6 March 2015 (the “Amended pre-pack
reorganization plan”). 504
• On 6 January 2015, Banca Intesa requested the Commercial Court in Belgrade to

open bankruptcy proceedings over BD Agro alleging its permanent insolvency. 505
On 21 January 2015, the Commercial Court accepted Banca Intesa’s request and
initiated preliminary bankruptcy proceedings; 506
• On 25 June 2015, that court approved the amended pre-pack reorganization plan.
The required majority of creditors, including Nova Agrobanka, BD Agro’s largest
502 Reply, §1288; C-Mem. §765, relying on Exh. CLA-24, ILC Articles, Articles on Responsibility of States
for Internationally Wrongful Acts with commentaries, Article 31(2).

503 Exh. CE-85, BD Agro’s submission accompanying the pre-pack reorganization plan, 25 November 2014.
504 Exh. CE-101, BD Agro’s submission to Commercial Court accompanying the pre-pack reorganization
plan, 6 March 2015; Exh. CE-116, Amendment to the pre-pack reorganization plan of BD Agro, 6 March
2015.
505 Exh. CE-109, Decision of the Commercial Court in Belgrade opening bankruptcy proceedings over BD
Agro, 30 August 2016, p. 8. See also Rej., §448.

506 Exh. CE-109, Decision of the Commercial Court in Belgrade opening bankruptcy proceedings over BD
Agro, 30 August 2016, p. 8. See also Rej., §448.
200
creditor at the time, voted in favor of the plan. 507 A minority of creditors, including
Banca Intesa, however, filed appeals to the Commercial Appellate Court in
Belgrade; 508
• On 6 August 2015, since BD Agro’s reorganization was ongoing, the Commercial

Court denied Banca Intesa’s request for opening bankruptcy proceedings over BD
Agro; 509
• On 30 September 2015, the Commercial Appellate Court allowed Banca Intesa’s

appeal, reversed the approval of the amended pre-pack reorganization plan, and
remanded the case to the Commercial Court of Belgrade. 510 In particular, the
Appellate Court stated (i) that it was necessary to verify the data in the amended
plan, as there were substantial differences between BD Agro’s property valuations
in the original and the amended plans and (ii) that BD Agro needed to submit an
extraordinary audit report and an updated amended plan in accordance with that
report;
• On 1 October 2015, the Agency advised BD Agro of the termination of the

Privatization Agreement on 28 September 2015;
• On 7 October 2015, the Commercial Appellate Court revoked the Commercial

Court’s decision of 6 August 2015 denying Banca Intesa’s request for opening
bankruptcy proceedings over BD Agro; 511
507 Exh. CE-39, Court hearing minutes, 25 June 2015.

508 Exh. CE-41, Appeal of the City Administration of the City of Belgrade, Secretariat for Finance, 29 July
2015, CE-40; Appeal of the Tax Administration of the Republic of Serbia dated 29 July 2015; Exh. CE-354,
Appeal of Banca Intesa, 12 August 2015.
BD Agro, 30 August 2016, p. 8.

510 Exh. CE-358, Decision of the Appellate Court, 30 September 2015, p. 1. In addition to accepting Banca
Intesa’s appeal, Commercial Appellate Court also accepted appeals filed by Izoteks, Vihor, City of Belgrade
and Tax Administration. See Exh. CE-358, Decision of the Appellate Court, 30 September 2015, p. 9.
511 Exh. RE-465, Decision of the Commercial Appellate Court, 7 October 2015.
201
• On 16 October 2015, the Commercial Court ordered BD Agro to amend the
reorganization plan in accordance with the decision of the Appellate Court within
512
15 days;
• On 21 October 2015, the Agency seized the Beneficially Owned Shares; 513
• On 26 October 2015, Mr. Markićević on behalf of BD Agro wrote to the Privatization

Agency, seeking instructions on how to proceed with the reorganization process.
He explained that the Commercial Court had ordered BD Agro to act in accordance
with directions of the Appellate Court within 15 days, failing which the Commercial
Court would reject the amended pre-pack reorganization plan. Mr. Markićević
wrote this letter as he then was General Director of BD Agro, the Agency not having
yet appointed a legal representative for the company after the Decision on Transfer
of Capital; 514
• The Agency did not respond within that period;
• On 8 December 2015, as BD Agro had not complied with the court’s order of 16
October 2015, the Commercial Court dismissed BD Agro’s proposal for conducting
bankruptcy proceedings in accordance with the amended plan, 515 which decision
became final on 5 January 2016; 516
• On 30 August 2016, BD Agro was declared bankrupt. 517
675. It is clear from this statement of the facts that Banca Intensa’s request for bankruptcy of BD
Agro, pursuant to which BD Agro was eventually declared bankrupt, 518 resumed because
512 Exh. CE-359, Notice from the Commercial Court in Belgrade, 16 October 2015.
2015.
514 Exh. CE-360, Letter from I. Markićević to the Privatization Agency, 26 October 2015. See also Markićević
WS III, § 120.
515 Exh. CE-361, Decision of the Commercial Court in Belgrade, 8 December 2015, p. 1.
BD Agro, 30 August 2016, p. 9.

BD Agro, 30 August 2016.

BD Agro, 30 August 2016; Exh. RE-467, Print screen from the course of proceedings before Commercial
Court in Belgrade, regarding bankruptcy proceedings no. St. 15/16, 20 January 2020, p. 2.
202
BD Agro’s reorganization failed. The reorganization, which had the requisite support of BD
Agro’s creditors, and which would have revived BD Agro, failed, in turn, because
Mr. Markićević could not proceed without the Agency’s approval, which was not forthcoming.
676. Serbia argues that Mr. Markićević, and hence BD Agro, “was neither obliged to request the
Privatization Agency’s approval, nor was the Privatization Agency authorized to give such
approval.” 519
677. Mr. Markićević sought instructions from the Privatization after the termination of the
Agreement. The question is thus what his powers were during the period in which the
Agreement had been terminated but no new management was in place yet. The answer is
found in Article 47 of the 2014 Law on Privatization, which provides that, after the termination
of a privatization agreement, the management of the privatized company is prevented from
making certain decisions, including, in particular, decisions on the reorganization of the
company and that decisions violating this prohibition are null and void:
“[Paragraphs 1 and 2]
After termination of the agreement on sale of the capital, the management bodies of the
subject of privatization cannot, prior to selection of new management bodies, render the
decisions on the following:
1) decrease or increase of the capital of the company;
2) acquisition or disposal of real estate or the high value property;
3) reorganization of the company;
4) pledging assets, mortgaging, and applying other kinds of property encumbrance;
5) renting or leasing property;
6) settlement with creditors.
The decision rendered contrary to paragraph 3 of this Article shall be null and void.” 520
678. Serbia does not appear to dispute that the matters contained in the amended pre-pack
reorganization fall within the ambit of Article 47 and are thus outside the remit of the
management of the formerly privatized company. Indeed, the amended plan concerned the
reorganization of the company and included provisions on both acquisition of high value
property (new heifers) and disposal of high value property (sale of non-core assets), all items
falling within the ambit of Articles 47(2) and 47(3). In addition, the purpose of the pre-pack
519C-Mem., §203, relying on Markićević WS II, §195.

520Exh. CE-223, Law on Privatization, Official Gazette of the Republic of Serbia no, 83/2014 and 46/2015,
Art. 47.
203
reorganization plan was to reach a settlement with BD Agro’s creditors, which falls within
the scope of Article 47(6).
679. Serbia objects that Article 47 of the 2014 Law on Privatization does not apply in this case
as the decision to commence reorganization, as well as the decision to acquire and dispose
of high value property were taken prior to the termination of the Agreement. Execution of
those decisions, says Serbia, would not fall within the ambit of Article 47. This limitation of
Article 47 does not arise from the legal text. Neither does Serbia offer any support by way
of legal authorities or otherwise. In the Tribunal’s view, the purpose of Article 47 is to restrict
the pre-termination management of the company to the conduct of day to day business until
a new management is in place, preventing it from making any decisions that may materially
impact the business of the newly de-privatized/re-nationalized company. That seems a
perfectly reasonable solution to handle the transition from the old to the new ownership.
Hence, Mr. Markićević, acting for the pre-termination management of BD Agro, had no
choice but to seek instructions in respect of the reorganization from the Privatization Agency.
The fact that the instructions were about amendments to a pre-existing plan as opposed to
a new plan does not appear sufficient to make the rationale underlying Article 47
inapplicable. The Commercial Court had ordered BD Agro to amend the reorganization plan
in accordance with the decision of the Appellate Court, including submitting a new
extraordinary auditor report and adding accounting data. It is not evident that such a revised
reorganization plan would fall within the ambit of BD Agro’s 25 April 2014 (pre-termination)
decision to commence its reorganization. 521
680. The Tribunal recalls that BD Agro was in a distressed situation at the time of the valuation.
It had made no profits for several years, was in bankruptcy proceedings and had submitted
a reorganization plan to overcome its operational and financial issues and restore its
profitability. Its bank accounts were blocked since 8 March 2013. 522 The Tribunal has
accounted for these difficulties in valuing BD Agro (§701).
2. Methodology
681. Both Parties have each relied on experts to value damages, who in turn cite
contemporaneous valuations in support of their conclusions.
521 Exh. RE-468, Decision of BD Agro’s Shareholders Assembly, 25 April 2014.

522 Exh. CE-511, Mr. Bodolo’s Report, 24 January 2019, p. 6.
204
682. The experts agree on the valuation date being 21 October 2015, i.e. the date of seizure of
BD Agro’s shares. The Tribunal concurs as this is indeed the date when the breach was
perpetrated.
683. The Parties also agree to use Dr. Hern’s terminology when valuing BD Agro’s so-called
“core assets” separately from its non-core assets. The Tribunal sees no reason not to follow
this approach.
684. Where the experts differ is whether, on the valuation date, BD Agro’s farm business should
be considered as a going concern and valued on a DCF basis or whether it should be
considered “illiquid” and valued on an asset basis. The Tribunal recalls that, as a general
matter, assets need to qualify as a going concern having a proven track record of profitability
in order to be valued in accordance with the DCF method. 523 In Vivendi, for instance, the
Tribunal observed that “international tribunals have stated that an award based on future
profits is not appropriate unless the relevant enterprise is profitable and has operated for a
sufficient period to establish its performance record.” 524
685. International valuation standards define a going concern as “a business enterprise that is
expected to continue operations for the foreseeable future.” 525 While it is true that BD Agro
was experiencing financial difficulties, on the valuation date, it was not in bankruptcy. Its
Amended pre-pack reorganization plan had been adopted by a majority of creditors,
including a number of companies experienced in the dairy business. 526 By voting in favour
of the reorganization, these companies expressed that they considered that BD Agro’s
business would continue to operate for the foreseeable future. The Agency too appears to
have recognized this fact when it approved BD Agro’s 2015 financial statements. 527 The
Tribunal thus finds that, on the valuation date, BD Agro was a going concern.
523 See for instance, Mohammad Ammar Al-Bahloul v. The Republic of Tajikistan, SCC Case
No. V064/2008, Final Award, 8 June 2010, §§71, 75.
524 Exh. CLA-49, Compañía de Aguas del Aconquija S.A. and Vivendi Universal S.A. v. Argentine Republic,
ICSID Case No. ARB/97/3, Award, 20 August 2007, §8.3.3.

525 Exh. RE-485, IVSC Glossary.
526 Hern ER II, §76.
527 Tr., Hearing on Jurisdiction and Merits, Day 8, 159:24-161:4 (Cowan) (“Mr. Pekař: Would it be fair to say
that the Privatization Agency agreed that BD Agro was a going concern at the end of 2015? Mr. Cowan: I
believe it’s more the preparation of the statements, that’s probably fair to say, yes. I would agree with that.
Mr. Pekař: I don’t understand. I believe that the financial statements of a company need to be approved by
205
686. This being so, BD Agro was making losses. It is not disputed that BD Agro was consistently
loss-making from 2006-2014, i.e. during the years before the valuation date of 21 October
2015. 528
687. In the absence of demonstrated profitability, the Tribunal does not consider it appropriate to
apply the DCF methodology to value BD Agro’s farm business. While investment tribunals
have applied the DCF methodology in the absence of a proven track record of profitability,
they have only done so when there was sufficient evidence of future profitability. In Rusoro
Mining v. Venezuela, for instance, the tribunal observed that the application of the DCF
methodology was appropriate not just for the valuation of going concerns with profitability,
but also for enterprises that were not going concerns, but had detailed business plans,
available financing, records of financial performance, predictability of performance with
other projects, foreseeability of costs, and certainty of the price and sale of their products
and services. 529 The Claimants have produced no evidence on any of these aspects that
would allow the Tribunal to conclude that future profitability is sufficiently certain. In the
circumstances, the Tribunal discards the DCF methodology.
688. It follows that the appropriate valuation methodology to value all of BD Agro’s assets, i.e.
core and non-core assets, is the asset-based methodology.
689. The Parties differ on the size of BD Agro’s land, particularly the size of the Construction
Land.
690. The Tribunal recalls that, at the hearing, Dr. Hern and Mr. Grzesik agreed with Ms. Ilić that
the size of the Construction Land was 279.4 ha. 530 Serbia, however, insists that this figure
the shareholders, is that your understanding? Mr. Cowan: Yes, prepared by management and approved by
the shareholders. Mr. Pekař: If a shareholder does not believe that a company is a going concern, why
would the shareholder approve the financial statements? Mr. Cowan: I agree.”).
528 Cowan ER II, §3.15. See also Expert Presentation of Mr. Cowan, p. 9.
529 Exh. RLA-196, Rusoro Mining Limited v. Bolivarian Republic of Venezuela, ICSID Case No. ARB
(AF)/12/5, Award, 22 August 2016, §759. See also Mohamed Abdel Raouf Bahgat v. Arab Republic of
Egypt (I), PCA Case No. 2012-07, Award, 23 December 2019, §434 referring to Rusoro Mining, and Exh.
CLA-49, Compañía de Aguas del Aconquija S.A. and Vivendi Universal S.A. v. Argentine Republic, ICSID
Case No. ARB/97/3, Award, 20 August 2007, §8.3.3.
530 Mr. Grzesik’s presentation, slide 4; Dr. Hern’s presentation, slide 4; Tr., Hearing on Jurisdiction and
Merits, Day 7, 57:8-12 (Grzesik); Tr., Hearing on Jurisdiction and Merits, Day 8, 5:11-15 (Hern); Hearing on
Jurisdiction and Merits, Day 7, 144:11-145:4 (Ilić).
206
is wrong as it is not based on the area of BD Agro’s land included in BD Agro’s bankruptcy
sale of 9 April 2019. The Tribunal does not agree:
• Serbia excludes certain lands subject to court disputes with [ZZ] Buducnost
Dobanovci and Inter Kop. These court proceedings were initiated in 2018, 531
almost three years after the valuation date. Serbia has not advanced a cogent
reason why events occurring after the valuation date should be taken into account.
Its own expert, Ms. Ilić, testified that only reasons existing at the time of the
valuation could present a potential reason for excluding land from valuation; 532
• Serbia also excludes certain land plots based on litigation between itself and BD
Agro related to the Land Swap Agreement. 533 The court action was brought to
invalidate the swap and Serbia speculates that BD Agro would “almost certainly”
have to return the land it had received from Serbia under the land swap
agreement. 534 It admits that court proceedings related to the land swap were
pending on the valuation date. 535 Thus, the Tribunal sees no reason to disregard
the legal situation as it stood at the time of the valuation, being that the land in
question was owned by BD Agro, not to speak of the fact that, if the swap were
undone, another land asset would return into BD Agro’s ownership or equivalent
compensation at market value would become part of the valuation;
• No land should be excluded based on alleged restitution claims with respect to

land plots in Novi Bečej Nos. 21842, 22062/2, 22062/5, 22414/2 and 2063/1. 536
Serbia concedes that the claims are a mere “possibility” 537 and that “not much
information is available” concerning these claims. 538 Moreover, the Serbian
531 Exh. CE-806, Overview of court proceedings No. P-3093/2018, 2 March 2020.
532 Tr., Hearing on Jurisdiction and Merits, Day 7, 145:5-17.
533 Exh. RE-396, Agreement on exchange of land between the Ministry of Agriculture, Forestry and Water
Management and BD Agro, 4 January 2010, p. 3.

535 R-Submission on Quantum, §29 (“Even though the proceedings related to this dispute are still ongoing
[…]”).
536 Exh. RE-451, List of BD Agro’s land which was not sold, 30 June 2018.
207
Restitution Agency confirmed that there were no restitution requests submitted
with respect to BD Agro’s land on the valuation date; 539
• Still for the same reason, Serbia’s exclusion of land forming the subject-matter of
the Hypo Park Agreement must be dismissed. On the date of valuation, BD Agro
did own this land; 540
• While Serbia initially sought to exclude land sold to Eko Elektrofrigo, it later
conceded that this land should not be excluded. 541
• The other exclusions sought by Serbia fail as well. 542 In respect of “the land
distributed to the employees of BD Agro prior to the privatization” 543 Serbia has not
established precisely which land plots were allegedly distributed to BD Agro’s
employees, when they were distributed or why these land plots were included in
the other valuations of BD Agro’s land. As far as the land plots “labeled as public
roads” 544 is concerned, Serbia has not furnished any convincing evidence that BD
Agro did not own these plots at the valuation date. In respect of “the land
expropriated in 1991” 545, Serbia does not contest the Claimants’ submission that
BD Agro continues to use this land. Finally, at least some of “the land conceded to
the Municipality of Zemun” 546 was already excluded from BD Agro’s valuation and
should not be excluded again.
691. In consequence, the Tribunal agrees with the experts Ms. Ilić, Dr. Hern and Mr. Grzesik that
the size of the Construction Land was 279 hectares. 547
539 Exh. CE-859, Response from the Serbian Restitution Agency, 28 February 2020.
540 Claimants’ Opening presentation, slide 280; Ilić ER I, p. 153 (pdf).
541 R-PHB 2, fn.313 (“Respondent concedes that no further exclusion is necessary for the land sold to Eko
Elektrofrigo because it was never included in Ms. Ilić’s original calculation accepted by Claimants.”).
542 These include land plots Nos. 1281/2, 1281/3, 1281/4, 1281/5, 1281/6, 1281/8, 1281/9, 1281/10,
1281/11, 1281/12, 1281/13, 1281/14, 1281/15, 1281/16, 1281/17, 1281/18, 4054. See Claimants’ Opening
presentation, slide 281.
543 R-PHB 2, §98.
544 R-PHB 2, §98.
545 R-PHB 2, §98.
546 R-PHB 2, §98.
547 Mr. Grzesik’s presentation, slide 4; Dr. Hern’s presentation, slide 4; Tr., Hearing on Jurisdiction and
Merits, Day 7, 57:8-12 (Grzesik); Hearing on Jurisdiction and Merits, Day 7, 144:11-145:4 (Ilić).
208
4. Price per m2
692. The experts agree on the general approach to be taken to value the Construction Land. 548
They have different opinions, however, on the value of that land, Dr. Hern proposing a range
between EUR 22-30/m2 and Mr. Cowan 14.7 EUR/m2, based on Ms. Ilić’s first report.
693. The Tribunal finds Mr. Cowan’s approach to be more reasonable:
• Dr. Hern states that his lower bound price of 22 EUR/m2 “reflects the valuation of
BD Agro’s as determined by Serbian tax authorities for calculating property
taxes.” 549 However, according to Mr. Grzesik, the Claimants’ real estate expert,
this principal source of Dr. Hern’s lower bound price falls into a category of “mass
appraisals”, which “carry little evidentiary weight when valuing specific individual
properties.” 550 Further, Dr. Hern states that his lower price “is broadly consistent
with the Dec 2015 Confineks report valuation of 24 EUR/m2.” 551 However, once
again, Mr. Grzesik does not rely on the First Confineks Valuation and treats it as
“secondary evidence” because it does not refer to evidence of comparable
transactions. 552 Finally, while Dr. Hern relies on BD Agro’s transactions of 20 to 23
EUR/m2, Mr. Grzesik disregards them because they were too old and thus carried
“little evidentiary weight”; 553
• Dr. Hern states that his upper bound price of 30 EUR/m2 “is based on weighted
average price used in Mr. Mrgud’s valuation.” 554 However, Mr. Grzesik opined that
Mr. Mrgud’s valuation, based on asking prices, was flawed, because it provided no
information about the sources of these prices or when they were published; 555
548 Cowan ER I §2.17 (“Dr. Hern’s approach to the valuation of the land relies on contemporaneous
transactions, contemporaneous valuations by the tax authority and contemporaneous valuations prepared
by third parties. I do not disagree with Dr. Hern’s approach.”).
549 Hern ER I, §89(A).
550 Grzesik ER I, §6.13, with reference to Hern ER I, §§71-72; Tr., Hearing on Jurisdiction and Merits, Day
7, 73:19-75:10.
551 Hern ER I, §89(A).
552 Grzesik ER I, §§6.6 & 8.1.
553 Grzesik ER I, §§6.5 & 6.8; see, also, Tr., Hearing on Jurisdiction and Merits, Day 7, 72:14-73:1.
554 Hern ER I, §89(B).
555 Tr., Hearing on Jurisdiction and Merits, Day 7, 80:24-81:2 (“if you are relying on asking prices, then as
much information as possible is needed, because asking prices are the lowest level of evidence that you
can use in a valuation.”)
209
• Dr. Hern relies on the value of the land in Batajnica as the main source of evidence
for his upper bound price of 30 EUR/m2, finding that, by its characteristics, that
land was comparable to the land in Zones A, B, and C. There are, however, major
differences between the Batajnica land and Zones A, B, and C land that make the
former an unsuitable comparator:
i. The Batajnica transactions are based on value assessments by the tax

administration for determining the tax on property transfer. They are thus
different from property valuations based on international standards; 556
ii. It is well accepted that the information used for valuation should originate
on or before the valuation date. The Batajnica assessments, dating from
March to August 2016, do not meet this requirement. 557 Mr. Grzesik
admitted that he was not sure when the assessments actually took place. 558
It is likely that the Batajnica assessments were based on the tax
administration’s previous assessments that also took place in 2016, not in
2015, because the tax administration is required to base its assessments
of the property value on its most recent tax decisions concerning real estate
sales; 559
iii. As far as location is concerned, Dr. Hern initially made a reservation about
the comparability of the Batajnica land with Zones A, B, and C. 560 There
are, in fact, several differences. Importantly, the Batajnica land is close to
the Batajnica settlement and to major traffic infrastructure (highway, roads,
and railway). 561 In contrast, Zones A, B, and C land is located some
556 Ilić ER II, §§2.97-2.118.

557 Exh. CE-159, Tax Administration Zemun Branch, Number 021-464-08-00029/2016-I1A02, Delivery of
Information, 12 February 2016; Exh. CE-160, Tax Administration Zemun Branch, Number 021-464-08-
00029-1/2016- I1A02, Delivery of Information, 25 May 2016; Exh. CE-161, Tax Administration Zemun
Branch, Number 021-464-08-00125/2016-I1A02, Delivery of information, 28 July 2016.
558 Tr., Hearing on Jurisdiction and Merits, Day 7, 98:22-24 (“Q. And you don’t know actual time of the
transactions that they used for their assessment. A. No.”).

559 Exh. RE-526, Instruction on the Procedure and Method of Determining Tax on the transfer of absolute
rights, Sections 6,8,9,10,13,15, 2009, §13.

560 Hern ER I, §69 (“broadly comparable […] [h]owever, while the Batajnica region lies next to the E75 road
[…] BD Agro would have to rely on the Sremska Gazela for a connection to the E70.”).
561 Tr., Hearing on Jurisdiction and Merits, Day 7, 126:1-128:8. See also Presentation of Danijela Ilić, slide
22.
210
distance away from Dobanovci 562 and has no access to any roads 563 or
railway. 564
694. The Tribunal thus accepts Mr. Cowan’s use of the price of 14.7 EUR/m2 to value the
Construction Land.
5. 30% Discount
695. In her first expert report, Ms. Ilić (i) compared construction land sale transactions with BD
Agro’s land; (ii) applied a 10% adjustment to account for “the willingness of [the] seller to
negotiate the sale”; 565 and (iii) applied a further 30% discount to account for the larger size
of BD Agro’s land 566 and other factors such as the existence of infrastructure and access
road. 567 She concluded that the appropriate price for the Construction Land was 14.7
EUR/m2, which price Mr. Cowan then used in preparing his valuation.
696. The Tribunal finds Ms. Ilić’s overall approach reasonable. She used asking prices in her
analysis, first reducing them by 10% to account for likely price negotiations between buyer
and seller, the usual practice in Serbia being to apply a 10-15% reduction between asking
and actual price. 568 She then applied a 30% discount to reflect differences between the
comparables which she uses and BD Agro’s land.
697. 697. While the Claimants oppose this 30% discount, the Tribunal notes that the
representative comparables chosen by Ms. Ilić and BD Agro’s land were of a different
size. 569 Dr. Hern himself accepted that size does matter when commenting that, in one
562 Presentation of Krzystof Grzesik, slide 5. See also Presentation of Danijela Ilić, slide 22.
563 Exh. CE-143, General Regulation Plan for the BD Agro Complex Zones A, B and C in the Suburb of
Dobanovci, Municipality of Surčin, 31 December 2008.
564 See Exh. CE-143, General Regulation Plan for the BD Agro Complex Zones A, B and C in the Suburb
of Dobanovci, Municipality of Surčin, 31 December 2008, Section A.4 - Scope of the plan, compared to
Exh. CE-521, Plan of Detailed Regulation for Intermodal Terminal and Logistical Centre “Batajnica”, 23
June 2015, Section 2.1 - Plan Boundary.
565
Ilić Presentation, p.11; Ilić ER I, §9.92.
566
Ilić ER I, §9.48. The Tribunal understands that Ms. Ilić has applied the same discount in other instances
because of the differences in the size of the land of the comparables and BD Agro’s land (see, for e.g., Ilić
ER I, §§9.48, §9.61, and §9.77), which the Claimants have not contested.
567
Ilić Presentation, p.11.
568
Ilić ER II, § 2.35 and 2.104. The Claimants do not appear to contest this.
569 Ilić ER I, §9.1, p.115.
211
transaction, the large area of BD Agro’s land on sale may have pushed the price down. 570
That said, BD Agro may have been able to split its land in smaller parcels before selling it,
making any discount on the sale of the land as a whole inapposite. However, even if it had
done so, it remains that there were other important differences between the comparators
chosen by Ms. Ilić and BD Agro’s land. While the comparators had access to the roads and
other infrastructure, 571 this was not the case for BD Agro’s land, which still needed to be
developed. 572 Moreover, although the Claimants argue that it is not possible to establish
the exact location of the comparators and to determine the differences between the
comparators chosen by Ms. Ilić’s and BD Agro’s land, 573 the descriptions of the comparators
make clear that they were equipped with infrastructure and had access to roads. 574 Ms. Ilić’s
testimony that these differences justify a discount was not seriously rebutted. 575 To the
Tribunal, applying a discount appears reasonable as any buyer would incur costs and spend
time in developing BD Agro’s land and would factor the development costs and time into the
price offered. Failing more precise indications in the record about the size of this deduction,
it appears reasonable to the Tribunal to accept the 30% discount applied by Ms. Ilić. For the
avoidance of doubt, the Tribunal stresses that this discount is already included in the 14.7
EUR/m2 price that Mr. Cowan used in his calculations and is thus reflected in the table
below (§707).
570 See Hern ER I, §65 (“the area sold was very large (around 102ha), which may have put a downward
pressure on the price.”); Hern ER III, §37 (“Ms Ilić discusses BD Agro’s sale of 102ha land from 2008 at 15
EUR/m2, which I have not relied on in my valuation due to the large area which may have put a downward
pressure on the sale price.”).
571 See Exh. RE-561, Asking prices for KO Dobanovci.
572 Tr., Hearing on Jurisdiction and Merits, Day 7, 87:12-88:05 (Grzesik) (“THE PRESIDENT: […] I had
questions on this, because it was unclear to me in what stage the land was, in terms of development, and
what else was needed and how much time this would take. […] A. I think what I can say is that Zones A, B
and C were under the regulation plan -- that was land which was suitable for the development of industrial
and business uses. However, in order to get to those uses, a lot more work needs to be done in terms of
provision of infrastructure, in terms of provision of roads, in terms of the whole planning procedure, so any
developer buying this site would be fully aware of the enormous amount of work that still needed to be done
to enable these sites to be put in a situation where you could start development.”).
573 C-PHB 1, §323.
574 See Exh. RE-561, Asking prices for KO Dobanovci.
575 Tr., Hearing on Jurisdiction and Merits, Day 7, 164:07 et seq. (Ilić). See also Presentation of Danijela
Ilić, slide 11.
212
698. In his calculations, Mr. Cowan applied a bankruptcy sales discount of 50%. However, he
accepted that such a discount would be inapplicable in case of a going concern. 576 As
discussed above (§685), at the time of valuation, BD Agro was a going concern. Hence, this
discount is inapposite.
7. Liabilities
699. It is common ground that liabilities must be deducted from assets to get to the near asset
value of BD Agro. The Parties’ experts had different opinions, however, on a number of
elements of BD Agro’s liabilities and, consequently, on their total amount:
i. Total estimated liabilities (excluding deferred tax liabilities): Relying on the

figures included in the Second Confineks Valuation and his own analysis,
Mr. Cowan submits that BD Agro’s estimated liabilities were EUR 42.2
million. Dr. Hern reaches a lower figure of EUR 37.8 million. The Second
Confineks Valuation determined that BD Agro’s liabilities amounted to EUR
40.4 million. That amount was also used as the basis for liability values in
BD Agro’s 31 December 2015 Financial Statements. To that amount, Mr.
Cowan added EUR 1.8 million because the principal amount of a Banca
Intesa (later Agrounija) loan accounted for in the Second Confineks
Valuation increased, 577 resulting in an increase in the interest payable
thereon (and thereby increasing BD Agro’s liabilities by that amount). 578
The Tribunal finds Mr. Cowan’s approach reasonable;
ii. Conversion fee: The experts agree that, for a buyer to develop BD Agro’s
land it would need to convert it from agricultural land to industrial land and
to pay a corresponding conversion fee. That fee would then have to be
deducted from the value of the land. The experts disagree, however, on the
amount of the conversion fee. The Law on Agricultural Land specifies that
the conversion fee is based on 50% of the average price of agricultural land
or 20% of average price of construction land. The experts agree on using
576 See, for instance, Cowan ER III, Table 4.8.

577 Exh. RE-646, Agrounija’s Registration of Claim with Enclosures, 13 January 2016; Exh. CE-551,
Conclusion of the list of acknowledged and challenged claims, 30 March 2018, p. 2.
578 Cowan ER III, §2.21 et seq.
213
the agricultural price as basis. In his expert report, Mr. Grzesik reaches an
agricultural land price of EUR 1.85 million, to which he applies a conversion
fee of EUR 1.5 million. By contrast, Ms. Ilić arrives at an agricultural land
price of EUR 3.4 million to which she applies a conversion fee of EUR 3.1
million. In her first report 579 and at the hearing, Ms. Ilić furnished a detailed
explanation for her approach 580 and explained why the fee must be
calculated on the basis of the previous year’s tax assessment. 581 Mr.
Cowan then used Ms. Ilić’s conversion fee amount in his expert report. 582
The Tribunal finds Ms. Ilić’s reasons plausible. In the absence of any
contrary indications provided by the Claimants, it adopts the conversion fee
used by the Respondent’s experts;
iii. Payment to Canadian suppliers: The experts agree that payments to

Canadian suppliers amounting to EUR 2.2 million are to be deducted,
which the Tribunal will follow; 583
iv. Court proceedings: Mr. Cowan includes EUR 200,000 in BD Agro’s

liabilities. The Tribunal agrees, as the item was included in BD Agro’s 2015
financial statements. 584
v. Capital gains tax: Dr. Hern and Mr. Cowan disagree on the applicable
capital gains tax. Dr. Hern calculates capital gains tax by using the
“deferred tax liabilities” in BD Agro’s 2015 balance sheet as a proxy for the
579 Ilić ER I, Appendix 1.1.

580 Tr., Hearing on Jurisdiction and Merits, Day 7, 177:09 et seq.
581 Tr., Hearing on Jurisdiction and Merits, Day 7, 177:09 et seq. This explanation also addresses Mr.
Grzesik’s concern as to why Ms. Illic adopts an agricultural value of EUR 1/m2 in her main valuation, but a
value of EUR 3.4/m2 for determining the conversion fee (Tr., Hearing on Jurisdiction and Merits, Day 7, 58:
13-25). As she explains, the tax authorities provide an annual assessment each year based on which the
conversion fee is to be calculated. See, in particular, Tr., Hearing on Jurisdiction and Merits, Day 7, 177:22-
178:09 (“[T]he authority that has to do the assessment of this conversion fee is the Tax Authority. How do
they do it? They take from the previous year the assessment they made for tax purposes, the annual
taxation calculations, and of course, if I am to simulate this procedure and arrive at what the realistic figure
would be, I would then go and check what tax was assessed. There is a table I would need to look at which
shows the prices in individual zones that were determined by the Tax Authority for the previous year, so for
2014, the €3.4 is the price of agricultural land in the zone in which BD Agro land was located.”).
582 Cowan ER III, Table 4.4.
584 See Cowan ER III, §§2.17-20 & 4.2 et seq. See also Exh. CE-172, Confineks d.o.o. Beograd, Report on
the Valuation of Assets, Liabilities and Capital of BD Agro AD Dobanovci, January 2016.
214
capital gains, based on the Claimants’ instruction. 585 By contrast, Mr.
Cowan deducts the book value of BD Agro’s tangible assets (i.e. BD Agro’s
land, plant, equipment and biological assets) as of 31 December 2013 as
a proxy for the purchase price, from the value of land according to Ms. Ilić
and applies a 15% capital gain tax rate. 586 The Tribunal adopts Mr.
Cowan’s approach, which it finds objective and logical.
vi. Redundancy payments: The experts disagree whether certain redundancy

payments should be included in BD Agro’s valuation. While the Claimants
submit that the redundancy program was voluntary, they offer no authority
in support. In any event, BD Agro was obliged to prepare a redundancy
program in accordance with Annex 1 of the Privatisation Agreement. 587
Further, BD Agro’s 2015 financial statements also recognize redundancy
payments as being obligatory. 588 The Tribunal finds that these payments
must be accounted for;
vii. Bankruptcy costs: As discussed above in the context of the bankruptcy

discount, BD Agro was a going concern on the valuation date. This
reduction in liabilities is thus inapplicable. This finding is confirmed by the
fact that Mr. Cowan did not deduct these costs in his going concern
scenario. 589
700. Contrary to the bankruptcy sale discount that Mr. Cowan did not apply in his going concern
scenario, Mr. Cowan applied a 30% distress discount in that scenario. He considered this
585 Hern ER I, §§144-145.

586 Cowan ER II, §6.12.
587 Exh. CE-17, Annex 1 to the Privatization Agreement, p. 9.
588 Exh. CE-171, BD Agro AD Dobanovci, Notes to the Financial Statements for Year 2015, Note 2.19 (“The
Company recognizes severance at termination of employment when it is obviously obligatory: either to

terminate the employment relationship with the employee, in accordance with adopted plan, without the
possibility of withdrawal; or to provide severance pay for termination of employment as a result of an offer
in order to encourage voluntary termination of employment with aim of reducing the number of
employees.”).
215
discount reasonable, representing the impact on the price of selling a distressed business.
Dr. Hern disputed this discount.
701. As discussed above, the record shows that, at the time of the valuation, BD Agro was a
going concern. That it had made no profits for several years does not change this position.
Its creditors had approved a reorganization plan. They thereby showed that they expected
the business to overcome its operational and financial issues and become
profitable. Moreover, the majority of BD Agro’s assets, as the table in paragraph 707 shows,
were constituted of land, the value of which would in any event not be impacted by the
prospects of the business (subject to a pre-bankruptcy “fire sale”, which would not come
into play here for a going concern with a reorganization plan in place). For these reasons,
the Tribunal comes to the conclusion that there is insufficient basis to apply Mr. Cowan’s
proposed 30% distress discount.
9. Interest
702. The Claimants invoke the most-favored nation provision contained in Article 5 of the
Canada-Serbia BIT to argue that they are entitled to rely on the preservation of right clause
in Article 10 of the Cyprus-Serbia BIT and Article 13(1) of the Qatar-Serbia BIT, with the
result that they can claim interest according to the more favourable provisions in Serbian
law.
703. Article 5 of the Canada-Serbia BIT contains a most favoured nation clause of the following
content:
“ARTICLE 5
Most-Favoured-Nation Treatment
1. Each Party shall accord to an investor of the other Party treatment no less favourable
than that it accords, in like circumstances, to investors of a non-Party with respect to the
establishment, acquisition, expansion, management, conduct, operation and sale or other
disposition of an investment in its territory.
2. Each Party shall accord to a covered investment treatment no less favourable than that
it accords, in like circumstances, to investments of investors of a non-Party with respect
to the establishment, acquisition, expansion, management, conduct, operation and sale
or other disposition of an investment in its territory.
[…].”
704. Accordingly, investors of a Contracting Party and covered investments shall be treated no
less favorably than investors or investments of investors of a non-Party in respect of the
“establishment, acquisition, expansion, management, conduct, operation and sale or other
216
disposition” of an investment. The Tribunal does not see how provisions on interest rates
would fall within the ambit of this provision. Indeed, the interest rate prescribed by Serbian
law is unrelated to the establishment, acquisition, expansion, management, conduct,
operation and sale or other disposition of an investment. Consequently, the claim for interest
under Serbian law through the operation of the Canada-Serbia MFN provision must be
dismissed.
705. In the alternative, the Claimants seek interest at 6-month average EURIBOR + 2%,
compounded semi-annually. Serbia agrees to pay interest on a flat interbank rate, but not
with an increase of 2%, which it says should not be awarded “considering […] revelations
about BD Agro's mismanagement by Mr. Obradovic.” 590
706. In accordance with the principle of full reparation, Mr. Rand is entitled to an interest rate
calculated in a manner which “best approximates” the value lost. 591 Mr. Obradovic’s conduct
is irrelevant in this context and Serbia has not substantiated its argument that it should play
a role here. The Respondent recognizes that tribunals have awarded interest at the
interbank interest rate plus 2 percentage points. 592 Late interest on debts is intended to
remedy the non-availability of funds due or, in other words, to pay for the time value of
money. The time value of money can be compensated by taking into account the cost of
borrowing funds to make up for the unpaid sums or the loss involved in not being able to
invest those sums. Under both assumptions, the interest would exceed a rate applied
between financial institutions exclusively. For these reasons, the Tribunal finds it reasonable
to award interest at EURIBOR for 6 months deposits, plus 2% per annum, and to compound
such interest semi-annually.
10. Conclusion
707. It follows from the above that the Tribunal has made several adjustments to the valuations
prepared by the Parties’ experts, as a result of which the final amounts are as follows: 593
590 Rej., §1481.

591 Exh. CLA-39, Azurix Corp. v. The Argentine Republic, ICSID Case No. ARB/01/12, Award, 14 July 2006,
§440.
592 Rej., §1480 relying on Exh. CLA-6, National Grid v. Argentina, Award, 3 November 2008, §294, and
Exh. RLA-195, Khan Resources Inc., Khan Resources B.V., and Cauc Holding Company Ltd. v. The
Government of Mongolia, UNCITRAL, Award, 2 March 2015, §425.
593 This table is based on the table in Cowan ER III, §4.4, after adjusting it as necessary in light of the
Tribunal’s conclusions above.
217
At 21 October 2015 in EUR m Value in EUR m
Dobanovci Development Land [Construction Land] 41.9
Other Construction Land 1.3
Novi Becej 0.2
Non-farm assets 43.4
Agricultural land 6.4
Other fixed assets 18.8
Current assets 5.0
Deferred tax assets 0.1
Farm Assets 30.3
Total assets 73.7
Total estimate liabilities (42.2)
Conversion fee (3.1)
Payment to Canadian suppliers (2.2)
Court proceedings (0.2)
Capital Gains Tax (5.7)
Redundancy payments (0.7)
Total liabilities 54.1
Net asset value of BD Agro at 21 October 2015 / Value of 100% 19.7

shares in BD Agro at 21 October 2015
218
708. Accounting for these adjustments, the value of 100% of the shares in BD Agro on
21 October 2015 was 19.7 million. 594 Mr. Rand indirectly owned 75.87% of BD Agro’s
shares, through Rand Investments (in which he had a 100% shareholding) and Sembi (in
which he held a 97.5% shareholding), 595 resulting in a valuation of EUR 14,572,730. To this
figure, interest should be added at 6-month average EURIBOR + 2%, compounded semi-
annually until the date of payment (see above, §706).
IX. COSTS
A. Claimants' Position
709. In their submission of 12 November 2021, the Claimants argue that the Respondent should
bear the totality of the arbitration costs they incurred, including their share of the Tribunal’s
fees and their legal fees and costs, in the amount of EUR 4,054,775.72, CAD 1,517,905.72
and USD 674,829.89, which are broken down as follows:
A. COUNSEL FEES AND EXPENSES
Squire Patton Boggs fees
Squire Patton Boggs

expenses (including travel
expenses, translation costs,
costs of courier services and
phone charges)
Stankovic & Partners fees and

expenses
TOTAL:
B. EXPERT WITNESSES’ FEES AND EXPENSES
Mr. Agis Georgiades
Mr. Miloš Milošević
Dr. Richard Hern
Ms. Bojana Tomić-Brkušanin
594 Cowan ER III, Table 4.8.

595 Mem., §54.
219
Mr. Krzystof Grzesik
Mr. Robert J.C. Dean
Mr. Uglješa Grušić
TOTAL:
C. ARBITRATION COSTS
Arbitration costs USD 625,000
TOTAL: USD 625,000
D. ADDITIONAL COSTS
Expenses incurred directly EUR 77,152.82

by Claimants and/or their
representatives and fact CAD 149,965.15
witnesses during the
arbitration
Mr. Broshko’s fees
Mr. Markićević’s fees
Canadian tax law analysis
performed by Koffman Kalef
Canadian tax law analysis
performed by Legacy Tax &
Trust Lawyers
Guernsey trust law analysis
performed by Ogier
TOTAL:
220
B. Respondent's Position
710. In its submission of 12 November 2021, the Respondent submits that the Claimants should
bear all the costs and expenses of these proceedings, including the Respondent’s legal fees
and expenses totaling USD 600,000.00 and EUR broken down as follows:
Advance payments made to ICSID USD 600,000.00

Costs of Legal Representation EUR
Costs of Engaging Experts EUR
Costs of Attending the Hearing EUR
Translation Costs EUR
C. Arbitration Costs
711. The costs of the arbitration are composed of:
Tribunal’s Fees:
Gabrielle Kaufman-Kohler: USD 417,900.00

Baiju Vasani USD 191,968.75
Marcelo Kohen: USD 207,995.00
Tribunal’s Expenses: USD 17,252.46
Assistant’s Fees and Expenses:
Rahul Donde: USD 221,084.55
TOTAL: USD 1,056,200.76
Administrative Fee: USD 252,000.00
Other Direct Expenses: USD 281,941.60
GRAND TOTAL: USD 1,590,142.36
712. These costs have been paid out of the advances made by the Parties. The ICSID Secretariat
will provide the Parties with a statement of the case account in due course and will return to
the Parties any unused amount in equal shares.
221
D. Analysis
713. Article 61(2) of the ICSID Convention provides:
“In the case of arbitration proceedings the Tribunal shall, except as the parties
otherwise agree, assess the expenses incurred by the parties in connection with
the proceedings, and shall decide how and by whom those expenses, the fees
and expenses of the members of the Tribunal and the charges for the use of the
facilities of the Centre shall be paid. Such decision shall form part of the award. “
714. This provision gives the Tribunal discretion to allocate all costs of the arbitration, including
attorney’s fees and other costs, between the Parties as it deems appropriate.
715. There are generally three approaches for awarding costs in ICSID arbitrations: (i) some
tribunals apportion arbitration costs equally and rule that each party should bear its own
costs; (ii) others apply the “costs follow the event” principle, under which the losing party
bears all or part of the costs of the proceedings, including those of the prevailing party and
(iii) still others follow a mixed approach in which they take into account the outcome of the
claims as well as the conduct of the parties in the arbitration and other appropriate
circumstances.
716. In the exercise of its discretion, the Tribunal finds it appropriate that the Parties each bear
half of the costs of the proceedings and bear their own legal and other costs. This approach
seems fair and reasonable considering all the circumstances:
• The Tribunal concluded that it had jurisdiction only over Mr. Rand’s claims under the
ICSID Convention and the Canada-Serbia BIT in respect of his interest in the
Beneficially Owned Shares. It lacked jurisdiction over his claims in respect of his
payments for the benefit of BD Agro and his indirect shareholding in BD Agro. It also
lacked jurisdiction over the claims of the other Claimants under the Canada-Serbia
BIT, and over Sembi under the Cyprus-Serbia BIT;
• The issues involved were complicated because of Mr. Rand’s unusual investment
structure, which triggered objections and extensive debates;
• Mr. Rand has been awarded less than 20% of the amount claimed, and that by
majority;
222
• While the Parties and their counsel conducted these proceedings in a professional,
cooperative, and efficient manner incurring reasonable costs, there is a significant
disparity between the Claimants’ costs and those of the Respondent.
X. OPERATIVE PART
717. For the reasons set forth above, the Tribunal:
a. DECLARES that it has jurisdiction over Mr. Rand’s claims under the Canada-Serbia
BIT in respect of his interest in the Beneficially Owned Shares and that these claims
are admissible;
b. DENIES jurisdiction over all other claims under the Canada-Serbia BIT and the
Cyprus-Serbia BIT;
c. DECLARES that the Respondent has breached Article 6(1) of the Canada-Serbia BIT;
d. ORDERS the Respondent to pay EUR 14,572,730 to Mr. William Rand, together with
interest at the average EURIBOR for 6 months deposits plus 2% per annum,
compounded semi-annually, until the date of payment;
e. ORDERS the Parties to each bear 50% of the Tribunal’s fees and expenses and
ICSID’s fees as notified by ICSID;
f. ORDERS the Parties to bear their own legal fees and other costs;
g. DISMISSES all remaining claims and requests for relief.
223
[signed] [signed]
Mr. Baiju S. Vasani Prof. Marcelo G. Kohen

Arbitrator Arbitrator
Date: 27 June 2023 Date: 26 June 2023
(subject to the attached dissenting opinion)
[signed]
Prof. Gabrielle Kaufmann-Kohler

President of the Tribunal
Date: 23 June 2023
224

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INTERNATIONAL CENTRE FOR SETTLEMENT OF INVESTMENT DISPUTES

In the arbitration proceeding between

ICSID Case No. ARB/18/8

Members of the Tribunal

Secretary of the Tribunal

Assistant to the Tribunal

Date of dispatch to the Parties: 29 June 2023

I. INTRODUCTION AND PARTIES ...................................................................................... 1

4. Non-Retroactivity and Time Bar .......................................................................107

5. Abuse of Process .............................................................................................121

B. Exercise of Sovereign Powers.................................................................................133

2. Respondent’s Position .....................................................................................150

3. Size of the Construction Land ..........................................................................187

3. Size of the Construction Land ..........................................................................196

ICSID Rules of Procedure for Arbitration

Witness Statement of Aksel Azrac dated 16

Expert Report of Bojana Tomić Brkušanin

Witness Statement of Erinn Broshko dated 5

Second Witness Statement of Erinn Broshko

Third Witness Statement of Erinn Broshko

Fourth Witness Statement of Erinn Broshko

Agreement between Canada and the Republic

Rand Investments Ltd., William Archibald

Respondent’s Counter-Memorial with Request

Coropi Coropi Holdings Limited

Expert Report of Sandy Cowan dated 19 April

Second Expert Report of Mr. Sandy Cowan

Third Expert Report of Mr. Sandy Cowan

Claimants’ Second Post Hearing Brief dated

Witness Statement of Vladislav Cvetkovic

Exh. CE-[#] Claimant’s Exhibit

Exh. CLA-[#] Claimants’ Legal Authority

Exh. RE-[#] Respondent’s Exhibit

Exh. RLA-[#] Respondent’s Legal Authority

Second Expert Report of Agis Georgiades of

Expert Report of Uglješa Grušić dated 3

Expert Report of Krzystof Grzesik dated 3

Hearing on jurisdiction, merits and damages

Expert Report of Dr. Richard Hern dated 16

Second Expert Report of Richard Hern dated

Third Expert Report of Richard Hern dated 6

Convention on the Settlement of Investment

International Centre for Settlement of

Witness Statement of Robert Jennings dated 3

MDH Serbia Marine Drive Holding d.o.o.

Second Witness Statement of Igor Markićević

Third Witness Statement of Igor Markićević

Fourth Witness Statement of Igor Markićević

Claimant’s Memorial on the Merits dated 16

Expert Report of Miloš V. Milošević dated 16

Second Expert Report of Miloš V. Milošević

Third Expert Report of Miloš V. Milošević

NoD Notice of Dispute dated 4 August 2017

Witness Statement of Djura Obradović dated

Second Witness Statement of Djura Obradović

Third Witness Statement of Djura Obradović

Privatization Agency of the Republic of Serbia

Privatization Agreement between Mr.

Expert Report of Professor Mirjana Radović

Second Expert Report of Professor Mirjana