Jurisdiction Ratione Personae and Corporate Nationality in International Investment Arbitration - Legitimate Corporate Planning or Abuse of Right?

Abstract

Corporate nationality in investment arbitration was and still is an area of much debate. The number of bilateral investment agreements (BIT’s) have grown significantly over the past 20 years, including also other international agreements, such as North American Free Trade Agreement (NAFTA) or Energy Charter Treaty (ECT), the purpose of which is to encourage international investment. The vast net of international investment agreements (IIA’s) had enabled investors to structure and take advantage of the specific IIA’s, which secure their objectives in the host country, by using shell or so called “mailbox companies.” This process can also be defined as “treaty shopping.” However, such practice had brought a lot of controversy and conflicting views in academic and business society. Therefore, the main question that must be analysed is whether the use of corporate nationality is actually an abuse of right, or, conversely, it is legitimate for international investors to structure their investments in the way that is most suitable for their goals. Much of the answer for the later question rests on the way of interpretation of the investment agreement. Accordingly, the interpretation methods of the IIA’s should be analysed, taking into account the standing and context of general international law in foreign investment disputes. In addition, the ways for the host countries to defend from the increasing number of arbitration requests and “treaty shopping” practice must be identified in order to shift investment arbitration back to its original tracks and purpose – encouragement of the international investment.

Keywords: Investment treaty arbitration, foreign investment disputes, jurisdiction ratione personae, treaty shopping, corporate nationality, bilateral investment agreements, mailbox companies

JEL Classification: K33, K41, K22