PRESERVE, PROTECT & DEFEND Global Nationalization Risk: Practical Considerations for Investors

Preserve, Protect
and Defend
Global Nationalization Risk:
Practical Considerations for Investors
PRESERVE, PROTECT & DEFEND Global Nationalization Risk: Practical Considerations for Investors


1   Foreword                                                                                          3

2 The Political Situation                                                                            4

3   The value of Investment Treaty protections                                                       8

4 How to structure your investment                                                                   11

		Legal structuring and restructuring                                                                12

		Tax structuring                                                                                    14

5 Case Studies                                                                                       16

		Argentina                                                                                          18

		Indonesia                                                                                          22

		South Africa                                                                                       26

		United Kingdom                                                                                     30

		United States of America                                                                           34

6 Key Contacts                                                                                       38
Return to Contents Page                                   PRESERVE, PROTECT & DEFEND Global Nationalization Risk: Practical Considerations for Investors   3


Ed Poulton                   Maria del Carmen Tovar
Partner, London              Partner, Lima

The extent of governmental involvement in their                        We have looked at the treaty framework that
national economies goes to the very heart of political                 underpins investment decisions, assessing the
and economic debates that have raged since time                        protections afforded by investment treaties and tax
immemorial, and as such can seem to be an issue on                     treaties - how they are valuable to international
which opinions are clearly and irrevocably set. However,               investors and how investments can be structured
the last few years of political upheaval has shown that                to take advantage of them.
those sands can, and do, shift. The last few days and
weeks have arguably accelerated this momentum,                         While debates around nationalization are widespread,
albeit in response to a punctual threat: governments                   we have applied this analysis to five case study
have torn up what were perceived as immutable rules                    jurisdictions of particular relevance, each demonstrating
of economic engagement in response to the Covid-19                     a particular aspect of the debate: Argentina,
pandemic. The question is whether the genie will be                    Indonesia, South Africa, the UK and the US.
able to be returned into the bottle.
                                                                       Baker McKenzie’s uniquely global platform enables
In August 2019, Baker McKenzie’s Dispute Resolution                    us to assess these risks and the associated practical
team in London produced UK Nationalization: Practical                  considerations with an equal focus on local remedies
Considerations, an introductory guide to practical                     and global protections. In this report, we draw upon
steps that investors can take to protect their position                the collective knowledge of more than 1100 international
in the event of a nationalization, such as was proposed                disputes lawyers around the world, embedded in
by the UK’s opposition Labour Party for wide                           their local markets, experts in their industries.
swathes of the UK economy.
                                                                       In a related report (available here), our team has
In response to client demand, we have broadened our                    partnered with the Investment Treaty Forum at the
analysis to look at the issue through a global lens.                   British Institute of International Comparative Law
                                                                       (BIICL) to present the first comprehensive empirical
Working with geopolitical commentator, business                        study of corporate restructuring and investment
advisor and co-founder of Global Torchlight, David                     treaty protections, examining all publicly available
Chmiel, we dispel four commonly-held misconceptions                    decisions of investor-state tribunals dealing with
about the nature of nationalization policy, (each of                   issues of corporate structuring and restructuring.
which has been disproved by governments’ responses                     Our findings from that study support and inform
to the current crisis), namely:                                        the recommendations we make here.

• Misconception One: Nationalization risk is limited                   We trust you will find this report useful and
  to countries with weak political and legal systems;                  interesting. Please use the box below to register
• Misconception Two: Nationalization policies focus                    for any further updates on this topic. For more
  on natural resources companies;                                      specific questions, please contact any of the authors
• Misconception Three: Nationalization is driven                       listed at the back of this report, or your usual
  only by economic concerns; and                                       Baker McKenzie contact.

• Misconception Four: Nationalization is carried
                                                                       Ed Poulton & Maria del Carmen Tovar
  out only by expropriation.

                         To be kept informed of further events and publications on this issue, please click here
PRESERVE, PROTECT & DEFEND Global Nationalization Risk: Practical Considerations for Investors   Return to Contents Page

                      The Political Situation
Return to Contents Page                                     PRESERVE, PROTECT & DEFEND Global Nationalization Risk: Practical Considerations for Investors   5

The Political Situation

                                      The COVID-19 pandemic is now shattering long-held assumptions about the global
                                      economic and political order. Quite rightly, the principal focus of policy makers is
                                      to protect public health. However, the potential for immense economic damage
David Chmiel                          is already causing governments to embrace mitigative measures that are far more
Geopolitical Advisor and co-founder
of Global Torchlight                  radical than many would have thought politically conceivable a few months ago.

These policies will likely include nationalization of                    governments often favoured privatization. During
assets currently in private hands. Some of these acts                    that time, Australia, Canada, France, Germany and the
will be welcomed as governments effectively step                         UK all put government- run companies into private
into the shoes of private owners of distressed assets                    hands. The privatization of state-owned enterprises in
in an effort to stem economic contagion – much as                        Central and Eastern Europe and the former Soviet Union
was the case during the global financial crisis a                        was a cornerstone of post- Cold War economic reforms
decade ago. In other cases, demands may grow for                         and throughout the developing world, governments
more compulsory action to expropriate assets seen                        opted for public-private partnerships over state-led
as critical to public health security or to the basic                    economic expansion initiatives.
functioning of society in order to ensure that resources
are directed toward areas of greatest need.                              But nationalization never completely disappeared
                                                                         as a policy option and the political pendulum may be
Even when the immediate medical crisis abates –                          swinging once again in favour of taking assets into
and may that be as soon as possible – many of                            state control. This report sets out a number of cases
the world’s largest economies may have altered                           in which governments in some of the world’s most
fundamentally. It is likely that debates will then                       important economies have recently nationalized assets
emerge about the need for more foundational policy                       or where arguments in favour of nationalization have
change, including whether critical assets should sit in                  re-entered the mainstream of political discourse.
public or private ownership. By that point, whole
sectors of the economy may already have been                             As private investors grapple with these changes, it is
nationalized and the nature of these debates would                       important to recognise that there is no single pattern
be very different from those seen recently in some                       to this debate. Risk takes different forms in different
of the countries examined in this report.                                places. However, it is important to dispel commonly-
Nationalization would already be a fact of life.                         held misconceptions about the nature of
                                                                         nationalization policy if businesses are to hone their
It is, therefore, vitally important for companies to gain a              risk management and mitigation processes to deal
greater understanding of the political dynamics that                     with this re-emerging challenge.
have driven nationalization in the past in order to better
appreciate how those policies may work in the present
and future. The issues set out in this report are more
relevant today than at any time in the recent past.
                                                                                    Misconception One: Nationalization risk is
                                                                                    limited to countries with weak political and
                                                                                    legal systems
                                                                         Given historic patterns, there is sometimes a presumption
Nationalization is not a new risk                                        that risk of nationalization exists only in countries
for multinational companies.                                             where free market economic systems are not firmly
                                                                         established or where political and legal institutions are
There is a long, global history of governments                           insufficiently robust to prevent arbitrary expropriation.
expropriating assets or otherwise bringing them under                    One of the most striking features of the current debate
domestic or state-owned control. In fact, such acts                      over state versus private ownership is that it is prominent
have sometimes been catalysts for more substantive                       in some of the countries that were at the forefront of
geopolitical disruption. In the 1980s and 1990s, however,                the privatisation movement in recent decades.
6    PRESERVE, PROTECT & DEFEND Global Nationalization Risk: Practical Considerations for Investors                                      Return to Contents Page

The Political Situation

              Recently, some governments have simply let relevant operating licenses
           expire without giving foreign investors the opportunity to renew them or they
                     have altered criteria to favour domestic or state bidders...

To give a few examples, the Polish government has                                                The global financial crisis of 2008-9 saw banks,
embarked on a policy of “repolonisation” which                                                   insurance companies and other troubled businesses
encourages domestic companies to acquire greater                                                 come into state ownership in order to restore public
stakes in financial institutions, media companies and                                            confidence in national financial systems. More
other strategic sectors. The renationalization of                                                recently, some political leaders have sought greater
railroads and utilities was a key plank of the last two                                          control of media assets or, at the very least, to limit
general election manifestos of the opposition Labour                                             the extent of foreign ownership in that sector.
Party in the UK. Even in the United States, prominent                                            The motives for doing so are often linked to desires
politicians have called for de facto nationalization or                                          to control political narratives, limit criticisms of
“municipalisation” of private health insurers and                                                government or promote broader nationalist agendas.
electricity companies.
                                                                                                 Ownership of public utilities is another area for heated
More recently, US Attorney General William Barr                                                  debate as politicians argue that continued private
suggested that the US – alone or with its allies –                                               ownership of these businesses results in price inflation
could acquire controlling stakes in Ericsson, Nokia and                                          for consumers and an absence of long-term investment
other companies competing with China’s Huawei in                                                 in infrastructure renewal. In other countries, such as
the provision of 5G infrastructure. To be fair,                                                  South Africa, even some types of privately-owned
nationalization is also a growing risk in some emerging                                          land are now potentially subject to expropriation.
economies. Indonesia’s policy of bringing key natural                                            Those investors operating in sectors with historic
resources under domestic control has heightened                                                  propensities for nationalization are often attuned to
investor concern in that sector. Governments in                                                  mitigating associated risks from the inception of any
Argentina, Bolivia, Ecuador and Venezuela have all                                               investment. As the breadth of the risk grows,
embarked on nationalization exercises in the past                                                however, larger swathes of national economies are
decade – to varying degrees of success.                                                          potentially susceptible to these kinds of policies,
                                                                                                 warranting much broader attention to the
This debate does not respect geographical boundaries.                                            circumstances in which political leaders in any country
Multinational investors can no longer simply presume                                             may choose to target a particular sector.
that because they do not do business in parts of the
world where expropriation has been used in the past,
                                                                                                       Misconception Three: Nationalization is driven
that they need not pay heed to underlying political
                                                                                                       only by economic concerns
dynamics elsewhere to assess whether governments
are developing more favourable attitudes to                                                      In many cases, a government’s motives for
renationalization.                                                                               nationalization are economic in nature. Such actions
                                                                                                 may allow for retention of greater shares of
                                                                                                 associated revenue in national treasuries – often only
                                                                                                 once foreign investors have borne the sunk costs of
     Misconception Two: Nationalization policies
                                                                                                 building a particular investment or making it
     focus on natural resources companies
                                                                                                 competitive. This is thought to be a key motive behind
Some of the most recent high-profile examples of                                                 the Mexican government’s decision to halt private
nationalization have involved natural resources                                                  investment in the country’s oil and gas sector.
companies, particularly in the mining and oil and gas                                            Renationalized industries are also sometimes viewed
sectors. However, governments are also demonstrating                                             as champions of broader economic growth with state
a growing propensity to target other sectors of                                                  ownership of assets ensuring that resources are
national economies as well.                                                                      allocated to domestic priorities.
Return to Contents Page                                 PRESERVE, PROTECT & DEFEND Global Nationalization Risk: Practical Considerations for Investors   7

The Political Situation

However, it is wrong to presume that nationalization                nationalization over extended periods of time or by
risk is minimised where a country’s economy is strong.              using less overt methods. Recently, some
National security can also be a powerful motivator.                 governments have simply let relevant operating
In the wake of the 9/11 terrorist attacks, the Canadian             licenses expire without giving foreign investors the
and US governments both nationalized airport                        opportunity to renew them or they have altered
security screening through the creation of national                 criteria to favour domestic or state bidders in any
government agencies to carry out those functions.                   reprocurement exercise. In other cases, changes to
Governments have also justified expropriation of                    underlying legal or regulatory environments may, over
natural resources on similar grounds. The assertion of              time, render a particular asset or sector less attractive
national security creates additional complications for              to foreign investors and cause them to divest their
investors seeking ex post facto compensation, since                 interests – often at an undervalue to their true worth.
some avenues of legal recourse allow exemptions in
circumstances where national security is involved.                  This “quasi-nationalization” or “stealth nationalization”
                                                                    has taken many forms. For example, in the resources
Nationalization must also be viewed in the context of               sector, some governments have enacted mandated
heightened populism and nationalism. There has been                 beneficiation laws requiring that any natural resources
a backlash against foreign investment in countries where            be processed or refined in-country, rather than
such activity is perceived to be favoured over domestic             exported in their raw state. Other countries have
interests and where politicians think they can generate             instituted bans on “fly-in / fly-out” workers in order
popular appeal by challenging foreign investors. Equally,           to encourage greater hiring within local communities.
some governments are questioning the equity of bilateral            A host of governments have also repealed investment
investment treaties, arguing that they favour multinational         incentives or changed tax and royalty laws in ways
companies over nation states. Others argue that                     that are less favourable to foreign investors.
meaningful efforts to tackle systemic problems such
as climate change can only be achieved when associated              Even where assets are directly taken into government
industries are brought back under state control.                    ownership, there can be considerable variances in the
                                                                    compensation paid for them. The Canadian
These motivating factors are almost never mutually                  government acquired the Trans Mountain pipeline
exclusive and governments will often pursue                         between Alberta and British Columbia in 2018 for a
nationalization policies due to a combination of                    negotiated market value. In contrast, when the UK
economic and political factors. This means that                     Labour Party proposed to renationalize electricity,
investors must develop much greater awareness                       gas and water suppliers, it said that Parliament would
of the complex interplay of issues in domestic and                  undertake the valuation exercise, with deductions
regional politics in order to understand how particular             made for variables such as pension fund deficits and
investments are perceived within a country and the                  the state of repair of assets. The net effect could have
degree to which they are at risk of politicisation.                 meant that minimal compensation was paid in practice.

                                                                    These changes in methodology present investors
       Misconception Four: Nationalization is carried
                                                                    which a much more complex environment to assess as
       out only by expropriation
                                                                    part of any risk management strategy. The net effects
Expropriation is probably seen as the most common                   of legal or regulatory changes may not be readily
tool with which to take assets back into state control.             apparent and traditional avenues of legal recourse
For investors, the growing challenge lies in the fact               may not be available where measures such as outright
that many governments are now opting to effect                      expropriation without compensation are not used.
PRESERVE, PROTECT & DEFEND Global Nationalization Risk: Practical Considerations for Investors   Return to Contents Page

                      The value of Investment
                      Treaty protections
Return to Contents Page                                                   PRESERVE, PROTECT & DEFEND Global Nationalization Risk: Practical Considerations for Investors   9

The value of Investment Treaty protections

Ed Poulton                   Katia Ekaterina Finkel     Richard Molesworth            Dogan Gultutan
Partner, London              Senior Associate, London   Senior Associate, London      Associate, London

Investment Treaties                                                                    State). This type of provision prevents shell, or
                                                                                       letterbox, companies from obtaining the benefit

An investment treaty is an                                                             of investment protection.

agreement made between two                                                             Investment: only an investment as defined by the
or more states, containing                                                             relevant treaty will be protected. The definition

reciprocal undertakings for the                                                        usually constitutes a general and wide opening
                                                                                       phrase, such as “every kind of asset”, followed by
promotion and protection of                                                            a non-exhaustive list, including:
investments made by nationals                                                          • movable and immovable assets and rights
and companies of one state in                                                              in property;

the territory of the other state(s).                                                   • company shares, stocks, bonds and other
                                                                                           interests in companies;
                                                                                       • claims to money;
Many investment treaties are bilalteral investment
treaties (or BITs) between two states. There are also                                  • copyright, trademarks and IP rights; and
multilateral investment treaties (such as the Energy                                   • business concessions and licences.
Charter Treaty and the ASEAN Comprehensive
Investment Agreement) and investment chapters in
                                                                                       Many investment treaties contain more favourable
free trade agreements (such as NAFTA and the TPP).
                                                                                       terms, such as specific acknowledgment that a change
                                                                                       in the form of the investment will not affect its
As they are individually negotiated treaties, their terms
vary and the precise wording of particular provisions                                  characterisation as an investment for the purposes of
will affect their interpretation in any dispute. Nevertheless,                         the BIT. Similarly, some investment treaties have more
they typically include common definitions, substantive                                 restrictive provisions, for example requiring investments
protections and dispute resolution mechanisms along                                    to be pre-approved by the host state to qualify for
the lines of those described below.                                                    protection, limiting protected investments only to
                                                                                       certain sectors or requiring investments to have
Common definitions                                                                     certain characteristics such as the commitment of
                                                                                       capital or the assumption of risk.
Investor: only an “investor” as defined by the relevant
treaty can benefit from the investment protection.                                     While the term “investment” is typically defined widely,
Most investment treaties define investors as (i) natural                               this is an area of significant scrutiny in arbitral
persons (i.e. individuals) who are nationals of the
                                                                                       proceedings and has accordingly developed its own
relevant state and (ii) legal persons (e.g. companies)
                                                                                       jurisprudence in the field of Investor-State arbitration.
incorporated or established there. Some investment
treaties require legal persons to have an actual
economic presence or seat of establishment in the                                      Common substantive protections
jurisdiction. For example, the ASEAN Comprehensive
Investment Agreement (ACIA) requires corporate                                         National treatment; most favoured nation (MFN)
investors to have substantial business operations in                                   treatment: investment treaties typically provide that
the State in which they are incorporated (the Home                                     foreign investors are entitled to be treated no less
10     PRESERVE, PROTECT & DEFEND Global Nationalization Risk: Practical Considerations for Investors                                             Return to Contents Page

The value of Investment Treaty protections

                           While the term “investment” is typically defined widely, this is an
                                  area of significant scrutiny in arbitral proceedings

favourably than local investors (national treatment) and
other foreign investors (MFN treatment), subject only
                                                                                                   Dispute resolution and enforcement
to certain limited and specifically described exceptions.
                                                                                                   The most valuable aspect of investment treaties is
Fair and equitable treatment (FET); full protection                                                that they usually provide foreign investors with a
and security: investment treaties include additional                                               private right of action: the right to bring an
broad guarantees of treatment for foreign investors in                                             international arbitration claim directly against the
accordance with international law. The host state will                                             host state. While in many cases (and as we explore in
typically promise “fair and equitable treatment” and                                               the case studies below) investors will have the option
“full protection and security” for investments, and                                                of pursuing domestic claims, the ability to pursue a
promise not to engage in “arbitrary” or “discriminatory”                                           public international law claim before an international
decision-making. FET clauses generally require the                                                 tribunal provides additional comfort and leverage.
host state to maintain predictable and stable investment
environments consistent with legitimate expectations.                                              Dispute resolution mechanism: The applicable
This involves providing an independent, impartial and                                              arbitral institutions will be determined by the relevant
effective legal process (to deal both with administrative                                          investment treaty in each case, however many
                                                                                                   treaties provide for arbitration:
and substantive claims) where investors can pursue
the effective protection of their rights (and in some                                              • under the International Centre for Settlement
circumstances, it may be necessary for the investor to                                               of Investment Disputes (ICSID) Rules;
pursue these before any treaty claim can properly be
                                                                                                   • ad hoc, under the United Nations Commission on
brought). Full protection and security clauses require
                                                                                                     International Trade Law (UNCITRAL) Arbitration Rules;
the host state not only to abstain from physically
damaging foreign investment, but also to implement                                                 • occasionally, under the arbitration rules of the
positive measures to protect foreign investment (for                                                 Arbitration Institute of the Stockholm Chamber
example against harm caused by private actors).                                                      of Commerce (SCC) or the International
                                                                                                     Chamber of Commerce (ICC).
Protection against unlawful expropriation and
compensation: investment treaties do not prohibit                                                  There is general consensus that recourse to ICSID
expropriation, but establish clear limits on expropriation                                         arbitration can be useful. While ICSID is an
(and measures having equivalent effect1). Such provisions                                          autonomous international organisation, it operates
typically only permit expropriation where it is carried out:                                       under the auspices of the World Bank.

• in the public interest;
                                                                                                   The existence of ICSID proceedings is made public
• following due process of law;                                                                    (and awards are generally published) meaning that
• in a non-discriminatory manner; and                                                              the threat of commencing proceedings under the
• in return for just compensation (at market or fair value)                                        ICSID may be sufficient to persuade a state that it
                                                                                                   should take an investor’s claim seriously. Additionally,
Free transfer of funds: investment treaties commonly                                               any award issued by an ICSID tribunal must be
give foreign investors the right to transfer funds into                                            recognised and enforced as if it were a judgment of
                                                                                                   the highest domestic court in any ICSID member state.
and out of the host state without delay, using a market
rate of exchange. This covers all transfers related to an
investment, including interest, proceeds from liquidation,
repatriated profits and infusions of additional financial
resources after the initial investment has been made.

1. Expropriation is not limited to physical takings; it can include a wide range of measures that deprive the investor of the economic value of its investment.
Return to Contents Page                 PRESERVE, PROTECT & DEFEND Global Nationalization Risk: Practical Considerations for Investors

                          How to structure your investment
12      PRESERVE, PROTECT & DEFEND Global Nationalization Risk: Practical Considerations for Investors                                                   Return to Contents Page

How to structure your investment

Ed Poulton                      James Smith                       Ekaterina Finkel                 Oliver Pendred
Partner, London                 Partner, London                   Senior Associate, London         Senior Tax Advisor, London

Legal structuring and                                                                               Treaty shopping is an attempt to structure the way
                                                                                                    in which an investment is held (which can involve
restructuring                                                                                       entering into transactions and/or establishing entities
                                                                                                    in certain unconnected states) solely, or in large part,
Investment law on abuse of process                                                                  for the purpose of enjoying the benefits of favourable
and “treaty shopping”                                                                               treaty rules. Given that in investment law there is no
                                                                                                    doctrine of legal precedent and that arbitral tribunals
                                                                                                    are not bound by the decisions of previous tribunals,
A key issue for investors is the                                                                    there is a lack of consistent approach to so-called
                                                                                                    ‘treaty shopping’.
ability to structure the way they
hold investments to benefit from                                                                    It is therefore difficult to say with absolute certainty
                                                                                                    in which circumstances tribunals will permit
investment treaties, or more                                                                        restructuring an investment through a seemingly
favourable treaties. Alternatively,                                                                 unconnected state to gain greater treaty protection.
                                                                                                    Much depends on the facts of each case and the
investors sometimes want to                                                                         views of the members of the tribunal appointed.

restructure their investment to
                                                                                                    While arbitral tribunals have often expressed some
gain the benefit of a treaty, or                                                                    unease in connection with investors’ treaty shopping,2
                                                                                                    they have generally taken a literal view of the
more favourable treaty. This is                                                                     definitions which both states agreed in the
often referred to as “treaty                                                                        investment treaty in favour of investors. Arbitral
                                                                                                    tribunals will not “add other requirements [to the
shopping” and, particularly in                                                                      agreed definition of investor] which the parties could
the case of restructuring once                                                                      themselves have added but which they omitted to
                                                                                                    add”.3 Where an investment treaty requires only that
the investment is already held,                                                                     the claimant investor be constituted under the laws of
is a controversial issue in                                                                         the relevant contracting state, this will be sufficient.

international investment law.                                                                       The situation is more difficult for investors in the
                                                                                                    case of restructuring, particularly if this takes place
                                                                                                    after the issues giving rise to the claim have arisen.
                                                                                                    Phoenix Action v. Czech Republic4 is an extreme
                                                                                                    illustration of this. The case concerned the Czech
                                                                                                    Republic-Israel BIT of 1997 and the claimant investor’s
                                                                                                    claim under that treaty for compensation for breach
                                                                                                    in connection with its investments in two
                                                                                                    Czech companies.

2. See for example in Saluka Investments B.V. v. The Czech Republic, UNCITRAL, Award 17 March 2006 (accessible here) where the Tribunal stated that it had “some
sympathy for the argument that a company which has no real connection with a State party to a BIT, and which is in reality a mere shell company controlled by another company
which is not constituted under the laws of that State, should not be entitled to invoke the provisions of that treaty. Such a possibility lends itself to abuses of the arbitral
procedure, and to practices of “treaty shopping” which can share many of the disadvantages of the widely criticised practice of “forum shopping.”” [para. 240]. 3. Ibid, para. 241
4. Phoenix Action, Ltd. v. The Czech Republic, ICSID Case No. ARB/06/5, Award 15 April 2009 (accessible here).
Return to Contents Page                                                     PRESERVE, PROTECT & DEFEND Global Nationalization Risk: Practical Considerations for Investors   13

How to structure your investment

  2020 Empirical Study: Corporate Restructuring and Investment Treaty Protections
  Our team has partnered with the Investment Treaty Forum at the British Institute of International
  Comparative Law (BIICL) to present the first comprehensive empirical study of corporate restructuring
  and investment treaty protections, examining all publicly available decisions of investor-state tribunals
  dealing with issues of corporate structuring and restructuring. Access the report here.

In this case:                                                                            was reasonably foreseeable at the time of the
                                                                                         restructuring that a dispute with the respondent
• the investment had been made at a time when
                                                                                         would arise.8 The Tribunal was not convinced that
  there was an already existing (for over a year)
                                                                                         any other reasons for the restructuring cited by the
  civil litigation and problems with tax and
                                                                                         claimant (including tax or business specific reasons)
  customs authorities;
                                                                                         were determinative for the restructuring,9 and that
• the Israeli entity was created by a Mr Vladimir 		                                     gaining access to a new treaty claim was the
  Beno, who had fled the Czech Republic while 		                                         determinative reason for the restructuring on
  under criminal investigation and had obtained 		                                       the facts.10
  Israeli nationality, to purchase shares in the two
  Czech companies he had owned as a Czech citizen
  while living in the Czech Republic. His aim was
  therefore to bring pre-existing disputes to the
  attention of the ICSID Tribunal, and the investment
                                                                                             Tips for successful (re)structuring
  was a medium through which to do that; and
• consistent with the above, no economic activity in                                         Based on our analysis of the cases, the following
  the market place was either performed or even                                              factors are key to an effective (re)structuring:
  intended by the claimant investor.
                                                                                             Ensure any structure complies with the
The tribunal agreed with the Czech Republic’s                                                express wording of the applicable investment
argument that it did not have jurisdiction as “Phoenix                                       treaty (or investment contract), and that this
is nothing more than an ex post facto creation of a                                          treaty is in force at all material times.
sham Israeli entity created by a Czech fugitive from
justice, Vladimír Beňo, to create diversity of nationality”
                                                                                              A (re)structuring has more chance of being
and that the case was “one of the most egregious cases
                                                                                              recognised as legitimate if the investor can
of ‘treaty-shopping’ that the investment arbitration
                                                                                              point to some economic justification or merit
community has seen in recent history”.5
                                                                                              for holding the investment in this particular
                                                                                              way (for example, tax or internal
It ruled that the claimant’s investment did not
                                                                                              reorganisation) - we always recommend
qualify as a protected investment under the BIT
                                                                                              working alongside tax advisers in working out
or the ICSID Convention6 and the arbitration was
                                                                                              the most efficient structure from both a tax
declared as an abuse of the system of international
                                                                                              and investment protection perspective.
ICSID investment arbitration.

In Philip Morris Asia v Australia,7 the claimant                                              The earlier any (re)structuring is done in the
conducted a corporate restructuring in anticipation of                                        life-cycle of an investment, and in particular if
a dispute (linked to introduction of plain packaging                                          this takes place before the alleged breach
laws) to gain access to a treaty claim under the                                              occurs (or is anticipated), the less likely it is to
Australia – Hong-Kong BIT which would not otherwise                                           be viewed as an abuse of process.
have been available. The Tribunal held that the
restructuring constituted an abuse of process as it

5. Ibid, para. 34. 6. Ibid, para. 145. 7. Philip Morris Asia v Australia, PCA Case No. 2012-12, Award on Jurisdiction and Admissibility 17 December 2015 (accessible here).
8. Ibid, para. 569. 9. Ibid, para. 582. 10. Ibid, para. 584.
14   PRESERVE, PROTECT & DEFEND Global Nationalization Risk: Practical Considerations for Investors                                       Return to Contents Page

How to structure your investment

Tax structuring                                                                                  (dealing with matters such as double taxation), and
                                                                                                 sometimes will require mandatory binding arbitration
                                                                                                 between the two states to resolve particular disputes.
Decisions on investment protection and, in particular,
                                                                                                 Therefore it will be important to consider the taxation
access to favourable investment treaties, cannot be
                                                                                                 considerations alongside investment protection
taken in isolation. Other factors have to be taken into
                                                                                                 considerations when evaluating possible investment
account, most notably taxation. The amount of tax
                                                                                                 structures, as both can have a material effect on the
incurred during the lifecycle of an investment, and the
                                                                                                 economics and risk profile of the investment.
implications of the structure on the effective rate of
tax on the investment, means that tax will often be
a primary factor in structuring decisions.                                                       International norms in tax treaties
                                                                                                 There are more than 3,000 bilateral tax treaties that
Tax treaty protections                                                                           are currently in force. Whilst they are generally based
                                                                                                 on international norms, including model treaties
The effective rate of tax on the investment, both                                                developed by the Organisation of Economic Cooperation
in the jurisdiction of the investment and in the                                                 and Development (“OECD”) and the United Nations
jurisdiction in which the investor is resident for tax                                           (“UN”), they often have different terms and rates
purposes will be significantly affected by any tax                                               attached to them, which may have depended on the
treaty between those jurisdictions. Broadly, tax                                                 relative negotiating positions and preferences of the
treaties serve to allocate taxing rights between the                                             parties at the time the treaties were agreed. Often
two contracting states for different types of income                                             there will be structures that are commonly used for
and gains that might arise. For instance, the                                                    foreign direct investment into particular jurisdictions
investment jurisdiction may impose a withholding                                                 that might take advantage of a particularly favourable
tax on dividends paid by a company resident in that                                              tax treaty. However simply establishing an investment
jurisdiction of say 15% and that rate of withholding                                             vehicle in a particular jurisdiction is not sufficient to
tax may be reduced to, say, 5% or 0% by a tax treaty                                             be able to access the benefit of that jurisdiction’s tax
between that jurisdiction and an investor jurisdiction.                                          treaties for a number of reasons.
Similarly, the investment jurisdiction may impose a tax
on capital gains arising on the disposal of shares in a                                          Firstly, tax treaties apply to persons that are resident
company resident in that jurisdiction but a tax treaty                                           for tax purposes in the jurisdiction and if, for instance,
with the investor jurisdiction may stipulate that such                                           a company is managed and controlled in another
gains are only taxable in the investor jurisdiction,                                             jurisdiction, it may not be considered resident there.
potentially at a lower rate.
                                                                                                 Secondly, the income received by the entity in
Tax treaties should also protect taxpayers to some                                               the treaty jurisdiction must be beneficially owned
degree from being taxed on the same income in both                                               by the recipient (ie, it is not simply passed through
jurisdictions when that is the result of applying the                                            to another person) otherwise certain reliefs may not
domestic law in the states involved. In this respect,                                            be available, such as reduced rates of withholding
tax treaties will override tax rules in domestic law and                                         tax on dividends.
can offer taxpayers some relief from double taxation.
Finally, tax treaties may offer legal mechanisms for                                             And thirdly, there are specific and increasingly
resolving disputes with respect to particular mutual                                             well-developed provisions in treaties that are targeted
agreement procedures between the contracting states                                              at treaty shopping and other forms of treaty abuse.
Return to Contents Page                               PRESERVE, PROTECT & DEFEND Global Nationalization Risk: Practical Considerations for Investors   15

How to structure your investment

                        ...94 jurisdictions have signed up to implement tax Treaty related
                               measures to prevent base erosion and profit shifting...

‘Limitation of benefits’ and the                                  including having adequate premises and employees
                                                                  for whatever activity that entity may be engaged in,
‘principle purpose test’                                          even if that entity is simply an investment holding or
                                                                  financing company. Tax authorities may contend that
Tax avoidance involving treaty abuse was a specific               a lack of economic substance means that the entity is
focus on the G20 and OECD Base Erosion and Profit                 only established there to benefit from the tax treaty,
Shifting (“BEPS”) project that began in 2013 and has              such that the principal purpose test is failed. The
transformed the international tax landscape over the              requirement to have substance in treaty jurisdictions,
last few years. As part of the BEPS project, measures             and the commercial feasibility of having such substance,
were agreed to prevent the granting of treaty                     will therefore be another important factor to consider
benefits in “inappropriate circumstances”. In particular,         alongside the merits of particular tax and bilateral
this involved having a minimum standard of                        investment treaties.
introducing a “limitation of benefits” rule or “principal
purpose test” to tax treaties. Amending tax treaties
normally involves a lengthy bilateral negotiation,
                                                                  Interaction between investment
which may have delayed the implementation of this                 treaties and tax treaties
minimum standard. However, 94 jurisdictions have so
far signed up to the Multilateral Convention to                   It is also worth pointing out that the interaction
Implement Tax Treaty Related Measures to Prevent                  between tax and investment treaties is more complex.
Base Erosion and Profit Shifting (“MLI”), which will              Governments can often use their fiscal regimes to
result in changes to the thousands of bilateral treaties          achieve nationalist objectives by capturing a greater
between the signatories coming into effect much                   share of the economic returns of an investment in
more rapidly.                                                     their jurisdiction. Given that tax treaties override
                                                                  domestic law they can offer some protection to
A “limitation of benefits” clause, which are standard             investors. However, tax may also be included in the
for US tax treaties, includes certain additional tests to         scope of an investment treaty and substantial tax
establish whether an entity qualifies as a “resident” for         disputes have been dealt with under the procedures
the purposes of the relevant treaty such that the                 under such treaties. There are various articles that are
person can avail itself of its benefits. The alternative          commonly used in investment treaties that may serve
to the limitation of benefits clause is to include a              to protect investors from arbitrary changes to the tax
general anti-abuse rule by way of a “principal purpose            code and expropriatory levels of taxation, including
test”. Under this test, which is common in European               those that require that investments be accorded fair
treaties, if one of the principal purposes of transactions        and equitable treatment and provisions requiring
or arrangements is to obtain treaty benefits, those               compensation for losses suffered in certain
benefits would be denied unless it were established               circumstances.
that granting them would be in accordance with the
object and purpose of the provisions the treaty.

The principal purpose test is a contributor to the ever
increasing importance of having sufficient “economic
substance” in treaty jurisdictions. Economic substance
in this context means not only the management and
direction of the entity in the jurisdiction, but also
potentially certain core income-generating activities,
PRESERVE, PROTECT & DEFEND Global Nationalization Risk: Practical Considerations for Investors   Return to Contents Page

                      Case Studies
Return to Contents Page   PRESERVE, PROTECT & DEFEND Global Nationalization Risk: Practical Considerations for Investors



                                                                                             South Africa

                                                                                 United Kingdom

                                                         United States of America
18    PRESERVE, PROTECT & DEFEND Global Nationalization Risk: Practical Considerations for Investors                                        Return to Contents Page

Case study: Argentina
Political Situation
by David Chmiel

Argentina is no stranger to                                                                       mate – now the Vice President – was former
                                                                                                  President Cristina Fernández de Kirchner. On that
nationalization or expropriation.                                                                 news, shares on the country’s stock exchange dropped

At various times in its history,                                                                  by 48% and the Argentine Peso lost 26% of its value
                                                                                                  against the US Dollar, amidst concerns that the new
oil companies, railways, airlines,                                                                government would revert to old ways and undertake
                                                                                                  further nationalization in sectors such as energy.
utilities and postal services,                                                                    There is widespread belief that President Fernández
among others, have been                                                                           is unlikely to take action against foreign investors in
                                                                                                  Vaca Muerta, at least in the near-term. The project
brought back into state                                                                           is important to Argentina’s overall economic
ownership – sometimes                                                                             development and generation of foreign currency
                                                                                                  reserves. Moreover, foreign energy companies possess
on multiple occasions.                                                                            the technological know-how necessary to extract
                                                                                                  oil and gas from shale reserves.
The most recent high-profile act of nationalization in
                                                                                                  Nevertheless, investors are paying close attention to
the country occurred in 2012, when the government
                                                                                                  an emerging potential dispute between the government
of President Cristina Fernández de Kirchner
                                                                                                  and its foreign creditors. On taking office in December
renationalized 51% of the shares of YPF, the country’s
                                                                                                  2019, the new government suspended repayments for
largest energy company which was privatised in 1993.
                                                                                                  two years on US$ 150 billion in outstanding sovereign
That spawned a raft of multijurisdictional litigation
                                                                                                  debt as a precursor to negotiating a broader
between the Argentine government and affected
                                                                                                  restructuring of those obligations. The International
shareholders which continues to the present.
                                                                                                  Monetary Fund subsequently stated that it considers
                                                                                                  Argentina’s debt position to be unsustainable.
The renationalization of YPF dented investor
                                                                                                  The possibility of write-downs and even defaults –
confidence, but seemingly only temporarily. In the
                                                                                                  as occurred in Argentina in both 1982 and 2001 –
intervening years, foreign energy companies have
                                                                                                  cannot be ignored completely.
made significant investments in the Vaca Muerta
shale oil and gas reservoir, with the total amount of                                             Any sovereign debt crisis has the potential to create
capital committed rising from US$ 3 billion in 2013                                               significant broader political and economic challenges
to US$ 7.5 billion by 2019. This was aided, to no small                                           for the country’s government. This, in turn, might
degree, by the election in 2015 of President Mauricio                                             lead to the pursuit of policy options currently seen as
Macri on a liberal economic platform which foreign                                                unlikely or unfeasible, such as taking critical assets
investors perceived as offering security and stability                                            back into state control. The risk in this case, is not one
after years of uncertainty.                                                                       of a government embarking on nationalization in its
                                                                                                  own right, but rather seeing it as a feasible option as
However, the country’s political environment has                                                  a consequence of other policy decisions. All of this
changed once again. In October 2019, Macri was                                                    demonstrates the need for continual reassessment of
defeated in his bid for re-election by the populist,                                              nationalization risk to account for changing broader
Peronist candidate, Alberto Fernández, whose running                                              circumstances.
Return to Contents Page                                             PRESERVE, PROTECT & DEFEND Global Nationalization Risk: Practical Considerations for Investors     19

Protection of foreign investments in Argentina

Claudia Benavides            Luis Dates              Maria del Carmen Tovar        Santiago Maqueda                   Jorge Valencia                    Natalia Mori
Partner, Bogota              Partner, Buenos Aires   Partner, Lima                 Senior Associate,                  Senior Associate,                 Associate, Lima
                                                                                   Buenos Aires                       Bogota

Overview                                                                         Constitutional protection of
Should a foreign investor have                                                   property rights
its assets expropriated (whether                                                 Under Argentine law, shares in a private company
directly, or through creeping                                                    are constitutionally protected property rights, and
                                                                                 can only be expropriated through the enactment of
expropriation or regulatory                                                      an expropriation law by the National Congress with
encroachment), a qualifying                                                      previous proper compensation and a formal
                                                                                 declaration of the public use or utility involved
investor would have claims                                                       (National Constitution, art. 17).
for unlawful expropriation and
breach of the FET standard                                                       Expropriations Law No. 21,499
under any applicable investment
                                                                                 Expropriations Law No. 21,499 further regulates this
treaties. A map of those treaties                                                formal expropriation proceeding. In general terms,
to which Argentina is a party                                                    after the National Congress enacts the law, the
                                                                                 National Executive and the expropriated party must
is set out below. The main                                                       agree on the value and, absent such agreement, an
advantage of being able to                                                       official authority must appraise the property’s value,
                                                                                 which must be previously paid or deposited by the
pursue such an investment treaty                                                 National Executive prior to taking possession
claim would be to avoid having                                                   over the property.

to sue the Argentinian authorities                                               However, this procedure can present some setbacks
in their own courts. In addition,                                                in certain cases, most notably due to the fact that
                                                                                 Expropriations Law No. 21,499 prohibits the payment
investors may have access to                                                     of compensation in respect of loss of profits—a key
claims in the domestic courts.                                                   compensation concept in the expropriation of
                                                                                 profit-making companies.

                                                                                 Official appraisals may therefore widely vary
                                                                                 depending on the methodology used to ascertain
                                                                                 the present value of the expropriated shares
                                                                                 (e.g., in the expropriation of Spanish-owned airline
                                                                                 Aerolíneas Argentinas, appraising authorities reached
                                                                                 the conclusion that the value was negative due to its
                                                                                 current capital-debt structure, and therefore no
                                                                                 compensation had to be paid).
20   PRESERVE, PROTECT & DEFEND Global Nationalization Risk: Practical Considerations for Investors                                      Return to Contents Page

                            The International Monetary Fund [has] stated that it considers
                                    Argentina’s debt position to be unsustainable.

Nonetheless, the legal system allows for a judicial
procedure to be initiated to discuss the appraisal
                                                                                                 Administrative proceedings
methodology and assumptions.
                                                                                                 Another manner in which nationalization can take
                                                                                                 place is through the unilateral revocation of licenses,
Additionally, there are indirect or “creeping” ways
                                                                                                 permits or contracts granted to the investor
nationalization may take place, such as the enactment
                                                                                                 authorizing a specific activity or service (this is
of legislative or administrative regulations that
                                                                                                 especially the case for public utility companies, mostly
substantially limit the exercise of the owner’s rights.
                                                                                                 natural gas and electricity distributors or transporters,
For these cases, Argentine law grants several remedies
                                                                                                 as well as telecommunication operators).
that may apply depending on the case.

                                                                                                 In these cases, such decisions must be challenged in a
For instance, the owner may seek to consider such a
                                                                                                 previous administrative procedure, and only once the
case as an “abnormal” expropriation and thus go to
                                                                                                 latter is completed can the expropriated licensee,
court to seek to obtain a full expropriation, with
                                                                                                 permittee or contractor submit its challenge in court.
payment of the compensation, under the “abnormal”
expropriation proceeding regulated by Expropriations
                                                                                                 As a final note, in all these cases the National
Law No. 21,499 and which is similar to the one
                                                                                                 Government must be sued before Federal Courts,
described above.
                                                                                                 which in turn tend to defer in favour of the National
                                                                                                 Government’s policies and decisions, unless explicit
Alternatively, the owner may seek annulment of
                                                                                                 and gross violations to applicable laws took place.
such regulations and full compensation of all losses
suffered (including loss of profits) under State Liability
Law No. 26,944. In such a case, it would have to
demonstrate that such regulations are unconstitutional.
In addition, before reaching a court it would have to
submit a prior administrative claim according to
Administrative Procedures Law No. 19,549.

Finally, if the regulations are not nullified, still the
owner may seek compensation under State Liability
Law No. 26,944, but without being able to obtain loss
of profits and also having to meet a higher evidentiary
standard (i.e., having to demonstrate that the
regulations imposed a “special sacrifice” over the
owner, different than that to the rest of society
or similar market players).
Return to Contents Page                                  PRESERVE, PROTECT & DEFEND Global Nationalization Risk: Practical Considerations for Investors   21

               Argentina: Investment Treaties

In force                      Czechia
                                                                                                                                 (Not in force)
Algeria                       Egypt                Mexico                                Sweden
Armenia                       El Salvador          Morocco                               Switzerland                             Dominican Republic
Australia                     Finland              Netherlands                           Thailand                                Greece
Austria                       France               Nicaragua                             Tunisia                                 Japan
BLEU (Belgium & Luxembourg)   Germany              Panama                                Turkey                                  New Zealand
Bulgaria                      Guatemala            Peru                                  Ukraine                                 Qatar
Canada                        Hungary              Philippines                           United Kingdom                          United Arab Emirates
China                         Israel               Poland                                United States of America
Costa Rica                    Italy                Portugal                              Venezuela
Croatia                       Jamaica              Romania                               Vietnam
Cuba                          Korea, Republic of   Russian Federation
22    PRESERVE, PROTECT & DEFEND Global Nationalization Risk: Practical Considerations for Investors                                     Return to Contents Page

Case study: Indonesia
Political Situation
by David Chmiel

In keeping with current global                                                                    companies. The government also announced plans for
                                                                                                  state-owned energy companies to take control of
trends, Indonesia is not immune                                                                   dozens of oil and gas fields such as the Mahakam

from the recent incursion of                                                                      Block in East Kalimantan when existing production
                                                                                                  sharing contracts expire over the course of the next
nationalism into economic                                                                         decade, rather than submit them to rebidding by
                                                                                                  foreign oil and gas companies.
                                                                                                  These efforts came at the same time as plans were
In April 2019, incumbent President Joko Widodo won
                                                                                                  announced to utilise more of the country’s natural
election to a second five-year term of office following
                                                                                                  resources for domestic development needs and to
a campaign in which both he and his opponent
                                                                                                  encourage domestic refining capabilities with bans
promised to continue efforts to bring the natural
                                                                                                  on the export of raw, unrefined resources.
resources sector under greater domestic control,
including through nationalization where necessary.
                                                                                                  It is, however, premature, to take this as a sign of
                                                                                                  impending autarky in Indonesian economic policy.
This willingness to prioritise domestic interests over
                                                                                                  Widodo has repeatedly said that foreign investment is
those of foreign investors is not new in Indonesian
                                                                                                  critical to Indonesia’s sustained development. Shifting
politics. Early in the country’s history as an
                                                                                                  geopolitical currents support this trend. The President
independent nation, a number of Dutch and British
                                                                                                  has expressed scepticism about the costs to Indonesian
investments were nationalized. More recently,
                                                                                                  sovereignty of accepting Belt and Road Investment
Widodo’s immediate predecessor, President Susilo
                                                                                                  from China. Moreover, Indonesia is potentially well-
Bambang Yudhoyono, introduced limits on foreign
                                                                                                  positioned to serve as an alternate manufacturing
investment in sectors as diverse as oil services, retail,
                                                                                                  location for US multinationals seeking to shift
agribusiness and power generation. He also                                                        production from China amidst ongoing trade wars.
announced plans to terminate many of the bilateral                                                In that regard, in early 2020, the government tabled
investment treaties to which Indonesia was a party,                                               legislation in Parliament aimed at encouraging foreign
arguing that they favoured the interests of                                                       investment, including comprehensive tax reform.
multinational companies over those of developing
countries like Indonesia. In fact, a large number of                                              Ministers have also suggested that additional sectors
treaties have been terminated and some are being                                                  will open to outside investment, albeit likely subject
renegotiated.                                                                                     to the continued emphasis on nationalization of
                                                                                                  ownership of natural resources and associated
When Widodo was first elected in 2014, some                                                       processing. Balancing the need for foreign investment
speculated that he might take a more liberal view on                                              against domestic political pressure for Indonesians to
foreign investment than Yudhoyono. However, his                                                   reap the maximum benefits of their country’s
actions in his first term of office did not necessarily                                           economic growth will require careful and sustained
bear that out. In that period, a number of foreign                                                efforts by policymakers.
mining companies made high-profile exits from
Indonesia following sustained political pressure to sell
majority interests in their local operations to domestic
Return to Contents Page                                      PRESERVE, PROTECT & DEFEND Global Nationalization Risk: Practical Considerations for Investors   23

Protection of foreign investments in Indonesia

Jo Delaney                   Andi Kadir         Richard Allen                 Hadyu Ikrami
Partner, Sydney              Partner, Jakarta   Of Counsel,                   Associate, Jakarta

Overview                                                                  In addition, investors may have access to claims in the
                                                                          domestic courts. In Indonesia, various forms of judicial

Should a foreign investor have                                            protection are available to foreign investors. These
                                                                          protections are aimed not only at attracting and
its assets expropriated (whether                                          facilitating foreign investments, but also at providing
directly, or through creeping                                             investors with recourse in case of violation of their
                                                                          rights. The country’s prevailing statute on investment
expropriation or regulatory                                               is Act No. 25 of 2007 on Investment (“Investment Act”).
encroachment), the investor may
have access to claims under any                                           This legislation is supplemented by various
                                                                          presidential, ministerial, and local governments’
applicable investment treaties.                                           regulations, as well as regulations of the Investment
                                                                          Coordinating Board (“BKPM”), the country’s single-
While judicial protection for foreign investors exists in
                                                                          window agency for investment matters. Article 32 of
Indonesia, it has varying degrees of consistency and
                                                                          the Investment Act provides broad options to investors
predictability. This has made international arbitration
                                                                          to settle their disputes with the government, namely
an obvious choice for many foreign investors. A map
                                                                          good offices, arbitration, and/or court proceedings.
of those treaties to which Indonesia is a party is set
out below. Indonesia has terminated approximately
                                                                          In practice, while most disputes involving foreign
30 BITs in recent years. However, it is party to the
                                                                          investors are submitted to international arbitration,
ASEAN Comprehensive Investment Agreement and ASEAN
                                                                          foreign investors may also submit claims to the State
free trade agreements that include investment chapters.
                                                                          Administrative Courts (“PTUN”) and General Courts.
This means that many foreign investors retain the
                                                                          Further, judicial protection for foreign investors is also
ability to invoke investment treaty protections (for
                                                                          available in non-contentious cases; the Supreme Court
example unlawful expropriation or FET, as set out in
                                                                          and Constitutional Court have the power to conduct
‘The value of Investment Treaty protections’ above) in
                                                                          judicial reviews to ensure constitutional and
the face of government interference in their investment.
                                                                          regulatory consistency.

Notably, some of the investment protections are
more restrictive, particularly those negotiated recently.                 State Administrative Courts
For example, investment protections are denied to
investors who do not have a substantial business                          PTUN hear claims of violations of good governance
operation. FET is limited to the minimum standard of                      principles by public officials submitted by individuals
treatment recognised in public international law. In some                 or private corporations, including ad hoc governmental
treaties, claims must be brought within three years.                      decisions. As such, many of the cases heard by PTUN
                                                                          involving investors relate to their licenses.
At the same time, the exceptions to investment
protections have been broadened. For example, the                         For example, in late November 2019, the Indonesian
ASEAN Hong Kong China SAR Investment Agreement                            subsidiary of a multinational mining company filed a
extends exceptions to measures relating to the                            lawsuit with PTUN against the Ministry of Energy and
conservation of natural resources.                                        Mineral Resources (“MEMR”).
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