EXAM Flashcards
Definition of Investor
Definition of Investment
Possibilities to solve a conflict between investor and host country
- National law system of the host system
- International law: Diplomatic protection
What is the problem with domestic protection?
Compensation is given to the home state, not to the investor
What are the absolute standards?
Fair and equitable treatment
Full protection and security
Explain the Fair and equitable treatment
Party made a specific representation to an investor to induce a covered investment, that created a legitimate expectation, and upon which the investor relied in deciding to make or maintain the covered investment
Case Spain v. 9REIN
Energy subsidy.
What kind of risks does the BIT cover?
Sovereign risks
What kind of risks does the BIT cover?
Sovereign risks (Behaviour of the Host State)
What is the definition of the full protection of security (FPS) standard?
Protect the investor, due dilligence.
The standard of full protection and security doesn’t impose strict liability upon the host state but rather requires a host state to exercise due diligence
Arab Spring
AAPL v. Sri Lanka
Related to FPS –> Due Diligence:
Majority vote: the government should have taken important precautionary measures.
Objective due diligence: The State should be capable to control the situation
Disserting vote: the tribunal’s application of due diligence rules fails to take into account the national emergency and extraordinary conditions because the situation provoked that the State was no longer capable to exercise due diligence. Also, the government was confronting a force majeure situation
The government had a compelling sovereign duty to undertake a military operation to regain control, the timing and modalities of the security operation must fall within its exclusive discretion The government wasn’t capable to exercise due diligence
Ampal v. Egypt
FPS
Due Diligence
Majority vote: Tribunal tried to look the specific situation of the host state to acknowledge that certain circumstances were difficult
What is the definition of due diligence?
The due diligence is a demonstration of effort to avoid damages, but not a demonstration of results.
Criteria of due diligence
Objective assessment criterion of due diligence
Reasonable measures of prevention, which a well-administrated government could be expected to exercise under similar circumstances
Subjective due diligence standard
Taking into consideration the means at the disposal of the State, and the specific circumstances and capability of the State.
- Extended war clause
it was necessary the destruction
Expropriation
- 3 elements of expropriation
o Measure
o Public benefit
o Compensation
- Requirements of expropriation
o Acting in public interest
o Non-discriminator
o Legality (Observation of a national procedure where appropriate and, if need be, its verifiability in a domestic court)
o Compensation (without delay, subject to interest, effectively realizable + freely transferable
- Types of expropriation
o Direct: Transfer of title to property form one legal subject to another by an official act
o Indirect: impairment of usage, controlling or performance possibilities, or generally as significant loss of value of the investment, principally every state measure can influence the value of the investment
Criteria – Perspectives – effects: expropriation
Sole effects:
o Perspective of the investor
o Investor cannot influence in their investment.
o The investment is no longer usable.
o Investors argue that the State shall bear the burden of the costs, that it want to receive compensation
Police Powers
o Perspective of the Host State
o The State’s rights to influence in the investment
o Social or general welfare purpose, in such case the measure should be accepted without any imposition of liability
Proportionality
o You look at the purpose and you look at the measure, you simply balance whether the effect of that particular measure is the one with the least effect on the affected investor
Relative Standards
MFN: Most Favoured Nation Treatment
Umbrella Clause
National treatment
MFN: Most Favoured Nation Treatment
look which further treaties and instruments has the host state, that the host state concluded with other States.This allows me to import a better standard of a third BIT in my arbitration
Ensure equality of competitive conditions between foreign investors of different nationalities.
No cherry picking
Shall MFN be used to procedural provisions?
- Argument in counter: There is no reason to import some clauses from a BIT to another, when the latter doesn’t have anything to do in the negotiation process of the first one.
- Argument in favor: the BIT has an MFN clause, so it’s included to guarantee its accomplishment. Also, the procedure is a right such as the substantive rights.
Umbrella Clause
o This standard allows you when there is a contractual regulation, the State can elevate the contractual claim on the international claim in the international arbitration.
What kind the contractual claims should be affected of the umbrella clause, or according to which criteria?
When the action of the host State violates the BIT and breach the contract.
Which contracts should be elevated with the Umbrella Clause?
o Broad interpretation: Every contract breach is a treaty breach.
o Narrow interpretation: Contract breach should be a sovereign act
- National treatment
o The BIT also demands that the foreign investor must be treated as a national investor
