Setting Limits on Corporate Nationality Planning in Investment Treaty Arbitration
ICSID Review Foreign Investment Law Journal, Volume 27, Issue 2 (Fall 2012)
Posted: 8 May 2014 Last revised: 13 Oct 2015
Date Written: November 1, 2012
Maintaining stability in investment treaty arbitration requires the establishment of predictable limits on corporate nationality planning. With increasing frequency, respondents have attempted to set such limits by relying on the principle of abuse of right, seeking the dismissal of claims on grounds of abusive corporate restructuring by claimants. Although several investor-State tribunals have found that abusive corporate restructuring can deprive a tribunal of jurisdiction, the analysis in such cases has been divergent. Expansive application of the principle of abuse of right by tribunals also may increase State exposure under investment treaties by encouraging claimants to seek damages based on allegations of abuse of right by States. When available, denial of benefits provisions can provide respondents with a superior, treaty-based alternative for establishing predictable limits on corporate nationality planning in investment treaty arbitration. In addition, given the rapidly increasing availability of denial of benefits provisions, the scale of their contribution to the stability of investment treaty arbitration can be significant. For such an important contribution to be achievable, however, tribunals in future cases must refrain from imposing unrealistic requirements on respondents invoking denial of benefits provisions.
Keywords: arbitration, investment treaty arbitration, investor-State arbitration, treaty shopping, denial of benefits, customary international law
JEL Classification: F02, F20, F21, K33
Suggested Citation: Suggested Citation