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Claims by Dual Nationals under Investment Treaties: A New Form of Treaty Abuse?

Published on December 9, 2015        Author: 

The issue of treaty abuse (or ‘treaty shopping’) has received heightened attention recently in the context of the on-going negotiations for the conclusion of the Transatlantic Trade and Investment Partnership (TTIP). In a public consultation on the potential inclusion of an investor-State arbitration clause in TTIP, the European Commission (EC) has raised concerns regarding the investors’ manipulation of corporate nationality through the so-called “shell” or “mailbox” companies in order to take advantage of the protection afforded by investment treaties (See Public consultation on modalities for investment protection and ISDS in TTIP, Question 1, p. 18). In line with the contributions made by many of the participants involved in the consultation process, the EC has stated that these companies should be excluded from the scope of TTIP. Accordingly, the EC has proposed to narrow the definition of the term ‘investor’ by requiring that a juridical person must have ‘substantial business activities’ in the territory of a signatory State (See Public consultation on modalities for investment protection and ISDS in TTIP, Question 1, pg. 18).

The foregoing requirement certainly responds to the criticisms of inappropriate treaty shopping, and it may be considered as a useful tool to prevent corporate investors from obtaining treaty protection by illegitimate means. Yet, the EC overlooks the fact that, in addition to corporations, investment treaties might also be subject to abuse by individual investors. In this context, a new type of BIT claim is now emerging in the field of investor-State arbitration, whereby investors who hold the nationality of both contracting parties to the treaty (i.e. dual nationals) make their own State a respondent before an international tribunal. Read the rest of this entry…

 
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