Portfolio Investment in ICSID Arbitration: Just a Matter of Consent?

Abstract

The constant evolution of the ways to invest foreign capitals in the marketplace has urged the need for defining the boundaries of the notion of investment, provided that Article 25 of the ICSID Convention is silent on this point. Against this background, the question of whether the intangible financial flows that generally fall within the category of portfolio investment can be considered as protected investment under the ICSID Convention has acquired significance due to some high-profile ICSID cases. This article examines to what extent portfolio investment can be included in the notion of investment under Article 25(1) of the ICSID Convention and, consequently, substantive protections granted to portfolio investment can be enforced within the ICSID framework. It is argued that the sophistication of financial instruments makes it difficult to find a one-size-fits-all solution, thereby requiring a case-by-case assessment of the relevant portfolio investments vis-a-vis the “typical characteristics” of an investment identified by the case law. In this analysis, the often overlooked requirement of the “contribution to the economic development of the host State” is subject to reconsideration.