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PCA Case No. 2011-17, Guaracachi America & Rurelec vs. Bolivia

PCA Case No. 2011-17, Guaracachi America & Rurelec vs. Bolivia
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Table of Contents
1 PCA Case No. 2011-17



- AND -


- AND - 


- between -



(the “Claimants”)

- v. -


(the “Respondent” or “Bolivia”, and together with the Claimants, the “Parties”)
31 January 2014


Dr José Miguel Júdice, Presiding Arbitrator

Mr Manuel Conthe

Dr Raúl Emilio Vinuesa

Secretary to the Tribunal: Martin Doe

Mr Nigel Blackaby
Mr Noah D. Rubins
Mr Lluís Paradell
Ms Caroline Richard
Mr Jeffery Commission
Mr Francisco Abriani
Ms Belinda McRae
Freshfields Bruckhaus Deringer US LLP


Dr Hugo Raúl Montero Lara, Attorney General
Ms Elizabeth Arismendi Chumacero, Deputy Defense Attorney and Legal Counsel to the State
Office of the Attorney General

Mr Eduardo Silva Romero
Mr José-Manuel García Represa
Mr Álvaro Galindo Cardona
Mr Juan Felipe Merizalde
Ms Ana Carolina Silva
Dechert LLP



1. The Claimants in the present arbitration are Guaracachi America, Inc., a company incorporated in the United States of America, with principal place of business at Loockerman Square 32, Suite L-100, Dover, Delaware, United States of America (hereinafter, GAI), and Rurelec Plc., a company constituted under the laws in force in the United Kingdom, with principal place of business at Prince Consort House, 5th Floor, 27-29 Albert Embankment, London SE1 7TJ, United Kingdom (hereinafter, Rurelec, and together with GAI, the Claimants). The Claimants are represented in these proceedings by:

Nigel Blackaby, Freshfields Bruckhaus Deringer US LLP
Noah D. Rubins, Freshfields Bruckhaus Deringer US LLP
Lluís Paradell, Freshfields Bruckhaus Deringer US LLP
Caroline Richard, Freshfields Bruckhaus Deringer US LLP
Jeffery Commission, Freshfields Bruckhaus Deringer US LLP
Francisco Abriani, Freshfields Bruckhaus Deringer US LLP
Belinda McRae, Freshfields Bruckhaus Deringer US LLP

2. The Respondent in the present arbitration is the Plurinational State of Bolivia (hereinafter,Bolivia or the Respondent). The Respondent is represented in these proceedings by:

Hugo Raúl Montero Lara, Attorney General
Elizabeth Arismendi Chumacero, Deputy Defense Attorney and Legal Counsel to the State
Eduardo Silva Romero, Dechert (Paris) LLP
José-Manuel García Represa, Dechert (Paris) LLP
Álvaro Galindo Cardona, Dechert LLP
Juan Felipe Merizalde, Dechert LLP
Ana Carolina Silva, Dechert (Paris) LLP


3. The Claimants commenced these proceedings by a Notice of Arbitration dated 24 November 2010 pursuant to Article 3 of the United Nations Commission on International Trade Law Arbitration Rules, as revised in 2010 (hereinafter, theUNCITRAL Rules), Article IX of the Treaty between the Government of the United States of America and the Government of 10 the Republic of Bolivia Concerning the Encouragement and Reciprocal Protection of Investment (hereinafter, the “US-Bolivia BIT”), and Article VIII of the Agreement between the Government of the United Kingdom and Northern Ireland and the Government of the Republic of Bolivia for the Promotion and Protection of Investments (hereinafter, the “UK- Bolivia BIT”, and together with the US-Bolivia BIT, the “Treaties” or “BITs”).

4. The Claimants alleged that the nationalisation carried out by the Bolivian State of GAI’s and Rurelec’s 50.001% shareholding in Empresa Eléctrica Guaracachi S.A. (hereinafter, “EGSA”), a company incorporated under the laws of Bolivia, as well as the failure to obtain justice through the Bolivian court system, caused injury to the Claimants quantified at USD 142.3 million. Moreover, they argued that Bolivia seized further assets owned by Rurelec’s subsidiary, Energía para Sistemas Aislados Energais S.A. (hereinafter, “Energais”), resulting in a further loss of USD 661,535. Therefore, they commenced these proceedings so as to obtain adequate and effective compensation from the Tribunal.1  


5. By letter dated 24 November 2010, pursuant to Article IX of the US-Bolivia BIT and Article VIII of the UK-Bolivia BIT, the Claimants served the Respondent with a Notice of Arbitration, which was received by the latter on 30 November 2010.

6. By letter dated 12 January 2011, the Claimants appointed Mr Manuel Conthe as the first arbitrator.

7. On 28 March 2011, given that a 30-day term as from the appointment of the first arbitrator had elapsed without Respondent appointing an arbitrator, the Claimants requested that the Secretary-General of the Permanent Court of Arbitration (hereinafter, the “PCA”) designate an appointing authority to appoint the second arbitrator.

8. On 27 April 2011, the Secretary-General of the PCA designated H.E. Judge Gilbert Guillaume as appointing authority in this arbitration for all purposes under the UNCITRAL Rules.

9. On 3 May 2011, the Respondent sent a letter appointing Dr Raúl Emilio Vinuesa as the second arbitrator. Such appointment was accepted by the Claimants on 10 May 2011.

10. On 20 June 2011, in light of the Parties’ inability to agree on the appointment of the presiding arbitrator, the appointing authority was requested to proceed to such appointment. As requested, by letter dated 8 August 2011, H.E. Judge Gilbert Guillaume appointed Dr José Miguel Júdice as the presiding arbitrator.

11. On 9 December 2011, taking into account the agreements reached between the Parties, they submitted the Terms of Appointment and Procedural Order No. 1 (hereinafter, the “Procedural Order No. 1”) to the PCA, stating, inter alia, that the languages of the arbitration would be English and Spanish, that the PCA would act as registry and administering authority for the proceedings, and that the place and legal seat of the proceedings would be The Hague. In addition, Procedural Order No. 1 set forth the following procedural calendar:

12. Pleadings: Number, Sequence, Time Limits

12.1. The Claimants shall file its Statement of Claim on 1 March 2012.

12.2. The Respondent shall file its Statement of Defense, pursuant to the UNCITRAL Rules, on 1 August 2012.


12.3. The Claimants shall file its Reply, in accordance with Article 24 of the UNCITRAL Rules, on 1 November 2012.

12.4. The Respondent shall file its Rejoinder, in accordance with Article 24 of the UNCITRAL Rules, on 1 February 2013.


12.7. An oral hearing will be held from 1 to 10 April 2013 (exclusive of the weekend) at which the Parties will present their experts and witnesses, and make oral submissions.”

12. On 1 March 2012, the Claimants submitted, in accordance with Procedural Order No. 1, their Statement of Claim in English, accompanied by witness statements, the expert report of Dr Manuel Abdala, all other evidence relied upon in support of their Statement of Claim.

13. On 23 March 2012, the Claimants submitted, in accordance with Procedural Order No. 1, a Spanish translation of the documents mentioned in the previous paragraph.

14. By letter dated 26 June 2012, the Respondent informed both the Tribunal and the Claimants that, on 13 June 2012, the Office of the Attorney General had determined that the public tender to retain the services of external counsel had been unsuccessful, since none of the tendering firms had met the required conditions. As a consequence, the Respondent requested a two (2) month extension for the submission of its Statement of Defence.

15. On 2 July 2012, after considering the Claimants’ allegations against the granting of such extension, the Tribunal issued Procedural Order No. 2. The Tribunal decided to grant a 45-day extension. In addition, it urged the Parties to try to agree within a deadline of 30 days on a calendar for further submissions that would not require postponing the scheduled hearing.

16. On 9 August 2012, following the Parties’ failure to reach an agreement and the expiry of the aforementioned extension, the Tribunal issued Procedural Order No. 3, wherein it was decided that the procedural calendar would be as follows:

“(a) The Respondent shall file its Statement of Defense, pursuant to the UNCITRAL Rules, on 14 September 2012;

(b) The Claimants shall file their Reply, in accordance with Article 24 of the UNCITRAL Rules, on 5 December 2012;

(c) The Respondent shall file its Rejoinder, in accordance with Article 24 of the UNCITRAL Rules, on 22 February 2013; and


(d) An oral hearing will be held on 1-10 April 2013 (exclusive of the weekend) at which the Parties will be able to examine experts and witnesses, and make oral submissions.”

17. By letter dated 9 August 2012, the Respondent informed the Tribunal that it had retained Dechert (Paris) LLP as external counsel. Moreover, it requested that the Tribunal bifurcate the proceedings (hereinafter, the “Request for Bifurcation”) pursuant to Article 23(3) of the UNCITRAL Rules, on the following grounds: (i) the merely contractual nature of the Claimants’ claims; (ii) the Claimants, by resorting to the Bolivian courts, have made exercise a choice under the fork-in-the-road clause provided for in the US-Bolivia BIT, such that the arbitration should proceed only in respect of the nationalisation claim; and (iii) the premature nature of the claims raised by the Claimants.

18. On 13 August 2012, the Tribunal issued Procedural Order No. 4 wherein the Claimants were granted until 23 August 2012 to submit any comments they might have on the Request for Bifurcation filed by the Respondent. The procedural calendar set forth in Procedural Order No. 3 was maintained.

19. By e-mail dated 23 August 2012, the Claimants requested that the Tribunal grant an extension of the deadline set forth in Procedural Order No. 4, until 27 August 2012, in order to “have an opportunity to consult with the Claimants’ representatives with respect to the Respondent’s request.

20. By e-mail dated 23 August 2012, the presiding arbitrator granted the extension requested by the Claimants.

21. On 24 August 2012, the Tribunal issued Procedural Order No. 5, wherein it confirmed the extension granted by the presiding arbitrator by e-mail, while maintaining the procedural calendar set forth in Procedural Order No. 3.

22. By letter dated 27 August 2012, the Claimants submitted their Response to Respondent’s Request for Bifurcation and submitted new evidence in support thereof. The Claimants requested that the Tribunal reject such Request on the following grounds: (i) the Request for Bifurcation was a dilatory tactic contrary to the procedural agreement reached by the Parties set forth in Procedural Order No. 1, (ii) bifurcation would not achieve any greater efficiency or economy, and (iii) bifurcation was also inappropriate as the jurisdictional objections could not be separated from the merits of the dispute.

23. By letter dated 29 August 2012, the Respondent acknowledged receipt of the Claimants’ Response to the Request for Bifurcation and made a series of clarifications and corrections to
the Tribunal on the matter, alleging that the Claimants had raised new claims (hereinafter, the “New Claims”).2

24. On 30 August 2012, the Tribunal issued Procedural Order No. 6, disregarding the last letter sent by Respondent given its untimely nature. In such Order, the Tribunal acknowledged the difficulty of deciding on the Request for Bifurcation due to the lack of complete information on the position of the Parties and concluded as follows:

“(a)The calendar of submissions, defined through common agreement by Procedural Order No. 1 as amended by Procedural Orders Nos. 2 and 3, is maintained and therefore Respondent shall file its Statement of Defense on 14 September 2012, and the other Submissions will follow as and in accordance with the defined calendar;

(b) On 14 September 2012, either as part of its Statement of Defense or in a separate Memorial on Jurisdiction, the Respondent shall set forth in full its objections to the jurisdiction of the Arbitral Tribunal;

(c) On 15 October 2012, the Claimants shall file a Counter-Memorial on Jurisdiction;

(d) On 31 October 2012, the Respondent may file a Reply on Jurisdiction;

(e) If a Reply has been filed, the Claimants may file a Rejoinder on Jurisdiction on 15 November 2012;

(f) Once the Parties have fully pleaded the jurisdictional issues, as set forth in the above calendar, the Tribunal will decide whether (i) to bifurcate the proceedings and hold specific hearings on the jurisdictional issues, (ii) to refuse the requested bifurcation and therefore to decide on its own jurisdiction following the scheduled hearings on the merits, or (iii) to decide on its jurisdiction without the need for any hearing;

(g) To allow the possibility referred under f) (iii) above, and in accordance with Article 17(3) of the UNCITRAL Rule 2010, Parties are requested to state on their Memorial and Counter-Memorial whether they would request an oral hearing on jurisdiction, even if the Arbitral Tribunal considers it unnecessary.”

25. By e-mail dated 30 August 2012, the Respondent requested that the Tribunal reconsider the decision adopted in Procedural Order No. 6 “taking into account the arguments submitted in
15 good faith” in its letter dated 29 August 2012. Furthermore, the Respondent requested a further 45-day extension, until 29 October 2012, to file its Statement of Defence “taking into account (i) the inclusion of New Claims by the Claimants in the Statement of Claim, (ii) the recent hiring of the legal team of Dechert and (iii) that the Respondent has only received the electronic damages model of Dr Manuel Abdala, Claimants’ expert, last Wednesday, 29 August 2012” [Tribunal’s translation].

26. By letter dated 3 September 2012, the Claimants objected to the Respondent’s request on two grounds: (i) the Respondent had been in possession of the Statement of Claim since 1 March 2012, which was enough time to have submitted its Statement of Defence, and (ii) the delay and the request for an additional extension to submit its Statement of Defence were both unjustifiable and unfair. They also requested that the Respondent adhere to the calendar established in Procedural Order No. 6.

27. On 3 September 2012, the Tribunal issued Procedural Order No. 7, whereby, in order to ensure that all the conditions necessary for the Respondent to submit its Statement of Defence were met, the Tribunal decided to modify the schedule of submissions on the merits, absent any change to the schedule of submissions on jurisdiction. Hence, the Tribunal set a new calendar:

“a) On 5 October 2012, the Respondent shall file a Response;

b) On 4 January 2013, the Claimants shall file Reply;

c) On 13 February 2013, the Respondent shall file a Rejoinder;

d) On 14 March 2013, each Party shall provide, with a copy to the Tribunal and the PCA: (a) the names of the witnesses whose statement or report has been submitted by the other Party with the request that they be available for cross-examination at the hearing; and (b) as the case may be, a request for the Tribunal to permit the appearance at the hearing of witnesses whose statement or report has been submitted by the Party.”

28. By subsequent e-mails between the Parties and the Tribunal dated 14 September 2012, it was agreed that the Respondent would file its Memorial on Jurisdiction on 17 September 2012.

29. On 17 September 2012, the Respondent filed its Memorial on Jurisdiction, together with witness statements and relevant supporting evidence. Once again, the Respondent reiterated its request that the Tribunal bifurcate the proceedings on the following grounds: “(a) Claimants have commenced an arbitration that entails an undue joinder of Treaties and claims into a single proceeding before a single tribunal; (b) Rurelec is neither an ‘investor’
16 nor holds an ‘investment’ in Bolivia in the terms of the United Kingdom Treaty; and (c) Bolivia is entitled to deny the benefits of the United States Treaty to Guaracachi America pursuant to Article XII thereof” [Tribunal’s Translation].

30. By the the PCA’s letter dated 22 September 2012, the Respondent was informed that the abovementioned documents had been received and the Tribunal had decided to continue the proceedings pursuant to the timetables set forth in Procedural Orders Nos. 6 and 7.

31. By e-mail dated 23 September 2012, the Respondent informed the PCA that “it has made a formal request that a true bifurcation be ordered and that the scheduled deadlines regarding the merits of the case, including that of October 5, 2012 for the submission of the Respondent’ s Statement of Defense, be set aside”.

32. By the PCA’s letter dated 24 September 2012, the Respondent was informed that, the Tribunal, “considering that there are no new facts that would justify amending the calendars set forth in its prior orders”, maintained the deadlines established in Procedural Orders Nos. 6 and 7.

33. By letter dated 4 October 2012, the Respondent requested an extension of 10 days, until Monday, 15 October, to the deadline to file its Response on the merits on the following grounds: (i) the New Claims raised by the Claimants were sufficiently complex from a technical standpoint that their expert had been unable to complete his work; (ii) the expert appointed by the Respondent had only had one month and one week to prepare an answer to such report, whereas the Claimants’ expert had had at least 15 months between the submission of the Notice of Arbitration and the Statement of Claim to prepare his report; and (iii) were such extension to be granted, it would not affect the procedural calendar set forth in Procedural Order No. 6. Additionally, the Respondent proposed a new procedural calendar whereby, if the extension requested be granted, it would give up 10 days for the purpose of preparing its Rejoinder, thus ensuring that the Claimants’ right to file their Reply was not curtailed.

34. By subsequent e-mails of the same date, the Tribunal decided to grant the extension requested by the Respondent. Furthermore, it took note of the consequences suggested by the Respondent with respect to the reduction of the period for filing its Rejoinder.

35. By subsequent e-mail, the Claimants regretted not having had the opportunity to comment on the extension requested by the Respondent before the Tribunal decided thereon. On the other hand, they requested that the Tribunal grant a 10-day extension as from the date of receipt of the Statement of Defence, until 26 October 2012, to submit their Counter-Memorial on 17Jurisdiction, as otherwise they would have only 10 days as from the reception of the Statement of Defence to file their Counter-Memorial on Jurisdiction.

36. In response to this request, by e-mail dated 4 October 2012, Respondent informed the Tribunal that such an extension would affect the subsequent dates set forth in the procedural calendar, as Bolivia was to file its Reply on Jurisdiction on 31 October 2012, i.e., five days following receipt of Claimants’ Counter-Memorial on Jurisdiction. Accordingly, it argued that it should be able to file its Reply on Jurisdiction no earlier than 9 November 2012. However, in view of other commitments that posed a conflict with such date, it requested that, were the Claimants’ extension to be granted, it be allowed to submit its Reply on Jurisdiction by 23 November 2012.

37. By e-mail dated 5 October 2012, the Claimants consented to Bolivia’s proposal, provided that they were allowed to file their Rejoinder on Jurisdiction by 17 December 2012.

38. On 9 October 2012, the Tribunal issued Procedural Order No. 8. The Tribunal accepted, “as a strict and final exception”, the Respondent’s request that the deadline for the filing of its Statement of Defence be extended until 15 October 2012, together with the consequences suggested by the Respondent with respect to the reduction of the period for the filing its Rejoinder. Finally, the Tribunal accepted the agreement reached by the Parties with respect to the extensions for the filing of their submissions on jurisdiction. Therefore, a new schedule was established, for submissions on the merits as well as on jurisdiction. The calendar was as follows:

“a) On 15 October 2012, the Respondent shall file their Statement of Defence;

b) On 26 October 2012, the Claimants shall file their Counter-Memorial on Jurisdiction;

c) On 23 November 2012, the Respondent may file a Reply on Jurisdiction;

d) If a Reply has been filed, the Claimants may file a Rejoinder on Jurisdiction on 17 December 2012;

e) Once the Parties have fully pleaded the jurisdictional issues, as set forth in the above calendar, the Tribunal will decide whether (i) to bifurcate the proceedings and hold specific hearings on the jurisdictional issues, (ii) to refuse the requested bifurcation and therefore to decide on its own jurisdiction following the scheduled hearings on the merits, or (iii) to decide on its jurisdiction without the need for any hearing;

f) On 13 January 2013, the Claimants shall file Reply on the merits;


g) On 13 February 2013, the Respondent shall file a Rejoinder on the merits; and

h) On 14 March 2013, each Party shall provide, with a copy to the Tribunal and the PCA: (a) the names of the witnesses whose statement or report has been submitted by the other Party with the request that they be available for cross-examination at the hearing; and (b) as the case may be, a request for the Tribunal to permit the appearance at the hearing of witnesses whose statement or report has been submitted by the Party.”

39. On 15 October 2012, the Respondent filed its Statement of Defence, as well as the relevant supporting documents, as stated in Procedural Order No. 8.

40. By letter dated 19 October 2012, the Claimants acknowledged receipt of the foregoing documents and requested the valuation model prepared by the Respondent’s expert in electronic format.

41. On 22 October 2012, the Respondent made the valuation report available to the Claimants in electronic format as requested.

42. On 26 October 2012, the Claimants submitted their Counter-Memorial on Jurisdiction in accordance with the schedule set forth in Procedural Order No. 8.

43. On 23 November 2012, the Tribunal issued Procedural Order No. 9. The Tribunal accepted the possibility of holding a hearing on jurisdiction within the period between 21 January and 8 February 2013 and lasting a maximum of three days. However, it would not alter the dates scheduled for the hearing on the merits, if any was held. At the same time, it invited the Parties to make any comments on this proposal by 27 November 2012.

44. By e-mail dated 23 November 2012, the Respondent requested that the Tribunal grant a three-day extension, until 26 November 2012, for the submission of its Reply on Jurisdiction, as agreed upon with the Claimants, provided that they were granted an equivalent term to file their Rejoinder.

45. By subsequent e-mails of the same date, the Claimants confirmed and the Tribunal accepted the agreement to which the Respondent had made reference.

46. On 26 November 2012, in accordance with the abovementioned agreement, the Respondent filed its Reply on Jurisdiction.
47. By letter dated 27 November 2012, the Claimants submitted their comments as requested by the Tribunal under Procedural Order No. 9. In such regard, they informed the Tribunal that they would be unavailable on the dates proposed for the holding of a hearing on jurisdiction, due to other professional commitments, and they restated their position that a single hearing should be held on both jurisdictional objections and the merits of the case.

48. By letter of the same date, the Respondent also submitted its comments regarding a possible hearing on jurisdiction. In such respect, (i) it expressed its disagreement with the failure to suspend the hearing on the merits; (ii) it proposed that the hearing on jurisdiction be held on the dates scheduled for the hearing on the merits; and, finally, (iii) it informed the Tribunal that its representatives would be available for a hearing on jurisdiction on 4-5 February 2013, and suggested that it be held in Paris.

49. On 30 November 2012, the Respondent filed its Reply on Jurisdiction, together with all relevant supporting documents.

50. By letter dated 12 December 2012, the Claimants informed the Tribunal that Mercados Energéticos Consultores (hereinafter, “MEC”) no longer provided technical services to Compass Lexecon, given the alleged actions performed by Bolivia.

51. On 17 December 2012, the Tribunal issued Procedural Order No. 10, whereby it decided that no hearing on jurisdiction would be held and confirmed the extensions previously agreed upon by the Parties.

52. On 20 December 2012, the Claimants filed their Rejoinder on Jurisdiction, together with all relevant supporting documents.

53. By e-mail dated 2 January 2013, the Claimants informed the Tribunal that the Parties had reached an agreement on the submission of the Reply on the Merits. Thus, the Claimants would file their Reply on 21 January 2013, whereas the Respondent would file its Rejoinder on 20 February 2013. By subsequent e-mails of the same date, the Respondent confirmed and the Tribunal accepted such agreement.

54. By letter dated 2 January 2013, the Claimants informed the Tribunal of the Decision on Jurisdiction adopted in Teinver S.A. v. Argentine Republic dated 21 December 2012, as they deemed it relevant to certain key aspects of this arbitration.

55. By letter dated 14 January 2013, the Respondent provided its comments with respect to the Teinver S.A. v. Argentine Republic case.
56. On 21 January 2013, the Claimants filed their Reply on the Merits, together with all relevant supporting documents.

57. On 25 January 2013, the Tribunal issued Procedural Order No. 11. The Tribunal accepted the extensions previously agreed upon by the Parties and admitted the Parties’ allegations on the Teinver S.A. v. Argentine Republic case, which became an integral part of the their written submissions.

58. By subsequent letter from the PCA of the same date, the Parties were required to make an additional deposit so as to cover future arbitration expenses.

59. By letter dated 25 January 2013, the Respondent answered the Claimants’ letter dated 12 December 2012 regarding MEC. Bolivia denied the Claimants’ allegations concerning intimidation tactics or that it had caused MEC to resign from their role in this arbitration.

60. By e-mail dated 6 February 2013, the Respondent informed the Tribunal that the Parties had reached an agreement on an extension of the deadlines for the submission of the Rejoinder on the Merits.

61. By e-mail dated 7 February 2013, the Claimants confirmed the abovementioned agreement.

62. By letter dated 12 February 2013, the Respondent submitted a Request for a Document Production Order and a Request for Cautio Judicatum Solvi.

63. On 14 February 2013, the Tribunal issued Procedural Order No. 12, whereby it accepted the extension previously agreed upon by the Parties and urged the Claimants to comment on both Requests submitted by the Respondent.

64. By letter dated 15 February 2013, and within the term set forth in Procedural Order No. 12, the Claimants filed their Response to the Request for a Document Production Order.

65. By letter dated 20 February 2013, and within the term set forth in Procedural Order No. 12, the Claimants filed their Response to the Request for Cautio Judicatum Solvi.

66. On 21 February 2013, the Tribunal issued Procedural Order No. 13, whereby it accepted the abovementioned agreement reached by the Parties and decided not to order the Claimants’ production of the “agreement” and the “further documentation” requested by the Respondent. Moreover, it confirmed that there was no conflict of interest whatsoever between the Tribunal and Salvia Investments (the funder).

67. By the PCA’s letter dated 1 March 2013, the Tribunal accepted that the hearing be moved to Paris and held on 2-6 April, with 8 April held in reserve.
68. By subsequent e-mails, the Parties agreed that the hearing be held in Paris on 2-5 and 8 April, with 9 April held in reserve. Furthermore, the Respondent informed the Tribunal that the Parties had reached an agreement on a brief extension of the deadline for the submission of the Rejoinder on the Merits.

69. As previously agreed upon, on 3 March 2013, the Respondent filed its Rejoinder on the Merits.

70. By letter dated 3 March 2013, the Respondent requested that the Tribunal declare inadmissible the excerpts of the reports of Mr Abdala from Compass Lexecon that had been prepared first by MEC and later by Estudios de Infraestructura (hereinafter, “EdI”), since the individuals who had prepared these had not been identified.

71. On 11 March 2013, the Tribunal issued Procedural Order No. 14, wherein it dismissed the Request for Cautio Judicatum Solvi, due to insufficient evidence of the Claimants’ alleged insolvency.

72. On 11 March 2013, the Tribunal issued Procedural Order No. 15. The Tribunal confirmed the prior agreement and accepted that the hearing be held in Paris on the dates agreed upon by the Parties. In addition, it requested that, by 14 March 2013, the Parties submit the lists of their respective witnesses and experts who would appear during the hearing, and proposed that a telephone conference call be held among the Tribunal, the PCA and the Parties on 26 March 2013.

73. By letter dated 14 March 2013, the Claimants responded to the request that the excerpts of the Compass Lexecon Report that had been prepared by both MEC and EdI be declared inadmissible. They opposed Bolivia’s request and argued that the Respondent itself had also failed to identify the individuals who had prepared the relevant excerpts of reports attributed to the Comité Nacional de Despacho de Carga (hereinafter, the “CNDC”).

74. By letters dated 14 March 2013, both Parties provided the Tribunal with their respective lists of witnesses and experts.

75. On 21 March 2013, the Tribunal issued Procedural Order No. 16, whereby it decided that it would be useful to have representatives of MEC, EdI, and CNDC appearing at the hearing. For such purpose, it requested that the Parties contact the relevant representatives and provide the Tribunal with their contact details by 25 March 2013. The PCA contacted MEC’s representative.
76. On 26 March 2013, in accordance with Procedural Order No. 15, the aforementioned telephone conference call was held among the Tribunal, the Parties, and the PCA.

77. On 27 March 2013, the Tribunal issued Procedural Order No. 17, wherein it settled the matters on which agreement could not be reached between the Parties during the telephone conference call, including, inter alia, the duration of opening statements, the scope and allocation of time for the examination of witnesses and experts, and the submission of new documents by the Claimants. With respect to the latter, the Tribunal decided to allow the Claimants to submit the new documents and that the Respondent should be granted an opportunity to comment on these.

78. As stated in Procedural Order No. 17, the Claimants submitted their new documents on 27 March 2013, whereas the Respondent provided its comments on these on 28 March 2013.

79. By letter dated 29 March 2013, the Claimants requested that the Tribunal allow them to respond to the submissions made by the Respondent with its comments of 28 March 2013. Moreover, considering the length of these submissions, the Claimants requested that the Respondent identify the excerpts of Professor Damodaran’s work on which it intended to rely during the hearing.

80. By subsequent e-mail of the same date, the Tribunal concluded that there was no need for additional comments by the Claimants and decided to admit the documents submitted by them, with the exception of Exhibits C-363 to C-367. The Tribunal also decided to the documents submitted by the Respondent, with the exception of Exhibit R-169.

81. On 1 April 2013, the Tribunal issued Procedural Order No. 18, whereby it confirmed the foregoing decision and requested that the Respondent identify the excerpts of Exhibits R-170 and R-171 on which it intended to rely during the hearing.

82. On 2-5, 8 and 9 April 2013, the hearing on jurisdiction and the merits was held in Paris.

83. On 12 April 2013, the Tribunal issued Procedural Order No. 19, whereby it confirmed the agreement reached by the Parties for the submission of their post-hearing briefs.

84. By e-mails dated 17 May 2013, both Parties sent their agreed corrections to the transcripts to the Tribunal.

85. By e-mails dated 24 May 2013, the Parties informed the Tribunal that they had agreed to submit their post-hearing briefs one week later than the date established in Procedural Order No. 19. The Tribunal accepted this agreement by subsequent e-mail.
86. On 31 May 2013, both Parties submitted their post-hearing briefs and costs submissions, together with all supporting documents.

87. By letter dated 24 June 2013, the Claimants submitted a copy of the award in Liman Caspian Oil v. Kazakhstan.

88. By the PCA’s letter dated 26 June 2013, the Respondent was invited to comment on the Claimants’ letter, noting that following receipt of the Respondent’ s comments, the proceedings would be deemed closed.

89. By letter dated 30 June 2013, the Respondent commented on the Claimants’ letter and the Claimants’ costs submission.

90. By letter dated 8 July 2013, the Claimants objected to the content of the Respondent’s letter.

91. By e-mail of 9 July 2013, the Presiding Arbitrator noted the Claimants’ letter and the proceedings were thus closed.

92. By letter dated 20 December 2013, the Respondent requested that the Tribunal re-open the proceedings and allow the submission of certain materials relating to Mr Abdala’s participation in the Pan American Energy v. Bolivia proceedings.

93. By letter dated 27 December 2013, the Claimants’ opposed the Respondent’s request to re-opne the proceedings.

94. On 2 January 2014, the Tribunal issued Procedural Order No. 20, wherein it declined to re-open the proceedings.



95. GAI, a company incorporated in the United States of America, and Rurelec, a company constituted under the laws of the United Kingdom, acting in their capacity as Claimants in these arbitration proceedings, submit claims for economic compensation against the Plurinational State of Bolivia, by virtue of their status as investors from the United States and the United Kingdom in accordance with the Treaties between these two States and Bolivia.
96. The Claimants have brought these arbitration proceedings in order to obtain compensation from Bolivia for the damages allegedly caused by modifications made to the regulatory framework of the electricity sector, the failure of the Bolivian judiciary to provide justice and, ultimately, the nationalisation of both investors’ 50.001% interest in EGSA.


97. According to the Claimants, during the 1980s, Bolivia faced an economic crisis marked by a drop in investments, savings, exports, consumption, and a decreasing GDP, as well as by periods of hyperinflation, a large foreign debt, etc. This situation also threatened to produce an imbalance in the balance of payments, which would render any attempt at the future growth of the county impossible.3

98. Therefore, the Claimants state that, in 1985, the Bolivian Government, with the support of several multilateral organisations and agencies, decided to implement a structural adjustment program consisting in the elimination of local price controls, the reduction of tariffs, the encouragement of currency floating, the promotion of the private sector, the privatization of State-owned companies, and the reduction of the degree of economic regulation.4

99. Starting in 1991, the effects of the adjustment program could be clearly observed. As of that year, according to Claimants, the Bolivian economy experienced considerable growth. This development also coincided with funding from international institutions to boost the Bolivian economy, in turn benefiting the electricity sector, to which part of such funding was allocated.

100. Nonetheless, from the Claimants’ viewpoint, the funds allocated were not enough. Bolivia’s electricity sector accounted for 50% of the country’s exports, and took up 40% of public investment. This meant that, without a continuous injection of funds from international institutions, the sector was at constant risk.5  

101. While the Respondent asserts that Bolivia electricity sector at the time was sustainable,6 the Claimants allege that the electricity sector faced various problems, such as a worldwide lack of funding (which entailed the reduction of multilateral funding for the electricity sector), the freezing of new investments (due to the suspension during the economic crisis of the
25application of the 9% rate of return on investment established in the National Electricity Code), and the limited technical abilities of the National Electricity Management Agency, the entity responsible for the regulation of electricity services.7

102. The Claimants contend that these difficulties forced the Bolivian electricity sector and the National Electricity Company (Empresa Nacional de Electricidad, hereinafter, “ENDE”), the State electricity producer into a difficult financial position and made it necessary to restructure the sector with the benefit of financial aid and technical capacity from foreign investors.8

103. However, the Respondent asserts that ENDE was the largest electricity generator in the country and also had highly qualified personnel9 and modern electrical units. Moreover, ENDE had reported positive financial results until 1995 (the year of the capitalization) and had a generation capacity of 498 MW.10  

104. The Claimants deny that ENDE enjoyed such a good position and argue that its financial results do not entirely reflect the reality of the situation. Thus, between 1986 and 1993, the Government had to absorb part of ENDE’s debt, covering its liabilities by using USD 102 million of YPFB and treasury funds. Furthermore, contrary to Bolivia’s assertions,11 the joint report of the United Nations Development Program (hereinafter, “UNDP”) and the World Bank described ENDE’s financial position as “strained”.12 Therefore, a considerable injection of funds was necessary to ensure the preservation of the electricity sector in Bolivia.

105. The Respondent for its part denies the foregoing assertions and reaffirms that ENDE yielded positive financial results as set forth in its annual reports. In addition, the Respondent asserts that the Bolivian electricity sector was able to finance itself, except for the period used by the Claimants (1983-1985). In fact, the UNDP and World Bank deemed ENDE to be one of the most efficient electricity generation and transmission companies.13


1. Legal Framework

106. At the beginning of the 1990s, Bolivia implementedbroad reforms aimed at attracting foreign investors and establishing a new regulatory framework that would foster the involvement of the private sector and competition in the energy sector and, in particular, in the electricity industry.14  

107. In this vein, in September 1990, Bolivia enacted Law No. 1182 (hereinafter, the “Investment Law”) for the purposes of “stimulating” and “ensuring” national and foreign investments in Bolivia, as reinforced by treaties.15  

108. Subsequently, in 1992, Bolivia passed Law No. 1330 (hereinafter, the “Privatization Law”), chiefly targeted at the privatization of small State-owned enterprises.

109. In 1994, the Bolivian Government enacted a new law, Law No. 1544 (hereinafter, the “Capitalization Law”), through which the private sector was allowed through international public tenders to bid for equity offerings and thus acquire shares in the main State-controlled entities,16 including ENTEL (telecommunications), YPFB (hydrocarbons), ENDE (generation and transmission of electricity), ENAF (mineral-ore processing), LAB (airlines), and ENFE (railways).17

110. The statutory privatization scheme allowed private investors to acquire a 50% interest in the abovementioned entities, as well as to obtain control over the management of the relevant State-owned companies in exchange for a certain amount of capital. The remaining 50% (which investors were not allowed to acquire) was allocated to a public fund, created to guarantee Bolivian pensions.18

111. The cornerstone of the regulatory framework was Law No. 1604 of 1994, (hereinafter, the “Electricity Law”), which established the basic framework for the supply of electricity. In addition, an independent entity was created, the Electricity Superintendency (Superintendencia de Electricidad, hereinafter, the “SSDE”), charged with the enforcement
27of the Electricity Law and the management of the electricity sector,19 and the National Power Dispatch Committee (Comité Nacional de Despacho de Cargal, hereinafter, the “CNDC”), subject to the oversight of the SSDE.20  

112. Afterwards, as further development of the objectives of the Electricity Law, the Wholesale Electricity Market Operation Regulations (Reglamento de Operación del Mercado Eléctrico Mayorista, hereinafter, “ROME 1995”) and the Prices and Tariffs Regulations (Reglamento de Precios y Tarifas, hereinafter “RPT 1995”) were jointly issued in 1995.21 Finally, in 2001, Supreme Decrees No. 26093 and No. 26094 published a new ROME and RPT (hereinafter, “ROME 2001” and “RPT 2001”),22 which replaced the prior ones.

2. Guarantees Afforded by the Regulatory Framework

113. The new regulatory framework included a series of guarantees based on the principles of efficiency, transparency, quality, continuity, adaptability and neutrality, enshrined in Section 3 of the Electricity Law.23

114. These guarantees were in line with the guidelines laid down by the UNDP and the World Bank, which may be summed up as follows: “(a) ensure that the interconnected system would be operated at the minimum level of cost following appropriate reliability and environmental standards; (b) promote—through competition and private sector participation—an efficient and reliable electricity supply and the efficient use of electricity; (c) open the sector to private initiative and strengthen market competition, open access to networks, improve efficiency, and attract fresh capital for its development; (d) set tariffs that reflect operational and financial costs, while adopting an explicit and direct system of subsidies for basic supplies of electricity to target low income households, and for the expansion of the service; (e) establish a regulatory, institutional and legal environment to enable the utilities to compete on equal basis; and (f) ensure that these policy directives would be followed through the creation of an effective, transparent and independent regulatory framework that clearly states the rights and responsibilities of the different sector players.24


115. The Capitalization Law provided for the transfer of the assets of State-owned enterprises, including ENDE, to new companies that would receive an inflow of private capital through an international public tender process.

116. Additionally, the Electricity Law set forth that the Interconnected Electricity System (Sistema Interconectado de Electricidad; hereinafter, “SIN”), which had been until then composed of vertically-integrated companies, would now be split into generation companies, transmission companies, and distribution companies. Thus, the assets of ENDE were separated and three new generation companies were created: Corani, Valle Hermoso, and EGSA. Three power plants belonging to ENDE were transferred to the latter company: Guaracachi in Santa Cruz, Aranjuez in Sucre, and Karachipampa in Potosí.25

117. In 1994, the international public tender process, in which 50% of the capital of EGSA was tendered, was commenced.


118. On 29 June 1995, Energy Initiatives, Inc., a US subsidiary of General Public Utilities Power Inc. (hereinafter, “GPU”), was declared the successful bidder in the abovementioned international public tender, with a bid of USD 47.13 million in exchange for a 50% shareholding in EGSA, which at that time held the three aforementioned gas plants.26

119. Pursuant to the Terms and Conditions of the tender, the successful bidder could be—or, in the Claimants’ opinion, had to be—a company whose sole purpose was to hold the shares of the company which was the subject of the tender.27 Accordingly, Energy Initiatives set up a subsidiary, GAI, one of the Claimants in these proceedings.28  

120. Later, on 28 July 1995, after EGSA was granted an electricity generation license for a period of 30 years for each of the plants (renewed for 10 additional years) as well as license agreements, Bolivia, GAI, and EGSA entered into a Capitalization Agreement. This Agreement provided that payment had in fact been made and determined the allocation of
29the new capital: 90% was to be allocated, within seven years, to capital investments that would increase generation capacity.29  

121. In 1998, in order to increase electricity generation capacity, EGSA’s shareholders and Board of Directors30 approved the purchase of two General Electric 6FA industrial gas turbines, known as GCH-9 and GCH-10. These were installed in the Santa Cruz plant and started operating in 1999. According to the Claimants, this constituted a new investment of USD 65 million and produced a capacity increase of 149.9 MW.31

122. This meant that, by 1999, EGSA had an aggregate capacity of 397.6 MW and had made, according to the Claimants, investments of USD 72.2 million in Bolivia (representing 154.3% of the USD 47.1 million in new capital which EGSA had received).32 Given that these investment exceeded those required by the 90% investment obligation established in the Capitalization Agreement, GAI was allowed to acquire in 1999 an additional 0.001% of EGSA’s capital, thus gaining control over the company33 and over the appointment five out of seven members of the Board.

123. In 2001, GPU merged with First Energy Corp., another US company. Then, in 2003, First Energy Corp. sold its interest in GAI to Bolivia Integrated Energy Limited (hereinafter, “BIE”), a British Virgin Islands company which is itself a subsidiary of Integrated Energy Limited (hereinafter, “IEL”), a company incorporated in the United Kingdom.34
124. On 8 October 2004, by means of a sale agreement between Rurelec and EGSA, Rurelec acquired Energía para Sistemas Aislados ESA S.A. (hereinafter, “ESA”), a subsidiary of EGSA which was subsequently converted by Rurelec into Energais.35

125. According to the Claimants, a few months later, in 2005, Rurelec, through its wholly owned British Virgin Islands subsidiary Birdsong Overseas Limited (hereinafter “Birdsong”), entered into an agreement with IEL for the acquisition of 100% of the shares of BIE for USD 35 million, thereby indirectly acquiring 100% of GAI.36 According to the Claimants, this sale closed on 6 January 2006, after which Rurelec had acquired indirect ownership, through Birdsong and BIE, of 100% of GAI.37 Nonetheless, the Respondent argues, based on the documents submitted by the Claimants, that the sale—if there really was any—was not
31completed before 29 June 2009. Accordingly, the alleged investments by EGSA prior to that date cannot be attributed to Rurelec in any way.38  

126. The Claimants state that, with Rurelec as the new major shareholder, EGSA increased its electricity generation capacity to 185MW, investing another USD110 million. In particular, between 2006 and 2008, new technology was incorporated (seven Jenbacher natural gas engines for the Aranjuez plant and a new GE 6FA gas turbine for the Guaracachi plant).39 In addition, in 2009, EGSA completed the construction of its fourth electricity generation plant—the second in the city of Santa Cruz—known as the Santa Cruz co-generation plant. The new plant had two turbines, GHC-7 and 8, which had to be moved out the Guaracachi 32plant to make space for the Combined Cycle Gas Turbine project (hereinafter, “CCGT”). These works involved an additional investment of USD 3.5 million.40

127. It bears noting that, following the installation of new Jenbacher engines in the Aranjuez plant, EGSA removed and sold four Worthington engines (which were older and ran on diesel, thereby consuming a larger amount of fuel). Rurelec purchased two of them through the acquisition of EGSA’s subsidiary, Energais,41 for USD 550,000. Once decommissioned, the engines were dismantled and stored in the EGSA’s facilities in Sucre. The other two engines were sold to European Power Systems AG (hereinafter, “EPS”).42  

128. The last technological project undertaken by EGSA was the CCGT. This project began in 2007 and was scheduled to start operations in May 2010. However, it was then postponed to November, which deadline was not met either. The purpose of the project—apart from obtaining better economic and financial results—to enhance the sustainable development of Bolivia through the development of state-of-the-art combined cycle technology, in accordance with the United Nations Framework Convention on Climate Change.43 This project resulted in a series of financial benefits for EGSA, which, according to the Claimants, would be shared with the State (through the Vice-Ministry of Environment and Territorial Planning)in 2007, in accordance with the applicable rules.44  

129. Furthermore, EGSA participated in certain projects to provide electricity to certain portions of the Bolivian population who were not receiving adequate supply (the so-called Rural Electrification Projects45 ). Since 2006, EGSA also subsidized low-income residential consumers by approximately USD 2.7 million through the so-called “Dignity Tariff”, which was renewed in 2010 through the Dignity Tariff Agreement.46

130. The Respondent alleges that, with the exception of the USD 47 million paid by GAI in 1995 for the capitalization of EGSA, the Claimants have made no capital contribution of their own. Rather, all of the abovementioned investments in new electricity generation capacity were funded either with the resources of EGSA itself or with banking debt incurred by it. 33Additionally, the Respondent contends that several developments led to the depletion by 2007 of the operating capital of EGSA, leading EGSA to see its value progressively reduced until the date of the nationalisation.47  

131. In addition, the Respondent maintains that the CCGT project was considerably delayed, over budget, and totally unfinished at the time of the nationalisation.48 On the other side, the Claimants argue that the amounts invested in this project were in line with the budget approved by the shareholders and directors of EGSA (which was increased in 2008 and approved again) and included a further increase in power with respect to what was initially forecasted. Moreover, the project was 95.1% completed by the time of the nationalisation.49

132.The Respondent nevertheless considers that there is witness and documentary evidence which has not been challenged by the Claimants that proves their assertions.50  


133. The Claimants assert that GAI invested in EGSA on the basis of the regulatory framework developed since 1990 and the guarantees provided thereby. Later, Rurelec decided to invest (as further detailed below) in EGSA on the basis of the existing regulatory framework and the guarantees, as well as Bolivia’s purported commitment (in the 2006 Dignity Tariff Agreement, renewed in 2010) to maintain the regulatory framework described above.51
134. Nonetheless, despite this purported commitment, Bolivia proceeded to modify the regulatory framework as of 2007 in respect of the method of compensation and ultimately proceeded with an unexpected total nationalisation of the sector.52  

135. The Respondent disagrees with the Claimants’ view. To start, it denies that there was any creeping expropriation commencing with the amendment to the regulatory framework and completed with the nationalisation of EGSA.53 A creeping expropriation is characterized by “a set of measures that, in isolation, do not have the effect of expropriating the investment, but do have that effect when taken together” [Tribunal’s Translation]. There is no such thing in the present case: the Nationalisation Decree did not constitute the final step of a creeping expropriation.54  

136. According to the Respondent, the Dignity Tariff Agreement did not contain a stabilization clause55 and the first owners of GAI had already envisaged the possibility of a nationalisation, given that Power Inc., a company belonging to the GPU Group, contracted a policy against expropriations with the Overseas Private Investment Corporation (hereinafter, “OPIC”) on 27 December 1995.56 In addition, the nationalisation was included in the 2006-2010 Government Program (in line with the nationalisation policy developed by Evo Morales), was openly discussed by the press, and was addressed in negotiations between EGSA and the Ministry of Hydrocarbons and Energy in early 2009 (and not in 2008, nor lasting until April 2010, as the Claimants alleged) in which, among other matters, the possibility that the State obtain a majority interest in EGSA was discussed.57  

137. Lastly, the Respondent maintains that Bolivia made no guarantee that it would not nationalise of the electricity sector58 and, in any event, the Claimants have not submitted any evidence of such.59

1. Modification of the Capacity Price Calculation

138. The first modification of the regulatory framework which allegedly affected the Claimants’ investment is that related to the capacity price (hereinafter, “PBP”).60  

139. Initially, the calculation method was established by both ROME 1995 and RPT 1995. The starting point for the calculation of the capacity price was the FOB price of a new generation unit, a turbine. Certain additional costs related to its installation, connection, and entery into operation were added to the FOB price. These additional costs could not exceed 50% of the equipment’s catalogue value. A “discount rate” (“tasa de actualización”) established by the Elecricity Law was then used to convert this total investment cost for new equipment into a monthly sum equivalent to one kilowatt of installed capacity.61  

140. Subsequently, ROME 2001 and RPT 2001 introduced a number of modifications regarding the PBP calculation.62 Such modifications were developed in Operating Norm No. 19/2001, issued by the CNDC (Resolution approved by the SSDE No. 121/2001). Nevertheless, the most relevant aspect to bear in mind in these proceedings is the introduction by means of this Operating Norm of a new “complementary equipment” category to be considered in the calculation of the Total Cost of the Investment (neither of ROME 2001 nor in RPT 2001 having made any provision therefor). This new category entailed a 20% increase of the FOB price,63 added prior to the application of the 50% factor mentioned above.64 This implied that the investment cost could reach up to 180% of a certain turbine’s FOB price.65

141. Following subsequent modifications to Operating Norm No. 19/2001,66 on 8 February 2007, the CNDC issued Operating Norm No. 19/2007 (Resolution approved by the SSDE
36No. 040) by which the 20% “complementary equipment” head was eliminated from the PBP calculation.67  

142. According to the Claimants, this measure resulted in a 17% decrease in capacity prices and had a considerable impact on EGSA’s cash flows. The Claimants also allege that the Resolution failed to comply with procedural requirements set forth in the law.68 However, according to the Respondent, the creation of the “complementary equipment” head was due to certain specific circumstances.69 The Respondent thus proceeded with its elimination, once these specific circumstances had ceased to exist and in accordance with a study performed by the consulting firm Bates White, since there was no longer any economic justification to add a further 20% “complementary equipment” amount to the turbine’s FOB price prior to adding the 50% for additional costs.70  

143. On 22 March 2007, EGSA commenced an administrative proceeding before the Superintendency of Electricity against the abovementioned measure. On 10 May 2007, the motion was denied in Resolution SSDE No. 54/2007. On 31 May 2007, EGSA filed an appeal of this decision before the Sistema de Regulación Sectorial (hereinafter, the “SIRESE”). This motion was again denied in Resolution No. 1612. Consequently, on 3 April 2008, EGSA filed an action before the Supreme Court of Bolivia. In parallel, EGSA also commenced a proceeding regarding the alleged procedural faults of Resolution SSDE No. 040, which had been implemented by Resolution CNDC 209/2007. Both proceedings are still pending.71  

2. Modification of the Spot Price Calculation

144. The second modification having allegedly affected the Claimants’ investment is that relating to spot prices. Initially, ROME 1995 and RPT 1995 established the price to be paid to generators for power dispatched in the spot market.72 The CNDC determined the spot price by calculating the total remuneration for each plant73 using the integral of the power injected
37into the Main Interconnection System over an hour’s time, multiplied by the Short Term Marginal Cost of Power.74 The Marginal Cost was in turn established by the Last Marginal Generation Unit.75  

145. Following the signature in 1999 of the licenses authorizing EGSA to carry out power generation activities for a 30-year term, the CNDC adopted Operating Norm No. 3/1999 (Resolution approved by SSDE No. 266/1999), which established that all Thermal Units required to cover power demand during peak hours could be deemed the Marginal Generation Unit.76 Afterwards, with the enactment of ROME 2001 and RPT 2001, the spot price calculation method was adjusted, setting forth a new definition of Marginal Cost which excluded Forced Generation Units, i.e. those which, for technical reasons, were required to dispatch in a specific geographic area despite other lower-cost sources of power supply within the SIN.77  

146. Following an additional modification made in 2003 in Operating Norm No. 3/ 1999,78 in June 2008, the Bolivian Government amended Operating Norm No. 3 again in Supreme Decree No. 29599, which was subsequently adopted by Resolution approved by the SSDE No. 283/2008. This new amendment excluded liquid fuel units (such as diesel) as potential Marginal Generating Unit.79  

147. According to the Claimants, this change caused a reduction in the profit margin of the most efficient companies (such as EGSA).80 However, from the Respondent’s point of view, the main objective of the change (adopted in consultation and with the agreement of electricity sector companies themselves81 ) was to optimize the pricing system in accordance with the
38principle of supply efficiency (Article 3 of the Electricity Law) and to further environmental policy goals.82

148. According to the Respondent, such a change was necessary (as stated by the regulators of the electricity market) in order to put an end to the perverse effect produced by the least efficient units, which distorted the spot price of electricity and produced a windfall profit for all electricity producers, to the detriment of consumers. The above change thus created an incentive for generation companies to replace obsolete diesel generators and install new units.83  

149. As stated by the Claimants, the inefficient units to which Bolivia refers84 were inherited by EGSA and subsequently put on sale in 2004 through ESA, but EGSA was prevented from concluding such sale at the last minute. In any case, the Claimants assert that, given the creation in 2003 of the stabilization fund for electricity prices, consumers were not prejudiced by the regulatory framework that was in place prior to the introduction of Resolution No. 283.85 Moreover, it is also not true that the pre-existing regulatory framework created incentives for the use of inefficient generation units, but quite the contrary.86  

150. Nevertheless, the Respondent insists that the Claimants are wrong. Even if the stabilization fund was aimed at preventing excessive variations in electricity prices for consumers, the purpose of the spot price modification was very different. It sought to prevent price distortion by excluding certain motors from the calculation of marginal costs because they were excessively inefficient. In addition, many other countries have adopted a similar measures, which shows that this measure is reasonable.87

3. Nationalisation of EGSA by Bolivia 

151. According to the Claimants’ version of events, on 1 May 2010, at about 6:00am, Bolivian military personnel appeared suddenly and without warning and forced their way into
39EGSA’s offices.88 A banner was put up with the message “NACIONALIZADO” (“NATIONALISED”) and another one with the acronym of ENDE. In addition, on that same day, President Evo Morales issued Supreme Decree No. 0493 (hereinafter, the “Nationalisation Decree”), ordering the nationalisation of the 100% of GAI’s shareholding in EGSA and transferring these shares to ENDE.89  

152. Nevertheless, the Respondent maintains that the nationalisation was foreseeable and “it was performed in a peaceful and orderly manner” and military personnel was only used in order to “guarantee the peaceful transfer of the company’s control and avoid thefts during the transition of materials or information that would prevent EGSA from continuing operations” [Tribunal’s Translation]. In short, it was a normal procedure.90

153. Following the facts described above, EGSA’s senior staff was called to a meeting, and ENDE proceeded, in accordance with Article 3 of the Nationalisation Decree,91 to the appointment of a new financial manager and legal advisor, which office was entrusted to Mr Jerges Mercado.

154. Pursuant to the provisions set forth in Article 2(III) of the Nationalisation Decree, ENDE was to pay for the expropriation of GAI. Such compensation was to be determined through a valuation process (carried out by an entity selected by the Government) with a maximum duration of 120 days, at which time payment was to be made.92 Additionally, Articles 2(V) and 5 provided that liabilities incurred by EGSA (including financial, tax, environmental liabilities, etc.) would be deducted from the amount of compensation to be established.93  

155. Between July 2010 and March 2011, the Claimants assert that four meetings were held between Rurelec and certain Government representatives—including the Minister of Hydrocarbons and Energy, the Vice Minister of Electricity, the Attorney General, and ENDE’s General Manager, amongst others—in order to try to reach an agreement and have
40the Bolivian authorities make an offer of compensation for the expropriation. Nevertheless, according to the Claimants, in only one of the meetings (held on 8 November 2010) the Claimants were informed of EGSA’s purported negative value (an assertion which was not repeated in subsequent meetings). In the end, no offer of compensation was made.94

156. In response to the Claimants’ assertions, the Respondent insists that Bolivia followed the procedure legally set forth for the fixing of fair compensation due to the Claimants. In this vein, it retained an independent consulting firm in July 2010 to perform the statutory audit (which was eventually prepared by PROFIN Consultores S.A. within the 120-day deadline)95 and held five (and not four) meetings for the determination of fair compensation.96 The problem was that EGSA had a negative value and Bolivia therefore had no obligation whatsoever to provide compensation.97  

157. The Claimants assert that EGSA’s profits amounted to USD 5.8 million in 2010, as stated in the financial statements which were approved by the Board of Directors in March 2011 following a positive assessment by PriceWaterhouseCoopers.98 Despite such approval, on 20 April 2011, Nelson Caballero, head of ENDE, requested a new audit of EGSA’s Financial Statements for 2010. According to the Claimants, this new audit sought to reduce EGSA’s profits and thereby indirectly reduce the amount of compensation that the Claimants would receive for the expropriation. The second audit reflected a loss of USD 2.3 million.99 The Respondent does not deny that this second audit took place, but it insists that it was totally unrelated to the nationalisation, and that it did not have the objective that the Claimants allege it had.100  

158. Following EGSA’s nationalisation, Energais requested the release of the Worthington engines so that they could be shipped to its facilities located in Argentina. However, according to the Claimants, such request was denied, since EGSA’s Board of Director and its
41General Manager considered, pursuant to Decree No. 0493, that those assets had also been nationalised and, thus, belonged to the Bolivian State.101

159. Given the above, Energais and Rurelec’s lawyers sent various letters to the Government requesting the return of the engines, since they considered that they could not have been included within the Nationalisation Decree given that title thereto had been transferred to Energais in 2004.102

160. The Respondent acknowledged during the arbitral proceedings that Bolivia had never expropriated the engines and offered to return them to the Claimants.103 This offer was subsequently accepted by the Claimants during the hearing. This claim was therefore withdrawn by the Claimants from the present arbitration,104 as has also been confirmed by the Respondent.105


161. The dispute concerning this arbitration is grounded on the alleged violation by Bolivia of certain provisions of the US-Bolivia BIT and the UK-Bolivia BIT.


162. The relevant provisions of the BIT are shown below in both authentic versions thereof:



163. The relevant provisions of the BIT are shown below in both authentic versions thereof:




The Respondent’ s Arguments

164. The Respondent claims it has not provided its consent for investors from the United States and investors from the United Kingdom to join or consolidate claims arising under different BITs into a single arbitration proceeding before a single tribunal. Likewise, it considers that it is for the Claimants to prove such consent on the part of the Respondent.106  

165. Nevertheless, the Respondent asserts that neither Article IX of the US-Bolivia BIT nor Article 8 of the UK-Bolivia BIT (invoked by the Claimants107 as governing consent in the context of these proceedings) contain Bolivia’s consent to jointly settle disputes between foreign investors and Bolivia on the basis of a treaty other than the one applicable to such foreign investors.108  

166. In addition, Bolivia deems the dispute settlement provisions in the Treaties to be incompatible, as under the US-Bolivia BIT only the national or company who is a party to a dispute against the State may commence arbitration, while the UK-Bolivia BIT allows either Party to do so. This means that Bolivia may file counterclaims against investors under the UK-Bolivia BIT, but lacks such power under the US-Bolivia BIT.109  

167. Consequently, the Respondent believes that the Tribunal lacks “rationae voluntatis” jurisdiction over the present dispute, given the Claimants’ failure to provide sufficient evidence of the Respondent’s consent thereto. As explained by international case law and legal scholars, and in accordance with the treaty interpretation provisions set forth in Articles 31 and 32 of the Vienna Convention on the Law of Treaties (hereinafter, the “VCLT”), no two claims may be joined or consolidated into a single proceeding without the express consent of the State.110
168. In the Respondent’s view, the Claimants draw a distinction between “consolidation” and “joinder” [Tribunal’s translation] of claims,111 according to which only consolidation requires the express consent of the State.112 However, the Claimants fail to explain why such consent is not necessary in the case of a joinder of claims.113  

169. Thus, the Respondent considers that the scope of State consent under a treaty may not be unilaterally modified by an investor,114 but rather, that such consent is determined by the scope of the offer to arbitrate made by the State (Bolivia) under the relevant treaty. Therefore, the investor may only accept what has been offered by the State,115 and Bolivia has made no offer in these proceedings that would allow the Claimants to choose whether to commence one or two arbitration proceedings.116

170. Furthermore, the Claimants state that Bolivia has quoted no legal authority whatsoever in support of its objection on lack of consent to consolidation.117 Nonetheless, the Respondent believes that such an assertion entails a “false debate” [Tribunal’s translation], as it is “absurd” [Tribunal’s translation] to require that consent to a tribunal’s jurisdiction be supported by a legal authority.118

171. On the other hand, the Respondent considers that the cases on which the Claimants rely are fundamentally different from these proceedings: in such cases, States did not object to the tribunal’s jurisdiction on the basis of a lack of consent to the joinder of disputes.119 Therefore, the “implied” [Tribunal’s translation] State consent in such cases cannot be applied to these proceedings, modifying the scope of Bolivia’s consent.120 Likewise, the Respondent submits that in Duke Energy the relevant treaties were binding upon the same
parties,121 whereas in these proceedings each Claimant invokes a different consent pursuant to a different Treaty.122 

172. Similarly, the Respondent contends that Bolivia’s consent cannot not be presumed, since, as other investment tribunals have held, State consent must be “certain and unambiguous” [Tribunal’s translation].123 To hold otherwise would suggest that a State party to a treaty consents to everything that is not expressly prohibited therein, which the Respondent describes as “absurd” [Tribunal’s translation].124 

173. Lastly, Bolivia submits that its consent cannot be overlooked because of procedural efficiency considerations. According to the Respondent, the Claimants confuse procedural matters under Article 17(1) of the UNCITRAL Rules with other jurisdictional matters (the inexistence and scope of Bolivia’s consent).125 Accordingly, the UNCITRAL Rules do not allow a tribunal to dismiss State consent, but rather confirm that such consent is necessary under Article 17(5) thereof. Finally, Bolivia believes that should a Party be excluded from the proceedings, such Party should be Rurelec.126

The Claimants’ Arguments

174. The Claimants allege that that there has been no consolidation of claims in these proceedings. According to the legal authorities and case law submitted by the Claimants, “consolidation” is defined as “a procedural device combining two or more proceedings into one proceeding with the result that the other tribunals cease to function, and therefore express consent is required to consolidate proceedings.”127 From the Claimants’ standpoint, however, these proceedings present a different situation involving two investors who have decided to jointly submit several claims in the context of a single proceeding. As a result, the case law on which Bolivia relies cannot be applied to the present case, as it deals with the consolidation of two separate arbitrations into a single proceeding.128 
175. Similarly, the Claimants contest Bolivia’s argument that the Tribunal lacks jurisdiction over the dispute given the lack of express consent by the State to a joinder of claims in a single proceeding when such claims have been brought by different claimants under different treaties. They allege that the Respondent has failed to invoke any case law or legal authorities in support of its position because there is no precedent in which claims brought by different claimants have been dismissed on the grounds of their joint submission.129 

176. Instead, the Claimants submit that in multi-party arbitrations claims are often submitted jointly, even under different legal instruments, provided these are compatible (as the Claimants believe is the case in these proceedings with the US-Bolivia and UK-Bolivia BITs).130 The Claimants further oppose the possibility that a counterclaim be filed under the UK-Bolivia BIT. In fact, the only incompatibility alleged by Bolivia131 does not exist, as the Claimants have submitted the dispute under the relevant dispute settlement provisions set forth in each Treaty.132 

177. Finally, the Claimants consider that, in the interest of justice and efficiency, the Tribunal should settle the dispute in a single proceeding, since a separate filing of claims would require the Claimants to invest much more money and effort and would lead to double proceedings and to a possible inconsistency between future awards. Therefore, the Tribunal must allow the Claimants to submit their claims jointly, especially considering that Bolivia has failed to explain how a joint submission of claims would adversely affect the proceedings or to otherwise indicate which of the Claimants should be excluded.133 

178. The Claimants consider that there is no reason to believe that, upon signing the Treaties, Bolivia did not account for the fact that multiple claims could be heard in a single proceeding. It is undisputed that multiple investors may jointly file claims in the context of a single proceeding without being specifically authorized to do so under the relevant investment treaty, and even if the State opposes such joinder of claims. Likewise, an investor may file arbitration proceedings under different legal instruments, on the basis of the consent which has been provided for each of such legal instruments, and even if such instruments do not expressly provide for this possibility.134

179. Additionally, whether the Claimants may be jointly heard in the same proceedings is a procedural rather than a jurisdictional question. In this regard, the Tribunal has broad discretion to rule upon this issue under the UNCITRAL Rules and Procedural Order No. 1. The advantages of a unified proceeding in terms of efficiency and consistency are undisputed and, in any event, Bolivia has not provided a single reason to proceed otherwise.

180. The Claimants consider that Bolivia has failed to pursue its claim on the alleged incompatibility of the BITs135 as well as its argument that a “consolidation” is under discussion in these proceedings. By opposing these proceedings Bolivia only seeks to delay a final award, as it has not even contested the fairness and efficiency of jointly settling claims that have been jointly submitted, nor has it explained how such joinder of claims would adversely affect it.136

181. In any event, the Claimants believe that their claims may be analyzed from the standpoint of either of them, as there is a single damage. Should the Tribunal consider these claims from GAI’s standpoint, it would find that GAI would have directly lost the market value arising out of the spot price and effective remedy claims, without having to consider any question pertaining to Rurelec, as Rurelec’s loss would be entirely compensated by way of a full damages award in favour of GAI. On the other hand, should the Tribunal decline jurisdiction over GAI’s claims, then it might consider analyzing Rurelec’s stake in EGSA, which is the same as GAI’s. As regards regulatory measures, the losses incurred by both of the Claimants would also be the same. If the Tribunal considers Rurelec’s claims, then Rurelec’s loss would be the market value of its shareholding in EGSA as of the valuation date, as well as the related loss arising from the effective remedy and spot price claims. In this context, it

would not be necessary to consider any other matter pertaining to GAI, as GAI’s loss would have been entirely redressed by way of a full damages award in favour of Rurelec. If the Tribunal were to decline jurisdiction over Rurelec’s claims, it should have to consider GAI’s claims. The valuation of GAI’s shareholding in EGSA is the same as Rurelec’s; hence, the damages calculation for both Claimants would be the same.137


The Respondent’s Arguments

182. Bolivia considers that there is no legitimate conflict between Bolivia and Rurelec in this arbitration, as Rurelec cannot be regarded an “investor” and has not made any “investment” pursuant to the UK-Bolivia BIT. Therefore, Bolivia’s alleged consent could not have been provided.

183. Firstly, and relying on international case law and the VCLT, the Respondent claims that Rurelec has the burden of proof with respect to both the alleged existence of an “investment” and its capacity as an “investor”. Rurelec must prove that it acquired a direct ownership interest or, if allowed for under the UK-Bolivia BIT, an indirect ownership interest in EGSA prior to the dispute. However, neither of these points has been proven and thus, the Tribunal should decline jurisdiction over the dispute.138

184. Secondly, in the Respondent’s view, the documentation submitted by the Claimants does not prove an investment by Rurelec in GAI in January 2006. Assuming arguendo that such documentation is sufficient, which the Respondent claims is not, it would merely prove a possible acquisition of an indirect ownership interest in EGSA on 29 June 2009, on which date the controlling interest chain between EGSA and Rurelec would have been established.139 Based on such date, the major capital investments in new productive capacity undertaken by EGSA between 2006 and 2008, and repeatedly referred to by the Claimants,
would have taken place without Rurelec holding any ownership interest in EGSA. In any event, the date on which such possible acquisition of an indirect ownership stake took place would be irrelevant, as there is no document evidencing actual payment of the investment, which consequently does not exist.

185. Thirdly, if Rurelec had invested in EGSA, such an investment would be an indirect investment as it would have been made through Birdsong, BIE, and GAI. Moreover, BIE and Birdsong Overseas Limited are incorporated under the laws of the British Virgin Islands,140 a territory to which the provisions of the UK-Bolivia BIT are not applicable. In addition, as an indirect investment, it would not be protected under the UK-Bolivia BIT, unlike under the US-Bolivia BIT. In this regard, Respondent claims that the US-Bolivia BIT contains a broad definition of investment which includes “every kind of investment owned or controlled directly or indirectly by that national or company” [Tribunal’s translation],141 whereas the UK-Bolivia BIT makes no reference to a direct or indirect investment holding.

186. On the other hand, according to the Respondent’s interpretation of Articles II to V of the US- Bolivia BIT, protected investments must be “of” nationals or companies “of” each Contracting Party, thus requiring a direct ownership relationship between the investment and the national of a Contracting Party for the latter to be considered an investor. This interpretation is supported by the terms “own” and “owner” included in Article V(2) of the US-Bolivia BIT which, according to the Respondent’s interpretation, imply ownership or legal right to hold the shares.

187. Since the UK-Bolivia BIT makes no reference to “direct or indirect” ownership, based on the case law cited by the Respondent, the protected investment must be deemed direct.142 Moreover, the Respondent stresses that 13 out of the 22 BITs signed by Bolivia contain said phrase, whereas 8 do not. Thus, if the parties to the UK-Bolivia BIT had intended to protect indirect —and not just direct— investments, they would have made a specific reference thereto, as was the case in other treaties.

188. Hence, Respondent submits that an indirect investment in EGSA is not protected under the UK-Bolivia BIT.143 It also considers that the courts and tribunals in the cases cited by the Claimants did not rule on the existence of terms confirming the inclusion of indirect investments in the relevant treaties (as is the case, in the Respondent’s opinion, under the
UK-Bolivia BIT), neither did such courts or tribunals consider the State’s position upon signing different treaties or the difference between direct and indirect investments.144 

189. The Respondent further argues that the provisions of the UK-Bolivia BIT only protect “capital” investments.145 This argument has been upheld by international courts and tribunals as well as by legal authorities in light of the inherent meaning of the term “investment”.146 Consequently, a contribution in cash or any other economic value is required for an investment to be protected under the UK-Bolivia BIT. As stated by the Respondent, Rurelec made no capital investment in Bolivia pursuant to the UK-Bolivia BIT.

190. Even assuming that Rurelec is an investor and that the UK-Bolivia BIT protects indirect investments, the Respondent submits that Rurelec has made no contribution “within” Bolivian territory. It further states that the distinction drawn by the Claimants between “capital investment” and “investment” in the different versions of the UK-Bolivia BIT147 is irrelevant, as Bolivia’s objection was not based on such distinction.

191. Bolivia’s objection is based on the objective notion of the term “investment”, which implies a monetary contribution or input in the host State. Thus, the Respondent challenges the White Industries148 case cited by the Claimants, where the tribunal disregarded the relevance of a monetary contribution or input, but at the same time deemed it important to confirm that the foreign investor had indeed made such contribution or input in the case at hand.149 Likewise, in Romak and Alps Finance150 (which, according to Bolivia, have been misinterpreted by Claimants as dealing with special circumstances), the tribunal separated
the facts from the inherent meaning of the term “investment”, criticizing the Claimants’ position.151 

192. In addition, Rurelec would have to prove that it made a monetary or other contribution in the territory of Bolivia.152 The Respondent argues that the Claimants have failed to demonstrate the foregoing.153 Bolivia has only proven a possible acquisition of an indirect ownership interest in EGSA in 2009 (ten years following the capital contributions in Bolivian territory relating to the capitalization of EGSA). No evidence has been submitted to prove that such an investment was made through a monetary or other economic contribution, or that it was made in Bolivian territory. The Respondent submits that EGSA’s shareholders have made no capital contributions since 1999, and that the alleged “investments” made by the Claimants in 2006 and 2007 cannot be attributed to the Claimants, as Rurelec did not have an indirect shareholding in EGSA at the time.

193. Lastly, since EGSA’s capitalization in 1999 (10 years prior to Rurelec’s alleged acquisition of an indirect ownership interest), there has been no capital contribution by EGSA’s shareholders. Neither the purchase of the two engines owned by Energais in Bolivia (decommissioned, disassembled, and stored at EGSA) nor Rurelec’s interest in Energais can be deemed as investments under the UK-Bolivia BIT.154 

194. For the foregoing considerations, Rurelec does not qualify as an investor and its alleged investment cannot be considered a “protected investment” under the UK-Bolivia BIT. Therefore, the Tribunal lacks jurisdiction “rationae personae” over this dispute.

195. The Respondent states that the Claimants’ arguments in support of Rurelec’s alleged acquisition in EGSA154 are insufficient. Bolivia denies Rurelec’s acquisition of an indirect shareholding in EGSA during 2006 or 2009156 for the following reasons:
(a)  The Claimants have provided no evidence of payment for said acquisition. They merely transcribe the price included in a stock purchase agreement dated 12 December 2005, a share transfer dated 5 January 2006, and a press release issued by Rurelec on 5 January 2006.157 The conditions under which such payment took place are likewise not proven.158

(b)  Documents submitted by the Claimants do not prove the shareholding chain that would link Rurelec and EGSA since 2006, but rather an alleged indirect investment made by Rurelec since 2009. Only a letter from Nerine Fiduciaries to its Freshfields attorneys dated 26 October 2012 (same date on which Claimants submitted their Counter- Memorial on Jurisdiction) would relate Birdsong to EGSA before 2009.159 No other document from any of the other intervening entities has been submitted to confirm that the BIE shares were actually owned by Birdsong. Likewise, no explanation has been provided as to why Birdsong (if it really acquired the shares in 2006) waited until 2009 to register them under its name, neither is there evidence that Birdsong was wholly owned by Rurelec.160 In any event, such documents are not official documents.161

(c)  Mr Peter Earl’s position as President of EGSA’s Board of Directors does not prove that EGSA’s shares have been owned, even indirectly, by Rurelec. Moreover, his attendance as President of the Board of Directors at the official opening of EGSA’s new facilities is not “exceptional” [Tribunal’s translation].162

196. In light of the above, Bolivia states that the Claimants have failed to provide evidence of Rurelec’s payment for the allegedly acquired shares, or of an economic contribution in Bolivian territory. Accordingly, the Respondent claims that there has been no protected investment under the Treaty, which results in the Tribunal’s lack of jurisdiction rationae personae.

The Claimants’ Arguments

197. Firstly, the Claimants submit that Rurelec acquired its indirect majority stake in EGSA on 6 January 2006,163 and that Rurelec was already EGSA’s majority shareholder during the period of EGSA’s investments to improve its electricity generation capacity between 2006 and 2007. The Claimants deny that such stake was acquired at a later date—in June 2009—, as they assert that: (i) Bolivia requested specific documents from the Claimants on this matter on 7 September 2012 and Rurelec submitted said documentation; (ii) as evidenced by such documents, the execution and delivery of the stock transfer dated 5 January 2005 shows that the transaction was completed on 6 January 2006 with the payment of USD 35 million; (iii) other ancillary documents likewise confirm that Rurelec made its investment in 2006;164 and (iv) the Respondent became aware of Rurelec’s investment in EGSA prior to 2009, as proven by the fact that in March 2007, Bolivian authorities, along with Mr Earl and the United Kingdom’s Ambassador to Bolivia, attended the inauguration ceremony for EGSA’s new GCH-11 unit.165 

198. The Claimants claim to have provided sufficient evidence that Rurelec acquired an indirect majority stake in EGSA and claim that Bolivia has not disproven the foregoing, which is why its objection thereto should be dismissed. The Claimants allege that the price of USD 35 million for the purchase of EGSA was fully paid, as evidenced by the 2006 and 2007 annual reports and the audits performed.166 Following the acquisition and until June 2009, BIE’s shares were held in escrow by entities designated for the benefit of Birdsong, as per corporate practice.

199. Secondly, the Claimants consider that the UK-Bolivia BIT does protect indirect investments, as it covers “every kind of asset” as well as “any form of participation in a company”, and the list of protected investments included therein is non-exhaustive. Indirect shareholdings are an asset and therefore, a form of participation in a company, which makes them protected investments under the UK-Bolivia BIT. This conclusion is supported by extensive arbitral practice,167 and the cases submitted by Bolivia are inappropriate for these proceedings.

200. The Claimants insist that Rurelec’s indirect shareholding in EGSA must be deemed an “investment” under the illustrative list of the Treaty, as such list refers to “shares in [...] a company and any other form of participation in a company.” The latter is a broad definition and the absence of more specific language (“directly or indirectly”) cannot narrow its scope, as intended by the Respondent. Bolivia has failed to prove that the UK-Bolivia BIT deliberately excluded indirect investments.168 For the Claimants, tribunal practice provides a consistent interpretation of provisions similar to the ones set forth in the UK-Bolivia BIT, which protect indirect investments.169 

201. Bolivia’s argument that investments should be made directly by nationals or companies for them to be protected by a BIT is rejected by international case law.170 In turn, case law and legal scholars cited by the Claimants171 rebut the theory that the presence of third-party companies as intermediaries in order to obtain a stake in EGSA prevents Rurelec from being considered an investor under the UK-Bolivia BIT.

202. Thirdly, the Claimants object to the concept of “investment” suggested by Bolivia, which requires a capital contribution in Bolivian territory (“capital investment”), and further reject the statement that Rurelec has made no capital investment and consequently cannot be protected under the UK-Bolivia BIT.172 Said statement applies a rule which has been created exclusively by ICSID case law based on the ICSID Convention, and which cannot be applied to the present dispute.173 
203. Conversely, the Claimants consider they have made major investments in Bolivia.174 In addition, Rurelec and the Government of Bolivia conducted a project aimed at providing electricity to unserved rural areas, and agreed that Rurelec would finance a subsidy to low-income consumers known as the “dignity tariff”. This was financed by Rurelec through its returns on the investments made, deferred dividends, commercial loans, and other financing sources for EGSA.175 

204. According to the Claimants, Bolivia’s interpretation of the concept of “protected investment” is incorrect and distorts the true meaning that the UK-Bolivia BIT intended for such term, depriving it of its effet utile. The Respondent relies on the Spanish version of the UK-Bolivia BIT and refers to the concept of “returns” (rentas) in Article 1(b) thereof.176 In such version, the concept of “capital investment” (inversión de capital) is defined within the concept of “returns”. However, the English version of the Treaty only uses the term “investment”,177 which, in the Claimants’ opinion, is the concept actually defined by the UK-Bolivia BIT. Under the VCLT, in case of any inconsistency between different versions of the same treaty, the meaning that best reconciles both texts shall prevail, which in this case is of the one set forth in the English version, as the latter includes a broad concept of investment which accurately reflects both the drafters’ intention and the object and purpose of the UK-Bolivia BIT.

205. Likewise, the Claimants insist that the case law submitted by the Respondent to determine the concept of “investment” is inappropriate. On the one hand, Bolivia cites cases where a narrow concept of investment is used in connection with Article 25 of the ICSID Convention, which cannot be applied in this case. On the other hand, the cases cited by Bolivia relating to to the UNCITRAL Rules account for a minority position and are based on facts different from the ones underlying these proceedings.178 

206. In any event, the Claimants assert that, if Respondent’s definition of “investment” were to be applied, Rurelec’s investment would also fall within the scope thereof on account of its
contributions to the Bolivian economy, as mentioned above.179 Based on the report from its witness Marta Bejarano, Bolivia states that Rurelec made no contribution in EGSA using its own funds, but rather decapitalized EGSA and increased its indebtedness. This latter statement, however, has been rebutted by the Claimants’ witness Marcelo Blanco.180 

207. On the other hand, the Claimants reject the requirement that the investment be made in Bolivian territory. From the Claimants’ viewpoint, references to territory concern the host State Party which would benefit from the investment, not the place where the contribution must take place.181 If the relevant criterion were the place where the contribution is made, any investor acquiring an interest in a company (as is the case of Rurelec) would be deprived of the protection under the Treaties only because it made no direct capital contribution, but rather paid to the initial investor (in this case, GAI). Nevertheless, case law cited by the Claimants states otherwise, as it protects foreign investors who have acquired a previously existing investment: the investment remains even if the investor changes.182 

208. In any event, the Claimants consider that Bolivia’s additional criterion of a “contribution” in Bolivian territory has been complied with, given that Rurelec paid for the acquisition of its shares in EGSA and thus, such contribution must be deemed an investment in Bolivia.183 This interpretation would be consistent with the Quiborax decision184 cited by the Respondent. If we apply the facts of Quiborax to these proceedings, the payment of USD 35 million made by Rurelec for the acquisition of a controlling interest in EGSA would amount to a “contribution” pursuant to the definition provided in Quiborax.185 As a result, Bolivia’s objection should be rejected.

209. Likewise, the Claimants allege that Rurelec has made other important contributions in Bolivia, such as the obligations incurred in connection with the USD 20 million loan granted to EGSA by the Corporación Andina de Fomento (hereinafter, the “CAF”), or the expertise and know-how provided to EGSA’s personnel and operations. This important contribution
has even been acknowledged by independent third parties, such as the credit rating agency, Fitch.186 

210. Lastly, the Claimants consider that both Rurelec’s shareholding in Energais and the Worthington engines constitute protected investments under the UK-Bolivia BIT. In accordance with Article 5(2) thereof, measures taken by the Respondent in respect of the Bolivian subsidiary of a UK investor (such as its expropriation in this case) require just and effective compensation. Moreover, the Worthington engines constitute movable property under Article 1(a)(i) of the UK-Bolivia BIT, and therefore Rurelec’s indirect interest in such movable property is protected.187


The Respondent’s Arguments

211. According to the Respondent, Article XII of the US-Bolivia BIT allows any of the Contracting Parties (in this case, Bolivia) to deny the benefits therein to a company of the other Contracting Party. For that purpose, two conditions must be complied with, both of which are met by GAI: (i) ownership by nationals of a third State (GAI’s shareholder, BIE— entity created by IEL and later acquired by Birdsong- has always been domiciled in the British Virgin Islands); and (ii) not carrying out any business activities, even substantial business activities, in the territory of the United States. GAI is a “special purpose vehicle” created to acquire and hold the new shares EGSA would issue as a result of its capitalization plan.188 Since both requirements are met, the Respondent denies the benefits under the US- Bolivia BIT, which precludes its consent to arbitration under such Treaty from being invoked in these proceedings. Consequently, the Tribunal lacks jurisdiction over GAI’s claims.

212. The Respondent explains that it has properly exercised its right to deny the benefits under the US-Bolivia BIT to GAI in accordance with Article XII thereof,189 as it timely invoked such provision pursuant to the UNCITRAL Rules and International Law in response to the Claimants’ Statement of Claim. The Claimants reject such statement and submit that Bolivia intends to apply Article XII of the Treaty retroactively.190 In turn, Bolivia points out that the Claimants’ reasoning is contrary to Article 23(2) of the UNCITRAL Rules and to the case
law cited by the Claimants, since in the absence of any special provision in the Treaty limiting the application of the denial of benefits clause, general provisions —such as Article 23(2) mentioned above— shall apply which govern the time limits for the submission of jurisdictional objections and allow these to be raised up until the filing of the Statement of Defence.191 

213. On the other hand, the Claimants consider that denial of benefits cannot operate ex tunc, as this would breach investors’ legitimate expectations.192 However, the Respondent asserts that such expectations were not violated in GAI’s case, since its investment was made in the mid-90s and the US-Bolivia BIT entered into force in 2001. Additionally, Bolivia argues that a legitimate expectation cannot be based on a State’s failure to exercise a power to which it is entitled. The future possibility to deny benefits was part of the legal framework of the US-Bolivia BIT. Thus, the Claimants were aware of the possibility that Bolivia exercised such power following the Treaty’s entry into force.193 

214. As regards the absence of substantial activities in the US, the Claimants allege that the application of the denial of benefits clause on that basis leads to an unfair result, as Respondent required GAI’s establishment as part of EGSA’s capitalization process.194 According to the Respondent, such statement is false, since neither the Bidding Rules nor the Capitalization Agreement required that the “subscribing company” for the purpose of acquiring shares in EGSA be a “special purpose vehicle”, neither they did impose nationality requirements or restrict the commercial activities to be undertaken by such subscribing company.195  

215. Therefore, GPU was free to choose the company that would participate in the bidding process as the subscribing company to acquire EGSA’s shares. However, it decided to create a “vehicle” in the State of Delaware (GAI) without any commercial activity in the United States. This latter point is contested by the Claimants,196 but confirmed by the Respondent, who insists that as GAI (i) declared zero US dollars in taxes in 2011; (ii) cannot be considered a “traditional holding company,”197 and (iii) its commercial activities mentioned by the Claimants are either insufficient or inexistent, as they merely met the minimum legal requirements of the State of Delaware.198 Therefore, in the Respondent’s words, “GAI is no more than a mailbox company,”199 and there are no documents that prove otherwise.200 Consequently, it meets the two conditions set forth in Article XII of the US-Bolivia BIT for the Treaty benefits to be denied to it.

The Claimants’ Arguments

216. According to the Claimants, the application of Article XII of the US-Bolivia BIT would violate the international principle of pacta sunt servanda and would contravene the object and purpose of investment treaties (the promotion of investments based on rationality and predictability). According to the case law submitted in these proceedings, the denial of benefits cannot apply retroactively, as sought by the Respondent, that is, once the investment has been made, since the purpose of such provision is to give a State the opportunity to alert investors in advance that they are no longer afforded protection under the relevant treaty, thereby protecting the legitimate expectations such investors may have.201 Denial of benefits

in this case would run contrary to the principles of stability, certainty and good faith, as Bolivia (i) required the establishment of GAI, (ii) was aware of its investment since day one, (iii) included such investment in the Nationalisation Decree, and (iv) now that arbitration proceedings have been initiated and having received all the returns on the investment, purports to deny the benefits of BIT protection to the investment holders. For the foregoing reasons, the Tribunal cannot accept the retroactive application of Article XII of the US-Bolivia BIT.202 

217. In addition, the Claimants consider that Bolivia cannot deny the benefits of Article XII of the US-Bolivia BIT because the conditions set forth therein have not been met, especially the absence of “substantial business activities” in the United States. The Claimants stress that the US-Bolivia BIT does not provide a definition of “substantial business activities”. If the VCLT were applied, the term “substantial” would not be a synonym of “large”, as the decisive question would be the materiality and not the magnitude of the business activity. This is the interpretation provided by arbitral case law. Therefore, GAI has indeed conducted substantial commercial activities in the United States, since it maintains offices in said territory, holds shareholders’ meetings in Ohio as well as Board of Directors’ meetings, prepares the minutes of said meetings, etc., thereby fulfilling the conditions described in arbitral case law.203 

218. In addition to the allegations on the prospective application of the denial of benefits,204 the Claimants consider that such provision cannot be understood as “[a] plea that the arbitral tribunal does not have jurisdiction shall be raised no later than in the statement of defense,” as pointed out by the Respondent pursuant to Article 23(2) of the UNCITRAL Rules.205 Instead, it is an act that forms the basis for such a plea. The UNCITRAL Rules set out the procedural deadline beyond which an existing jurisdictional obstacle will be waived, but the deadline for creating such an obstacle is a matter of substance, governed by international law.206 In this regard, it is a well-established principle that “jurisdiction is to be determined in light of the situation as it exists on the date the judicial proceedings are instituted.”
Moreover, “once established, jurisdiction cannot be defeated. It simply is not affected by subsequent events.”207

219. In the Claimants’ opinion, the denial-of-benefits clause may affect an investor’s claims in two different ways, neither of which can operate retroactively:

(a)  The State deprives the claimant of all substantive protections of the treaty, and that measure is in line with the treaty. All claims would thus be inadmissible. But if the State has not denied benefits at the moment it takes measures on the grounds that the treaty has been violated, then all protections are at that moment in place, and a breach of the treaty can occur. By later denying the benefits of the treaty, the State cannot undo the legal reality of a treaty breach —it can only prevent its subsequent actions from violating the treaty.

(b)  The State deprives the claimant of the benefit of its consent to arbitration as set forth in the treaty, preventing claims from being adjudicated by an arbitral tribunal. But if the State has not denied benefits at the moment when the claimant initiates arbitration, then the State’s consent is still in place, and the offer to arbitrate is accepted by the investor and transformed into an irrevocable agreement. By later denying the benefits of the treaty, the State cannot withdraw a consent that has already been accepted —it can only prevent the investor from initiating arbitrations with respect to future disputes.208 

220. In this case, the disputed events took place in May 2010. At that time, the Respondent had not invoked the denial-of-benefits clause. Therefore, the full range of substantive protections of the US-Bolivia BIT applied to the Claimants and their investment. Moreover, to the extent that Bolivia’s conduct was contrary to the terms of the Treaty, GAI immediately acquired a right to compensation. Similarly, the Claimants initiated this arbitration in November 2010, two years before Bolivia sought to withdraw its treaty benefits. However, Bolivia accepted the offer to arbitrate and, in turn, GAI had long since availed itself of the benefit of the arbitration clause of the US-Bolivia BIT. Additionally, the Respondent was at all times aware of the Claimants’ investment in Bolivia.209

221. In any case, unlike the Respondent’s arguments,210 the Claimants state that it is the Respondent who must prove the fulfilment of all necessary conditions to deny the benefits of
the Treaty in accordance with Article 27(1) of the UNCITRAL Rules.211 Since Bolivia has failed to show that GAI is not engaged in any substantial economic activities, the denial-of-benefits clause cannot apply.


The Respondent’s Arguments

222. According to the Respondent, the Claimants have filed New Claims in the Statement of Claim, which had not been included in the Notice of Dispute or in the Notice of Arbitration. The New Claims refer to violations of the Treaties on the part of Bolivia in connection with: (i) electricity spot prices; (ii) capacity payments; and (iii) the two Worthington engines. The Respondent alleges that, by way of this submission it describes as “untimely”, the Treaties were violated in two respects (Article IX of the US-Bolivia BIT and Article 8 of the UK- Bolivia BIT):

(a)  The conditions necessary for the notice of New Claims have not been fulfilled. The term “dispute” in the Notice of Arbitration and the term “dispute” in the Statement of Claim are used differently, and the New Claims are included in the latter, despite not being included in the former (neither in the Notices dated 13 May 2010 nor in those invoked in the same document).212 

(b)  The cooling-off period established in the Treaties for the possible amicable settlement of the dispute was not fulfilled. This breach would have occurred even if the New Claims had been included in the Notice of Arbitration, since the Respondent had no opportunity to use the period of amicable consultations in any case. Furthermore, during the meetings held between July 2010 and March 2011, the compensation that had to be granted to the Claimants after nationalisation was discussed, but not the New Claims.213

223. According to the Respondent, the Claimants intend the Tribunal to hear new claims, forcing Bolivia to respond to them in a short period of time, considering the associated costs and complexity. Pursuant to recent case law, these New Claims should be rejected by the Tribunal, which lacks jurisdiction to hear them because the conditions established by the Treaties for such purposes have not been met.214

224. In its Reply on Jurisdiction, the Respondent states that the Claimants have failed to prove two points in connection with the New Claims: (i) prior notification of such claims to Bolivia, and (ii) that such claims were mentioned during negotiations between the Parties. Therefore, the Tribunal shall decide whether Bolivia gave its consent to arbitrate these New Claims and whether the conditions on disputes and cooling off were met.

225. Against the statements made by the Claimants concerning Article IX of the US-Bolivia BIT,215 the Respondent holds that, in addition to its prior arguments216 and based on Murphy,217 a dispute arises at the time in which an investor alleges a treaty violation. Thus, the period of three months required under the US-Bolivia BIT starts running on the date of such allegation, which the investor shall prove. Hence, GAI has the burden of proving that Bolivia became aware of a dispute under the Treaty concerning the New Claims at least three months before the commencement of this proceeding. Nonetheless, this evidence has not been submitted.218

226. Furthermore, the Respondent argues that the Claimants contradict themselves concerning the condition on prior notification under the US-Bolivia BIT. Although they initially espoused its mandatory condition when giving written notice to Bolivia of the dispute for purported expropriation,219 they now deny the application of such condition concerning the New Claims, alleging that notice and cooling off conditions are not imperative or jurisdictional in nature. Based on the VCLT and in the Burlington and Murphy cases220, as well as on recent precedents221 that in its criterion outweigh the precedents invoked by the Claimants,222 the
Respondent affirms that the statement above takes issue with Articles 8 of the UK-Bolivia BIT and IX of the US-Bolivia BIT.

227. Now therefore, should the Tribunal find that the notification and cooling off conditions are of a procedural nature, it shall construe them so that they make full effect, since otherwise, the text of the Treaties would lose its effet utile, and the good faith interpretation rule would be thus breached.223

228. On the basis of ICS Inspection and Control Services,224the Respondent considers that the Tribunal does not have the power to set aside the notification and cooling off conditions, even if they were futile. In any case, this has not been demonstrated by the Claimants either;225 therefore, there is no evidence that: (i) Bolivia would not have amicably resolved the disputes concerning the New Claims with no notification thereof before the Statement of Claim; or that (ii) negotiations on the New Claims would not have succeeded because negotiations on nationalisation did not succeed.226

229. Lastly, the Respondent affirms that against the backdrop of limitations to Bolivia’s consent in the Treaties, the considerations of cost and “dilatory nature” are inappropriate.227

230. Third, Bolivia affirms that the Claimants have made allegations in an “opportunistic” manner and “for the first time in this arbitration” that the measures giving rise to the New Claims resulted in the expropriation, as preliminary steps that were capped with the nationalisation, and thus related to the notified nationalisation.228 The Respondent considers that such allegations are false on the following grounds:
(a)  Both the Notice of Dispute and the definition of “dispute” in the Notice of Arbitration evidence the limited nature of the single dispute notified to the Respondent.229

(b)  The Claimants acknowledge that the notifications of May 2012 referred to “[t]he dispute [that] arises out of the Bolivian Government’s nationalisation of Rurelec’s indirect shareholding in [EGSA] by means of Supreme Decree No. 0493 dated 1 May 2010.”230 Nonetheless, the New Claims concerning the PBP and spot prices cannot “arise out of” the 2010 Supreme Decree, since they stem from measures adopted in 2007 and 2008, respectively.231

(c)  The Claimants have not submitted any evidence that the measures that gave rise to the New Claims were preliminary steps for the nationalisation of their investment.232 In any case, this argument takes issue with the terms of their claims, since they have never mentioned an indirect expropriation.233

(d)  The thesis according to which the Claimants reserved the right to add facts and arguments to support their claim is “absurd”, especially if the cases that define the notion of “dispute” or “controversy”234 are considered, so that the New Claims would not be considered as pertaining to the dispute on nationalisation.235 In any case, no relationship between the facts, applicable law and the chronology underlying the New Claims and nationalisation has been established.236 

(e)  The Claimants’ have also included in their New Claims the claim for the Worthington engines, and both Parties agree that these engines were not within the scope of application of the Nationalisation Decree.237 

231. According to the Respondent, the Claimants suggest that negotiations on compensation for the nationalisation were “amicable” and could have served to negotiate on the New Claims.
However, the New Claims were never discussed in the consultations and meetings held on the assessment of EGSA’s equity for the calculation of the compensation owed for the nationalisation.238 This is confirmed by the Claimants themselves in their Statement of Claim239 and Counter-Memorial on Jurisdiction.240 Moreover, the Respondent adds that it became aware of the New Claims after the submission of the Statement of Claim, months before the amicable consultations finished. The Claimants themselves acknowledged that they have “raised these specific issues for the first time during the legal and quantification exercise that the filing of a Statement of Claim entails,”241 so that it is impossible for these to have been negotiated beforehand.242

232. In light of the foregoing, the Respondent reaffirms that the Tribunal has no jurisdiction to hear the New Claims raised by the Claimants.

The Claimants’ Arguments

233. In the Claimants’ view, the “New Claims” have been properly submitted within this arbitration and, thus, no Treaty provisions have been breached, since such claims are encompassed within the same dispute (i.e., nationalisation).243

234. Concerning the amicable consultations period mentioned by the Respondent, the Claimants conclude that (i) the US-Bolivia BIT does not require prior notification of the dispute, so that the argument related to GAI would not withstand scrutiny;244 (ii) the amicable consultation period is a procedural and not a jurisdictional matter (as found in the case law invoked), so that non-observance of this requirement does not alter the Tribunal’s jurisdiction;245 and (iii)
in any event, the Claimants have actually fulfilled such obligation, since all “New Claims” refer to the notified nationalisation. In addition, in the notification letter and in the Notice of Arbitration itself, the Claimants reserved the right to add facts and legal issues on the basis of the claim made.246 

235. The precedents invoked support the Claimants’ conclusion that it is not compulsory to send a separate notice or apply the period of amicable consultations when claims refer to the same dispute.247 The cases relied upon by the Respondent are irrelevant, because they refer to scenarios in which (i) the claimant had not sent the notice of arbitration (a scenario not considered in this arbitration), or (ii) the tribunal classified the claims as “inappropriate” because they were out of context, untimely and related to legislation different from the one under discussion.248 

236. Ultimately, the Claimants consider that they have complied with the amicable consultation period, since they have attempted to reach an agreement with Bolivia in order to obtain fair compensation for the nationalisation of their investments. Nonetheless, after four meetings held to that effect, no compensation was offered. It makes no sense for Bolivia to require the Claimants to undergo an amicable consultation period after having qualified the purported “New Claims” as “frivolous” and “not even claims under the Treaties or international law”. This would force the Claimants to start new negotiations in which Bolivia would not participate, making it necessary to start a new arbitration, convene a new tribunal and debate the same issues again.249 Requiring futile amicable conversations prior to the arbitration would be unnecessarily stringent, formalist and it would not inure to the benefit of the Parties. This vision is in accordance with Article 32 of the VCLT.250 

237. Therefore, it would be unreasonable to deprive the Tribunal of its jurisdiction to hear three claims based on a purportedly defective notification, especially given that they are part of a wider claim, with respect to which negotiations were not successful and Bolivia has shown no intention to settle. In any event, and as previously explained by the Claimants,251 there would be no use in requiring negotiations concerning claims connected to the spot prices, PBP and Worthington engines, considering the attitude and the statements made by Bolivia in the course of the proceedings.252 

238. Hence, the Claimants’ efforts to settle their dispute with the Respondent have been both lengthy and unsuccesful. Under these circumstances, the Treaties do not impose additional requirements, and the Tribunal shall accept its jurisdiction on the claims at issue. In any event, the Claimants consider that they have complied with the notification and amicable consultation requirements. Thus, based on the Respondent’s own arguments, since the measures related to the spot prices, PBP and Worthington engines were implemented in the context of the nationalisation of the electricity sector, there would be no need for a separate notification of such claims, since these would be included within the nationalisation itself.253 


The Respondent’s Arguments

239. According to the Respondent, the New Claims fall within the exclusive scope of Bolivian law, and cannot be considered international disputes under the Treaties. Thus, the Tribunal should find that, as per the VCLT rules of interpretation and Articles IX(1) and 8(1) of the US-Bolivia BIT and the UK-Bolivia BIT, respectively, the Respondent has not given its consent so that such domestic claims be subject to dispute in the context of these proceedings.254

240. On the basis of Iberdrola v. Guatemala,255 Bolivia states that it has only given its consent to arbitrate disputes “concerning an obligation [of Bolivia] pursuant to this Agreement” [Tribunal’s translation] in accordance with Article 8(1) of the UK-Bolivia BIT, but not for

any investment-related dispute.256 Furthermore, it interprets Article IX(1) of the US-Bolivia BIT accordingly, including disputes “arising out of a [...] purported breach of any conferred right, generated or acknowledged by this Treaty” [Tribunal’s Translation], as well as those arising out of an “investment authorization” or an “investment agreement” (none of which exist in the present case). Once more, the consent granted by Bolivia is limited to disputes regarding obligations set forth in the Treaties.

241. In any case, Bolivia considers that the Tribunal shall make its own classification of the legal nature of the New Claims in accordance with the international case law invoked257 and considering that an actual “treaty claim” requires investors to demonstrate, through a clear and accurate reasoning, which acts and conducts are attributable to the State and would constitute violations of the relevant treaty or customary international law.258

242. As regards the New Claim concerning the spot price, the Respondent alleges that the Claimants intend to obtain a determination from the Tribunal on whether the price to be applied to electricity generators should be (i) the one set forth in Supreme Decree No. 26099 of 2 March 2001 or (ii) the one set forth in in Supreme Decree No. 29599.259 Ultimately, the Respondent considers that the Tribunal is being requested to determine whether such modification is compatible with the existing previously regulatory framework.

243. After outlining the evolution of regulations applicable to the electricity sector,260 the Respondent alleges that the reform made by Supreme Decree No. 29599 was targeted at mitigating the effect of the calculation method envisaged by the prior rules and regulations:261 in peak hours, the most inefficient generation units (in terms of costs and environmental damage), which contributed very little power to the system, turned into the Marginal Generation Unit,262 indicating the price that all generators would collect for each
kW/h contributed to the system. Thus, the price of electricity would increase proportionally with the system’s production, but would not be in line with the true cost of electricity produced by the other generation units. This was detrimental to consumers and resulted in a “windfall profit” for generators. Besides, the previous system did not encourage companies to acquire more efficient equipment, as in the case of EGSA, which had the most inefficient equipment in Bolivia.

244. Supreme Decree No. 29599 removed from the spot price calculation formula all generation units that distorted such calculation, provided that they met two requirements: (1) using liquid fuel and (2) having a power below 1% of the maximum power registered in 2007.263 Bolivia explains that this variation did not mean that companies owning such generation units would stop charging for the electricity that they were contributing to the system, but rather, that they would receive the monetary value of their unitary variable costs, as per Operative Rule No. 3/2008.

245. The Claimants also allege that the modification is contrary to their legitimate expectations. However, this allegation does not turn a matter of Bolivian law into an international matter, especially when the purported legitimate expectations stem from Bolivian regulations on spot prices.264 Ultimately, the Claimants seek that the Tribunal determine whether Bolivia has breached Bolivian law instruments.265

246. This New Claim is, thus, of a domestic nature, pertaining to Bolivian law. Therefore, Bolivia considers that it has not breached its obligations under the Treaties (fair and equitable treatment, full protection and security, and undermining the investment through the adoption of unreasonable measures).266 Moreover, it adds that the Claimants intend that the Tribunal act as an administrative authority or last instance regulator of the electricity sector, superseding Operative Rule No. 3/2008 and deciding on the correct procedure for the determination of the spot price, powers which exceed the scope of arbitration tribunals’ powers, as stated by relevant case law.267

247.Concerning the New Claim on the PBP, the Respondent alleges that Claimants intend that the Tribunal rule what the PBP should be: whether (i) that featured on Operative Rule No. 19
of 2001, adopted through Resolution SSDE No. 121/2001, or (ii) that established in new Operative Rule No. 19 of February 2007, adopted through Resolution SSDE No. 040/2007.268 

248. After outlining the most important provisions on the PBP calculation method,269 Bolivia holds that the modification made through Operative Rule No. 19/2007 was a consequence of the results yielded by the independent technical study conducted by Bates White on the values that form part of the PBP calculation. Such study concluded that there was no economic reason to add to the FOB price of the turbine an additional 20% for “ancillary equipment” before adding the 50% accounting for additional costs;270 thus, such 20% was eliminated.271 

249. Against such backdrop, the Claimants challenged the validity of Operative Rule No. 19/2007 both before both administrative authorities and courts.272 Now, in this arbitration, they request access to effective remedies, other than those available in the Bolivian court system, so that these claims may be enforced. Nonetheless, from the Respondent’s standpoint, the intention of the Claimants is for the Tribunal to decide whether there was a valid justification to make the modification by way of Operative Rule No. 19/2001, thus substituting any future ruling on this matter by Bolivian courts. Once more, this is a domestic law conflict which falls beyond the scope of the Tribunal’s jurisdiction.273 And even when the Claimants assert that they seek compensation for the “delay” in the ruling of Bolivian courts, the expert’s quantification reveals that the Claimants seek compensation calculated on the basis of a hypothetical annulment, by the Bolivian judiciary, of the Operative Rules with retroactive effects.274 

250. Finally, concerning the New Claim on the Worthington engines, the Respondent considers that the Claimants’ request seeks that the Tribunal decide a matter which is exclusively commercial in nature275 between Energais and EGSA.276 Moreover, these New Claims were
not included in the Nationalisation Decree and, thus, no measure related to them can be attributed to the Respondent. In fact, Bolivia considers that the Claimants have not submitted sufficient evidence of the acts that could be tantamount to expropriation under International Law; and that, in any event, the statements made by the ENDE Manager (that the Claimants take as a basis to argue on the existence of a claim under the Treaties) do not compromise Bolivia’s international responsibility, since the latter is not a State officer empowered to proceed to expropriation.277 

251. Therefore, the New Claims do not refer to Treaty violations, but rather, they pertain to the scope of Bolivian domestic law and thus, the Tribunal lacks jurisdiction over this matter. Otherwise, it would be exercising powers that belong to Bolivian administrative and judicial authorities.278 

The Claimants’ Arguments

251. According to the Claimants, the claims the Respondent characterizes as “New Claims” are based on the Treaties and are not of a merely contractual or commercial nature, nor do they pertain to Bolivian law, as the Respondent alleges.279 The Claimants hold that if the facts presented could, prima facie, give rise to a violation of the Treaties, these would fall within the Tribunal’s jurisdiction. Thus, for each of their three claims, the Claimants present a situation in which prima facie Bolivia breached the Treaties.280 

252. First, as regards the claim relating to the spot price, the Tribunal is not expected to determine the price that should be applied to the generators, but rather to determine whether the regulatory framework in relation to spot prices was altered by Bolivia, frustrating the Claimants’ legitimate expectations, in breach of the fair and equitable treatment standard, the full protection and security standard, and the obligation not to impair investments by arbitrary and unreasonable measures.281 

254. Even if the Claimants’ legitimate expectations had been formed by reference to Bolivian law, that does not turn them into purely domestic ones. Arbitral Tribunals have considered that frustration of the legitimate expectations based on the legal framework of a State gives
rise to treaty violations.282 The same happens with the calculation of damages resulting from the spot price manipulation, since this is a matter of fact, assessed in accordance with principles of international law on compensation for breaches of international obligations.283 

255. Second, the Claimants are not requesting the Tribunal to determine the PBP, but to determine whether, following the Bolivian judicial system’s ineffectiveness and the four and a half year delay to resolve EGSA’s claim, Claimants have not had access to effective means to obtain compensation for their claims, all of which would lead to a breach of the Treaties. Therefore, this is a question of international law.284 In addition, given that the effective means standard applies both to judicial as well as administrative claims, it becomes difficult for the Claimants to understand Respondent’s argument. Likewise, quantification of damages in this case is a question of international law.285

256. Ultimately, the Claimants consider that should the Tribunal decide to acknowledge these questions and admit they may imply a breach of the Treaties, the Tribunal would also have jurisdiction to decide on the merits of the case in accordance with the case law and legal authorities cited.286 Bolivia’s argument should be rejected as the case law on which it relies cannot be applied to these proceedings,287 since the Claimants do not request the Tribunal to render an opinion on Bolivian law but rather to decide whether Bolivia fulfilled its obligations under the Treaties.

257. According to the Claimants, Bolivia has not challenged the existence of facts supporting such claims. On the contrary, Bolivia submits arguments on the merits alleging that its conduct does not amount to a breach of the Treaties, disguising such arguments as jurisdictional objections. Finally, the Iberdrola v. Guatemala case invoked by Bolivia is not applicable to this arbitration, since the Claimants are not requesting the Tribunal to fix spot and PBP prices, but to find that their modification gave rise to a breach of international obligations.


The Respondent’ s Arguments

258. According to the Respondent, in the event the Tribunal considers it has to exercise its jurisdiction on the New Claims, it shall take into account that the Claimants first resorted to the court system to obtain a decision on the PBP. In accordance with Articles IX(2) and IX(3)(a) of the US-Bolivia BIT, selection of one of the possible channels of dispute resolution by the Claimants (in this case, resort to the court system) discards the possibility to resort to other channel (such as the arbitration) to seek a decision with respect to the same claim. Likewise, the Respondent considers that the Claimants make an excessive use of “Treaty Shopping” and “cherry picking” when holding that such an objection would only affect GAI. Therefore, they consider Rurelec may import the effective means of protection in the US-Bolivia BIT not being affected by the fork-in-the-road clause. All that, from the Respondent’s point of view, shows an abusive nature of the accumulation of Treaties and the Claimants without the State’s consent that should be rejected by the Tribunal.288 

259. From the Respondent’s point of view, Article IX(3)(a) is a “fork-in-the-road” clause, thus, once the investor chooses one of the possible channels, his/her election is irrevocable and exclusive of others. Pursuant to the doctrine provided, the purpose of this kind of clauses is to prevent investors from submitting one same dispute before different forums simultaneously (as it would occur in the case at issue) so as to obtain greater chances of success.289

260. In any event, the Respondent holds that if the Tribunal is to decide whether the claim relating to the PBP that Claimants have submitted is like the one previously submitted before the Bolivian courts. By means of a table contrasting the Claimants’ allegations and pretensions before the Supreme Court with those submitted before this Tribunal,290 Bolivia explains how in both fora the Claimants disclose one same claim: to obtain compensation for the alleged losses incurred (as well as for the revenue they did not receive) as a result of the modifications introduced with respect to the PBP. 291 Therefore, should the Tribunal be seized of this New Claim, it would be “prejudging” a decision that will be subsequently rendered by the Bolivian Supreme Court, even acting as a “supervision agency” or an
“appellate stage” of the Bolivian judicial system.292 The foregoing considerations reinforce the Respondent’s thesis which asserts that such claim is of domestic nature.

261. Facing the Claimants’ argument pursuant to which claims shall meet a triple identity (of parties, action and claim) to be considered as one same dispute under the articles quoted hereinabove (identity which, according to the Claimants, is not met),293 the Respondent holds that this thesis is not well received among case-law and legal scholars for suffering from an excess of formalism vacating the fork-in-the-road clause from its content.294 According to the Respondent, the triple identity excessive formalism is evidenced in its third requirement, since should the Claimants’ position be adopted,295 it would be impossible to find a criterion of the same legal basis giving rise to the exercise of the fork-in-the-road clause. Therefore, the Tribunal shall disregard such an argument and decline its jurisdiction with respect to this New Claim.

262. Finally, a thorough analysis of the “identity of the parties” requirement would imply studying the companies’ corporate reality instead of making a nominal test. The Claimants seek to demonstrate it was not the same legal entity the one submitting both claims, a situation which, according to the Respondent, makes this requirement impossible to meet.296 Besides, in accordance with the case law provided, it is possible to study the “holding” for the purpose of determining if there is “identity of parties”.297 Lastly, the Claimants’ assertion according to which Bolivia’s objection would deprive the effective means provision clause from its effet utile when it prevents the investor from pursuing domestic proceedings is false.
According to the Respondent, the dispute unit as a pre-condition for application of the fork- in-the-road clause would be omitted.298 

263. Therefore, the Respondent concludes the Tribunal shall reject the claim relating to the PBP, since in accordance with Article IX(2) of the US-Bolivia BIT, it is one same claim submitted before two different fora.

The Claimants’ Arguments

264. The Claimants assert that the objection above should be rejected. For the fork-in-the-road to be invoked it is necessary that the dispute be the same and, therefore, the triple identity test: parties, subject matter and legal basis should be passed.299 The Claimants consider that (i) there is no identity of parties, since the domestic proceedings were not pursued by EGSA and Bolivia was not a party thereto; (ii) in the arbitration at issue GAI claims for economic damage, whereas in the domestic proceedings a number of administrative resolutions are sought to be revoked; and lastly, (iii) the cause is different. Although EGSA based its remedy on Bolivian law, GAI commenced this arbitration alleging a violation of the effective means standard under the US-Bolivia BIT.

265. In short, GAI needs to prove the ineffectiveness of the means available in the Bolivian court system. In the Pantechniki case provided by the Respondent,300 the arbitrator compared the legal basis of the claims and applied the triple identity test to determine whether the fork-in-the-road clause should operate or not, concluding that the test was actually met, since the parties, the subject matter and the legal basis were the same. Nevertheless, the arbitrator considered that the claimant’s claim relating to denial of justice should be heard, since this claim had not been addressed in the domestic sphere. Therefore, the Claimants consider that the Tribunal should afford the same treatment to its claim on effective means (i.e., consider that it could not be submitted before the domestic courts) and hear it. Should the arguments stated by Bolivia in that respect be accepted,301 Article II.4 and other BIT provisions would lose their meaning, since any lack of effective means or denial of justice claims before

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Referring Principles
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