Riverside Coffee LLC v Republic of Nicaragua - ICSID Case No. ARB/21/16 - Respondent's Counter-Memorial on the Merits and Memorial on Jurisdiction - 3 March 2023
Country
Year
2023
Summary
Source: icsid.worldbank.org
COUNTER-MEMORIAL ON JURISDICTION AND THE MERITS
TABLE OF CONTENTS
I. INTRODUCTION
II. STATEMENT OF FACTS
A. The Real Story of the Hacienda Santa Fé Invasion
1. Farmers Invaded Hacienda Santa Fé and Occupied the Upper Part of the Property between 1990 and 2004
2. In 2017, Displaced Members of Cooperativa El Pavón Re-Took El Pavón Because It Had Been Deserted by Inagrosa
3. When Inagrosa Requested Assistance, the Government Reacted Diligently under the Circumstances and Succeeded in Evicting the Invaders and Securing Order
a. Ongoing Civil Strife and Violent Unrest Across Nicaragua Made It Impossible for National Police to Take Immediate Action Regarding the Hacienda Santa Fé Invasion
b. Nicaragua Evicted the Illegal Occupants from the Hacienda on August 11, 2018
c. Nicaragua Acted Diligently to Evict the Illegal Occupants Again after They Re-Invaded Due to the Property Being Abandoned by Riverside and Inagrosa
B. Riverside Omits, Mischaracterizes or Distorts Relevant Facts About the Invasion of Hacienda Santa Fé
1. Riverside Has Not Proven the Invaders Were Paramilitaries
2. Riverside's Allegations about What Inagrosa Workers Heard During the Invasion Constitute Unreliable Hearsay
3. Riverside's Claim that Nicaragua Assisted the Invaders Is Unproven and Refuted by the Record
C. Riverside's Allegations Concerning Inagrosa's Hass Avocado Business Are Unfounded and Controverted by the Evidentiary Record
1. Riverside Has Not Proven that Inagrosa Had a Successful Avocado Business
2. The Alleged Hass Avocado Business Was Illegal Because Inagrosa Did Not Secure the Permits and Authorizations Required under Nicaragua Law to Run Such a Business
a. Inagrosa Did Not Have the Required Phytosanitary Permits and Authorizations Required to Import Avocado Seeds
b. Inagrosa Did Not Have the Required Phytosanitary Permits and Authorizations Required to Maintain Hass Avocado Sapling Nurseries at Hacienda Santa Fé
c. Inagrosa Did Not Have the Required Phytosanitary Permits and Authorizations Required to Export Avocados to Other Countries
d. Inagrosa Did Not Have the Required Export Authorizations to Export Avocados to Other Countries
e. Inagrosa Never Obtained the Necessary Environmental Permits to Change the Use of the Soil at Hacienda Santa Fé
f. Inagrosa Planted Avocado Trees in a Prohibited Area
g. Inagrosa Could Have Never Expanded the Plantation to Hectares
h. Inagrosa Never Obtained a Concession for Exploitation and Use of Water Resources for the Alleged Avocado Business
3. The Hass Avocado Business, as Alleged by Riverside, Is Infeasible from a Technical Perspective
a. Inagrosa Would Not Have Been Able to Access the U.S.
Market
b. Inagrosa Would Have Planted Too Many Trees Too Close Together
c. The Alleged Yields Are Not Realistic
d. Riverside Has Not Proven that there Was Sufficient Water at Hacienda Santa Fé to Sustain the Hass Avocado Crops
D. Riverside's Arguments Concerning Inagrosa's Forestry Business Are Contradictory and Unfounded
III. CLAIMS SUBMITTED FOR THE FIRST TIME IN CLAIMANT'S MEMORIAL ON BEHALF OF INAGROSA, A NICARAGUAN COMPANY, ARE INADMISSIBLE AND OUTSIDE THE TRIBUNAL'S JURISDICTION UNDER DR-CAFTA AND THE ICSID CONVENTION
A. Applicable Legal Principles
B. Claims on Behalf of Inagrosa that Riverside Asserts for the First Time in Its Memorial Are Inadmissible Under Articles 10.16.1(b) and 10.18.2(b)(ii) of DR-CAFTA
1. Riverside Failed to Comply with the Notice Requirement Under Article 10.16.2 of DR-CAFTA With Respect to the Claims it Attempts to Bring on Behalf of Inagrosa
2. Even if Claimant Had Properly Included Inagrosa's Claims in the Notice of Intent, Riverside's Claims on Behalf of Inagrosa Are Inadmissible Because Claimant Failed to Submit a Waiver on Behalf of Inagrosa as Required by Article 10.18.2(b)(ii) of DR-CAFTA
3. Claimant Improperly Seeks through this Arbitration to Recover Losses Suffered by Inagrosa
C. Riverside Has Not Shown that the Tribunal Has Jurisdiction Over Claims for Damage to Inagrosa Because It Has Not Shown that It Controlled Inagrosa at the Time of the Alleged Breaches
D. The Tribunal Lacks Jurisdiction Ratione Personae Over Any Claims Asserted on Behalf of Inagrosa Under Article 25(2) of the ICSID Convention Because Nicaragua Never Agreed that Inagrosa Should Be Treated as a "National of Another Contracting State"
IV. RIVERSIDE'S CLAIMS ON THE MERITS FAIL
A. Riverside Has Not Proven that the Alleged Measures Are Attributable to the State and Thus a Basis for International Liability
1. Professor Wolfe's Report Is Not Evidence of State Conduct
2. Claimant's Fact Witness Testimony Does Not Establish a State-Led Conspiracy to Invade Hacienda Santa Fé
B. Nicaragua Is Not Liable to Riverside in Light of the Non-Precluded Measures Clause at Article 21.2(B) of DR-CAFTA
1. Article 21.2(b) Is an Expansive Non-Precluded Measures Clause
2. Article 21.2(b) Is Self-Judging
3. The Invasion of Hacienda Santa Fé Implicated Nicaragua's "Essential Security Interests"
C. Article 10.6(1) of DR-CAFTA Also Provides Nicaragua With A Complete Defense To Riverside's Claims
1. DR-CAFTA Article 10.6 Is a Lex Specialis Applicable to Measures Adopted in Response to Armed Conflict or Civil Strife
2. Nicaragua's Response to the Invasions of Hacienda Santa Fé Was a Measure "Relating to Losses Suffered by Investments in Its Territory Owing to Armed Conflict or Civil Strife"
3. Nicaragua's Response to the Invasion of Hacienda Santa Fé Was Not "Discriminatory"
D. Even if Articles 21.2 and 10.6 of DR-CAFTA Did Not Displace the Other Treaty Provisions, Nicaragua Is Still Not Liable for a Breach of the Treaty
1. Nicaragua Accorded Fair and Equitable Treatment to Riverside's Investment as Well as Full Protection and Security
a. Nicaragua Acted in Good Faith with Respect to the Land Invasion and Inagrosa's Property Rights in Hacienda Santa Fé
b. Nicaragua Has Not Denied Claimant "Due Process"
c. Nicaragua's Approach to the Land Invasion Was Consistent with Riverside's Legitimate Expectations
2. Nicaragua Accorded Riverside's Investment Full Protection And Security Consistent With Article 10.5 Of DR-CAFTA
3. There Has Been No Expropriation and Nicaragua's Consistent Policy with Respect to Hacienda Santa Fé Has Been to Ensure that It Is Peacefully Returned to Inagrosa
a. Claimant Has Not Proven that the Invaders' Conduct Is Attributable to the State as Required Under International Law
4. Nicaragua Did Not Discriminate Against Riverside's Investment in Breach of the Treaty's National Treatment or Most Favored Nation Obligations
a. Claimant Has Failed to Prove That Nicaragua Accorded Better Treatment to Other National and Foreign Investors
b. Nicaragua's Approach Was Particularly Appropriate with Respect to The Invaders at Hacienda Santa Fé
c. DR-CAFTA and International Law Do Not Require That, in a Context of Civil Strife, Riverside Should Have Received Better Treatment Than Other Investors
V. RIVERSIDE IS NOT ENTITLED TO COMPENSATION
A. Riverside Has Not Proven that Nicaragua Caused the Damage It Claims
B. Riverside's DCF Valuation for Inagrosa Has No Legal Basis
1. Compensation Under DR-CAFTA and International Law
2. The DCF Methodology Should Not Be Used in This Case
C. Mr. Kotecha's Inputs and Assumptions for the DCF Methodology Are Fundamentally Flawed and Must Be Withdrawn
1. No Historical Financial Data or Credible Evidence Underlies the Kotecha Report's Analysis
2. Mr. Kotecha Assumes Inagrosa's Avocado Business Was Successful Despite No Evidence to This Effect
3. Mr. Kotecha Wrongly Assumes Inagrosa Could Export Avocados to the United States
4. Mr. Kotecha Adopted Mr. Rondón's Unsupported Cost Inputs Resulting in Inflated and Unrealistic Profit Margins
5. Other Notable Defects with the Kotecha Report's DCF Model
D. Any Damages Awarded Must Be Reduced Because Inagrosa Contributed to the Alleged Damages, Failed to Mitigate Its Damages, and Has Outstanding Debts to Nicaragua
1. The Principle of Contributory Fault Dictates a Reduction in Damages
2. Riverside Did Not Mitigate Its Losses Following the Illegal Invasion
3. Any Damages Awarded Must Be Offset by Nicaragua's Costs for Providing Security to Hacienda Santa Fé and Inagrosa's Outstanding Tax Debt
E. The Tribunal Should Apply an Alternative Valuation Methodology
F. Riverside Requests an Interest Rate that Is Incompatible under the Express Terms of DR-CAFTA
G. Riverside's Moral Damages Claim Must Be Rejected
1. Riverside Does Not Have Standing to Claim Moral Damages
2. Riverside Has Not Overcome the High Threshold for Establishing Its Right to Moral Damages
VI. PRAYER FOR RELIEF
I. INTRODUCTION
1. Riverside Coffee, LLC ("Riverside" or "Claimant") brings investment claims under the Dominican Republic-Central America Free Trade Agreement ("DR-CAFTA" or the "Treaty") against the Republic of Nicaragua ("Nicaragua" or the "Government") based on the alleged destruction of its investments in a Nicaraguan agricultural company, Inversiones Agropecuarias, S.A. ("Inagrosa"), which has at all times owned a 1,142.5-hectare property located in the northeast region of the Municipality of San Rafael del Norte in Nicaragua's Department of Jinotega ("Hacienda Santa Fé").
2. Riverside wants this Tribunal to believe this is a case about a lawless government seizing property from political opponents and foreign investors through "paramilitary" violence.
Without regard for the scope of the Tribunal's jurisdiction, Riverside loads its Memorial with political criticisms of Nicaragua and accusations of human rights violations unrelated to the dispute at hand. Nicaragua firmly rejects Riverside's irrelevant accusations.
3. Riverside' story of its case is recited in a 44-page Facts section, which presents a sequence of events that occurred in a period of less than two months, from June 16, 2018 to August 4, 2018. But the facts of this case cannot be encapsulated in a period of two months. Riverside's story is devoid of any historical background that would allow the Tribunal to assess the facts taking into account the context under which events occurred. For example, Riverside did not find it necessary to explain to the Tribunal that the June 2018 invasions to the Hacienda Santa Fé were not the first time that the Hacienda had been occupied by invaders. The story of the invasions to the Hacienda Santa Fé dates to the 1990s, before Inagrosa acquired it. Claimant was aware of this situation and in fact lived together with the invaders in different sectors of the Hacienda for more than a decade.
4. Partly for this reason, and notwithstanding the mud that Riverside slings, the reality of this case is entirely different than how Riverside attempts to paint it.
5. First, the evidence will show that Nicaragua had no role in the undisputedly illegal invasion and occupation of Hacienda Santa Fé except in trying to end it, while upholding the undisputed rights of the Hacienda's lawful private owners, avoiding unnecessary violence, and peacefully relocating the illegal occupants.
6. Nicaragua did so despite the fact that the 2018 invasion and occupation of Hacienda Santa Fé arose in an extremely sensitive context for the Government of Nicaragua. Crucially, the invaders and illegal occupiers of the Hacienda were led, not by agents of the State, but in largely part by heavily-armed former members of the Resistencia Nicaragüense or Contras--the U.S.- backed rebel group that fought a decade-long civil war against the Government in the 1980s. The invaders of the Hacienda insisted that they were entitled to occupy the land in consideration of their demobilization at the end of that bloody conflict. And their illegal invasion of Hacienda Santa Fé occurred at a point in 2018 when Nicaragua was experiencing months of widespread civil strife and political violence. Thus, in responding to the illegal occupation, Nicaragua had to contend with stretched resources while, at the same time, not escalating a tense situation involving landless former rebel fighters.
7. Nicaragua successfully navigated this legal, political, and security thicket in a manner fully consistent with its obligations under the DR-CAFTA. Having ended the occupation of Hacienda Santa Fé, Nicaragua has repeatedly invited Riverside and Inagrosa to reoccupy the property, thus far without result.
8. Second, and despite Nicaragua's success in peacefully clearing the Hacienda Santa Fé of illegal occupants, Riverside has repeatedly declined to take back its investment. Rather than actually invest in the development of Hacienda Santa Fé, it seems that Riverside prefers to invest in pursuing claims for no less than $644,098,011 in damages from a developing country. Riverside bases this extraordinary claim on the supposed economic harms sustained by its Hass avocado and forestry business as a consequence of Nicaragua's alleged breaches of the DR-CAFTA.
9. As set out fully below, Riverside's damages case is mostly based on a hypothetical Hass avocado business seemingly willed into place after the failure of Inagrosa's coffee crop from the Roya fungus in 2013. As Riverside tells it, Inagrosa's President and Chief Operating Officer, Mr. Carlos José Rondón, convinced Riverside to transform Inagrosa into a Hass avocado business overnight, despite that: (i) neither Mr. Rondón nor anyone else at Inagrosa had any experience in the Hass avocado business; (ii) Inagrosa never obtained a technical report, feasibility study, or economic analysis that concluded this transformation was feasible; and (iii) there is no record of any entity in Nicaragua having successfully cultivated, sold, or exported Hass avocados at a commercial scale.
10. Armed only with what Mr. Rondón describes as "some research" and intermittent consulting from a Costa Rican avocado grower,1 Inagrosa allegedly planted 16,000 Hass avocado trees across a 40-hectare orchard at Hacienda Santa Fé in 2014. Riverside alleges that the first Hass avocado harvest from this orchard was "successful,"2 despite providing no documentary evidence about this harvest (not even a picture) and despite the undisputed fact that Inagrosa never sold any avocados that were allegedly picked during this harvest. Based on this alleged success, Riverside claims that Inagrosa committed to expanding the Hass avocado business by 4,300 percent, i.e., from 40 hectares to 1,000 hectares in total. Riverside alleges that a 200-hectare component of this expansion was underway as of the time the alleged measures occurred, again without any evidence to this effect.
11. And because the alleged expansion would have required Inagrosa to totally deforest the 556-hectare forest located on the property, Riverside alleges that Inagrosa committed to log, process, and sell timber from the deforested trees, despite having no prior experience in the forestry business nor any third-party confirmation that this business venture would be profitable, feasible, or even legal.
12. Against this backdrop Riverside would have the Tribunal believe that from the time it lost its coffee plantation in 2013 to the time of the alleged invasion in 2018, Inagrosa went from being a failed coffee producer to having one of the most valuable Hass avocado plantations in the world (without having sold even one avocado) and an extremely valuable forestry business (that never even got off the ground).
13. As the adage goes, if a story sounds too good to be true, it probably is. And the case here is no exception. As set out fully in Section II of this pleading, Riverside's story--with respect to both Nicaragua's supposed breaches of the DR-CAFTA and its spectacular damages--is a work of fiction.
14. This is evident from the complete and utter lack of documentary support for Riverside's allegations. Riverside, for example, does not produce any of the business records that a business worth hundreds of millions of dollars should generate. There are no tax returns, no financial projections, no feasibility studies, no bank documents, no directorial resolutions, no plans of any kind, no internal business e-mails, no audited financials, and no indication whatsoever that any party, other than Riverside, in any way believed in Inagrosa's ability to generate profits, much less hundreds of millions of dollars in profits, through its unprecedented Hass avocado and forestry businesses.
15. Instead, Riverside bases its story almost entirely on post-hoc testimonials from Mr.
Rondón and other individuals affiliated with Riverside and Inagrosa. For example, Riverside bases every allegation about the Hass avocado and forestry businesses on the uncorroborated and unsupported testimony of Mr. Rondón, who claims that he used to have documents to support his account but those documents have since been lost and, so, the Tribunal will just have to take his word for it. Riverside also bases its claims about the Hacienda Santa Fé invasion on testimonials from individuals who were not there for the invasion or whose accounts about this invasion amount to unreliable hearsay testimony.
16. The very limited contemporaneous evidence that Riverside did produce, however, severely undermines Riverside's story as seen from the following, non-exhaustive examples. First, a 2014 report from Inagrosa's avocado consultant reveals that, far from being seamless, Inagrosa's knee-jerk transformation from coffee producer to an avocado producer was riddled with setbacks.
Second, information that Riverside submitted about Inagrosa reveal that, far from being a company with a fair market value in the hundreds of millions of dollars, Inagrosa had millions of dollars in debt and about USD $1,000 in liquid cash, had been rejected by investors in 2017 and 2018 during investment pitches, and had not received investments of any kind from its only known investor, Riverside, after 2014. Third, a 2017 ProNicaragua report confirms that Inagrosa's plan to generate massive profits by exploiting the lucrative U.S. consumer market for this fruit was dead on arrival because the U.S. agricultural authorities have a policy that prohibits the importation of avocados from Nicaragua, due to concerns about a fruit fly that is endemic to Nicaragua. Fourth, an August 2018 letter from Mr. Rondón reveals that, instead of believing that the Government was behind the invasion, Inagrosa viewed the Government as its ally and requested its assistance on more than one occasion to rid the Hacienda of the invaders.
17. The expert testimony submitted by Riverside also undermines its case. For instance, Riverside relies extensively on a report from expert Prof. Justin Wolfe to support its claim that the Hacienda Santa Fé invasion was conducted by Government-led paramilitaries. But that report does not include that conclusion and, in fact, never even mentions the Hacienda Santa Fé invasion.
Moreover, that report's description of paramilitaries is completely irreconcilable with Riverside's description of the invaders, as explained fully in Section II.B of this pleading.
18. Accordingly, Riverside has not met its burden of proving any of the components of its fantastical story. If anything, that story is controverted by the evidence Riverside produced with its Memorial. In any event, Riverside's story must be rejected because it is completely refuted by the evidence that Nicaragua presents with this pleading.
19. Indeed, in Section II.A of this pleading, Nicaragua details the real story behind the Hacienda Santa Fé invasion. This story, which is largely based on contemporaneous evidence, proves that the invaders were by no means "paramilitaries" acting on behalf of the Government.
They were members of a farming cooperative called "Cooperativa El Pavón" comprised in significant part of former members of the Resistencia Nicaraguense--the "contras"--who in fact fought against the Government of Nicaragua during the country's decade-long civil war. These individuals invaded Hacienda Santa Fé in 1990 to reclaim the land known as "El Pavón," located in the upper part of Hacienda Santa Fé, where they had lived without legal title in informal settlements between 1990 and 2004. Although these individuals erroneously maintained that they had been promised this land in exchange for demobilization at the end of the war, the Government evicted those individuals from the Hacienda in 2003, at the request of Inagrosa, because they had no legal right to possess that land. But some of these individuals returned to the Hacienda when they noticed that Inagrosa had all but deserted it. This attempted reoccupation of Hacienda Santa Fé by members of Cooperativa El Pavón is the "invasion" at issue in this case
20. The evidence in Section II.A also proves that the Hacienda Santa Fé invasion began in June 2017, i.e., a full year before the date Riverside alleges the invasion began. Riverside chose to ignore the June 2017 invasion and start the story in June, 2018 because the real story of the invasion would have left Claimant outside the limitations period under DR-CAFTA. This timeline is fatal to Riverside's theory of the case. This timeline, for example, refutes Riverside's claim that Nicaragua ordered the invasion in response to civil strife and unrest that plagued Nicaragua in 2018, given that the invasion occurred ten months before that strife and unrest began. And this timeline refutes Riverside's allegation that the Hass avocado and forestry businesses were thriving at the Hacienda in 2017 and 2018, given that several hundred individuals invaded the Hacienda in June 2017 and occupied that property for an entire year before being spotted by Inagrosa.
21. Nicaragua also proves in Section II.A that its reaction to the invasion was diligent and reasonable. When Inagrosa called the Government about the invasion, on June 16, 2018, the country was experiencing unprecedented violent unrest that had consumed the Government's limited resources. Under those extraordinary circumstances, the Government was completely incapable of taking immediate, forceful action at Hacienda Santa Fé. Nor, given the historical roots of the illegal occupants' asserted claims to the property, would such a course have necessarily been appropriate where, as was the case, de-escalatory alternatives were available. The Government coordinated with Inagrosa, conducted its own investigation, and relocated the invaders in a peaceful and orderly fashion in a process that ended on August 11, 2018, i.e., less than two months after Inagrosa requested Government assistance.
22. The only reason that the story does not end there is because the invaders re-invaded the Hacienda on August 17, 2018 after Riverside and Inagrosa failed to secure it or do anything at all to mitigate against the risk of another invasion. This failure by Riverside and Inagrosa is what caused the invasion to continue for another three years. Finally, in August 2021, thanks only to the Government's efforts, and without having received a single denunciation from Riverside or request for Government assistance, the Hacienda was rid, yet again, of the illegal occupants. Because Riverside and Inagrosa have inexplicably refused Nicaragua's invitation to re-take and secure the Hacienda, Nicaragua has expended significant resources to ensure that the now-abandoned Hacienda remains free of invaders.
23. In Sections II.C and II.D, Nicaragua presents evidence confirming that Inagrosa's Hass avocado and forestry businesses were not viable. Indeed, this conclusion is evident from the remarkable fact that Inagrosa never obtained the required permits and authorizations for these businesses. In fact, it did not even attempt to get those permits. As fully explained in those Sections, this fact means that the activities that Riverside alleges Inagrosa conducted for these businesses - e.g., importing seeds, creating tree nurseries, clearing the soil, planting avocados, using water resources to sustain the avocado plantation, and preparing to export avocados and timber to the Costa Rica and/or the U.S. - were illegal.
24. To be sure, this lack of permitting is not just a technicality that Inagrosa could have easily overcome. Rather, the permitting processes Inagrosa needed to complete for its businesses are uncertain and cannot be assumed. And Inagrosa's failure to adhere to the permitting processes in this case is not trivial. Each violation carries a substantial monetary penalty and the fact that the violations persisted over a five-year period suggests that Inagrosa could be susceptible to the more severe sanctions under Nicaraguan law, including the suspension or forced closure of the business.
25. Sections II.C and II.D also present evidence demonstrating that Inagrosa was not expanding the Hass avocado plantation to 1,000 hectares or preparing to deforest the 556-hectare forest, as Riverside alleges here. Rather, contemporaneous documents from Inagrosa confirm that, between 2015 and 2018, Inagrosa was actively soliciting the Government to classify the Hacienda as a private wildlife reserve, which resulted in a resolution to this effect from the environmental authorities in early 2018. This fact is dispositive because, under this classification, it would have been illegal to deforest the trees on the property or otherwise engage in any activity that could in any way disrupt the flora and fauna in the Hacienda. Inagrosa was aware of this fact, as clear from the handwritten application that Mr. Rondón submitted to the environmental authorities on behalf of Inagrosa, which states that Inagrosa the purpose of the application was to "conserve the forest area, protect the sources of water, in order to provide habitation to the fauna and flora and that way protect all of the animals that inhabit the forest."3
26. Sections II.C and II.D also present evidence confirming Inagrosa and Riverside had effectively deserted Hacienda Santa Fé by 2017, refuting Riverside's claim that the Hacienda was teeming with activity in 2017 and 2018 in advancement of Inagrosa's Hass avocado and forestry businesses. This evidence includes a contemporaneous letter from certain of the invaders that confirms these invaders entered the property in 2017 because it was in a state of abandonment.
and the testimony of Mr. José Valentín Lopez Blandón, the founder of Cooperativa El Pavón who communicated on a regular basis with the invaders and has personal knowledge of the facts and circumstances that led members of his community to invade the Hacienda in June 2017.
27. Finally, Sections II.C and II.D present other evidence that independently repudiate Riverside's claim that Inagrosa had viable Hass avocado and forestry businesses on June 16, with a combined fair market value in the hundreds of millions of dollars. In summary, this evidence provides that: (i) Inagrosa's avocado business was technically infeasible; (ii) Inagrosa had tried, but failed, to secure investor capital for either of the business ventures at issue here; (iii) Inagrosa had no more cash on hand to do any of the activities Riverside avers that Inagrosa was on the verge of doing in 2018; (iv) Inagrosa had fired almost all of its workers years before the invasion began; and (v) Inagrosa was effectively broke, owing more than a million dollars to Riverside and tens of thousands of dollars in unpaid property taxes to the Government.
28. The other Sections respond to, and refute, Riverside's arguments concerning the Tribunal's jurisdiction, the applicable legal standards with respect to the Treaty claims and their application here, and the amounts that should be awarded to Riverside, if any, in the unlikely event that Riverside wins on any of its asserted claims.
29. Section III will demonstrate the claims Riverside attempts to bring on behalf of Inagrosa under Article 10.16.1(b) are inadmissible under DR-CAFTA because Riverside failed to comply with the notice requirement under DR-CAFTA Article 10.16.2 and with the waiver requirement under DR-CAFTA Article 10.18.2(b)(ii). Riverside's attempt through this arbitration to recover losses suffered by Inagrosa is improper. Riverside has failed to show that the Tribunal has jurisdiction over claims for damages to Inagrosa because it has not demonstrated that it controlled Inagrosa at the time of the alleges breaches. Additionally, Riverside demonstrates these claims are outside of the Tribunal's jurisdiction because Riverside failed to demonstrate that Nicaragua agreed to treat Inagrosa as a "national of another Contracting State" as required by Article 25(2)(b) of the ICSID Convention and therefore the tribunal lacks jurisdiction ratione personae over those claims..
30. Section IV will demonstrate that the Tribunal should reject all of Riverside's claims under DR-CAFTA. Fundamentally, there can be no Treaty breach without conduct attributable to Nicaragua. Such is the case here. Nicaragua is not responsible for the invasion; to the contrary, it opposed it at every turn. And the invaders are not Government agents. They are local farmers and members of a cooperative with no affiliation to the Government. In fact, many of these individuals are former members of the group known as Resistencia Nicaragüense or Contras that had fought for many years against the same Sandinista Government that is in charge today.
31. Because the invasion and occupation were not measures attributable to Nicaragua, the only action at issue is Nicaragua's response to the illegal invasion and occupation of Hacienda Santa Fé. Where Nicaragua ultimately peacefully resettled all of the illegal occupants Riverside's complaint is, at best, that Nicaragua did not use force to clear the illegal invaders immediately and instead pursued a peaceful solution. But, as demonstrated below, Nicaragua's approach was fully in line with its DR-CAFTA obligations and appropriate to the circumstances. The illegal invasion and occupation of Hacienda Santa Fé was carried out by hundreds of people, many heavily armed, and led by former Contras who had participated in a bloody war against the Government. The invasion also came at an especially sensitive time when Nicaragua was being rocked by months of unrest and political violence that caused hundreds of deaths and widespread property damage.
32. Amid these events, the Nicaraguan National Police had no more than eight officers in San Rafael del Norte, where the Hacienda is located. Moreover, a violent clash at Hacienda Santa Fé, potentially pitting Government forces against ex-Contras presented the risk of an even worse political conflagration,. The State's calibration of its response to the occupation of Hacienda Santa Fé therefore implicated Nicaragua's interests in both calming and containing the civil strife that was then rocking the country and maintaining the settlement that ended the civil war. Under these circumstances, Nicaragua's response fell within the scope of DR-CAFTA's non-precluded measures (Article 21.2(b)) and civil strife (Article 10.6) clauses. These provisions provide a complete defense against all of Riverside's claims based on measures Nicaragua considered necessary for its essential security interests and took in response to conditions of civil strife. It follows that Nicaragua's peaceful removal and relocation of the illegal occupants from Hacienda Santa Fé cannot be a source of liability for the State.
33. Yet even if these special Treaty provisions did not apply, Riverside's claims would fail. There was no expropriation because the State did not take anything from the Claimant, has always recognized Inagrosa's right to Hacienda Santa Fé, and has actually offered the Hacienda back to Riverside and Inagrosa on more than one occasion. There was no breach of the duty of Fair and Equitable Treatment, whether broadly or narrowly construed, because Nicaragua acted lawfully, reasonably, and in good faith to resolve the illegal occupation, while always recognizing Inagrosa's legal title to the property. Nor did Nicaragua fail to accord Full Protection and Security to Riverside's investment but took contextually appropriate and ultimately successful measures to restore Hacienda Santa Fé to its lawful owners. There was likewise no discrimination against Riverside or its investment, and Riverside has not shown that similarly situated investors or investments received better treatment.
34. Finally, in Section V, Nicaragua proves that the quantum of damages that Riverside seeks in this case is completely baseless and precluded by DR-CAFTA and relevant investor-State jurisprudence. As an initial matter, Riverside has not satisfied - and cannot satisfy - its burden of demonstrating that Nicaragua proximately caused the alleged harm because, as already explained above, the alleged harm did not result from Nicaragua's actions. Moreover, Riverside's requested damages must be denied because they derive from a Discounted Cash Flow ("DCF") methodology that is wholly inappropriate here. Indeed, dozens of investment tribunals have concluded that this methodology must be discarded as entirely unreliable where, as here, the investments at issue are in businesses that are pre-operational, greenfield in nature, or not going concerns. And as explained above, the Hass avocado and forestry businesses at issue here fit that description. Actually, these businesses are even worse because they have no semblance of viability, as evident from the fact that they were operated illegally, lacked requisite permits and authorizations, were never tested via feasibility reports, and had no funding or buy-in from any independent investors or banks.
35. Also, in Section V, Nicaragua proves that the inputs in Riverside's DCF model are baseless, flawed, and, frankly, bogus. This conclusion is dispositive because, when garbage is put into a DCF model, its outputs will also be garbage. For that reason, Nicaragua offers an alternative methodology that, unlike Riverside's model, does not invite rank speculation. Nicaragua, however, explains that, even under that methodology, any award of damages to Riverside must be offset in significant fashion due to Riverside's contributory fault, its failure to mitigate damages, and also to account for the permitting sanctions and unpaid property taxes.
36. Nicaragua also submits the following with this pleading:
...
VI. PRAYER FOR RELIEF
541. For the reasons set out in this Counter-Memorial,820 the Republic of Nicaragua respectfully requests that the Tribunal:
a. DECLARE that the claims brought by Riverside Coffee, LLC on behalf of Inagrosa S.A. are inadmissible;
b. DECLARE that even if they were admissible, it has no jurisdiction to hear the claims brought by Riverside Coffee, LLC on behalf of Inagrosa S.A.;
c. DISMISS Claimant's claims brought under Articles 10.3, 10.4, 10.5, and 10 of DR-CAFTA as meritless;
d. DISMISS Claimant's request for compensation in its entirety, including its request for moral damages;
e. ORDER Claimant to pay Nicaragua the costs of providing security to preserve the abandoned Hacienda Santa Fé, as well as the amount of outstanding tax debt owed by Inagrosa S.A. or debt with the government of any other nature; and
f. ORDER Claimant to pay all costs and expenses related to this arbitration, including but not limited to the fees and expenses of the Tribunal, the administrative fees and expenses of ICSID, and all costs of Nicaragua's legal representation and expert assistance, plus pre-award and post-award compound interest accrued thereon until the date of payment estimated at a rate determined by the Tribunal.
g. GRANT any other or additional relief as may be appropriate under the circumstances or as may otherwise be just and proper.
March 3,
...
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