• The nationality of investors serves 2 purposes:
• Substantive standards in the treaty will only apply to respective nationals; and
• Jurisdiction of an international tribunal is determined, among others, by claimant’s nationality.
Article 4 ASEAN Comprehensive Investment Agreement
(d) “investor” means a natural person of a Member State or a juridical person of a Member State that is making, or has made an investment in the territory of any other Member State;
(e) “juridical person” means any legal entity duly constituted or otherwise organised under the applicable law of a Member State, whether for profit or otherwise, and whether privately- owned or governmentally-owned, including any enterprise, corporation, trust, partnership, joint venture, sole proprietorship, association, or organisation;
(g) “natural person” means any natural person possessing the nationality or citizenship of, or right of permanent residence in the Member State in accordance with its laws, regulations and
4. Scope of Investor (The “Rule of Origin”)
• (1) Individual investors (Natural persons)
• Eligible natural persons to be considered as an investor must have a link with IIA state party: nationality/citizenship or permanent resident.
• Most IIAs refer to nationality/citizenship
• Some IIAs refer to either nationality/citizenship or permanent resident (e.g.
Morocco – Nigeria BIT 2016, ACIA 2009, Singapore – EFTA FTA 2002) Permanent residents of home State, regardless of their nationality, qualify as investors
• Some IIAs refer to different links for different IIA state parties (e.g. Japan – Israel BIT 2017)
• Some IIAs does not even mention nationality but provides directly that investors mean “Germans within the meaning of the Basic Law for the Federal Republic of Germany” (e.g. China – Germany BIT 2003)
• ICSID Convention Art 25 does not set “permanent resident” as a valid link between
4. Scope of Investor (The “Rule of Origin”)
• (1) Individual investors (Natural persons)
• Single nationality: Nationality of investors is determined primarily by the law of the country whose nationality is at issue (domestic law)
• Nationals of the home State notwithstanding their place of residence, i.e. even if they reside outside the home State, shall be covered.
• E.g.: Mauritius-Singapore BIT (2000): The term “investor” means … a natural person having the nationality of a Contracting Party in accordance with its applicable law.
• Evidence by a valid passport or other standard citizenship certification, but not necessarily conclusive (Soufraki v. UAE, paras 47-84: Where … the jurisdiction of an international tribunal turns on an issue of nationality, the international tribunal is empowered, indeed bound, to decide that issue)
• Feldman v. Mexico: Under general international law, citizenship rather than residence or any other geographic affiliation is the main connecting factor between a state and an individual
4. Scope of Investor (The “Rule of Origin”)
• (1) Individual investors (Natural persons)
• Dual/multiple nationalities:
• Olguin v. Paraguay (investor had dual nationalities of Peru and the USA, dispute under Peru – Paraguay BIT): Peruvian nationality is enough
• Test of dominant and effective nationality: US Model BIT 2012, CETA 2016
• Investor shall be deemed to be exclusively a national of the State of his dominant and effective nationality
• Allows for consideration of a dual national’s individual circumstances to decide with which State the person has the closest connection
• Exclusion of dual nationals from treaty coverage
• Japan – Israel BIT 2017: Investor of a contracting party means a national of one state and who is not also a national of the other state Dual nationals are not covered by the BIT
• ICSID Convention Article 25.2: Nationals of the host state is excluded from protection (this ineligibility is absolute and cannot be cured even if the state party to dispute
4. Scope of Investor (The “Rule of Origin”)
• (2) Corporate investors (Juridical persons)
• Corporate nationality is more complex than individual nationality
• A variety of criteria to determine whether a juridical person is an investor of a contracting party
• Country of incorporation (legal establishment) vulnerable to ‘treaty shopping’ practice (Tokios Tokeles v. Ukraine, Saluka v. Czech Republic: Tribunals refused to pierce the corporate veil to identify the true nationality of investors)
• A company duly constituted or organized under the laws of the home country, without further requirements or qualifications, qualifies as an investor
• E.g. Art 1 Greece-Cuba BIT 1997 defines as investors: “with regard to either Contracting Party, legal persons constituted in accordance with the laws of that Contracting Parties
• The place of incorporation, without further qualifications, is an objective criterion easy to verify. There is normally no doubt concerning the country under whose law a company has been constituted or organized
• Place of constitution/organization/incorporation is a permanent attribute of an entity
4. Scope of Investor (The “Rule of Origin”)
• (2) Corporate investors (Juridical persons)
• A variety of criteria to determine whether a juridical person is an investor of a contracting party
• Country of seat (effective management):
• E.g. Art 1.2 China – Germany BIT 2003: Investor, in respect of Germany, means “any juridical person as well as any commercial or other company or association with or without legal personality having its seat in the territory of the Federal Republic of Germany, irrespective of whether or not its activities are directed at profit”
• E.g. Art 1.4 UK-Philippines BIT 1980: “A ‘Company’ of a Contracting Party must be incorporated or constituted and actually doing business under the laws in force in any part of the territory of that Contracting Party where a place of effective management is situated”
• The “seat” refers to an effective center of administration of the business operations (e.g. place where board of directors regularly meet or shareholders’ meetings are held, where the company’s top management is located, etc.)
• It helps to exclude “mailbox” companies constituted with the sole purpose of benefiting from the treaty
• The requirement of substantive business operations: E.g. Art 1.6 Belarus – Mexico BIT 2008:
4. Scope of Investor (The “Rule of Origin”)
• (2) Corporate investors (Juridical persons)
• A variety of criteria to determine whether a juridical person is an investor of a contracting party
• Country of ownership or control (ultimate owner)
• The test of control is often combined with other formal criteria such as incorporation and seat to justify coverage of an investor under the treaty. This element can be found in the French model BIT and some other BITs concluded by Sweden, Switzerland, Belgium-Luxembourg and the Netherlands.
• Thunderbird v. Mexico tribunal: “Control can also be achieved by the power to effectively decide and implement the key decisions of the business activity of an enterprise and, under certain circumstances, control can be achieved by the existence of one or more factors such as technology, access to supplies, access to markets, access to capital, knowhow and authoritative reputation.”
• E.g. Art 1.1 Belgium/Luxembourg-Philippines BIT: “ ‘Investor’ shall mean […] the ‘companies’, i.e. with respect to both Contracting Parties, a legal person constituted on the territory of one Contacting Party in accordance with the legislation of that Party having its head office on the territory of that Party, or controlled directly or indirectly by the nationals of one Contracting Party, or by legal persons having their head office in the territory of one Contracting Party and
4. Scope of Investor (The “Rule of Origin”)
• Shareholders as investors
• Many BITs include shareholding or participation in a company as ‘investment’ Foreign shareholders in the local company may pursue the claim in its own name
• CMS v. Argentina: Claimant owned 29.42 percent of TGN, a company incorporated in Argentina
• Argentina – US BIT definition of investment includes “a company or shares of stock or other interests in a company or interests in the assets thereof”
• Tribunal held that: The Tribunal therefore finds no bar in current international law to the concept of allowing claims by shareholders independently from those of the corporation concerned, not even if those shareholders are minority or non-controlling shareholders.
4. Scope of Investor (The “Rule of Origin”)
• Denial of benefits clause in BIT
• To exclude foreign investors without genuine link with their home states Singapore – Australia FTA, Investment Chapter, Art 18
Subject to prior notification and consultation, a Party may deny the benefits of this Chapter to an investor of the other Party that is an enterprise of the other Party and to investments of that investor if the enterprise: (a) is owned or controlled by a person of a non-Party or of the denying Party; and (b) has no substantial business activities in the territory of the other Party.