Definition of "Investment" under ICSID Convention: Did We Go beyond Salini? - Chapter 6 - Investment Treaty Arbitration and International Law - Volume 5
PDF from "Investment Treaty Arbitration and International Law - Volume 5"
Sungjin Kang, Counsel, LG Display Co. Ltd.
Originally from Investment Treaty Arbitration and International Law - Volume 5
The discussion on the definition of "investment" has a long history starting from the beginning of the emergence of international investment law. Historically, Friendship, Commerce and Navigation treaties governed every form of economic activity and made no distinction between "investors" and traders. In this context, the Havana Charter originally aimed to govern both trade and investment. However, it ended up merely providing guidelines on foreign direct investment.1 It left the obligation related to treatment of foreign investment to subsequent negotiations.2 Since the inception of the GATT 1947, the two areas of investment and trade have been separated. The impetus to separate has probably been motivated by both capital-exporting and capital-importing countries because they considered foreign investment as "a catalyst for development and prosperity."3
When the Convention on the Settlement of Investment Disputes between States and Nationals of Other States ("ICSID Convention") was negotiated, the negotiating Parties had a long discussion about whether to provide a definition of "investment" under Article 25 of the ICSID Convention. Since they decided not to provide a definition of "investment," this ‘agreement to disagree’ has led to a number of doctrinal controversies and divergent jurisprudential outcomes. In particular, the Salini v. Morocco4 case put the issue of the definition of "investment" in the spotlight again. This case is important as it provides a test which can be used by subsequent ICSID Tribunals to determine what constitutes "investment" in the context of ICSID arbitration.
In this paper, I will examine the definition of "investment" starting from the drafting history of Article 25 of the ICSID Convention in Part II. Part III will briefly discuss two approaches to address the lack of definition of investment under ICSID Convention. In Part IV, the author will briefly review the pre-Salini treaty practices and ICSID jurisprudence. Then the author will discuss the famous "Salini test" and its implication in Part V. After discussion on the Salini test, the author will review the subsequent ICSID cases in Part VI. Part VII will briefly review how treaty practice and national legislation has developed after the Salini case. The author is of the view that the Salini test still provides a well-accepted legal standard of the definition of "investment" under the ICSID Convention, and it also influenced other regimes to a certain extent, as a reflection of ICSID jurisprudence.