The "Baby Boom" of Treaty-Based Arbitrations and the Jurisdiction of ICSID Tribunals

Shareholders as "Investors" under Investment Treaties

in The Journal of World Investment & Trade
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The "Baby Boom" of Treaty-Based Arbitrations and the Jurisdiction of ICSID Tribunals

Shareholders as "Investors" under Investment Treaties

in The Journal of World Investment & Trade

References

1 See UNCTAIJ, Occasional Note: International Investment Disputes on tlre Rise, UN('TAH/WEB/[TE/IlT/2()()4/2, 29 November 2004, at 1. For recent statistics, see also Luke Eric Peterson, Recearrlr Note: Emerging Bilateral Investment Treaty Arbitration and Sustainable Development, August 2003; available at: 1m Jurisprudence du Ctttot, Editions A. Pedone, Paris, 2004, pp. 2-3. 4 Ibid., at p. 4.

5 ICSID, Pending Cases; available at: �www.worldbank.org/icsid/cases/pending.han> (last visited 6 January 2005). 6 See UNCTAD, supra, footnote 1, at 1 and Figure 3. Foreign direct investment stood at US$ 612 billion in 2004, according to UNCTAD estimates; see UNCTAD, Press Release, World FDt Flows Grew an Estimated 6% in 2004, Enduing Downturn, 11 January 2005, UNCTAD/PKESS/PR/2005/002. While global flows of foreign direct investment did experience declines in 2001-2003 from the high of US$ 1,388 billion in 2000, they increased in 2004, and UNCTAD predicts continued growth; see UNCTAD, World Investment Report 2004, United Nations, New York and Geneva, 2004, UNCTAD/W�R/2004, at pp. 1-15. 8 See UNCTAD, World Investment Report 2004, ibid., at pp. xvii and 6, and Figure 1.3. 9 Elo'ise Obadia, ICSID, Investment Treaties and Arbitration: Current and Emerging Issues, in G. Kaufmann- Koehler and B. Stucki (eds.), Investment Treaties and Arbitration, Swiss Arbitration Association, Zurich, Special Series No. 19, 2002, p. 67, at pp. 67-68.

10 As noted by Delaume in 1983, the resolution of new, complex, or novel issues has "significance for the 'interpretation' and 'application' of the Convention"; Georges R. Delaume, 1CS1D Arbitration and the Courts, 77 Am. J. Int'l L. 784, 1983, at 795. Report of the Executive Directors on the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, 18 March 1965, para. 23. 12 Christoph H. Schreuer, The ICSID Convention: A Commentary, Cambridge University Press, Cambridge, U.K., 2001, p. 191, Article 25, para. 241. See Georges R. Delaume, ICSID Arbitration: Practical Considerations, 1 J. Int'l Arb. 101, 1984, at 104-105. 14 Id.

e See Schreuer, supra, footnote 12, pp. 194-198, Article 25, paras. 249-256. rb Report of the Executive Directors, supra, footnote 11, para. 24. r� See id.; Aron Broches, The Convention on the Settlement of Investment Disputes Between States and Nationals of Other States of 1965, Explanatory Notes and Suwey of Its Application, 18 Y.B. Comm. Arb. 627, 1993, at 643. r" Antonio R. Parra, Provisions on the Settlement of Investment Disputes in Modem Investment Laws, Bilateral Investment Treaties and Multilateral Instruments on Investment, 12 Icsm Rev.— F.I. LJ. 287, 1997, at 313; see also Aron Broches, The Convention on the Settlement of Investment Disputes Between States and Nationals of Other States, 136 Recueil des Cours 331, 1972-n, at 349. 19 Schreuer, supra, footnote 12, p. 192, Article 25, para. 245; see also Antonio R. Parra, IcsiD and New Trends in Intemational Dispute Settlement, News from IcsiD, Vol. 10, No.l, Winter 1993, at 7 and 8. 20 See, for example, Bernardo M. Cremades and David J.A. Cairns, The Brave New World of Global Arbitration, 3 J.W.I. 2, April 2002, p. 173, at p. 184: "A State entering into a bilateral or multilateral investment treaty makes an open offer to investors of another State. The investor's acceptance of that offer ... does not arise until the investor commences arbitration." The investor can also accept the offer separately, for example by a simple letter. Zr See Genevieve Burdeau, Nouvelles perspectives pour 1'arbitrate dans les contentieux economiques interessant les Etats, 1 Revue de 1'Arbitrage 3, 1995, at 14. zz Parra, supra, footnote 18, at 323. z3 See generally Jan Paulsson, Arbitration without Privity, 10 ICSID Rev.-F.I.LJ. 232, 1995.

24LancoInternational,Inc.v.ArgentineRepublic(Lanco), ICSID Case No. Amj/97/6, Decision on Jurisdiction, 8 December 1998, 40 I.L.M. 457, 2001, at 471, 543. 25 See American Manu(acturing & Trading, Inc. v. Republic of Zaire (AM7), ICSID Case No. ARB/93/1, Award, 21 February 1997, 36 LL.M. 1534, 1997, at 1545, para. 5.23. 26 Antoine Goetz et consorts v. Republique du Burundi (Goetz), IcsiD Case No. ARB/95/3, Award Embodying the Parties' Settlement Agreement, 10 February 1999, 15 ICSID Rev.-F.LL.]. 457, 2000, at 493-494, para. 81: "The consent of the Republic of Burundi stems from its ratification of the agreement [on the protection of investments]; the consent of claimants stems from the filing of the request for arbitration." (unofficial translation). 27 See Asian Agricultural Products Ltd. v. Republic of Sri Lanka (A1PL), ICSID Case No. ARB/87/3, Award, 27 June 1990, 30 I.L.M. 580 (1991). 28 Ibid., at 581, para. 2; see also at 586-587, paras. 18-19. zy Report of the Executive Directors, supra, footnote 11, para. 25.

30 Broches, supra, footnote 18, at 361. 31 Christoph H. Schreuer, Travelling the BIT Route--Of Waiting Periods, Umbrella Clauses and Forks in the Road, 5 ].W.I.T. 2, April 2004, p. 231, at p. 231. 1.

3z See Barcelona Traction, Light and Power Co., Ltd. (Belgium v. Spain) (Barcelona Traction), I.CJ. Reports, 5 February 1970, 3, at 46-48. 33 Azurix Corp. v. Argentine Republic (Azurix), ICSID Case No. Ax.B/01/12, Decision on Jurisdiction, 8 December 2003, 43 I.L.M. 262, 2004, at 276, para. 72. 3^ Siemens A.G. v. Argentine Republic (Siemens), ICSID Case No. Atte/02/8, Decision on Jurisdiction, 3 August 2004, para. 140; available at: Elettronica Sicula S.p.A. (U.S. v. Italy), LC.]. Reports, 20 July 1989, 15, at 23 and 48-82; compare the Dissenting Opinion ofj. Oda, at 83.

'6 See ICSID, Documents Concerning the Origin and the Formulation of the Convention, Vol. 2, ICSID, Washington, D.C., 1968, p. 661. '� See Rudolf Dolzer and Margrete Stevens, Bilateral Investment Treaties, I3rill, Leiden, 1995, pp. 26 and 28. 31 Indeed, the first investment treaty case heard by an Icsm tribunal—/L�L, supra, footnote 27-recognized this principle. In that case, Claimant Asian Agricultural Products Ltd. (AAPL), a Hong Kong corporation, brought a treaty claim for destruction of a shrimp-producing centre that was owned by AAPL's Sri Lankan subsidiary, Serendib; op cit., at 581. The Tribunal awarded damages to AAPL based on its ownership interest in Serendib. Other tribunals have found jurisdiction in similar circumstances: see generally An.rr, supra, footnote 25; Goetz, supra, footnote 26; Lanco, supra, footnote 24; Alex Cenin, Eastern Credit L,imited, Inc. and A.S. Baltoil v. The Republic of Estonia (Genin), Icsm Case No. Atta/99/2, Award, 25 June 2001, 17 ICSID Rev.-F.I.LJ 395 (2002); Compania de Agues del Aconquija S.A. and Vivendi Universal v. Argentine Republic (Vivendi), Award, 21 November 2000, ICSID Case No. ARB/97/3, 40 I.L.M 426 (2001); Cnts Czech Republic B.V. v. Czech Republic (CAff;), UNCITPAL Arbitration, Partial Award, 13 September 2001, available at: (last visited 31 January 2005); Acip S.p.A. v. People's Republic of Congo (Acip), IcsiD Case No. AR»/77/1, Award, 30 November 1979, 1 ICSID Reports 306 (1993). 3y Cms Gas Transmission Co. v. Argentina Republic (Cnts Gas), ICSID Case No. AKU/O1/8, Decision on Jurisdiction, 17 July 2003, 42 I.L.M. 788, 2003, at 795, para. 49. 40 Ibid., at 796, para. 55. 41 Enron Corporation and Ponderosa Assets, L.P. v. The Aryentine Republic (Enron), ICSID Case No. APB/01/3, Decision on Jurisdiction, 14 January 2004, paras. 39-40; available at: 3z Goetz, supra, footnote 26, at 496-497, para. 89: "[T]he Tribunal observes that prior 1(:SID case-law does not restrict the capacity to act to only those legal persons that are directly affected by the alleged breaching measures; it extends that capacity to cover the shareholders in such legal persons, who are the actual investors." (unofficial translation).

^3Siemens,supra, footnote 34, para. 142. 44 See Mr. Franz Sedelrnayer v. The Russian Federation, Arbitration Award of 7 July 1998, Stockholm, Sweden, at 56-59; available at: Nycomb Synergetics Technoloqy Holing AB v Republic of Latvia, Award of 16 December 2003, Stockholm, Sweden, at 9; available at: (last visited 22 April 2005). tc Compania de A,quas del Aconquija S.A. and Vivendi Universal v. Argentine Republic (Vivendi Annulment), ICSID Case No. Aan/97/3, Decision on Annulment, 3 July 2002, 41 I.L.M. 1135, 2002, at 1146, para. 50. � See generally Lanco, supra, footnote 24.

48 See ibid., at 461,§10. a9 Id. 50 See Cms Gas, supra, footnote 39, at 791, para. 19. 51 See ibid., at 789, para. 1. 52 Ibid., at 793, paras. 36-37. s' Ibid., at 796, paras. 52-53. Specifically, the Tribunal examined AnPL, supra, footnote 27; AMT, supra, footnote 25; Goetz, supra, footnote 26; Ma�(jezini v. Spain, IcsiD Case No. ARB/97/7, Decision on Objections to Jurisdiction of 25 January 2000, 16 ICSID Rev.-F.LL.J. 212 (2001); Lanco, supra, footnote 24; Genin, supra, footnote 38; Vivendi, supra, footnote 38; Vivendi Annulment, supra, footnote 46; and Cmtt, supra, footnote 38. Sa CMS Gas, ibid., at 796, para. 55. Ss Ibid., at 796, para. 56.

s� See Enron, supra, footnote 41, paras. 39-40. 57 see ibid., para. 21. 58 See ibid., para. 34. 59 Ibid., para. 35. 11 Ibid., para. 39. Ibid., para. 49. 62 See Champion Trading Company and Ameritrade International, Inc. v. Arab Republic of Egypt (Champion Trading), ICSID Case No. ARB/02/9, Decision on Jurisdiction, 21 October 2003, at 3 and 18; available at: GAnai Investments, Inc. v. United Mexican States (GAMI Investments), Final Award, 15 November 2004; available at: ageslimportal sol_control cOllSultorial casos - Mexicol Gamil escritos/GAMI english.pd6 (last visited 31 January 2005).

66 See ibid., at 12, paras. 26-28. 67 Ibid., at 12, para. 28. 68 Ibid., at 14, para. 33. 6' Ibid., at 15, para. 37. 70 See ibid., at 15-18, paras. 36-43. " See Broches, supra, footnote 18, at 361, explaining that "the parties should be given the widest possible latitude to agree on the meaning of 'nationality' and any stipulation of nationality made in connection with a conciliation or arbitration clause which is based on a reasonable criterion". However, the parties' consent must still fall within the outer limits of Article 25. See Schreuer, supra, footnote 12, p. 91, Article 25, para. 7.

7' See Schreuer, ibid., pp. 278-279, Article 25, paras. 462-464; see also Delaume, supra, footnote 10, at 793-794; Moshe Hirsch, Tlie Arbitration Merharrism of the Interrrational Centre for the Settlement of Investment Disputes, Martinus Nijhoff, Dordrecht and Boston, 1993, p. 85. 73 Schreuer, ibid, p. 281, Article 25, para. 468. Ibid., pp. 279-280, Article 25, para. 465, citing, for example. Kaiser Bauxite Company v. Janraica, ICSID Case No. Ami/74/3, Decision on Jurisdiction, 6 July 1975, 1 ICSID Reports 296, 1993, at 303. 'e Societe Ouest A/ricaine des Betons Indnstriels [SOAW] v. Senegal, Iesm Case No. Auts/82/1, Decision on Jurisdiction, 1 August 1984, 2 IcsiD Reports 175, at 180-181, para. 29. 7" Amco Asia Corp. alld others i). Republic t)/ /nf ICSID Case No. AKR/81/t, Decision on Jurisdiction, 25 September 1983, 1 IcsiD Reports 393, at 396, para. 14. " Autopista Corrcesionada de Venezuela, C.A. v. Bolivarian Republic of Venezuela (Ankopista), ICSID Case No. AM.B/00/5, Decision on Jurisdiction, 27 September 2001, 16 Icsm Rev.-F.1.L.]. 469, 2001, at 505, para. 107. This conclusion was also reached by the Tribunal in Tokios Tokeles v. Ukraine (Tokios '1'okeles), IcsiD Case No. ARJV02/18, Decision on Jurisdiction, 29 April 2004, at 17, para. 42; available at: www.worldbank.org/ icsid/cases/tokios-decision.pdf> (last visited 5 January 2005). 7" Schreuer, supra, footnote 12, p. 278, Article 25, para. 463.

�9 See Dolzer and Stevens, supra, footnote 37, at pp. 35 and 37-38. 80 See, for example, The Energy Charter Treaty, Annex 1 to the Final Act of the European Energy Charter Conference, Article 17(1), 17 December 1994; available at: www.encharter.org/upload/l/Treat7yBook-en.pdf, (reserving the right of each Party to deny the benefits of the Treaty to any company of the other Party that is controlled by nationals of any third country and that has no substantial business activity in the territory of the other Party); the Treaty between the United States of America and the Argentine Republic Concerning the Reciprocal Encouragement and Protection of Investment, 14 November 1991, Article 1(2) (reserving the right of a Party to deny the benefits of the Treaty to any company of the other Party that is controlled by nationals of any third country, or by nationals o� the denying Party, and that has no substantial business activity in the territory of the other Party); the Treaty between the United States of America and Ukraine Concerning the Encouragement and Reciprocal Protection of Investment, 4 March 1994, Article 1 (2) (reserving the right of each Party to deny the benefits of the Treaty to any company of the other Party that is controlled by nationals of any third country and that has no substantial business activity in the territory of the other Party). 81 See Dolzer and Stevens, supra, footnote 37, at pp. 35 and 38-41, citing to the 1992 Swiss BITS with Albania, Latvia, Lithuania, and Viet Nam and the 1991 Swiss BIT with Argentina. H2 See Article 1(2) of the Agreement among the Governments of Brunei Darussalam, the Republic of Indonesia, Malaysia, the Republic of the Philippines, the Republic of Singapore, and the Kingdom of Thailand for the Promotion and Protection of Investments, 15 December 1987, 27 I.L.M. 612 (1988). The title was amended to ASEAN Agreement for the Promotion and Protection of Investments by the Jakarta Protocol of 12 December 1996. For a discussion and analysis of that provision, see Ynung Chi Oo Trading I'te Ltd. v. Governmenr of the Union of Myanmar, ASEAN LD. Case No. ARB/01/1, 42 LL.M. 540, 2003, at 549-550, paras. 46-52. 83 See Autopista, supra, footnote 77, at 505, para. 107.

84 See lbkios Tokeles, supra, footnote 77, at 10-22, paras. 25-52. The Tokios Tokelés Decision was adopted by a majority of the Tribunal with the President of the Tribunal dissenting. 11 See Champion Trading, supra, footnote 62, at 3 and 18. 86 See Tokios Tokeles, supra, footnote 77, at 1-2, para. 3. See ibid., at 1, paras. 1-2. H8 Ibid., at 8, para. 21.

"'' Ibid., at 8-9, paras. 21-22 (internal citations omitted). 911 See ibid., at 11-13, paras. 27-30. 91 See ibid., at 14-15 and 17-19, paras. 33-36 and 42-44. ''z See ibid., at 14-15, paras. 33-36. 9� See ibid., at 19-22, paras. 44-52. 9'� Ibid., at 24, para. 56. 95 See ibid., at 22-24, paras. 53-56, quoting Barcelona Traction, supra, footnote 32, at 39, para. 56.

96 See ibid., at 23, para. 55. 97 See ibid., at 24, para. 56. 9R See CMS Gas, supra, footnote 39, at 798, para. 66. 99 Ibid., at 798, para. 68. 100 See Etiroti, supra, footnote 41, para. 34.

101 See ibid., para. 35. 102 See ibid., para. 36. '03 Ibid., para. 37. 104 See ibid., para. 39. 105 See Lanco, supra, footnote 24, at 461, ,§10. 10(, See Vivendi Annulment, supra, footnote 46, at 1145, para. 46. 107 Enron, suyra, footnote 41, para. 44. 108 See ibid., paras. 45-49.

See ibid., para. 58. nn Ibid., para. 60. "' See id. �12 See Siemens, supra, footnote 34, para. 23. "3 See ibid., paras. 145-146. 114 Ibid., para. 150. 115 Id. 116 See Azurix, supra, footnote 33, at 270, paras. 42-43. 117 See ibid., at 275, paras. 65-66.

��R See ibid., at 275, para. 63. ��9 See ibid., at 277, para. 73. 120 See ibid., at 277, para. 74. lzt Generation Ukraine Inc. v. Ukraine (Generation Ukraine), ICSID Case No. AKts/00/9, Award, 16 September 2003; available at:

127FedaxN.V.v.RepublicofVenezuela(Fedax), ICSID Case No. AM/96/3, Decision on Jurisdiction, 11 July 1997, 37 I.L.M. 1378, 1998, at 1379 and 1381, paras. 1 and 18. See ibid., at 1381, para. 18. tz9 Ibid., at 1381, para. 19. 130 Ibid., at 1384, para. 29 (internal citations omitted). t3� Ibid., at 1386, para. 40.

t'z Id. i33 See Tukios Tokeles, supra, footnote 77, at 31, para. 72. 134 See ibid., at 32-33, paras. 75-76. 135 See ibid., at 33-34, para. 77. 131 See SGs Societe Generale de Surveillance S.A. v. Islamic Republic of Pakistan (Scs v. Pakistan), ICSID Case No. Aim/01/13, Decision on Objections to Jurisdiction, 6 August 2003, 18 ICSID Rev.-F.LL.J. 307, 2003, at 310, para. 11. �3� Ibid., at 330, para. 76.

13H Ibid., at 348, para. 135. ��9 Ibid., at 348, para. 136. ��° See SGS Societe G�n6rale de Surveillance S.A. v. Republic of the Philippines (Scs v. Philippines), ICSID Case No. Aau/02/6, Decision on Objections to Jurisdiction of 29 January 2004, at paras. 12-18; available at: (last visited 16 February 2005). Ibid., para. 100. See ibid., paras. 104-107. t Ibid., para. 101. Ibid., para. 112.

145 Francisco Orrego Vicuna, Carlos Calvo, Honorary N,SFTA Citizen, 11 N.Y.U. Envtl. L.J. 19, 2002, at 30. 146 Broches, supra, footnote 18, at 348.

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