Recent Developments in Treaty and Arbitral Practice

Abstract

Abstract Over the past ten to fifteen years, a number of significant developments have occurred and/or gained momentum, both in the way in which ‘investment’ is defined in investment treaties and in the manner in which arbitral tribunals have construed such treaty definitions. The common feature of these developments is that they have led to the application of a more restrictive notion of investment. This evolution arguably reflects widespread concerns that traditional treaty definitions are unduly broad and/or ambiguous, leading to undesirable outcomes and unpredictable decisions. Section II discusses the increasingly frequent adoption of enterprise-based, rather than asset-based, definitions of ‘investment’. Section III examines the by now prevalent requirement that investments must possess certain ‘characteristics’. Those characteristics overlap to a large extent with the Salini criteria applied under Art 25 ICSID Convention, and this requirement can therefore be viewed as an incorporation of the Salini test into investment treaty definitions. Section IV explores common exclusions found in investment treaties. Section V deals not with a development in treaty practice, but with a trend in arbitral interpretation. Specifically, it analyzes case law that has considered that the notion of investment under investment treaties, like the term ‘investment’ under Art 25 ICSID Convention, has an ‘objective’ or ‘implied’ meaning. This trend leads to the application of the Salini criteria under investment treaties, thus producing an effect similar to the characteristics-requirements examined in Section III.