Originally from Investor-State Arbitration--Lessons for Asia

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I will talk to you about what I have called two hot topics. Now because this seminar deals with issues that arise in practice, there will inevitably be overlap with points that have been touched upon in previous presentations.

Therefore, the two hot topics that I want to talk to you about are ones that we have touched upon a little today already but I hope I can bring some new perspective to them. The first is the question of what is an investment. The second is the thorny question, in the context of Asian arbitration, of the use of the most-favoured-nation clause to extend the ability of an investor to start claims directly against states where the treaty does not necessarily seem on its face to allow that.

So, I will start with, “When is an investment not an investment?” and there are two issues that I want to cover in dealing with this topic. The first is the question of the legality of an investment and then the second is the definition of an investment itself. This is of interest in the context of BIT arbitration in Asia because there have been two decisions involving Asian states this year that have dealt with this question of, “What is an investment?”

I should make it clear that there is a dichotomy, at least a slight dichotomy, between the definition of an investment in the instrument under which the claim is brought, the treaty itself, which will typically have a very wide, usually non-exhaustive, list of matters that can count as an investment and the ICSID convention. Now, you have heard in the previous set of presentations this morning that there is usually, in most investment treaties, a choice given to investors whether they wish to bring their claims under the ICSID convention or some other set of rules, usually although not exclusively an ad hoc arbitration under the UNCITRAL rules. It is important to bear in mind when considering this question of, “What is an investment?" that the ICSID convention, while it does not itself define what an investment is, has given rise to a considerable volume of jurisprudence as to what an ICSID investment is, which may not be the same thing, so tribunals have held, as the definition in the investment treaty itself. In other words, if you are bringing a claim under the ICSID convention as an investor, your investment needs to qualify twice, once as an investment under the investment treaty. So, bear that in mind and we will come circling back to that very shortly.