Nationality Requirements in Investor-State Arbitration

in The Journal of World Investment & Trade
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Nationality Requirements in Investor-State Arbitration

in The Journal of World Investment & Trade

References

1 The State hosting foreign investment is generally regarded as the "host State", and the State of which the investor is a national is regarded as the "home State". 2 Champion Trading Company, Ameritrade International, Inc., James T. Wahba, Jolur B. Wahba and Timothy T. Wahba v. Arab Repnhlic of Egypt, ICSID Case No. ARB/02/9, Decision on Jurisdiction, 21 October 2003; available at: . 3 Hiissein Niiaman Soufraki v. The United Arab Emirates, ICSID Case No. ARB/02/7, Award, 7 July 2004. Tokios Tokeles v. Ukraine, ICSID Case No. AKti/02/18, Decision on Jurisdiction, 29 April 2004. Loewen Gronp, Inc. & Ray Loewen v. United States of America, ICSID Case No. ARll(AF)/

6 Bilateral invcstment treaties (BITS) also contain such limitations. Article 8(1) of the Ukraine-Lithuania Bi'r, for example, provides for invcstor-Statc arbitration for "[a]ny dispute between an investor of one Contracting Party and the other Contracting Party in connection with an investment on the territory of that other Contracting Party". I Siil)ra, footnote 2. 8 Treaty between the United States of America and the Arab Republic of Egypt Concerning the Reciprocal Encouragement and Protection of Investrnents of 29 September 1982. (Entry into force: 27 June 1992).

" That Article states: "recourse may be had to supplementary means of interpretation, including the preparatory work of the treaty and the circumstances of its conclusion, in order to confirm the meaning resulting from the application of article 31, or to determine the meaning when the interpretation according to article 31: (b) leads to a result which is manifestly absurd or unreasonable." 111 Champion Trading n. Egypt, supra, footnote 2, at page 17. " Supra, footnote 3.

12 Ibid., at para. 83. 13 The Nottebohm case (Liechtenstein v. Gurrtemala), 4 Icj Rep. [1955].

t^ Iran and United States, Case No. A/18, Decision No. DEC 32-A18-FT, 6 April 1984, reprinted at 5 Iran- U.S.C.T.R. 251, at 263. t5 Ibid., at 265. Supra, footnote 2. 17 Ibid., at p. 16. 18 Eudoro Armando Olguin v. Republic 4 Paraguay, ICSID Case No. ARB/98/5, Award, 26 July 2001.

1" Ibid., at para. 60. 211 Ibid., at para. 61. 21 Id. 22 Marvin Feldman v. Mexico, Ieau� Case No. ARiz(AF)/99/1, Interim Decision on Preliminary Jurisdictional Issues, 6 December 2000, reprinted at 40 I.L.M. 615, 2001. =3 Ibid., at para. 30.

=a Ibid., at para. 32. 2i "Treaty Between the Government of the United States of America and the Government of [Country] Concerning the Encouragement and Reciprocal Protection of Investment, 2004 Model BIT (Draft)"; available at: . 26 NAFTA, Article 1113(2).

27 NAFTA, Article 1113(1) states: "A Party may deny the benefits of this Chapter to an investor of another Party that is an enterprise of such Party and to investments of such investor if investors of a non-Party own or control the enterprise and the denying Party: (a) does not maintain diplomatic relations with the non-Party; or (b) adopts or maintains measures with respect to the non-Party that prohibit transactions with the enterprise or that would be violated or circumvented if the benefits of this Chapter were accorded to the enterprise or to its investments." " zs See Article 1 (1)(b) of the Agreement between the Government of Australia and the Government of the Republic of Indonesia concerning the Promotion and Protection of Investments, 17 November 1992. 2') Waste Management, ¡ilL v. United Mexican States, IcsiD Case No. AIUJ(AF)/00/3, Final Award, 30 April 2004. 111 Ibid., at para. 80. See also Frallz Sedelrnnyer v. The Russian Federatioll, Award, 7 July 1998 (Stockholm, Sweden), unpublished, at page 59. However, note the Dissenting Opinion in that case on this point. 11 Societe Ouest Africaine des Betons Lrdustriels v. Senegal, 1<:5]1) Case No. ARU/82/1, Award, 25 February 1988, reprinted at 2 IcsiD Rep. [ 1994], p. 190.

32 Ibid., at para. 37. 11 Amco Asia Corporation aid Others v. Republic of Indonesia, ICSID Case No. ARlJ/H 1/1, First Award, 20 November 1984, reprinted at 1 1 Reports 413. 34 Ibid., at para. 14. 35 ld.

11 Delaume states that the Soahi Decision " is consistent with the manner in which many investments are made and especially those involving transnational companies or groups of companies, which, for various reasons, may elect to channel their investments through affiliated companies under their control"; Georges R. Delaume, How to Draft an Icsln Arbitration Clause, 7 ICSID Rev. — F.I.L.J. 168, 1992, at 178. Hirsch states: "We are of the opinion that the approach by the tribunal in the case of SOABI Sellega[ is preferable, since it is in keeping with the aim underlying the special arrangement set out in Article 25(2)(b) [of the 1(:sii) Convention]"; Moshe Hirsch, Ilie Arbitration MechQ/'¡sl11 of the Icsrn, M. Nijhoff, The Hague, 1993, at 104. Amerasinghe also agrees with this view; see C.F. Amerasinghe, Interpretation of Article 25(2)(b) of the ICSID Convention, in R.B. Lillich and C.N. Brower (cds.), Intemntional Arbitration in the 2lst Century: Towards Judicialization and Uniformity? Transnational Publishers, New York, 1994, pp. 223 et sog., at p. 236. ;� K. Nathan, Tlte IcsiD Convention: The Law of the International Centre for Settlement of Investment Displltes,Juris Publishing, Huntington, New York, 2000, at 97. Nathan argues that the Decisions stand for the proposition that "where the company is incorporated in a contracting state, an ICSID tribunal will not probe behind the veil of incorporation to see if the ultimate control of the company is in the hands of nationals of a contracting state." Nathan appears to be referring to the company immediately controlling the company suffering damage. 18 Christoph Schrcucr, The [(:sit) Convention: A COl1lmelltary, Cambridge University Press, Cambridge, U.K., 2001, at 318. 31 See Champion Trading, supra, footnote 2. 411 Banro American Resources, Inc. & Snriete Aiiqfere du Kivu et du Malliema SARL v. Democratic Republic of Congo, ICSID Case No. ARB/98/7. Award, 1 September 2000.

41 Ibid., at para. 11. 42 Autopista Concesionada de Venezuela, CA v. Bolivarian Republic of Venezuela, ICSID Case No. AxH/00/5, Award on Jurisdiction, 27 September 2001. 1. 43 Ibid., at para. 143.

"HofidayInnsS.A.andothersv.Morocco, ICSID Case No. ARE/72/1. 45 Pierre Lalive, The First "would Bank" Arbitration (Holiday Inns v. Moro((o�Some Legal Problems, 1 Icsil) Rep. [1993], p. 645, at p. 668, cited in Atitopista, supra, footnote 42, at para. 90. 46 Autopista, ibid., at para. 138. Ibid., at para. 140. 4H Supra, footnote 5. Supra, footnote 4.

50 In addition, the Tribunal also found that The Loewen Group had not exhausted all appeals when it settled the case without pursuing leave to appeal to the U.S. Supreme Court. 51 Loewetl, supra, footnote 4, at para. 228. It is important to note that, because Canada is not a signatory to the ICSID Convention, this case was decided under the Iesm Additional Facility Rules and not the Convention. The Decision would likely be different if the case were decided under the Convention. Article 25(2)(a) of the Convention states that a corporation need only have the appropriate nationality "on the date on which the parties consented to submit such dispute to conciliation or arbitration". On the other hand, see Schreuer, supra, footnote 38, at 322, for the view that a tribunal may require some form of continuous nationality even when deciding under the Convention.

■"-Loeiren, ibid., at para. 229. The Tribunal stated that "[t]here is only limited dispute as to the history of thc requirement of continuous nationality to the end of any international proceeding." See Jan Paulsson, Continuous Nationality in Loewen, Arbitration International, Vol. 20, No. 2, 2004, p. 213, for a criticism of this aspect of the Tribunal's Decision. At ibid., para. 236, the Tribunal notes that the claimants cited the Icsid Convention, which appears not to require such continuous nationality, and a recent International Law Commission Report, which proposed eliminating the rule. 54 The wording of the Decision indicated that it only applied to The Loewen Group's claim, and Ray Loewen subsequently sought clarification that the Decision also applied to his personal claim. In the Tribunal's Decision on Respondent's Request for a Supplementary Decision, 6 September 2004, it clarified that Loewen's individual claim was also rejected. The Tribunal reaffirmed comments in the earlier Award, in which it stated that a judicial system cannot commit a denial of justice until the claimant has exhausted all avenues of appeal. The Tribunal held that by failing to appeal the Mississippi Decision to the U.S. Supreme Court, Loewen had not exhausted all avenues (at para. 22). ss See supra, footnote 27. so NAFTA Article 1113(2) states: "Subject to prior notification and consultation in accordance with Articles 1803 and 2006, a Party may deny the benefits of this Chapter to an investor of another Party that is an enterprise of such Party and to investments of such investors if investors of a non-Party own or control the enterprise and the enterprise has no substantial business activities in the territory of the Party under whose law it is constituted or organized." 57 Waste Maiiagemerit, supra, footnote 29, at paras. 80—81. 1. 5H Ibid., at para. 85. On this point, see also Amerasinghe, supra, footnote 36, at pp. 259 and 262; and Nathan, supra, footnote 37, at 92 and 95, who argue against implying additional requirements into investment treaties. However, see Schreuer, supra, footnote 37, at 278-279 and 332; and Aron Broches, Denying Icsm'sjurisdictÙm: The ICSID Award in vacuum Salt Products Limited, 13 J. Int'l Arb. 21, 1996, at 27 and 29, for the opposite view. See Paulsson, supra, footnote 52, at footnote 5, for further criticism of this aspect of the Tribunal's Decision.

mTokiosTokelesv.Ukraine,supra, footnote 4. 61 Ibid., at para. 19. 62 Ibid., at para. 40.

1,3 Article 31(1) of the Vienna Convention on the Law of Treaties reads: "A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose." 11 See Tokios v. Ukraine, supra, footnote 4, Dissenting Opinion of Prosper Weil, 29 April 2004, at para. 23. Ibid., at para. 8. 66 Ibid., at para. 25. Ibid., at para. 1. 6K Ibid., at para. 30. (0" (d.

�" See also J. Lew, Icsid Arbitration: Special Features and Recenl Developments, in Norbert Horn (ed.), Arbitrating Foreign Investment Disputes, Kluwer Law International, The Hague, 2004, at 281: "In particular, the question of control of a foreign investor company by its parent or a subsidiary company along the chain of control remains to be fully clarified. This will be especially important to international firms who are beginning to structure their foreign investments to ensure they fall within the terms of at least one Bm."

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