Summary

Table of Contents

I INTRODUCTION AND REFERENCE TO ARBITRATION
II THE PARTIES
A THE CLAIMANT
B THE RESPONDENT
III GENERAL NATURE OF THE CLAIM AND AMOUNTS INVOLVED
A PEL BRINGS ITS EXPERTISE AND EXPERIENCE TO BEAR ON AN ESSENTIAL INFRASTRUCTURE PROJECT IN MOZAMBIQUE
B THE GOVERNMENT MAKES SPECIFIC ASSURANCES TO PEL, EMBODIED IN A MEMORANDUM OF INTEREST, WHICH INDUCE PEL TO INVEST SIGNIFICANT FURTHER RESOURCES IN THE PROJECT
C PEL INVESTS IN THE PROJECT ON THE BASIS OF MOZAMBIQUE'S ASSURANCES, COMPLETES THE PFS SUCCESSFULLY, AND THE GOVERNMENT APPROVES THE PFS
D MOZAMBIQUE HOLDS A PUBLIC TENDER FOR THE PROJECT IN AN EFFORT TO DEPRIVE PEL OF ITS RIGHTS AND THE VALUE OF ITS INVESTMENT
E THE TREATY PROTECTS PEL FROM MOZAMBIQUE'S WRONGFUL CONDUCT
1 PEL MEETS THE JURISDICTIONAL REQUIREMENTS OF THE TREATY
2 THE TREATY'S SUBSTANTIVE PROTECTIONS SAFEGUARD PEL FROM MOZAMBIQUE'S INTERNATIONALLY WRONGFUL CONDUCT
F MOZAMBIQUE CONTRAVENED THE TREATY'S SUBSTANTIVE PROTECTIONS AND PEL IS ENTITLED TO DAMAGES AS A RESULT
IV THE TREATY'S DISPUTE RESOLUTION PROVISION
V PROPOSALS AS TO THE NUMBER OF ARBITRATORS, LANGUAGE AND PLACE OF ARBITRATION
VI RELIEF SOUGHT

I INTRODUCTION AND REFERENCE TO ARBITRATION

1 Patel Engineering Limited ("PEL" or the "Claimant") hereby demands that the dispute which is described in this Notice of Arbitration ("NoA") against the Republic of Mozambique ("Mozambique", the "Government", or the "Respondent") be referred to arbitration pursuant to Article 9(3)(c) of the Agreement between the Government of the Republic of Mozambique and the Republic of India for the Reciprocal Promotion and Protection of Investment (the "Treaty" or the "BIT"),1 and Article 3 of the Arbitration Rules of the United Nations Commission on International Trade Law 1976 (the "UNCITRAL Rules").

2 The Treaty was signed on 19 February 2009 in New Delhi, India, and entered into force on 23 September 2009.

3 This dispute arises out of Mozambique's failure to fulfil fundamental legal obligations and assurances that formed the basis of PEL's decision to invest in developing and operating a rail corridor spanning approximately 500 km that was to link Moatize in the mineral-rich Tete province to Macuse, where PEL planned to construct a new port along the Zambezia coast (the "Project"). The Project was valued at USD 3.115 billion.

4 This NoA is accompanied by 51 factual exhibits (marked "Exhibit C-") and 10 legal authorities (marked "CLA-").

II THE PARTIES

A THE CLAIMANT

5 PEL is an Indian-incorporated infrastructure and construction service company founded in 1949.2 It is a public company whose stock is traded on both the Mumbai Stock Exchange and the National Stock Exchange of India. PEL's business encompasses all sectors of the infrastructure industry from dams, tunnels, hydroelectric projects, irrigation projects, highways, roads, bridges, railways and refineries, to real estate and township development. PEL's contact details are as follows:

...

B THE RESPONDENT

8 Mozambique is a sovereign state located in southeast Africa.

...

III GENERAL NATURE OF THE CLAIM AND AMOUNTS INVOLVED

A PEL BRINGS ITS EXPERTISE AND EXPERIENCE TO BEAR ON AN ESSENTIAL INFRASTRUCTURE PROJECT IN MOZAMBIQUE

10 The Claimant is an integrated infrastructure and construction services conglomerate with more than 70 years of experience. PEL has broad expertise encompassing all sectors of the infrastructure industry, and provides its clients with reliable solutions to complex construction challenges. PEL is recognised "as a leader in the industry for their strength in traditional construction methods and for their creative, fresh approach to cutting-edge technologies and delivery systems."3 PEL's clients comprise governments and commercial customers alike, and its "projects have helped grow local economies and improve the quality of life for communities and people around the world."4 From its inception in 1949, PEL "has grown from strength to strength, having successfully completed over 250 projects."5

11 In relation to the Project at the heart of the Parties' dispute, PEL identified that Mozambique is rich in mineral resources, especially coal and other minerals, for which there was demand from other countries including China and India.

Notwithstanding this natural wealth, however, Mozambique lacked both the port infrastructure, and rail transport connections to port infrastructure, that were needed to export large quantities of coal and other minerals which could be extracted. To enable Mozambique to overcome these hurdles, PEL identified that by building a new port at Macuse in the Zambezia province (the closest area of coastline to the vast coal reserves in the Tete province) and a rail corridor from Moatize in the Tete province to the new port, the rapid and economical export of large quantities of coal and other minerals would be possible.

12 PEL anticipated that the proposed development would: (i) contribute to the economic development of the central region of Mozambique in particular, as well as the country as a whole; (ii) promote development in the Zambezia Valley; (iii) provide a feasible export route for coal from the Tete province in north-western Mozambique; and (iv) create employment opportunities. In addition, Mozambique stood to gain hundreds of millions of dollars in tax revenue as a result of the Project.

13 In early February 2011, Mr Kishan Daga, Special Director-Projects at PEL at that time, met with Mr Paulo Zucula, the then Minister of Mozambique's Ministry of Transport and Communication ("MTC"), to explore the possibility of investing in Mozambique and in particular, to address the infrastructure challenges PEL had identified. Mr Daga explained to Minister Zucula PEL's proposal to construct a port along the Quelimane coast in Zambezia province, which comprises the shortest transport route from the mineral-rich Tete Province. Mr Zucula indicated his understanding that according to the Government's state authority, Mozambique Ports and Railways ("CFM"), a port in that location would not be feasible. PEL informed Minister Zucula that its initial studies demonstrated the contrary a port along the Quelimane coast was indeed possible and would be of great benefit to Mozambique.

Accordingly, PEL expressed its desire to conduct a prefeasibility study to develop the Project. To take the matter further, Minister Zucula indicated PEL would need to write to the MTC to formalise its request, and to cover the costs of an initial study to be conducted by an expert to be nominated by the MTC, who would first need to confirm that a port in PEL's proposed location would indeed be feasible.

14 Further to PEL's meeting with Minister Zucula, on 17 February 2011, Mr Daga formally wrote to the MTC to reiterate PEL's interest in developing infrastructure projects within the country.6 In particular, Mr Daga set out PEL's credentials and expressed an interest in developing a deep-water port and rail corridor between Tete and Chinde, on a Build-Own-Operate ("BOO") basis as part of a public-private partnership ("PPP"), to facilitate the transport and ultimate export of Mozambican coal and other minerals.7

15 Given Mozambique's need for such infrastructure, and in light of PEL's substantial expertise and experience in this area, the MTC reacted positively to PEL's proposal. Accordingly, and as advised by the MTC, PEL subsequently commissioned a preliminary study (the "Preliminary Study") in partnership with the MTC (including various MTC specialists), for assessing potential locations for a deep-water port in the eastern Zambezi Province, which could be connected by rail to coal mines located in the Moatize District in western Mozambique. 8 The Preliminary Study recommended Macuse as the first preference for the port's location, with Deia as a secondary option. 9 The Preliminary Study further advised that additional, detailed specialist studies be carried out in relation to the proposed port and rail corridor, including detailed engineering, environmental, and economic studies.10

16 PEL's Preliminary Study was well received by the MTC, whose actions and specific assurances led PEL to undertake further activities and commit further resources to the Project.

B THE GOVERNMENT MAKES SPECIFIC ASSURANCES TO PEL, EMBODIED IN A MEMORANDUM OF INTEREST, WHICH INDUCE PEL TO INVEST SIGNIFICANT FURTHER RESOURCES IN THE PROJECT

17 Following the submission of the Preliminary Study, PEL met with the MTC to discuss its findings, and to determine more precisely how to proceed with the Project. At that meeting, Minister Zucula expressed his satisfaction with the Preliminary Study, and agreed to enter into a memorandum of interest to set parameters for PEL to implement the Project.

18 Thereafter, on 6 May 2011, the Parties signed a Memorandum of Interest between the Ministry of Transport and Communications and Patel Engineering Ltd. (the "MOI") in relation to the Project.11 The MOI requires PEL to undertake a prefeasibility study (the "PFS") for the Project at "its own cost and expense".12 In exchange for PEL's investment, and only in the event the MTC ultimately approved the PFS, Clause 2(1) requires the Government of Mozambique to "issue a concession of the project in favour of PEL."13 As described in more detail below, the Respondent, through the MTC, made key assurances and representations to PEL which PEL relied upon when it decided to execute the MOI and undertake the PFS at its own cost and risk.

Accordingly, the MOI, which Minister Zucula signed "on behalf of the Government of Mozambique" 14 formed the basis of PEL's legitimate expectations when investing in Mozambique.

19 The key provisions of the MOI are set out in brief below. In short, pursuant to the MOI, PEL agreed to carry out the activities required to complete the PFS at its own cost and risk within one year of the signing of the MOI. In exchange for PEL's investment, the MTC agreed to grant PEL preferential rights in respect of the Project's implementation, including the "granting of a concession by the [Government] to PEL for the construction and operation of the Project"15 and a "first right of refusal for the implementation of the project."16

20 The MOI recitals highlight both the Government's desire to develop the Project and PEL's vital role in implementing it, including PEL's anticipated "construction and commissioning of the said project":

"a. MTC is interested in developing a Port in and around the Zambezia coast line with a corresponding railway line of 500 (five hundred) kilometers from the corridor of Tete to the proposed port through a Public Private Partnership (PPP).

b. This is required to provide transport of material, goods, coal and other commodities from the mineral rich region of Tete and other neighbouring provinces.

c.. ... Such project will enhance the economic prosperity in the entire region.

d. PEL has shown keen interest in the development of the said Project.. . .

e. PEL shall provide assistance in the successful construction and commissioning of said project to facilitate successful transport system on Public Private Partnership Mode".17

21 In exchange for certain guarantees from the Government, Clause 1 -- "Objective"18-- provides that PEL will undertake the PFS at its own expense and risk to develop the Project to better define the "terms and conditions for the granting of a concession by the [Government] to PEL for the construction and operation of the Project".19

22 Clause 2 of the MOI provides that in exchange for completing the PFS at PEL's expense within the allotted time period, and upon the approval of the PFS by the MTC, the MTC would then grant PEL a right of first refusal to implement the Project through a concession granted to PEL by the Government:

"1. PEL shall carry out a prefeasibility study (PFS) on the basis of the report of the working group for assessing the appropriate site of the port and to finalize the rail route thus ensuring that once the terms under Clause 7 of this memorandum are approved, the Govt. of Mozambique shall issue a concession of the project in favour of PEL.

2. After the approval of the prefeasibility study PEL shall have the first right of refusal for the implementation of the project on basis of the concession which will be given by the Government of Mozambique."20

23 The language in bold font in Clause 2.1 is not present in the Portuguese version of the MOI, 21 but the reference to PEL's mandatory right of first refusal is consistent in both the English and Portuguese versions of Clause 2.2 of the MOI, which are of "equal value" pursuant to Clause 12.

24 It is important to note that the PEL representatives who signed the MOI on 6 May 2011 -- Mr Kishan Daga (Special Director-Projects) and Mr Ashish Patel (Executive Director) -- do not speak Portuguese, and that this was well known and understood by Mozambique's government negotiators. Mr Daga and Mr Patel therefore relied upon assurances from the government negotiators that the Portuguese version of the MOI reflected the language contained in the English version of that same agreement. In fact, Mr Daga specifically requested confirmation that the English version of the MOI was identical to the Portuguese version, and the government negotiators, including Minister Zucula himself, confirmed that this indeed was the case. Furthermore, the oral negotiations of the MOI between Minister Zucula and Mr Daga likewise were conducted entirely in English, precisely because Mr Daga does not speak Portuguese. It was only once the terms of the MOI had been finalised that the MOI was translated into Portuguese. It was Mr Daga's understanding that Mozambican law required government contracts to be translated into Portuguese, and that this was the reason for translating the MOI. Although both the Mozambican negotiating team and Minister Zucula himself assured Mr Daga that the Portuguese and English versions were identical, this was not the case.

25 The specific and express assurances contained in the MOI -- that "the Govt.

of Mozambique shall issue a concession of the project in favour of PEL" and "PEL shall have the first right of refusal for the implementation of the project on the basis of the concession which will be given by the Government of Mozambique"22 -- were key to inducing PEL's investment in Mozambique.

After all, the PFS required significant investment in terms of money, time and the cost of other projects that PEL could be developing. PEL therefore sought assurances that, if the Government was satisfied with the studies carried out by PEL and its plans for the Project, PEL would then benefit from the work it had conducted and the investment it had made, by having a right of first refusal to implement the Project on the basis of a concession with the Government. In further recognition of the investment PEL would be required to make, and to protect PEL's position while it carried out the PFS, Clause 6 of the MOI granted PEL exclusive rights in relation to the Project. In particular, the MTC agreed not to solicit any third-party proposal or study for the Project throughout the process of the PFS's development and approval.

C PEL INVESTS IN THE PROJECT ON THE BASIS OF MOZAMBIQUE'S ASSURANCES, COMPLETES THE PFS SUCCESSFULLY, AND THE GOVERNMENT APPROVES THE PFS

26 On the basis of the Government's express assurances embodied in the MOI, PEL proceeded to expend substantial sums in undertaking the PFS. For the purposes of producing the PFS, PEL inter alia: (i) analysed the topography of the land along the proposed route of the 500 km rail corridor; (ii) surveyed the Zambezia coastline; (iii) examined oceanographic and meteorological data; (iv) proposed a port location and rail route; (v) produced a cost estimate for the construction of the port and rail corridor; and, at the Government's request, (vi) surveyed the entirety of the disused railway between Quelimane and Macuba to assess whether it could be reinstated. To complete the PFS successfully and in a timely manner, PEL dedicated considerable management and implementation time to the Project, with members of PEL's project and management teams making frequent visits to, and spending considerable time in, Mozambique.

27 PEL's hard work and extensive efforts paid off. PEL submitted the PFS on schedule to the MTC on 2 May 2012.23 On 9 May 2012, PEL presented the results of the PFS to technical and commercial personnel from the MTC and CFM, as well as representatives from the Ministry of Planning and the Ministry of Finance. 24

28 During May and June 2012, PEL engaged in further detailed technical and commercial discussions with various experts and officials from the MTC and the CFM. As part of these discussions, PEL submitted further information concerning the PFS and the envisaged Project, as requested by the Government, to ensure its satisfaction with PEL's plans. These discussions led to PEL producing and sending to the MTC, among other information, an estimated and projected commercial model, a statement on utilisation of funds for the Project, and information on the publications and other resources used to compile the PFS.25 Having provided this additional information, and having addressed the MTC's queries, PEL requested the MTC's approval of the PFS so that the Parties could "enter into the second phase of the project for [the] signing of [a] concession agreement."26

29 In light of PEL's investment and efforts, on 15 June 2012, the MTC informed PEL "that the Pre-Feasibility Study submitted by [PEL] was approved."27 In the same letter, the MTC stated that in order for PEL to pursue the Project, it was required to do two things: (i) expressly exercise its right of first refusal; and (ii) negotiate with the relevant state authority, CFM, to create a project company (the "Project Company") to implement the Project.28 Importantly, these were the only two requirements set out by the MTC to implement the Project at that time. In particular, the MTC made no mention of a public tender.

Rather, the MTC's instructions that PEL negotiate directly with the CFM confirmed PEL's understanding that it would be directly awarded the concession once the Project Company was established in conjunction with the relevant state company, to execute the Project on a PPP basis.

25 Exhibit C-8, Letter dated 15 May 2012 from Kishan Daga of PEL to Minister Zucula of MTC regarding "Additional information to the Prefesasibility Report for Development of Rail Corridor from Moatize to macuse and Port at Macuse, Statement of fund utilisation and projected/estimated cash flow for the entire project"; Exhibit C-9, Letter dated 1 June 2012 from Kishan Daga of PEL to Minister Zucula of MTC regarding "The source of information used for preparation of this report"; Exhibit C-10, Letter dated 11 June 2012 from Kishan Daga of PEL to Minister Zucula of MTC regarding "The discussion held on 11.05.2012 in regards to Rail corridor at CFM office".

26 Exhibit C-8, Letter dated 15 May 2012 from Kishan Daga of PEL to Minister Zucula of MTC regarding "Additional information to the Prefesasibility Report for Development of Rail Corridor from Moatize to macuse and Port at Macuse, Statement of fund utilisation and projected/estimated cash flow for the entire project"; Exhibit C-9, Letter dated 1 June 2012 from Kishan Daga of PEL to Minister Zucula of MTC regarding "The source of information used for preparation of this report"; Exhibit C-10, Letter dated 11 June 2012 from Kishan Daga of PEL to Minister Zucula of MTC regarding "The discussion held on 11.05.2012 in regards to Rail corridor at CFM office".

30 On 18 June 2012, PEL expressly exercised its right of first refusal,29 and confirmed that it would "proceed with CFM to incorporate an entity for implementation of the project as directed by you in your letter."30

31 On 22 June 2012, PEL again wrote to Minister Zucula. In that letter, PEL inquired about with whom in the CFM it should liaise to establish the Project Company, requested official authorisation from the MTC for the formation of the Project Company with CFM, and asked the MTC to designate the CFM as the Government's partner for the Project.31

32 Having received no response to the queries raised in its letter of 22 June 2012, and anxious to implement the Project it had envisioned, PEL proceeded to arrange a meeting with the CFM's President and Chairman of the Board, Mr Rosario Mualeia. During the course of that meeting, and much to PEL's surprise, PEL learned that the CFM Chairman had no information about the Project and knew nothing about the PFS or its approval. This was especially surprising to Mr Daga given that CFM representatives had been involved in the technical and commercial discussions that had ensued between early May and June 2012, when PEL submitted the PFS, and the time when the Government approved the PFS in mid-June. Notwithstanding the MTC's directives to PEL, Mr Mualeia assured Mr Daga that the CFM had not been directed by the MTC to commence negotiations with PEL in relation to the Project.

33 On 7 August 2012, PEL followed up with Mr Mualeia, seeking guidance on "how we can proceed further in regard to the formation of [the] SPV between PATEL and CFM for the above-mentioned project" so that PEL could "enter into the second phase of the Project for discussion and signing of [the] concession agreement as per [the] MOI without losing any more time."32

34 At a meeting between PEL and MTC Minister Zucula on that same day, Mr Daga informed the Minister that Mr Mualeia was entirely unaware of the Project, and CFM's role in relation to it. Minister Zucula telephoned Mr Mualeia during that meeting (in the presence of Mr Daga), and proceeded to engage in what seemed to be an extremely harsh conversation with the CFM Chairman. While that conversation took place in Portuguese (which Mr Daga could not comprehend), Minister Zucula informed Mr Daga -- after he terminated the call with Mr Mualeia -- that he had instructed the CFM to commence negotiations with PEL to form the Project Company. PEL was hopeful that such instructions would result in the CFM's cooperation with PEL to progress the Project without further delay.

35 Regrettably, this was not the case. During a meeting between Mr Daga and CFM Chairman of the Board Mr Mualeia, the latter explained to Mr Daga that CFM was unable to partner in the Project because it lacked sufficient funds to invest in a 20% equity stake as per the PPP law. Mr Mualeia further commented that, if CFM had access to that level of funding, it would have completed its existing projects first rather than investing in a large new project.

36 Anxious to implement the Project, and having received no further response from the Government, PEL again wrote to Minister Zucula on 15 August 2012, to request that the Minister provide PEL with access to the concession agreement template "in order to help expedite[] the process"33 of the Project's execution.

37 Thereafter, on 27 August 2012, the MTC replied to PEL's letter of 22 June 2012. The MTC stated that negotiations with CFM were not prohibited (curiously, the CFM alleged negotiations already had started), and provided the name of an MTC office to contact for the purpose of negotiating the concession, the Office of Studies and Projects.34

38 During the course of these negotiations with the CFM in mid to late 2012, PEL continuously requested the MTC to comply with its obligation under the MOI to award the concession for the Project to PEL.35 For example, in October 2012, PEL again requested a copy of the template Concession Agreement for Ports and Railways, and urged the MTC "that the process of signing [] the concession agreement starts at the earliest," especially given the "project is of national importance and will benefit the Government of Mozambique in many ways."36

39 In November 2012, nearly six months after the MTC had approved the PFS, PEL continued to implore the MTC to comply with its obligations under the MOI to award PEL the concession. In support of its request, PEL cited numerous "real examples of authorizations for direct awards [of concessions], including for projects in the port and railway infrastructure areas." 37 Notwithstanding PEL's pleas, and its undertaking that 20% of the equity in the Project Company would be allotted to the Government or its nominated partner (which was the maximum equity share permitted under the PPP law), the Government refused to award PEL the concession and instead, it proceeded with a public tender process which would be fraught with irregularities.

D MOZAMBIQUE HOLDS A PUBLIC TENDER FOR THE PROJECT IN AN EFFORT TO DEPRIVE PEL OF ITS RIGHTS AND THE VALUE OF ITS INVESTMENT

40 On 11 January 2013, more than six months after it approved the PFS and directed PEL to negotiate with CFM directly to create the Project Company to implement the Project, the MTC, in a remarkable volte face, reneged on its promise to award the concession to PEL.38 The letter states in relevant part:

(a) The MTC alleged it had informed PEL during a meeting in June 2012 that PEL's "preferential rights. . . could be materialized through a public tender where [PEL] would benefit from preference if it participated in the tender" or "through a direct negotiation" if PEL entered into a "strategic partnership" with CFM. In addition, the MTC explained that the "indicative factors of the strategic partnership should be construed so as to bestow upon CFM a relevant role in the company or Joint Venture and indication of a plan to reinforce CFM's capacity".

(b) The MTC informed PEL that a 20% equity offer made subsequently by PEL to CFM, which PEL understood to be the maximum equity share permitted under relevant legislation,39 was "by no means indicative of a strategic partnership". The MTC suggested PEL should be "more generous to ensure a greater participation of CFM".

(c) The MTC claimed that CFM and PEL "had not been able to reach an agreement leading to the development of a strategic partnership because no offer beyond 20% was made".40

(d) Accordingly, the Mozambican Cabinet of Ministers purportedly decided "to look in the market for a partner who was willing to accept more participation of [CFM]", notwithstanding the fact that PEL had offered the maximum equity share legally permitted. Indeed, it had been explained to the Minister that one of PEL's Consortium partners, SPI - Gestão e Investimento, S.A.R.L. ("SPI"), was a Mozambican company and held a 5% equity interest in the Project. Accordingly, PEL's proposal would have resulted in Mozambican entities owning significant equity in the Project. Notwithstanding this fact, however, the Government decided to find another partner through a public tender.

No doubt in an attempt to placate PEL, the MTC noted that if PEL were to participate in the public tender, it nevertheless would still benefit from the right of first refusal contained in the MOI.

41 PEL was both deeply troubled and surprised by the Government's letter of 11 January 2013. Much of its contents was contrary to PEL's understanding of the Parties' agreement at the time PEL decided to invest in Mozambique's infrastructure sector. It was also contrary to the information that both the MTC and the CFM had provided PEL with previously. For example, contrary to the MTC's assertions that CFM desired more than a 20% equity share in the Project, the CFM Chairman had communicated to Mr Daga that CFM had insufficient funds to purchase an equity stake in the USD 3.115 billion Project.

Thus, the MTC's justification for refusing to "issue a concession of the project in favour of PEL" as required by Clause 2.1 of the MOI -- PEL's purported failure to provide more than a 20% equity stake in the Project to CFM -- was not only contrary Mozambican law, but was also at odds with the CFM Chairman of the Board's statements to Mr Daga that CFM lacked sufficient funds to contribute any equity to the Project. Thus, rather than being a legitimate concern, the MTC's focus on the 20% equity participation appeared to be an after-the-fact excuse that was concocted to deny PEL the direct award of the concession that had been assured to PEL in the MOI, and that formed the basis of its legitimate expectations when it decided to invest in Mozambique.

42 It appeared to PEL that after making a substantial investment in the PFS, and defining the contours of the Project, the Government was now failing to uphold its end of the Parties' agreement. In short, it was attempting to cut PEL out of the Project that had been PEL's very own invention.

43 Accordingly, by letter dated 22 January 2013 (which PEL copied to the Prime Minister of Mozambique and the CFM Chairman of the Board given the importance of the matter), PEL disputed the Government's decision to conduct a public tender, and the inaccuracies contained in the MTC's letter of 11 January.41 PEL relayed its serious concern that the Government appeared to be reneging on the specific assurances of the MOI notwithstanding the fact that the Project was "conceived at [PEL's] sole initiative" and that, in accordance with the Parties' agreement as embodied in the MOI, PEL "undertook all the development work at [] substantial costs" and exercised its right of first refusal once the PFS had been approved by the MTC.42

44 PEL likewise set the record straight regarding its numerous fruitless attempts to negotiate with an utterly unresponsive CFM. Specifically, while PEL had at all times been willing to negotiate the terms of its offer with CFM, PEL simply "never received any reaction / response whatsoever from CFM till date [regarding] whether they are willing to participate and, if so, at what level of share participation."43 PEL likewise restated its understanding that 20% was the maximum equity share in the Project Company that it was permitted to offer CFM under Mozambican law and that regardless, its offer had never been non- negotiable. Accordingly, PEL pleaded with the Government to "not be penalised" for CFM's non-responsiveness, and requested a meeting to discuss: (i) the Project and CFM's participation; (ii) delaying the tender process; and (iii) commencing parallel negotiations on the concession agreement.44

45 Notwithstanding PEL's objections, the MTC published a Request for Proposal ("RFP") for the Project in the Noticias newspaper on 29 January 2013.45

46 PEL met the then-Mozambican Prime Minister Alberto Vaquina on 6 February 2013. During that meeting, Mr Daga explained the background to the Project, the work PEL had carried out to date, PEL's fruitless attempts to negotiate with the CFM, and the rights that had been granted to PEL in the MOI, including PEL's right of first refusal and its right to a direct award of a concession. Prime Minister Vaquina seemed surprised by Mr Daga's account of the events, and indicated that he had been informed of contrary facts during a Cabinet Meeting in which the Project had been discussed.

47 On 14 February 2013, the MTC wrote to PEL stating that it could not "reverse the decision already taken by the Council of Ministers" of Mozambique to hold a public tender.46 The MTC submitted, however, that PEL would nonetheless benefit from the right of first refusal it guaranteed to PEL in the MOI, but in the context of the public tender. 47 This was yet another promise the Government ultimately would flout in the subsequent months.

48 Around this time, in an article published by the newspaper O Pais Economico on 1 March 2013, CFM stated publicly that it would not participate in the Project because it already had taken stakes in other ventures.48 PEL brought this statement to the Prime Minister's attention in a letter dated 4 March 2013.49 It explained that the sole purported reason given by the MTC for holding the tender had been PEL's inability to reach an agreement with CFM. Since CFM was no longer interested in the Project, PEL requested the MTC to give effect to the MOI as signed, and permit PEL to develop the Project.50 At this stage PEL also gave assurances to the Prime Minister that PEL would follow the guidelines of the PPP law and would allocate 20% equity to any company nominated by the Government. Once again, the Government ignored PEL's request.

49 Rather than abiding by its obligations under the MOI, the Government instead subsequently distributed a tender notice to interested parties, inviting them to submit an expression of interest by 8 March 2013, to participate in a public tender for the Project. 51 Twenty-one companies ultimately expressed an interest in the Project.52

50 Given the considerable investment PEL already had made in Mozambique, and while expressly reserving its rights under the MOI, PEL was forced to form a consortium of companies to compete in the public tender process (the "PEL Consortium"). The PEL Consortium was comprised of PEL, Grindrod Limited (a leading South African freight logistics and shipping services provider with considerable experience in port and rail corridor management) and SPI (a privately-held Mozambican investment and consulting company).

51 The PEL Consortium submitted an Expression of Interest ("EOI") for the Project to the MTC by the 8 March 2013 deadline.53 In doing so, PEL was careful to note that its EOI was without "prejudice to the rights Patel is vested in as a result of the MO[I]" and that nothing in the PEL Consortium's letter or package shall be construed as "a waiver or a variation of any of the rights Patel has in terms of the MO[I]".54

52 Soon after, the MTC issued tender documents to six pre-qualified companies on 12 April 2013: (1) the Italian Thai Development Company ("ITD"); (2) Sumitomo Corporation; (3) Moto Engil, Codiza, Edvisa and Manica Consortium; (4) the CLZ Consortium; (5) Rio Tinto; and (6) the PEL Consortium. 55 The tender documents requested the recipients to submit technical and financial proposals for the Project by 29 May 2013.56

53 In parallel with its preparation for the public tender, PEL continued to petition the Government to suspend the public tender, and to honour the commitments it made to PEL in the MOI, which had induced PEL to invest in Mozambique in the first place. This included imploring Prime Minister Vaquina to abide by the commitments undertaken by the Government in the MOI, and providing the Government with a legal opinion from a prominent Mozambican law firm confirming PEL's interpretation of Mozambican law and the MOI.57

54 On 18 April 2013, PEL thought its numerous petitions to the Government to honour its MOI commitments finally had been successful, when the MTC informed PEL that the Council of Ministers had decided it was in the "national strategic interest" to permit PEL to begin negotiating towards the execution of the Project. The MTC explained that this decision had been taken "considering the urgency of these infrastructures, the national strategic interest, the time available and the fact that the tenderer has carried out all the feasibility and engineering studies, and that it is in the national interest that the project be accelerated." 58 On this basis, the Council of Ministers "decided to invite [PEL] to start the [negotiation] process with a view of carrying out those projects" and invited "the representatives of [PEL]. . . to contact the [MTC], to begin this process, within seven days."59 The MTC further requested PEL to provide a bank guarantee for 0.1% of the prospective investment value, to be held until the conclusion of the agreement.60

55 PEL promptly responded in writing to "formally accept" the Government's offer to commence negotiations for the concession without holding a public tender.61

56 Over the next few days, further seemingly positive steps were taken with the MTC promising to hand over a draft concession agreement and the parties scheduling their first direct negotiation meeting for 10 May 2013 in Maputo.62 In reliance on these steps, PEL provided the MTC with a bank guarantee for the equivalent of USD 3,115,000.63

57 Then, on 13 May 2013, the MTC informed PEL that Mozambique had once again changed its position.64 The Government alleged that, having heard from several unnamed "stakeholders" and having reviewed the relevant laws and regulations governing public private partnerships in Mozambique (the "PPP Law"), the Council of Ministers subsequently concluded there was no "space for direct negotiations with any of the bidders presented in the pre-selection phase" and that the public tender must proceed. Consequently, the MTC declared that "there shall be no place for direct negotiation with [PEL]".65 Rather, it instructed PEL to continue with the public tender in which it would benefit "from the start of pre-emption right from 15 percentage points as stipulated by Law".66 This was an astonishing reversal of a decision that had been made just 14 days earlier, in which the same governmental body authorised direct negotiations between PEL and the MTC as a matter of "national strategic interest".

58 PEL responded to the MTC on 4 June 2013.67 In its letter, PEL reiterated its understanding of the distinct rights it had been granted under the MOI and Mozambican law. Namely,

(a) Clause 2.1 guaranteed that, following the Government's approval of the PFS, "the Govt. of Mozambique shall issue a concession of the project in favour of PEL";

(b) Clause 2.2 conferred upon PEL a right of first refusal to implement the Project; and

(c) the PPP law provided for a 15% right of preference to which PEL was entitled for providing an unsolicited proposal for the Project. This 15% right of preference was entirely distinct from and in addition to the right of first refusal granted to PEL in the MOI.

59 Further, PEL explained its view that the PPP Law specifically permitted the direct award of concessions in special circumstances, all of which were present in the case of the Project. Accordingly, PEL requested that the Government "abide by the agreed condition[s] in [the] MO[I]" and the Council of Minister's approval of direct negotiations on 16 April 2013, and "start the negotiation of [the] concession agreement on the basis of [a] direct award."68

60 Despite PEL's plea to the Government to comply with its past assurances and its obligations under the MOI, PPP Law, and Resolution of the Council of Ministers, the plea again fell on deaf ears, with the MTC failing to reply directly to PEL's letter. Instead, on 10 June 2013, the MTC provided clarifications to queries from the tender bidders to the six companies comprising the "Short List phase" of the tender process, including PEL, and thereby impliedly rejected PEL's request to negotiate a concession agreement for the Project.69

61 In light of the above events, and having invested considerable time and costs into the Project to date on the basis of the Government's previous assurances, PEL was left with no choice but to continue to participate in the public tender process. Accordingly, on 27 June 2013, the PEL Consortium submitted its financial and technical proposals as part of the tender process.70 In doing so, PEL once again clearly and explicitly reserved its rights to rely on the terms of the MOI.71

62 On 19 July 2013, representatives of the MTC and various bidders convened at MTC's offices in Maputo.72 During this meeting, the MTC announced the scores it had allocated to each tender (which purportedly had been calculated by reference to a specific formula which had been published during the tender process): ITD was awarded 95 points, the CLZ Consortium was awarded 80 points and the PEL Consortium garnered 72.5 points.73 Accordingly, the MTC announced ITD as the winning bidder.

63 PEL was surprised and dismayed by the outcome of the tender process because, inter alia:

(a) PEL's indicative cost estimate for the Project was USD 3115 million whereas the cost estimate of the winning bidder was higher at USD 3993 million.

(b) The PEL Consortium was awarded zero points for construction expertise in ports and railways notwithstanding its substantial experience in such sectors.

(c) The PEL Consortium was awarded only 10 out of a possible 15 points for its interpretation and understanding of the Project, while the other bidders were each awarded 15 points. This was notwithstanding that:

(i) it was PEL, and not the other bidders, who was the Project's originator;

(ii) it was PEL that had carried out the Preliminary Study and the PFS for the Project;

(iii) it was PEL who possessed the detailed knowledge of the Project on the basis of its prior substantial investment and work; and

(iv) much of the tender process was based on the PFS, which had been prepared by PEL. In fact, the other bidders relied on the PFS prepared by PEL to compile their own bids.

(d) Some of the other bidders were awarded higher scores than PEL in the "manager's profile" category notwithstanding the fact that these operators had little or no experience operating railways or ports in Mozambique. In contrast, Grindrod, a member of the PEL Consortium, had significant experience in this field. In fact, Grindrod was already operating and managing Maputo port at the relevant time.

64 On 26 July 2013, the MTC formally notified PEL of its decision to award the concession to ITD.74

65 Separately, on 29 July 2013, the MTC provided further information explaining how the proposals had been evaluated.75

66 The PEL Consortium sent a letter to the MTC on 29 July 2013 expressing its concern over the MTC's handling of the tender. In particular, the Consortium raised serious concerns that the "proper process has not been followed in the evaluation and scoring of the technical and financial proposals submitted by the Consortium in terms of the rules of the RFP and in terms of Mozambique law."76 Amongst other concerns, PEL underscored the fact that:

(a) "the criteria communicated as being used by the MTC for the evaluation of the technical proposals differs materially from the criteria communicated to the bidders in the RFP for the tender";77

(b) the financial proposal scores did not appear to be calculated in accordance with the formula specified in the RFP and amended by MTC correspondence; and

(c) ITD's selection as the winning bidder evidently was "not based on the criteria and formula given in the project RFP documentation, including amendments thereto" and therefore the tender was "contrary to the public procurement policy of the country."78

67 In light of the serious irregularities surrounding the public tender, PEL requested that the MTC clarify the way in which the bids had been scored, and suspend its decision to award the concession to ITD until the "correct determination of the highest bidder is adjudicated on the criteria specified in the technical proposal and the formulas for the calculation of the final scores specified in the RFP read in conjunction with the amendments thereto."79

68 Pursuant to Article 140.1 of the Procurement of Public Works Legislation on administrative complaints and appeals, an application for review may be brought against decisions relating to the selection of applicants and the award of contracts taken by the Contracting Authority in the course of public procurement procedures, which may impair the rights and interests of the parties concerned. Once a complaint is submitted, the corresponding public procurement procedure is suspended, as per Article 140.6 of the Procurement of Public Works Legislation, and the Contracting Authority is prevented from: (i) deciding definitively on the final selection of bidders; (ii) starting the negotiation phase; (iii) deciding on the award; or (iv) concluding the contract.

Pursuant to Article 141 of the Procurement of Public Works Legislation, on 1 August 2013, PEL lodged a guarantee with the MTC in the amount of MZN 125,000 to officially contest MTC's award of the concession to ITD, expressly stating it was submitting the "GUARANTEE AMOUNT FOR RIGHT TO APPEAL TO AWARD". 80

69 The MTC responded to the PEL Consortium's complaint about the irregularities of the tender process on 12 August 2013.81 In effect, the MTC maintained that the tender evaluation criteria had remained unchanged, and that the PEL Consortium's 15% right of preference had been applied correctly.

Further, the MTC failed to provide detailed responses to the queries raised by the PEL Consortium in its letters of 19 and 29 July and 1 August, as it was required to do under Mozambican law.82 In particular, Article 253 of the Constitution sets out a duty to stipulate grounds on all acts and decisions from the Administration which may affect the rights and legitimate interests of interested parties, a duty which is further replicated and detailed in the legal statutes governing the actions of the Mozambican authorities.

70 After reviewing the MTC's explanations, it became clear that the tender evaluation had not been conducted in accordance with the tender documents provided to PEL and the other bidders. To the contrary, it appears to have been a sham tender conducted with the aim of reaching a pre-determined outcome.

For example, both the criteria and formulae articulated by the MTC in its letter of 12 August 2013 were "entirely different to the criteria and formulas specified in the RFP and subsequent clarifications through amendment notices."83 This was a clear violation of Article 8 of the Public Procurement Act, which mandates that "The evaluation of bids must be based solely on the criteria established in the tender documents."84 Given the serious irregularities surrounding the evaluation of the tenders, PEL reiterated its request that the award of the concession be placed on hold until the bid committee re-evaluated the bids in accordance with the criteria stipulated in the RFP as clarified by amendment notices.85

71 Following the confirmation of the award on 27 August 2013, PEL issued an appeal to the Minister of the MTC. This confirms that PEL satisfied all legal requirements in terms of challenging the award decision from an administrative law standpoint. Although PEL decided not to lodge a court appeal, this does not mean that it waived any of its rights. Even more so, the court appeal would not have suspended the award decision.

72 The Government disregarded PEL's serious concerns about the tender process, and the award of the Project to ITD. In particular, the MTC refused to reconsider its position and instead proceeded to confirm its award of the concession for the development of the railway corridor and port to ITD on 27 August 2013.86

73 Faced with this injustice, the PEL Consortium took immediate action. On 28 August 2013, the PEL Consortium reiterated in a 10-page letter captioned "FORMAL APPEAL" the numerous grounds for challenging the award to ITD.87 In particular, the PEL Consortium set out a number of examples where, in the PEL Consortium's view, "there has been a mis-interpretation, mis- application, or entirely incorrect application of the scoring provisions of the Project" as stipulated in the RFP and the amendments thereto. These examples included, inter alia:

(a) The PEL Consortium only received a score of 3.5 (out of 10) in the category of "Organic Composition of the Bidder" notwithstanding that: (1) PEL had over 60 years of experience in the heavy construction industry and had completed national and international projects in India and abroad; (2) PEL Consortium member Grinrod has a strategic relationship with (and was in the final stages of acquiring) RACEC, the preeminent railway construction company in Africa with a track record dating back to the 1960s; (3) Grinrod had designed and constructed numerous port and terminal projects in Mozambique and across Africa, had over 100 years' track record in operating port and rail infrastructure, and had experience operating and managing Maputo Port.88

(b) The PEL Consortium only received a score of 10.5 (out of 15) in the category of "Interpretation and Understanding of the Project"

notwithstanding that PEL and SPI conceived of the Project themselves and "spent the best part of two years on various feasibility and technical studies, resulting in the generation of a number of detailed reports" which ultimately led the MTC to determine it was both feasible and in the nation's strategic interest to proceed with the Project. Given the PEL Consortium's "deep and fundamental understanding of this Project and the significant number of site visits and technical studies conducted over the past two years" it was highly suspect that all of the other bidders - who had only 45 days to acquaint themselves with the Project prior to the tender - received the maximum score of 15 points.89

(c) In the category "Strategic Vision of the Business Model", the PEL Consortium scored zero in the subcategory of "Strategic Partnership"

notwithstanding that: (1) 30% of the Project was to be awarded to Mozambican entities with (i) 20% being allocated to the relevant Mozambican government entity (the maximum percentage allowed under the PPP law); (ii) 5% equity participation being granted to the Mozambican company SPI, which was part of the PEL Consortium; and (iii) 5% equity to be offered to other local Mozambican entities yet to be identified; and (2) none of the other bidders offered equity to Mozambican entities on a fully funded and free carry basis. Further, the PEL Consortium's Financial Proposal was superior to all other bidders in the subcategories of "Human Resources Development" and "Social Projects" with the PEL Consortium "offering the largest value financial package in terms of social programmes."90

(d) Competing bidders with either no or minimal experience of operating ports and railways, and no experience of operating in Mozambique, outscored the PEL Consortium in the category of "Manager's Profile of the Bidder" notwithstanding that PEL Consortium member Grindrod "is a well respected operator of ports and railways in the region and has an excellent track record, with significant experience of operating in Mozambique, which respectfully, none of the other bidding consortiums can match".91

(e) The MTC "unilaterally altered the scoring formula or applied the incorrect formula in error for both the calculation of the Financial Proposal scores and the consolidated Final Technical and Financial Proposal score"92 thereby deviating from the RFP and amendments thereto, in contravention of the PPP Law stipulating that "the criteria established for the evaluation of tenders as set out in the relevant tender documents. . . cannot be altered after the submission and opening of the tender bids."93

(f) According to the PEL Consortium's calculations, the winning bidder, ITD, would contribute only approximately 20% of the value (i.e, USD 195.8 million, by way of a concession premium and corporate social investment) as compared to the PEL Consortium (which would have contributed USD 977 million by way of a concession premium and corporate social investment). Notwithstanding this large discrepancy, which would have inured to the benefit of Mozambique and its people, ITD was nevertheless awarded 70 points (5 points more than the PEL Consortium's score of 65 points) for its Financial Proposal.94

74 In light of these inconsistencies and errors, the PEL Consortium again petitioned the MTC to "re-evaluate the Technical and Financial Proposals of each of the three bidders for the Project in accordance with the tender scoring provisions as stipulated in the RFP, including amendments thereto",95 and to hold the award in abeyance until these grave errors could be addressed.

75 The MTC, however, refused to change its position and rejected PEL's claims for compensation which, at that time, included reimbursement of the costs it had incurred for the PFS (estimated at USD 4 million), as well as royalties of 0.5% of the value of the investment (being. 5% of the USD 3,115,000,000 value of the Project identified in the PFS, i.e. USD 15,575,000) for its identification of the Project.96

76 In the course of 2013 through to 2015, PEL made several attempts to try to resolve its dispute with the Respondent. All such attempts failed.

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