International law

The definition of investor and investment is key to the scope of application of rights and obligations of investment agreements and to the establishment of the jurisdiction of investment treaty-based arbitral tribunals. This factual survey of state practice and jurisprudence aims to clarify the requirements to be met by individuals and corporations in order to be entitled to the treatment and protection provided for under investment treaties. It further analyses the specific rules on the nationality of claims under the ICSID Convention. As far as the definition of investment is concerned, most investment agreements adopt an openended approach which favours a broad definition of investment. Nevertheless recent developments in bilateral model treaties provide explanatory notes with further qualifications and clarifications of the term investment. The survey further reviews the definition of investment under ICSID as well as non-ICSID case-law for jurisdictional purposes.

Executive summary.
The definition of investor and investment are among the key elements determining the scope of application of rights and obligations under international investment agreements. There are two types of investors: natural and legal persons. For natural persons, investment agreements generally base nationality exclusively on the law of the state of claimed nationality. Some investment agreements also introduce alternative criteria, such as a requirement of residency or domicile. The issues related to the nationality of legal persons are more complicated. Companies today operate in ways that can make it very difficult to determine nationality.
Tribunals have usually adopted the test of incorporation or seat rather than control when determining the nationality of a juridical person, unless the test of control is provided for in the agreement.
Accordingly, it is the general practice in investment agreements to specifically define the objective criteria which make a legal person a national, or investor, of a Party, for purposes of the agreement. When the objective criteria used may include investors to whom a Party would not wish to extend the treaty protection, some treaties include “denial of benefits” clauses allowing exclusion of investors in certain categories. The ICSID Convention, the main instrument for the settlement of investor-state disputes, limits the jurisdiction of its Centre to disputes between one Contracting State and a national of another Contracting State. It provides specific rules on the nationality of claims. For natural persons, it requires nationality to be established on two important dates: the date of consent to arbitration and the date of registration, and does not cover dual nationals when one of the nationalities is the one of the other Contracting State party to one dispute.
The ICSID jurisprudence as to the nationality of natural persons is so far limited to four cases brought by dual nationals.
For legal persons, the ICSID Convention requires nationality to be established only on the date on which the parties consented to submit such dispute to arbitration and allows a departure from the principle of incorporation or seat, when the Parties agree to treat a legal entity with the nationality of the Contracting State as a national of another Contracting State because of foreign control.
A related issue is the question of the extent to which shareholders can bring claims for injury sustained by the corporation.
Recent jurisprudence has 1. DEFINITION OF INVESTOR AND INVESTMENT IN INTERNATIONAL INVESTMENT AGREEMENTS INTERNATIONAL INVESTMENT LAW: UNDERSTANDING CONCEPTS AND TRACKING INNOVATIONS – ISBN 978-92-64-04202-5 – © OECD 2008 9 decided in favour of the right of shareholders, to be accepted as claimants with respect to the portion of shares they own or control.
There is no single definition of what constitutes foreign investment. International investment agreements usually define investment in very broad terms. They refer to “every kind of asset” followed by an illustrative but usually non-exhaustive list of assets, recognising that investment forms are constantly evolving.
The ICSID Convention does not define the term investment. It is, however, possible to identify certain typical characteristics of investment under the Convention which have been increasingly used by arbitral tribunals:
i) duration of the project;
ii) regularity of profit and return;
iii) risk for both sides;
iv) a substantial commitment;
v) the operation should be significant for the host state’s development.