International Investment Law and Arbitration Commentary, Awards and other Materials

CHAPTER OUTLINE

This chapter, which should be read in conjunction with Chapter 9, addresses the second of two principal criteria for a dispute to enter the scope of submission to investment treaty arbitration – the existence of a protected investor. Whether an investor qualifies for treaty protection depends on its nationality. Essentially, only investors who are nationals of the other or another Contracting State to an investment treaty are eligible to seek treaty protection from a Contracting State. Arbitral tribunals are thus tasked with verifying if an investor is in possession of the nationality that it claims to have. Section 1 outlines the centrality of a determination on an investor's nationality to its status as a protected investor, and the implications of the premium placed on nationality. Section 2 explores in greater detail the process of determining the nationality of individual investors, while Section 3 is devoted to the nationality of corporate investors. Section 4 touches on the emerging phenomenon of ‘divisible’ investors, whereby duplicate claims are launched against a host State by an investor through or in conjunction with close affiliates bearing different nationalities. The result is parallel or multiple proceedings.

INTRODUCTION

The vast majority of investment treaties empower foreign investors to bring claims against host States for breaches of the latter's’ treaty obligations. Direct access to international dispute resolution was not unknown before the advent of investment treaties, but it was limited to those foreign investors who could rely on an arbitration clause in a contract concluded with the host State. Other contractual claims had to be presented by the home State through diplomatic channels. Satisfaction was both uncertain and heavily dependent on the discretion of the investor's home State in extending diplomatic support. What contract-based arbitration envisaged on a case-by-case basis in the past, treaty-based arbitration allows on a much larger scale in the present. The standing offer made by host States in investment treaties to arbitrate qualifying disputes with an unidentified number of protected investors in the absence of an underlying contract opened a ‘new world of arbitration’. And the deciding factor in this new order on an investor's eligibility to claim treaty protection is the investor's nationality.

Investment treaties, both bilateral and multilateral, define protected investors as nationals of another or other Contracting State(s). The following provisions are illustrative.