Good Faith Limitations on Protected Investments and Corporate Structuring

Abstract

Investment treaty tribunals have been tasked with determining the content of the principle of good faith as it exists in international investment arbitration inter alia as a discipline on whether certain foreign investments or their corporate structure benefit from investment treaty protection. The present paper reviews the complex and often contradictory jurisprudence that has addressed the issues of illegal investments and corporate structuring and attempts to expose the function and purpose of the principle of good faith within this context. The paper questions whether the principle of good faith should be relied upon by tribunals to restrict the definition of investor and investment in the relevant treaty or whether the plain meaning of treaty provisions should prevail. Although a small role for the principle of good faith may remain in investment treaty arbitration, this paper argues that expansive application of the principle should be rejected and instead tribunals should focus on the explicit language of the respective treaty and the ICSID Convention.

Keywords: international investment treaties, good faith, illegal investment, compliance with domestic and international law, nationality planning, corporate restructuring

JEL Classification: K33