Denial of Benefits after Plama v. Bulgaria
Building International Investment Law: The First 50 Years of ICSID (M. Kinnear ed.) (2015) (Kluwer)
Posted: 29 Feb 2016
Date Written: December 2015
Denial of benefits provisions play an increasingly important role in defining the outer limits of acceptable investment treaty shopping by multinational enterprises. Ten years ago, an investor-State arbitration tribunal, for the first time, provided extensive analysis of a denial of benefits provision. The 2005 Decision on Jurisdiction in Plama Consortium Limited v. Republic of Bulgaria has greatly influenced the operation of denial of benefits provisions today; the decision also has received considerable scrutiny from scholars and practitioners.
Ten years after the Plama Decision on Jurisdiction, and on the 50th anniversary of the ICSID Convention, this chapter will address one finding of the Plama tribunal that has had a particularly significant impact on investment arbitration jurisprudence, including ICSID jurisprudence: the proposition that a host State’s denial of treaty benefits after an investment has been made constitutes a “retrospective” application of the treaty which cannot be given effect.
This chapter concludes that the analysis of a host State’s “retrospective” denial of treaty benefits introduced by the Plama tribunal, and subsequently followed in a line of investment arbitration decisions, is flawed and, to some extent, has limited the efficacy of denial of benefits provisions.
For the reasons discussed below, invoking a denial of benefits provision after an investment has been made, or after a claim has been submitted to arbitration, does not constitute a “retrospective” application of an investment treaty and should be permitted by tribunals. Indeed, without such application of denial of benefits provisions, States would lose, to a very significant extent, an important mechanism for clarifying the distinction between legitimate corporate nationality planning and unacceptable “free-riding” by multinational enterprises that have no genuine connection to their purported home States.
Keywords: ICSID, investment arbitration, investor-State arbitration, denial of benefits, investment treaties
JEL Classification: K33
Suggested Citation: Suggested Citation