Distinguishing Investors from Exporters Under Investment Treaties

Abstract

Multinational corporations, when engaging in global operations, often act as both investors and exporters. Such intertwined investment and export operations can significantly complicate the application of investment treaty protections, which generally are intended to apply to investors, but not to exporters.

When attempting to distinguish investor and exporter activities, tribunals constituted under the investment chapter of the NAFTA have considered three kinds of limitations on recovery: (i) a causation limitation, (ii) a territorial limitation, and (iii) a capacity limitation. Of these three alternatives, the capacity limitation has the greatest potential to serve as an adaptable, effective criterion for ensuring full treaty protections for foreign investment while safeguarding against the exploitation of NAFTA's investment chapter by exporters. When determining whether a claimant has acted in its capacity as an investor, a tribunal should be guided by the nature of a claimant's global business.

The capacity limitation can be applied not only in NAFTA Chapter Eleven cases, but also more generally in disputes under other investment treaties, so long as textual support for the limitation exists under the applicable treaty. Thus, the capacity limitation can serve as a widely-available and effective resource for tribunals facing challenging questions concerning the proper application of investment treaty protections to integrated investment and export operations of multinational corporations.

Keywords: international arbitration, investor-State arbitration, investment arbitration, treaty arbitration, multinational enterprises, multinational corporations

JEL Classification: K33