Abuse of right by individual investors in investment arbitration

Abstract

The article analyzes the problem of abuse of rights by investors when they initiate proceedings in investment arbitration. For an individual or legal entity of any state, it is an attractive opportunity to use the dispute resolution mechanism in international arbitration against their state. This can lead to abuse of investors, resulting in an “artificial arbitration competence”. It is shown that the abuse of rights by investors can be expressed by manipulating of corporate nationality, treaty-shopping, and obtaining a second passport. It is set up that the concept of “procedural abuse” is derived from the principle of good faith, which is used to assess the legality of the initiation and filing of a claim by a foreign investor in an international investment tribunal. The author concludes that investment restructuring is an abuse of procedural rights if such manipulations are carried out to transfer existing disputes into the scope of bilateral investment protection treaties, that is, in order to create “artificial jurisdiction” of investment arbitration. If an individual investor has the nationality of two states — parties to a bilateral investment treaty, he or she cannot act as a foreign investor for the host state, with which he has significant ties at the time of investment. The conclusion about the abuse of rights can be made by a comprehensive analysis of all the circumstances of the case: the time of the establishment of the company, the implementation of investments, the violation by the state of obligations under the investment treaty.