Reproduced from www.worldbank.org/icsid with permission of ICSID.
1. In accordance with Annex A of Procedural Order No. 1, as revised on 2 November 2020, the Republic of Colombia ("Colombia" or "the Respondent") respectfully submits this Counter- Memorial on Jurisdiction, Merits and Damages.
2. The present case concerns the legitimate exercise of the State's regulatory powers to fight the scourge of drug-dealing and money laundering, that has affected Colombia for decades and continues to do so. The history of Colombia's fight against drug dealers is known, as are the thousands of lives that drug-dealing and the related violence has claimed. Contrary to what the Claimants attempt to portray - glossing over the most basic principles of Asset Forfeiture in Colombia - the measures at hand in this case do not constitute an expropriation, let alone an unlawful expropriation.
3. Asset Forfeiture Proceedings are a feature of Colombian law, enshrined in the Colombian Constitution of 1991, and which applies to assets which origin is illicit. It is no coincidence that the Constitution of 1991 enshrines Asset Forfeiture Proceedings as a means to fight illegal activities and the lucrative drug dealing. To recall, in 1991 Colombia was submerged in the fight against the drug-cartels, particularly the Medellin Cartel.
4. Indeed, Article 34 of the Constitution provides that asset forfeiture applies when assets have been the result of an illicit enrichment and acquired in violation of social mores or in a manner harmful to the public treasure. The Constitution provides that asset forfeiture requires a judicial decision to that end, and it distinguishes it from confiscation. Importantly, whereas confiscation and expropriation entail the existence of a right that is taken by the State, in the case of asset forfeiture proceedings, there is no acquired right as no right can be acquired in violation of the law. The asset forfeiture proceedings have been regulated in subsequent laws, and more specifically Law 1708 of 2014 - the Asset Forfeiture Code - which is applicable in this case.
5. This is the legal framework that existed, and which applied to the Claimants, when they decided to invest in Colombia. It is undisputed that the Claimants knew, or should have known, the legal framework. It is also undisputed that they knew the turbulent past of Colombia and the region in which they wanted to invest, and in particular, that Antioquia, where most of their alleged investments were made, was the epicentre of drug dealing activities. Hence, they accepted and decided to invest within a given legal framework and knowing the risks that investing in the area entails. What is more, as further noted in this Counter Memorial, part of the strategy of Mr. Seda's company, Royal Realty, was to acquire lots in regions where there was a perception of lack of security to negotiate prices down to a minimum, thus allowing returns of up to 1.000%. Besides the fact that such extraordinary gains are hardly realistic in any context - to say the least - it is evident the obvious risk that transacting in such environment entails.
6. Moreover, it should be noted that asset forfeiture proceedings follow the assets tainted by illegality, independently of who has them in a given moment. The action is not subject to a statute of limitation, precisely because it is aimed at avoiding money laundering. It is thus incumbent on the company or individual that acquires the property to conduct a proper due diligence on the assets to ensure that they are not tainted by illegality.
7. It is against this backdrop that the Claimants' acts need to be evaluated. The Claimants knew the law, knew they were investing in an area permeated by drug dealing and money laundering, where, as per their own exhibits, 80% of the land has been known to be in the hands of drug dealers at a given point. Yet they conveniently satisfied themselves with alleged studies that were insufficient in time and depth and which were ill-fitted for a due diligence in the context of asset forfeiture. Equally ineffective are what the Claimants try to present as "Certifications of Clean Title", which are mere responses from specific units of the Attorney General's Office to queries from individuals on the information that at a given date exists on the database of a specific unit of the Attorney General Office and that in no event constitute an assurance - let alone a commitment - by the State that the asset or land is "clean", as the Claimants would like the Tribunal to believe. In fact, as explained by former Minister of Justice, Dr. Yesid Reyes, their use for the purposes the Claimants attempt to use them has been disavowed by the authorities.
8. Furthermore, latest by 2014 Mr. Angel Samuel Seda ("Mr. Seda") knew that the lots where the Claimants were to build, and eventually started to build, the Meritage Project, were being claimed by a known drug dealer, Mr. Ivan Lopez Vanegas ("Mr. López Vanegas"). Not only did Mr. Seda knew that, but he met with Mr. Lopez Vanegas in several occasions until 2016.
Simply put, the Claimants feign ignorance in the face of clear evidence of the situation of the lot and assumed the risk their position entails. Moreover, pre-sales of units went ahead despite this situation. As such, the Claimants' claim about the alleged impossibility and impracticability of conducting a proper due diligence on the lot has no basis.
9. Another remarkable feature of the Claimants claim is their lack of financial contribution and risk assumed in their alleged investments and lack of evidence of their actual disbursements.
Indeed, as the Respondent demonstrates, the Claimants model for most of their projects was based on obtaining resources from the public via pre-sales of units or sale of shares in the eventual profits from hotel- room occupancies, greatly diminishing their actual contribution and exposure. In fact, for many of the Claimants' projects with respect to which the Claimants bring claims, the Claimants have not even acquired the land - in fact what is referred to by the Claimants throughout their Memorial as "sales-purchase agreements" are in fact merely promises to acquire that do not transfer ownership and title to the promisor buyer. This is the case of the so-called Meritage Lot. An analysis conducted by the Respondent's expert on quantum shows that, assuming that the Claimants actually disbursed amounts in equal proportion to their shareholding in the projects - which has not been proven, their "contribution" for the five "projects", which they claim were affected by the State's measures with respect to the Meritage Lot, was approximately USD 2.5 million. An amount that dwarfs in comparison with the Claimants' claim USD 309 million from the Colombian State.
10. Equally unsupported are the Claimants' claims of an orchestrated attempt by the different authorities to deprive them of the Meritage lot in violation of due process, and of the alleged violation of the State's obligations to afford them fair and equitable treatment, full protection and security and national treatment. As the Respondent demonstrates below, the State authorities have observed the process provided for in Law 1708 of 2014 as regards asset forfeiture proceedings. The allegations of the Fiduciary, Corficolombiana, as representative and title holder of the Meritage Lot have been heard, as have the interventions of Newport, despite the fact that Newport holds no right in rem over the Meritage Lot (this being a requirement set forth in Law 1708 of 2014 to be considered as affected party in an asset forfeiture proceeding). The legality of the precautionary measures imposed by the Asset Forfeiture Unit of the Attorney General Office has been reviewed twice by independent courts, and Newport's appeal on the Court's order accepting the Asset Forfeiture request by the Attorney General's office is still pending. Thus, the Claimants have benefited from all the applicable guarantees under Law 1708 of 2014 and their allegations of an orchestrated attempt by the different divisions of the State to disposes them of their projects ring hollow.
11. Importantly, contrary to the Claimants' assertion, the rationale informing the Asset Forfeiture Proceedings in the case of the Meritage Lot has remained the same from the beginning of the proceedings, that is, the investigations conducted by the Colombian authorities have shown that the lot where the Meritage Project was being built, has been acquired by a drug-dealer involved with the Medellín Cartel, and was then the object of a series of irregular transfers through the use of figureheads, who lacked the means to acquire, and did not pay for, the land, via falsifications by the Oficina de Envigado (the criminal band that succeeded the Medellin Cartel). The fact that the Attorney General's Office first learned about the origin of the lot due to a complaint by Mr. López Vanegas has no bearing on the illicit nature of the acquisition of the land and the unlawful transfers that followed.
12. As regards Mr. Seda's allegations concerning the collusion of personnel from the Attorney General's Office with Mr. López Vanegas to extort money from him - which Mr. Seda only reported in December 2016, after having had contacts with Lopez Vanegas for two years - are based on conjectures. The Anti-Corruption Unit of the Attorney General's Office heard Mr.
Seda's allegations, and in fact advised him to present an official complaint. The Unit took measures in this regard and conducted investigations on the merits of the allegations, and to date have not found any irregularity in the actions of the personnel of the Asset Forfeiture Unit as regards the proceedings vis-à-vis the Meritage Lot, which origin has been confirmed to be illicit.
13. It is a reiterated tenet of investment law that the protection provided by host States is not a risk insurance for bad business, let alone a means for exacting profits from the State. In the present case, the Claimants pursue some projects, most of which (i.e., Santa Fé de Antioquia, Tierra Bomba and 450 Heights) existed only in paper, and two of which were on construction phase and experiencing considerable delays (i.e., Meritage and Luxé). In this case, the State, in exercise of its regulatory powers, imposed precautionary measures on the lot where one of the projects was being developed, the Meritage Lot. The measure affected solely the land regarding the Meritage Project, halting the sale of units to third party buyers interested in the Project that was being built in the lot which origin was proved to be illicit. Yet, the Claimants allege that the Luxé Project, and their in-paper projects in Tierra Bomba, 450 height and Santa Fé de Antioquia, has been equally affected by the measures, preventing the Claimants from obtaining financing to complete, or pursue, them, due to the alleged damage to their reputation.
14. The Claimants' allegation is untenable. Beyond the obvious lack of causal link between a very specific measures in connection with the Meritage Lot (which is in itself fatal to the Claimants' case), the State has not initiated actions against Mr. Seda or the other Claimants, and is not liable for Mr. Seda's alleged damage to its reputation. Mr. Seda, on the other hand, has been very vocal about the imposition of the measures and the alleged threats suffered by Mr. López Vanegas, providing various interviews to the media. Furthermore, as showed by the Respondent, it is a known fact that financial entities have denied credit to Mr. Seda based on considerations alien to this claim. Pretending, as the Claimants do, that the State needs to compensate them for failed business, where their contribution has bene close to nil and which failure has no relation with the State's measures, is contrary to the rationale and reason of investment protection.
15. Moreover, as demonstrated by the Respondent, the Claimants' damages claims, regarding non- ongoing concerns, are completely speculative, overstated and have no correlation with either the reality of the measures or the reality of the economic market.
16. In the sections below, the Respondent sets the relevant facts underlying the dispute (Section II), before establishing that the Arbitral Tribunal should decline jurisdiction in the present case (Section III). The Respondent then shows that the Claimants' claims are unfounded and should be dismissed in their entirety (Section IV). Finally, the Respondent shows that the Claimants' claims for damages should be rejected in their entirety (Section V). For the avoidance of doubt, and unless stated otherwise, the Respondent does not accept any factual or legal assertion made by the Claimants in their Memorial.
17. In support of its submission, the Respondent also submits: