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2016 | OriginalPaper | Buchkapitel

5. Investor-State Arbitration Distorted

When the Claimant Is a State

verfasst von : Julien Chaisse, Dini Sejko

Erschienen in: Judging the State in International Trade and Investment Law

Verlag: Springer Singapore

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Abstract

Investments from emerging economies have increased since the beginning of the century and notably a large proportion of the flows of foreign direct investment (FDI) coming from emerging economies is executed by State-Owned Enterprises (SOEs) and Sovereign Wealth Funds (SWFs) both typical contemporary forms of State Controlled Entities (SCEs). Such trend that has been further reinforced since 2008/2009 and SCE’s investment activism has reflected into a systemic shift that has transformed State capitalism into a key feature of contemporary global economy. At the time, investment arbitration, which was designed to allow foreign private investors to sue sovereign States, has transformed since host States can now be judged at the initiative of another State owning enterprises making investments. The thesis of this chapter is that the international regime for foreign investment, which includes both substantive rules and arbitration principles, is gradually adjusting to the emergence of SCEs in the investment sphere. This adjustment implicitly means that the rules and practice of international investment are reshaped by actors, which were not initially at the center of the regime. Actually, and it is a great paradox, the regime for foreign investment, as designed in the last three decades, was intended to serve the interest of private investors, seen as the main driver of the global economy. Instead of excluding SCEs from its realm and favoring the emergence of different rules, the international investment regime is gradually absorbing State capitalism and allows foreign SCEs to sue host States before arbitration. This chapter provides a detailed analysis of the forces driving this transformation, of the flexibility of the international norms that apply to SCEs, of the rights that SCEs are acquiring, and, finally of the increased exposure of sovereign States to be judged by international tribunals at the initiative of other States. The chapter initially deals with the relevant norms of international economic law to understand which would best fit the need of SCEs in their transnational activities. Then the following section addresses the critical issue of the legal standing of SCEs under investment treaties since it determines the ability of SCEs to effectively benefit from the investment treaties protections through investor-State arbitration. In addition the chapter reviews a number of cases in which the legal standing of SCEs has been discussed. Finally, the chapter analyses the substantive rights which can benefit SCEs and which will drive the investment strategies of many SCEs in the coming years.

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Vorheriges Kapitel States’ Regulatory Autonomy to Protect Societal Values by Legitimate Regulatory Distinctions

Nächstes Kapitel Claims and Counterclaims Under Asian Multilateral Investment Treaties

The recent economic crisis is, however, underlining the role to be played by the national governments in no uncertain terms. See generally Ian Bremmer, State Capitalism Comes of Age—The End of the Free Market, 88 Foreign Affairs (2009) 40. See also Niall Ferguson, We Are All State Capitalist Now, Foreign Policy (2012) available at http://foreignpolicy.com/2012/02/09/were-all-state-capitalists-now/ (last accessed 18 August 2016); Larry Cata Backer, Sovereign Investing in Times of Crisis: Global Regulation of Sovereign Wealth Funds, State-owned Enterprises, and the Chinese Experience, 19 Transnat’l L & Contemp Probs (2010) 3.

See generally Aldo Musacchio & Sergio G Lazzarini, Leviathan in Business: Varieties of State Capitalism and Their Implications for Economic Performance. Harvard Business School (2012) available at http://www.hbs.edu/faculty/Publication%20Files/12-108.pdf (accessed August 18, 2016). See also Joseph L Bower et al.: Business Must Confront the New Challenges to the Free Market. Harvard business review (2011). See also New Masters of the Universe; State Capitalism's Global Reach, 402 The Economist (2012) 6; Christopher A McNally, Sino-Capitalism: China’s Reemergence and the International Political Economy, 64 World Politics (2012) 765.

There are more than 550 SOEs that are multinational enterprises and manages assets for more than USD 2000 billion. They have been active both in merger and acquisitions where they have invested USD 69 billion and in greenfield investments with operations valued around USD 49billion. See the UNCTAD World Investment Report 2015 at page 17 available at http://unctad.org/en/PublicationsLibrary/wir2015_en.pdf.

See Adrian Wooldridge, The Visible Hand, The Economist (2012); See also USA–China Economic and Security Review Commission Report to Congress (2011). The definition of SOEs is controversial. Official statistics from the Chinese Ministry of Finance define SOEs as including only wholly State-owned companies. In this article, SOEs are defined more broadly to include wholly State-owned SOEs and companies whose majority shares are owned by the Chinese government at various levels (including the central, provincial and municipal levels). Wu Jie, Scrutinizing China’s Fortune Global 500 Companies; Guo Qi (2013) <http://news.xinhuanet.com/fortune/2013-08/14/c_125166671.htm>. Accessed 14 August 2013; and <http://www.sasac.gov.cn/n1180/n1271/n20515/n2697206/15243512.html>. International tribunals have had to define SOEs and the Salini v. Morocco Decision on Jurisdiction notes that generally any commercial company dominated or predominantly controlled by the State or by State institutions, whether it has a legal personality or not, is considered to be a State-owned company. See Salini Costruttori SPA and Italstrade SPA v Kingdom of Morocco, July 16, 2001, ICSID Case No ARB/00/4, Decision on Jurisdiction para. 31. Also, the Al-Kharafi v Libya Final Arbitral Award notes that, in certain circumstances, the separate personality of an entity fully controlled by a State can be discarded and the State is considered to be bound by the terms of a contract entered into by such an entity; accordingly, the tribunal decides that the arbitration clause set out in the contract may be invoked against various State organs/entities. See Mohamed Abdulmohsen Al-Kharafi & Sons Co. v. Government of the State of Libya, Ministry of Economy in the State of Libya, General Authority for Investment Promotion and Protection Affairs, Ministry of Finance in Libya and Libyan Investment Authority, Final Arbitral Award (22 March 2013) paras. 263, 266, 268.

Based on data from the Sovereign Wealth Fund Institute in the last 8 years have more than doubled jumping from USD 3417 billion in September 2007 to USD 7204 billion, more information available here. The plunge of oil prices last year and the recent decrease of stock markets have not substantially affected the total market size of assets under the management of SWFs. See the Sovereign Wealth Fund Institute website data available at http://www.swfinstitute.org/sovereign-wealth-fund-rankings/.

See Julien Chaisse et al. Emerging Sovereign Wealth Funds in the Making: Assessing the Economic Feasibility and Regulatory Strategies 45 JWT (2011) 837.

Both SWFs and SOEs are forms of investments that originate from State ownership and State activity, and are thus regularly referred to as investments by “State-controlled entities” (SCEs). See R Gilson, CJ Milhaupt, Sovereign Wealth Funds and Corporate Governance: A Minimalist Response to the New Mercantilism, 60 Stan L Rev (2008) 1346. See also A Musacchio, SG Lazzarini, Leviathan in Business: Varieties of State Capitalism and Their Implications for Economic Performance (2012) <http://www.www.hbs.edu/faculty/Publication¨Files/12-108.pdf>.

See generally Thilo Hanemann, Chinese FDI in the United States. Rhodium Group (2013) <http://rhg.com/notes/chinese-fdi-in-the-united-states-q1-2013-update> (“In the past 15 months private Chinese firms spent more on US deals than in the 11 years before combined. In the same period, they accounted for 80 % of transactions and 50 % of total transaction value, a dramatic change compared to previous years when State-owned firms dominated Chinese capital flows to the US”.) A representative media account of this report is David Welch et al., Smithfield Stoking U.S. Unease Belies Benefit of China Deals, Bloomberg (2013) <http://www.bloomberg.com/news/2013-06-06/smithfield-stoking-u-s-unease-belies-benefit-of-chinese-deals.html> (noting that “[p]rivate companies are also freer of government influence”).

State-controlled entities which in the plain meaning of the term are entities of any kind controlled by a State such as State-owned enterprises and sovereign wealth funds. See Karl P Sauvant & Jonathan Strauss, State-Controlled Entities Are Important Outward Direct Investors, 4 Transnational Corporations Review (2012) 1 (Discussing that developing country sovereign wealth funds are players in the world foreign direct investment market which have received considerable attention while State-owned enterprises, another class of State-controlled entities are serious players in the world FDI market).

See generally EJ Drake, Chinese State-Owned and State-Controlled Enterprises: Policy Options for Addressing Chinese State-Owned Enterprises Testimony before the US-China Economic and Security Review Commission available at http://www.uscc.gov/sites/default/files/2.15.12drake_testimony.pdf (accessed August 18, 2016); OECD: State-Owned Enterprises: Trade effects And Policy Implications—An Interim Report, DAF/CA/PRIV (2010) 18 October 2010, 1.

See D Park & G Estrada, Developing Asia's Sovereign Wealth Funds and Outward Foreign Direct Investment.26(2) Asian Development Review (2009) 57–85.

See Joël Ruet et al., The Reshaping of Global Capitalism by MNEs from Emerging Countries, in Julien Chaisse and Philippe Gugler (eds) Expansion of Trade and FDI in Emerging Asia: Strategic and Policy Challenges (2009).

See generally Julien Chaisse & Chistian Bellak, Navigating the Expanding Universe of Investment Treaties—Creation and Use of Critical Index, 18 J Int’l Econ L (2015) 79.

The North American Free Trade Agreement (NAFTA) is a prime example of an agreement with a wide scope covering investment since it includes three Members. The Trans-Pacific Partnership (TPP) is another example of ambitious trade pact including investment matters with twelve Members. The legally verified text of the Trans Pacific Partnership was issued on 26 January 2016 available at https://www.tpp.mfat.govt.nz/text. Some States have already ratified the treaty but it is not in force yet. On the TPP, see generally ‘The Regulation of Investment in the TPP—Towards a defining international agreement for the Asia-Pacific region’ in Jansen Calamita and Mavluda Sattorova (ed) The Regionalization of Investment Treaty Arrangements--Developments and Implications (London: British Institute of International and Comparative Law, 2015) 270–319; Bryan Mercurio, The Trans-Pacific Partnership: Suddenly a ‘Game Changer’, 37 World Economy (2014) 1558–1574. These separate investment chapters in PTAs are comparable, on average, to self-standing BITs. They can include both rules on investment liberalization (non-discrimination safeguards) and investment protection (substantive standards of treatment afforded by the host State to the foreign investor or investment). UNCTAD: Investing in the SDGS: An Action Plan. World Investment Report (2014).

Arbitral panels are charged with the task of applying the rules of IIAs in specific cases, an often complex process given the broad and sometimes ambiguous terms of these arrangements. See, generally, Kenneth J Vandevelde, A Brief History of International Investment Agreements, 12 UC Davis J Int’l L & Pol’y (2005) 173 (noting that foreign investors are increasingly resorting to the mechanism of international arbitration for resolving their disputes with the government of a host country). On the emerging issue of sovereign debt restructure by International Tribunals, see Julien Chaisse Greek Debt Restructuring, Abaclat v Argentina and Investment Treaty Commitments: The Impact of International Investment Agreements on the Greek, in Chin Leng Lim and Bryan Mercurio (eds) International Economic Law after the Global Crisis—A Tale of Fragmented Discipline (CUP 2015) 306–28.

Here distortion is taken in the plain sense of the terms; that is distortion is the alteration of the original shape (or other characteristic) of something, such as an object, image, sound or waveform.

See Sect. 5.4.1.

Julien Chaisse (2015). Assessing the relevance of multilateral trade law to sovereign investments: Sovereign Wealth Funds as “investors” under the General Agreement on Trade in Services, International Review of Law: Vol. 2015, Special Issue on Sovereign Wealth Funds, 9, available at http://www.qscience.com/doi/abs/10.5339/irl.2015.swf.9 (accessed on 19 August 2016).

A dispute could arise when a WTO Member State believes that another Member State is violating a commitment that it has made under “mode 3” of GATS. Such a situation would lead to a dispute related to the domestic regulation of investment within the WTO. The WTO/DSB could rule on an investment dispute. The possibility of seeing investment disputes at the WTO is perhaps not so attractive for a reason directly related to the very nature of the DSM system.

While there are severe limitations to the Santiago Principles, they still remain an important first step in the creation of a new international norm. GAPP No. 24 says that “A process of regular review of the implementation of the GAPP should be engaged in by or on behalf of the SWF”. It can be observed that there is a necessity to respect all the Santiago Principles when setting up SWF for the emerging economies so as to take advantage of these minimal standards. Respecting each of the Santiago Principles will put the SWFs of such countries in the category of “good SWF” and then limit the regulatory obstacles which they could face in the U.S. market or the multiplicity of regulations in the E.U. market. Interestingly, the use of mere guidelines as opposed to hard regulation may in fine mark a milestone in rationalizing the integration of SWFs into the global capital markets. Complying officially with the IMF guidelines should not require many concessions by the emerging economies willing to set up new SWFs. Since the Santiago Principles remain quite loosely defined and minimal, a good strategy for a developing country would be to respect them and use these standards as a tool to ensure that Western countries will not create obstacles that run against the philosophy of this core of multilateral principles.

See generally, on the history and basics of investment law, Rudolf Dolzer and Christoph Schreuer, Principles of International Investment Law (OUP 2008); Jeswald W. Salacuse, The Law of Investment Treaties (OUP 2015); M Sornarajah, The International Law on Foreign Investment (CUP 2012). See also Amon Lehavi and Amir N. Licht, BITs and Pieces of Property, 36 Yale JIL (2011) 115. For a broader overview, see also KJ Vandevelde in fn. 15.

The trend has recently been described by Andrew Newcombe “Developments in IIA Treaty-Making” in Armand De Mestral and Celine Lévesque (eds), Improving International Investment Agreements (Routledge, 2012).

See generally Gus Van Harten, International Investment Treaty Arbitration and Public Law (OUP 2007); see also Gus Van Harten and Martin Loughlin, Investment Treaty Arbitration as a Species of Global Administrative Law, 17 EJIL (2007) 121.

Office of the U.S. Trade Rep. Bilateral Investment Treaties. http://www.ustr.gov/trade-agreements/bilateral-investment-treaties. Accessed 31 July 2015. (stating that the three aims of BITs are (1) “to protect investment abroad in countries where investor rights are not already protected through existing agreements”; (2) “to encourage the adoption of market-oriented domestic policies that treat private investment in an open, transparent, and non-discriminatory way”; and (3) “to support the development of international law standards consistent with these objectives”).

The term initially used by Bhagwati in relation to preferential trade agreements: see Jagdish N Bhagwati, US Trade Policy: The Infatuation with FTAs, Columbia University Academic Commons <http://hdl.handle.net/10022/AC:P:15619>.

See UNCTAD, World Investment Report 2013: Global Value Chains: Investment and Trade for Development (2013) <http://unctad.org/en/PublicationsLibrary/wir2013_en.pdf>. There were also another 339 trade agreements, bringing the total number of international investment agreements to 3,196. Id; see also ICSID Database of Bilateral Investment Treaties, International Center for the Settlement of Investment Disputes (ICSID) <https://icsid-worldbank-org.easyaccess1.lib.cuhk.edu.hk/ICSID/FrontServlet?requestType=ICSIDPublicationsRH&actionVal=ViewBilateral&reqFrom=Main>. Accessed 31 July 2015.

See, for example (studies on optimal rational design perspective), Jennifer L. Tobin and Marc L. Busch, A Bit Is Better Than a Lot: Bilateral Investment Treaties and Preferential Trade Agreements, 62 World Politics (2010) 1; Tim Büthe and Helen V. Milner, Bilateral Investment Treaties and Foreign Direct Investment: A Political Analysis, in Karl P Sauvant & L Sachs (eds), The Effect of Treaties on Foreign Direct Investment: Bilateral Investment Treaties, Double Taxation Treaties, and Investment Flows (2009); Elkins, Guzman & Simmons, Competing for Capital: The Diffusion of Bilateral Investment Treaties, 1960–2002, 60 Int’l Org (2006) 811; Kerner, Why Should I Believe You? The Costs and Consequences of Bilateral Investment Treaties, 53 Int’l Studies Q (2009) 73; Srividya Jandhyala, Witold J Henisz and Edward D. Mansfield, Three Waves of BITs: The Global Diffusion of Foreign Investment Policy, 55 J Conflict Res (2011)1047; (study on reputational effects of the existence of disputes on investments): Todd Allee and Clint Peinhardt, Delegating Differences: Bilateral Investment Treaties and Bargaining over Dispute Resolution Provisions, 54 Int’l Studies Q (2011) 1; (study on learning effects of facing legal claims on further signing of BITs): Todd Allee and Clint Peinhardt, Contingent Credibility: The Impact of Investment Treaty Violations on Foreign Direct Investment, 65 Int’l Org (2011) 401.

See ICSID Annual Report 2015 available at https://icsid.worldbank.org/apps/ICSIDWEB/resources/Documents/ICSID_AR15_ENG_CRA-highres.pdf. cfr. World Investment Report 2015 available here http://unctad.org/en/PublicationsLibrary/wir2015_en.pdf.

See Richard J Hunter, Property Risks in International Business, 15 Int’l Trade LJ (2006) 23 (distinguishing foreign direct investment from passive portfolio investments not involving control). See also Emmanuelle Cabrol et al., International Investments – Law and Practice, 6 International Business Law Journal (2008)796 (observing that although investment treaties are primarily aimed at protecting property and economic values, they do not exclude, in exceptional circumstances, compensation in moral damages, to legal as well as natural persons). See also Julien Chaisse, Promises and Pitfalls of the European Union Policy on Foreign Investment—How Will the New EU Competence on FDI Affect the Emerging Global Regime, J Int’l Econ L (2012) 51.

In the ICSID case of Suez, Sociedad General de Aguas de Barcelona S.A., and Vivendi Universal S.A. v. The Argentine Republic, the tribunal defined “treatment” as follows: “The word ‘treatment’ is not defined in the treaty text. However, the ordinary meaning of that term within the context of investment includes the rights and privileges granted and the obligations and burdens imposed by a Contracting State on investments made by investors covered by the treaty”. ICSID, Suez, Sociedad General de Aguas de Barcelona SA, and Vivendi Universal SA v Argentine Republic, Case No ARB/O3/19 (2006).

See Deyan Draguiev, Bad Faith Conduct of States in Violation of the “Fair and Equitable Treatment” Standard in International Investment Law and Arbitration, 5 Journal of International Dispute Settlement (2014) 273.

See Helge Elisabeth Zeitler, Full Protection and Security, in, Stephan W Schill (ed) International Investment Law and Comparative Public Law (CUP 2010). Such claims were dismissed in: GEA Group Aktiengesellschaft v. Ukraine, March 31, 2011, ICSID Case No ARB/08/16, Award, paras. 322–323; Frontier Petroleum Services Ltd v. Czech Republic, Final Award, 12 November 2010, Permanent Court of Arbitration, paras. 434–438.

See Rudolf Dolzer & Christoph Schreuer supra fn 21 and Van Harten fn 23.

See generally, Julien Chaisse, The Treaty Shopping Practice: Corporate Structuring and Restructuring to Gain Access to Investment Treaties and Arbitration,11 Hastings Bus LJ (2015) 225.

It fulfills investors’ needs in the following ways. It avoids exposure of the investor to the uncertainties of host State laws and regulation by creating a separate treaty based set of rules to govern host State’s conduct. It gives investors an alternative to the host State’s judicial system to seek relief from the host State’s actions. An investor can determine when there has been a breach of a treaty obligation and launch a claim. It is unnecessary for an investor to rely on its home State espousing its claim. There may be various reasons why a State may not want to make a claim against another State in diplomatic relations.

The ICSID Caseload—Statistics (Issue 2016–2) available at https://icsid.worldbank.org/apps/ICSIDWEB/resources/Documents/ICSID%20Web%20Stats%202016-2%20(English)%20Final.pdf (accessed August 19, 2016).

See Christoph Schreuer, Travelling the BIT Route: Of Waiting Periods, Umbrella Clauses and Forks in the Road, 5 Journal of World Investment & Trade (2004) 231 pointing out that most BITs refer to ICSID. More than 140 States are parties to the ICSID Convention. International Centre for Settlement of Investment Disputes, List of Contracting States and Other Signatories of the Convention, ICSID/3 (2007) <http://icsid.worldbank.org> (follow “List of Contracting States” hyperlink) Accessed 31 July 2015. Investment disputes may also be settled under the arbitration rules of the United Nations Commission on International Trade Law (UNCITRAL), the Stockholm Chamber of Commerce, the International Chamber of Commerce and ad hoc arbitration.

The ICSID Convention has been signed by 160 States and ratified by 152 States.

See generally Dolzer, R., Schreuer, C.: Principle of International Investment Law. (2012).

See Mark Feldman, The Standing of State-Owned Entities under Investment Treaties, in Karl P. Sauvant et al (eds) Yearbook on International Investment Law & Policy 2010 -11 (2012) 615.

Temasek Loses Final Indonesia Antitrust Breach Appeal, Bloomberg, 24 May 2010 <http://www.bloomberg.com/news/articles/2010-05-24/temasek-loses-final-appeal-against-indonesian-antitrust-law-breach-ruling>.

Temasek to Pay Indonesia Fines after Failed Anti-monopoly Appeal, Reuters, 18 January 2011 <http://www.reuters.com/article/2011/01/18/indonesia-temasek-idUSL3E7CI0AJ20110118>.

The Singapore- Indonesia BIT entered into force 21 June 2006 even though does not explicitly recognize Temasek as an “investor” has a broad definition of investor that does seem to be a threshold to the legal standing of Temasek: “any company, firm, association or body , with or without legal personality, incorporated, established or registered under the law of that Contracting Party.

The definition of investor/juridical person is more precise than the one above.: ““juridical person” means any legal entity duly constituted or otherwise organised under the applicable law of a Member State, whether for profit or otherwise , and whether privately-owned or governmentally - owned , including any enterprise, corporation, trust, partnership, joint venture…”.

See, for example, the “investor” definition in the Agreement between the Government of Canada and the Government of the Republic of South Africa for the Promotion and Protection of Investments, art. I. Available at http://investmentpolicyhub.unctad.org/Download/TreatyFile/3487 (accessed 19 August 2016).

BITs offer foreign investors a unique dispute settlement mechanism to enforce the rights given to them by the investment treaties. This unique element of investment treaties provides an investor with the possibility of bringing a direct claim against the host State in an international arbitration forum, such as the International Center for Settlement of Investment Disputes (ICSID) or the International Chamber of Commerce (ICC). A discriminatory act against an SWF can be followed by a direct claim by the SWF against the host State based on the applicable investment treaty between the host State and the home State of the SWF. Assuming successful passage through any jurisdictional challenges, an arbitration forum will have to decide whether the legislative or executive act can be considered a discriminatory measure that violates an investor protection standard.

In Tokios Tokeles v Ukraine the tribunal recognizes that a “number of investment treaties allow a party to deny the benefits of the treaty to entities of the other party that are controlled by foreign nationals and that do not engage in substantial business activity in the territory of the other party” but the Lithuania–Ukraine did not have such requirement. See Tokios Tokelés v. Ukraine, April 29, 2004, ICSID Case No. ARB/02/18, Decision on Jurisdiction, para 33.

See, for example, the definition of “investor” in the China—Italy BIT, art. 2. available at http://investmentpolicyhub.unctad.org/Download/TreatyFile/3370 (accessed 19 August 2016).

To avoid treaty shopping, certain limitations are used in IIAs: (1) they require the ultimate owners who control investment to be nationals of the home State party. This is a rare approach in IIAs but would avoid misuse of protection. Such an approach is used in the Germany–Antigua and Barbuda BIT. TNCs often have quite complex structures making it difficult to determine where ultimate control resides, and (2) they require a legal person to have substantial business activity, or its seat (location of effective management), head office or some other significant connection in a State party. This is a common approach adopted in IIAs, but it is quite vague leading to uncertainty when the issue is addressed in investor-State tribunals. Sometimes tribunals, in interpreting the requirement for the seat to be in a party State have required a minimal connection. For example, in one case it was held that if one director is resident in the jurisdiction and the corporation files its financial statement in that country, the seat of the corporation is in that country. Hence, the application of this requirement can be hard to predict in practice.

Phoenix Action, Ltd v The Czech Republic, April 15, 2009, ICSID Case No ARB/06/5, paras 1, 6–8, 22.

Sometimes, “investor” definition is even broader to include not only citizens but also individuals, who qualify as permanent residents under domestic law (HK). Natural persons having the nationality of both BIT parties under their respective laws. One possibility, following the international law principle of an effective link, is to consider a person as a national of the country of his/her dominant and effective nationality.

The United States concludes all of its BITs based on a model. The U.S. Department of State and the United States Trade Representative along with other agencies completed a 2012 Model BIT. See Bilateral Investment Treaties and Related Agreements, U.S. Dep't of State <http://www.state.gov/e/eb/ifd/bit>. Accessed 31 July 2015. For the text of the 2012 Model BIT, see 2012 Model Bilateral Investment Treaty, U.S. Dep't of State <http://www.state.gov/documents/organization/188371.pdf> [hereinafter 2012 Model BIT] Accessed 31 July 2015.

The US Model BIT 2012 defines investor of a party as “a Party or State enterprise thereof, or a national or an enterprise of a Party, that attempts to make, is making, or has made an investment in the territory of the other Party” The US Model BIT also defines State enterprises as “an enterprise owned, or controlled through ownership interests, by a Party”.

Canada – Kuwait BIT 2011 Art. 1.

Qatar – Moldova BIT 2012 not yet into force in art. 1, c) clarifies “In addition, Juridical persons include governments, official agencies, authorities, sovereign funds, trusts, and organizations established or organized in accordance with the respective State legislation of the Contracting Parties or of a third party in which the investor referred to above exercise effective control”.

See TPP Chapter 17 available at https://www.mfat.govt.nz/assets/_securedfiles/trans-pacific-partnership/text/17.-state-owned-enterprises-and-designated-monopolies-chapter.pdf.

See TPP Chapter 9 available at https://www.mfat.govt.nz/assets/_securedfiles/trans-pacific-partnership/text/9.-investment-chapter.pdf.

Singapore – China BIT 1985.

Similar language can also be found in a great number of Russian and Chinese BITs. In addition some Chinese BITs in the definition of investor will also refer to “economic entity”.

Jeswald W Salacuse, The Emerging Global Regime for Investment, 51 Harv Int’l L J (2010) 427.

One notable example is the case of CME Czech Republic B.V. v. The Czech Republic, an UNCITRAL arbitration under the Netherlands – Czech Republic BIT, which resulted in an award and payment of $355 million to an injured investor, one of the largest awards ever made in an arbitration proceeding. See Uncitral, CME Czech Republic B.V. v. The Czech Republic Final award (2003).

Beijing Urban Construction Group Co Ltd. v Republic of Yemen, ICSID Case No ARB/14/30. The case was registered in December 2014 and the Tribunal was constituted in July 2015.

Hanocal Holding BV and IPIC International BV v Republic of Korea, ICSID Case No ARB/15/17. The case was registered in May 2015 and the Tribunal was constituted in March 2016.

State General Reserve Fund of the Sultanate of Oman v. Republic of Bulgaria, ICSID Case No ARB/15/43. The case was registered in October 2015 and the Tribunal was constituted in February 2016.

Also in CDC Group plc v Republic of Seychelles, December 17, 2003, ICSID Case No ARB/02/14, Award. An ICSID tribunal decided a case initiated by a British SCE. The case is not based on any IIAs but it has in common with the other cases the fact that the nature of the ownership of the company did not prevent the right of the investor to stand in front of an ICSID tribunal. It deserves to be mention that the respondent did not raise an issue of jurisdiction ratione personae.

Ceskoslovenska Obchodni Banka, AS v The Slovak Republic, ICSID Case No ARB/97/4 (24 May 1999).

Telenor Mobile Communications AS v The Republic of Hungary, September 13, 2006, ICSID Case No ARB/04/15, available at http://www.italaw.com/sites/default/files/casedocuments/ita0858.pdf (accessed August 19, 2016).

Hrvatska Elektroprivreda dd v Republic of Slovenia, ICSID Case No ARB/05/24, Decision on the Treaty Interpretation Issue (12 June 2009).

Rumeli Telekom AS and Telsim Mobil Telekomunikasyon Hizmetleri AS v Republic of Kazakhstan, ICSID Case No ARB/05/16 (25 March 2010).

See Ceskoslovenska Obchodní Banka, A.S. v. Slovak Republic, ICSID Case No ARB/97/4, Decision of the Tribunal on Objections to Jurisdiction (24 May 1999).

“to the extent that such proceedings might include determinations as to whether the Slovenska inkasni spol. s.r.o. [Slovak Collection Company] has a valid claim in the form of a right to receive funds from the Slovak Republic to cover its losses as contemplated in the Consolidation Agreement at issue in this arbitration”. Ibid para. 9.

Ibid, [20].

Ibid.

A separate agreement between Croatia and Slovenia: Agreement between the Government of the Republic of Croatia and the Government of the Republic of Slovenia on Regulation of Status and other Legal Relation regarding the Investment, Use and Dismantling of Nuclear Power Plant Krško.

Hrvatska Elektroprivreda D.D. v The Republic of Slovenia, June 12, 2009, (ICSID Case No. ARB/OS/24) Decision on the treaty interpretation issue.

Ibid, 6 [13].

Ibid, [15].

A threshold issue is whether under the 2001 Agreement, to which only Croatia and Slovenia are parties, this Tribunal has jurisdiction over the dispute presented to it. More precisely, can HEP bring this case against the Republic of Slovenia and before us? Issues of jurisdiction were not seriously contested between the parties to this arbitration; nevertheless, some questions were asked and in any event the Tribunal is obliged to be satisfied of its jurisdiction (ibid, 40 [166]). The Tribunal did not thoroughly discuss an issue that might be of great relevance in relation to the legal standing of SCEs and SCEs investments: the commercial nature of the investment. In fact HEP was not operating on a profit basis but on a cost-covering basis (Art. 2 of 2001 Agreement attached to the Hrvatska Electroprivreda d.d. v. The Republic of Slovenia, ICSID Case No ARB/OS/24).

“On May 20, 1999, KaR-Tel and the Investment Committee executed Contract No. 0123-05-99 (“The Investment Contract”) pursuant to the aforementioned legislation”. supra note 69, para 101.

Ibid,3 [11].

Ibid, [206].

Ibid, [12].

Ibid, [213]. The Tribunal in an obiter dictum in para 215 states that “if the TSDIF was acting in this arbitration pursuant to public prerogatives , the closest analogy to its role would be that of a receiver. Bringing a claim in such a circumstance is perfectly legitimate in all developed municipal legal systems. To deny a receiver the right to bring such a claim would undermine any possibility of protecting the rights of the insolvent company’s creditors through an arbitration procedure”extending the ICSID jurisdiction to specific governmental functions.

“that the expropriation was not directly for the benefit of the State but for the benefit of Telecom Invest does not affect this conclusion, since, as the parties agree, expropriation can exist despite there being no obvious benefit to the State concerned” (supra note 190 [707]).

Tulip Real Estate and Development Netherlands BV v Republic of Turkey, ICSID Case No ARB/11/28, Award (10 March 2014) 289. More bluntly, the Noble Ventures v. Romania Award holds that legal entities separate from the State are not organs of the State, see Noble Ventures, Inc v Romania, ICSID Case No ARB/01/11, Award (12 October 2005) 69.

Electrabel SA v Republic of Hungary, ICSID Case No ARB/07/19, Decision on Jurisdiction, Applicable Law and Liability (30 November 2012) 7.95.

In substance, the Government of the Region of Kaliningrad claimed compensation for the expropriation of its assets further to the enforcement of a 2004 LCIA award which was rendered in favour of a Cyprus company against the Region of Kaliningrad (Russian Federation) for its failure to reimburse a loan. The 2004 LCIA award was enforced in Lithuania against two buildings that the Region of Kaliningrad owned there what triggered the Government of the Region of Kaliningrad claim before the ICC. See Government of the Region of Kaliningrad v the Republic of Lithuania (Paris Court of Appeal, Pôle 1, Chambre 1, 18 November 2010 no 09/19535).

See Kaliningrad Region v Lithuania, ICC (Final Award not public) (28 January 2009). For a report on this award, see ITA law available at http://www.italaw.com/cases/593. The Region applied to the Paris Appellate Court to set aside the ICC award on jurisdiction but the Court rejected the claim. Furthermore, the Court held that the Region as a “losing party” must pay EUR 150,000 to the Republic of Lithuania under article 700 of the French Civil procedure code. Article 700 of the French Civil procedure code establishes the general rules of distribution of court expenses between the parties. See generally Dmitry Davydenko, French Judgment Unenforceable Because of Lack of Legal Certainty, CIS Arbitration Forum, 30 March 2015 available at http://www.cisarbitration.com/2015/03/30/french-judgment-unenforceable-because-of-lack-of-legal-certainty.

In respect of natural persons, “investor” is normally defined to include both citizens/nationals and permanent residents of a Contracting Party in Lithuanian and Russian IIAs.

Telenor Mobile Communications AS v The Republic of Hungary, ICSID Case No ARB/04/15, 6 [17].

Ibid, [102].

See Convention on the Settlement of Investment Disputes between States and Nationals of Other States, 575 UNTS (1965) 159 (governing the ICSID). For more on the ICSID Convention, see generally Christoph H. Schreuer with Loretta Malintoppi, August Reinisch, Anthony Sinclair (2011), The ICSID Convention: A Commentary.

ICSID Convention, Preamble.

Emilio Agustín Maffezini v Kingdom of Spain, January 25, 2000, ICSID Case No ARB/97/7, Decision on Objections to Jurisdiction, para 74.

Ceskoslovenska Obchodní Banka, as v Slovak Republic, ICSID Case No ARB/97/4, Decision of the Tribunal on Objections to Jurisdiction (24 May 1999) [257]. NB: This is a difficult case since it has been categorized as an investment treaty dispute even though the Czech Republic–Slovak Republic BIT, not yet in force, was incorporated into the arbitration by virtue of a contract between the parties.

ICSID, Ceskoslovenska Obchodni Banka v. Slovak Republic, ICSID Case No ARB/97/4, 257.

ICSID, Ceskoslovenska Obchodni Banka v. Slovak Republic, ICSID Case No ARB/97/4, 259.

GEA Group Aktiengesellschaft v Ukraine, ICSID Case No. ARB/08/16, Award (31 March 2011) 262.

Prosper Weill, Dissenting Opinion [14].

100

Malaysian Historical Salvors, SDN, BHD v The Government of Malaysia, May 17, 2007, ICSID Case No. ARB/05/10, Award on Jurisdiction.

101

Global Trading Resource Corp and Globex International, Inc v Ukraine, ICSID Case No ARB/09/11, Award (1 December 2010) 46.

102

In the Report of the Executive Directors on the Convention, ICSID Convention, page 40, available at https://icsid.worldbank.org/ICSID/StaticFiles/basicdoc/CRR_English-final.pdf. The directors State that the “adherence to the Convention by a country would provide additional inducement and stimulate a larger flow of private international investment into its territories, which is the primary purpose of the Convention”.

103

Ian Bremmer. State Capitalism Comes of Age. Foreign Affairs (31 January 2016).

Titel: Investor-State Arbitration Distorted
verfasst von: Julien Chaisse
Dini Sejko
Verlag: Springer Singapore
Buch: Judging the State in International Trade and Investment Law
Print ISBN: 978-981-10-2358-3

Electronic ISBN: 978-981-10-2360-6

Copyright-Jahr: 2016
DOI: https://doi.org/10.1007/978-981-10-2360-6_5