Application of the Salini test in determining investments in the practice of the International Center for Settlement of Investment Disputes

Abstract

Determination of the existence of subject-matter jurisdiction is of practical importance for the entire dispute settlement process by the International Center for Settlement of Investment Disputes (ICSID), which was created for protection of the rights of foreign investors. The subject-matter jurisdiction of ICSID is conditioned by existence of an “investment”. Determination of existence of an investment in each particular dispute is attributed to the exclusive competence of the arbitral tribunal itself, since the concept of “investment” is not disclosed in the text of the Washington Convention. The authors assess the key features of the activity that is recognized as investment, used by the arbitrators conducting qualification of one or another transaction to establish whether or not they fall under requirements of the Article 25 of the Washington Convention. Special attention is turned to the methodology and practice of application of the aforementioned criteria. It is noted that in each criteria, the arbitrators determine their own structure. Detailed analysis is carried out on the issues of subject-matter jurisdiction in the decisions of ICSID , beginning with the Fedex case, in which the need to use objective criteria in determination of ICSID jurisdiction without their interpretation is pointed for the first time; and Salini case, in which the arbitrators disclosed the content of these criteria, as well as subsequent decisions that illustrated different approaches of the arbitrators towards interpreting the Salini test. The conclusion is made that despite the fact that the criteria used in modern arbitration practice developed in the Salini case do not possess regulatory characteristics, their presence allows making objective distinction between the investments protected on the level of international agreements and regular commercial transactions. The Salini test provides potential investors with the opportunity to assess risks prior to starting investment activity on the territory of a foreign country, as well as protect the parties to the investment relations from abuse.