Definition of Investor
Definition of Investor
Australia-Egypt Bilateral Investment Treaty
RECOGNISING the importance of promoting the flow of capital for
economic activity and development and aware of its role in expanding
economic relations and technical co-operation between them,
particularly with respect to investment by investors of one Party
in the territory of the other Party;
CONSIDERING that investment relations should be promoted and
economic co- operation strengthened in accordance with the
internationally accepted principles of mutual respect for sovereignty,
equality, mutual benefit, non-discrimination and mutual confidence;
Australia-Hong Kong Bilateral Investment Treaty
Desiring to create favourable conditions for greater investment by
investors of one Contracting Party in the area of the other;
Definition of Investor
Investment - Australia
70% Company A
30% Company X
Company A
- Bahamas
Company B
- Singapore
Company C
- United
States
Company X
- Australia
Natural Persons as Investors
• Nottebohm Case (International Court of Justice):
– “Nationality is a legal bond having as its basis a social fact
of attachment, a genuine connection of existence, interests
and sentiments, together with the existence of reciprocal
rights and duties…”
• Most IIAs:
– Nationality defined by reference to a State’s domestic laws
Natural Persons as Investors
ICSID Article 25.2(a) – dual nationals with nationality of the host State are
denied jurisdiction
Eudoro Olguin v Paraguay – dual national of the United States and Peru
brings claim against Paraguay under the United States-Paraguay IIA.
Paraguay argues, based on Nottebohm, not required to recognise Mr
Olgiun’s US nationality since effective and genuine nationality was
Peruvian. Rejected.
Champion Trading v. Egypt – dual nationals of the United States and
Egypt sought to bring a claim before an ICSID tribunal against Egypt under
the US-Egypt IIA, arguing that their dominant and effective nationality was
US and not Egyptian. This was order to get around the ICSID Article
25.2(a) that nationals may not bring a claim against their own State, in this
case Egypt. Rejected.
US-Uruguay Bilateral Investment Treaty:
‘investor of a Party’ means a Party or State enterprise thereof, or a national
or an enterprise of a Party, that attempts to make, is making, or has made
an investment in the territory of the other Party; provided, however, that a
natural person who is a dual citizen shall be deemed to be exclusively a
citizen of the State of his or her dominant and effective citizenship.
Legal Persons as Investors
Two common methods of determining nationality of legal
persons under IIAs:
• Place of incorporation
• Effective seat of control/’siege social’
Place of Incorporation
Australia – Hong Kong Bilateral Investment Treaty:
“companies” means:
corporations, partnerships, associations, trusts or other
legally recognised entities incorporated or constituted or
otherwise duly organised under the law in force in any
part of its area
Benefit: simplicity
Cost: open to abuse by companies of non-parties to an IIA
that seek to access its protections
Place of Incorporation – Denial of Benefits
US Model Bilateral Investment Treaty:
[a] Party may deny the benefits of this Treaty to an investor
of the other Party that is an enterprise of such other Party
and to investments of that investor if the enterprise has no
substantial business activities in the territory of the other
Party and persons of a non-Party, or of the denying Party,
own or control the enterprise.
Seat of Control
Germany-China Bilateral Investment Treaty:
“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”.
ASEAN Framework Agreement on Investment:
“the term ‘company’ of a contracting Party shall mean a
corporation, partnership or other business association,
incorporated or constituted under the laws in force in the
territory of any Contracting Party wherein the place of
effective management is situated”
Nexus between Investor and Investment
India Model Bilateral Investment Treaty:
This Agreement shall apply to all investments made by investor
US Model Bilateral Investment Treaty:
“investment” means every asset that an investor owns or controls,
directly or indirectly,
German Model Bilateral Investment Treaty:
the term “investments” comprises every kind of asset which is
directly or indirectly invested by investors
Abuse of Rights by Investors?
Some tribunals have barred jurisdiction or denied
admissibility to investors’ claims where these are
considered an abuse of their right to bring a claim (i.e. an
abuse of the definition of investor).
Phoenix v Czech Republic:
‘a corporation cannot modify the structure of its investment
for the sole purpose of gaining access to ICSID jurisdiction,
after damages have occurred’ since this would amount to an
‘abuse of the system’.
IPFSD policy option – Definition of investor