Investment Claims Research Articles

Corporate Wealth Over Public Health? Assessing the Resilience of Developing Countries' COVID-19 Responses Against Investment Claims and the Implications for Future Public Health Crises

In the wake of the Covid-19 pandemic, states around the world swiftly enacted a multitude of far-reaching emergency responses to contain the viruses’ spread and to cope with the economic repercussions of the ensuing crisis. However, these measures detrimentally impacted the operating conditions of many businesses or, at the least, decreased their profitability. As this inevitably affected foreign investments, investors could be tempted to invoke “Investor State Dispute Settlement” (“ISDS”) clauses in International Investment Agreements (IIAs) to initiate proceedings before arbitral tribunals and seek compensation for loss of profit caused by states’ Covid-19 responses. Due to the specific circumstances in most developing countries, they were hit particularly hard by the crisis and are especially vulnerable to the threat of investment claims. It is therefore important to enable developing countries to realistically anticipate the risk of investment arbitration by assessing the chances of success of foreign investment claims against those policies that were most frequently adopted by them amidst the crisis. Against this background, this paper assesses how likely developing countries’ Covid-19 responses breached substantive standards of investor treatment under typical IIAs and which defense strategies states may invoke to justify their regulatory action. Based on this analysis, this paper concludes by formulating policy recommendations on how developing countries may enhance the resilience of their emergency responses against foreign investors amidst future public health crises.

The Investment Protection Rules of the EU-Canada Trade Agreement

Abstract This article provides an in-depth analysis of the substantive protection provided to investors against indirect expropriations under the EU-Canada Free Trade Agreement (ceta) and under the Constitution of Finland. More specifically, we analyse these respective spheres of protection in a regulatory context in Finland where Canadian investors operate actively: industrial mining. The purpose of the comparative analysis is to provide tentative answers to three broad research questions: Can investors challenge legitimate public interest measures under ceta’s investment protection rules? Is the protection provided under ceta co-extensive with the protection provided under the constitutions of countries placing high on global rule of law rankings? And are countries upholding the rule of law safe from investor claims under ceta’s reformed investment protection rules? A more general purpose is to bring more depth and nuance into the debates concerning the reform of the investment treaty regime, which often travel at a high level of abstraction.

‘Necessity’ due to COVID-19 as a Defence to International Investment Claims

Abstract Sovereign States have had to take drastic measures to contain the spread of the SARS-CoV-2 virus, including measures severely restricting the operation of businesses in their territory. In addition, and because of, the public health crisis, States will be forced to take a series of measures to stimulate their economies. These measures are likely to affect investments that benefit from international investment protection, leading these investors to contemplate initiating arbitration proceedings against the host State. This article examines whether, when faced with such claims, host States will be able to resort to the doctrine of necessity under customary international law to defend the measures that they have taken. In doing so, it draws on the application of the doctrine of necessity in international investment arbitration so far, including its application to disputes arising out of the Argentine financial crisis. The article proposes a more analytical approach to the doctrine of necessity in customary international law, which will be vital if the doctrine is to remain relevant as a measure of last resort to which States can turn when faced with a crisis.

Interocean v Nigeria: Can a Domestic Investment Statute Provide the Basis for Claims under Customary International law?

In an Award dated 6 October 2020 (Award), the Tribunal in Interocean Oil Development Company and Interocean Oil Exploration Company v Federal Republic of Nigeria3 dismissed all the claims brought by two United States oil companies, Interocean Oil Development Company and Interocean Oil Exploration Company (Interocean), against Nigeria, and awarded arbitration costs to Nigeria. The Award confirms the possibility of bringing an investment claim for breach of customary international law based solely on a domestic investment statute. In doing so, the Award has not only expanded the potential scope of investment claims for foreign investors in Nigeria, especially for those who are not eligible for substantive protections under any investment treaties; it has also enriched investment arbitration jurisprudence. The Award is a landmark decision in Nigeria because it arose from the first investment arbitration instituted against Nigeria with a decision on the merits. Prior to the Interocean case, two...

Potential Investor Claims and Possible State Defences During the Covid-19 Emergency

Since it was announced as a public health emergency of international concern in 2019, Covid-19 has caused enormous loss of property and life. The country's emergency policies in responding to the Covid outbreak are numerous, such as closing public transportation and prohibiting the export of medical devices. These policies have potentially harmed the interests of investors. This study has three purposes: investors' potential claims to challenge state measures addressed to Covid-19, the legal defences of states, and the possibility of an international investment dispute. This study shows that investors' potential claims may be delivered based on violations of the principles of fair and equal treatment, full protection and security, and national treatment and the most favoured nations. While a state can defend itself based on the principles of force majeure and state necessity, states can also defence through Non preclude measures or right to regulate clause in international investment agreements. In addition, it would also be better to build international solidarity and cooperation to mitigate and defeat the Covid-19 pandemic than sue the government before ISDS. States need collective action to avoid a surge of investor-state Arbitration. Governments’ policy to combat Covid-19 is to be considered as acting in necessity and therefore cannot be found in breach of their investment treaty obligations as long as that policy meet the necessity, proportionate, and non-discrimination requirements.

Round-Tripping in International Investment Law: A Teleological Assessment

Abstract This article addresses the issue of round-tripping investment in international investment law (IIL), which is domestic capital fleeing the home country and then flowing back in the form of foreign direct investment (FDI). It provides a functional definition of this concept and identifies why it may be considered a peculiar type of FDI. It also sets out a comprehensive framework for the treatment of round-tripping investment in IIL by analyzing whether international investment agreements do protect round-tripping investors and their investments and by reviewing how investor-State dispute settlement case-law has dealt with objections put forward by respondent States to round-tripping investors bringing their investment claims to international arbitration. Lastly, this article attempts to answer the question ‘should round-tripping investment be protected under IIL?’ by verifying whether the economic and legal reasons that justify according a differentiated treatment to foreign investors also apply in the case of round-tripping investors.

International Jurisdiction for Investor Claims Based on Prospectus Liability following CJEU 12.9.2018, C-304/17, Löber/Barclays

Abstract Lately, the value of many products on foreign financial markets has dropped considerably. As a result, affected investors regularly strive to hold the issuers of these products liable before domestic courts. In the following, the relevant European rules of international civil procedural law and the related case law of the Court of Justice of the European Union will be examined. Thereafter, a fresh methodological approach to the questions at hand will be presented.

Proposed Regulation of Third-Party Funding in Investor-State Dispute Settlement

Third-party litigation funding is increasingly used to finance legal claims in investor-state dispute settlement, with financiers funding investor claims against sovereign states in exchange for a share of potentially substantial compensation rendered in eventual arbitral awards. A chiefly unregulated phenomenon, third-party funding has been perceived especially controversial in the context of the investment arbitration regime, a system some allege is already ingrained with inequities. Third-party funding raises numerous policy questions, such as conflicts of interests, disclosure, costs of the proceedings, and even the entire permissibility of the practice in investor-state dispute settlement. This review raises various issues and concerns related to third-party funding in investor-state dispute settlement and presents the regulatory efforts and criticism thereof with regards to the reform of rules of both the International Centre for Settlement of Investment Disputes and the United Nations Commission on International Trade Law.

Corporate Wealth Over Public Health? Assessing the Resilience of Developing Countries' COVID-19 Responses Against Investment Claims and the Implications for Future Public Health Crises

In the wake of the COVID-19 pandemic, states around the world swiftly enacted a multitude of far-reaching emergency responses to contain the viruses’ spread and to cope with the economic repercussions of the ensuing crisis. However, these measures detrimentally impacted the operating conditions of many businesses or otherwise decreased their profitability. As this inevitably affected foreign investments, investors could be tempted to invoke ISDS clauses in International Investment Agreements to initiate proceedings before arbitral tribunals and seek compensation for loss of profit caused by states’ COVID-19 responses. Due to the specific circumstances in most developing countries, they were hit particularly hard by the crisis and are especially vulnerable to the threat of investment claims. It is therefore important to enable developing countries to realistically anticipate the risk of investment arbitration by assessing the chances of success of foreign investment claims against those policies that were most frequently adopted by them amidst the crisis. Against this background, this paper assesses how likely developing countries’ COVID-19 responses breached substantive standards of investor treatment under typical IIAs and which defence strategies states may invoke to justify their regulatory action. Based on this analysis, this paper concludes by formulating policy recommendations on how developing countries may enhance the resilience of their emergency responses against foreign investors amidst future public health crises.

Algorithmic Trading Regulation: The Frameworks for Human Supervision and Direct Market Interventions

This paper examines the regulation of algorithmic trading in the capital markets and focuses on the human supervision and director market interventions. We compare the regulation in the UK, the EU and the US to find a common basis and additional regulatory techniques. In Part I, we examine the requirements for the internal risk management process a firm has to conduct before an algorithm can be implemented on the market in each of the three jurisdictions. In Part II, we examine the direct market intervention methods and focus on circuit breakers and assess their effectiveness. In Part III, we investigate the liability issue in the algorithmic trading space, including the liability of trading firms and venues for breaches of regulatory requirements, compensation claims of individual investors, and the liability of the regulators. The possible contributions of this paper are to fill the gap of human supervision and direct market interventions in algorithmic trading and build a novel framework for machine learning regulations in finance.

Mass Investment Claims in the ISDS Reform Process: Promoting Procedural Efficiency and Strengthening the Rights of Individuals and Small and Medium-Sized Enterprises

Mass Investment Claims in the ISDS Reform Process: Promoting Procedural Efficiency and Strengthening the Rights of Individuals and Small and Medium-Sized Enterprises

Not all rights are created equal: A loss–gain frame of investor rights and human rights

AbstractInternational investment tribunals often use the language of ‘rights’ to characterize foreign investors’ claims against host states, evoking the language of human rights and, in some cases, appearing to conflate the two concepts. We investigate the cognitive framing of the relationship between investor rights and human rights in investor-state dispute settlement (ISDS), as characterized by investment tribunals. We first establish that arbitrators (and scholars and counsel) tend to characterize investor claims as rights claims in general and property rights claims in particular, even if this normative basis is far from precise. Second, building on behavioural economics and cognitive psychology, we argue that this characterization places human rights considerations at a structural disadvantage in ISDS. Investor rights are perceived by arbitrators as endowments that are possessed and that risk being lost, while the human rights of host state populations are viewed as aspirational demands that might only be fully realized in the future. Thus, governmental actions interfering with investments are perceived by arbitrators as actual losses, while competing human rights claims are perceived as potential gains or demands. Following prospect theory, the former (certain losses) will usually be weighed more heavily in a decision-making calculus than the latter (possible gains). This loss–gain frame provides a cognitive explanation for the prevalence of arbitral decisions that prefer investor claims over human rights, a phenomenon that is highly problematic in times in which the legitimacy of the ISDS system rests on its ability to consider the rights of non-investors.

When two worlds collide: a comprehensive approach to the intellectual property and investment law interface

Investment law and intellectual property (IP) law have largely developed unaffected by each other and, so far, any discussion on their interaction has been largely theoretical. That is until recently, when a small number of high-profile investment disputes has drawn attention to the interaction between national IP regimes and the international investment system. Christophe Geiger brought together experts from the worlds of IP and trade and investment law to explore the many questions that the interplay between these two conceptually very different systems raise. The Research Handbook on Intellectual Property and Investment Law addresses this evolving relationship in two parts. First of all, it analyses the systemic interaction between investment law and IP law in its national and international dimensions. Within the first part, one section addresses the protection of IP in trade and investment treaties, and another discusses the impact of investment protection on policy and regulatory autonomy. The section part begins with Henning Grosse Ruse-Khan, the author of an authoritative monograph on IP protection in international law, who sets the scene by outlining the elements of IP protection in trade and investment agreements. He notes opposing trends in international IP treaties and international investment agreements. Whereas the former limit the scope of national regulatory powers, the latter seem to grant Member States greater policy space. These opposing trends are further analysed by Susy Frankel who contrasts the object and purpose of IP and investment protection in treaties that protect both. The fundamental question of whether IP is protected as an investment and therefore falls within the scope of protection of investment law in the first place is addressed by Ruth Okediji and Carlos Correa. Both discuss the conditions for protection and how the scope of protection should be defined in order to retain policy space for states and to avoid abusive investor claims. The other chapters discuss the fundamental protection standards of international investment agreements (national treatment, most favoured nation and fair and equitable treatment) as applied to IP. Three chapters in the second section return to the question of national autonomy. They address issues raised by recent investment cases that involved IP claims. While Cynthia Ho argues that investor–state arbitration might have negative aspects on TRIPS flexibilities, Simon Klopschinski and Daniel Gervais focus on the notion of public policy in an investment context and how investment tribunals should approach this notion.

COMPLAINTS WHICH FOREIGN INVESTORS MIGHT BRING AGAINST HOST STATES DUE TO COVID-19 RESPONSE, AND THE DEFENCE HOST STATES MIGHT USE AGAINST THE COMPLAINTS

Purpose: This summative assignment sought to explore the possible complaints that foreign investors might raise against host states, as well as how host states might defend themselves from such complaints.
 Methodology: This being a summative assignment, the author relied on review of existing literature, reference to case law and reflective learning, as well as, critical thinking to provide a critical analysis to the question. Fundamentally, the author explored the international investment treaty standards that could be used by foreign investors to raise their complaints, as well as the treaty-specific exceptions that may inform the defences by host states in response to foreign investor claims. The researcher adopted a case study design through a qualitative content analysis technique towards analysis documented information in the form of case laws, existing research literature, constitutional reports, such as international investment arbitration reports and agreement.
 Findings: First and foremost, the author found out that foreign investors might complain about the violation of the full protection and security standard. However, states might invoke the doctrine of force majeure to defend against such claims. Also, the author found out that foreign investors might complain about unfair and inequitable treatment insofar as imposing Covid-19 measures are concerned. Nevertheless, host states might rely on the defence of distress to counter any complaints that may be brought about by foreign investors. Finally, the author explored the potential complaints insofar as direct and indirect expropriations are concerned, which hosts states may defend themselves against through the provisions of the defence of necessity as well as the defence of public health.
 Unique contribution to theory, policy and practice: The author recommends that host states and foreign investors need to strike a balance between the protection of investments and public interests.

Parameter Optimization Model Photovoltaic Battery System for Charging Electric Cars

Sales of electric cars and vehicles (EVs) have recently been showing a rapidly growing trend. In connection with rising electricity prices as well as social pressure on the environmental impacts of electromobility, there is also increasing interest of EV owners in the ecological source of electricity. The largest group of owners of EVs are residents of family houses, so, logically, they focus their attention on the possibility of using photovoltaic (PV) charging systems for EV charging. The design of the PV system for supporting EV charging is problematic due to several input parameters in the calculation of energy needs and due to the inconsistencies of electricity generation with normal electric vehicle (EV) charging time. While the PV system produces electricity during the day, family homeowners require charging EVs mainly at night. This requires batteries as part of a PV system. The optimal design of the PV of the battery system must take into account the real consumption of EV, the average daily distance traveled, the location, the weather bridging time, and, last but not least, the investor’s financial situation. The timing mismatch of electricity needs and generation may result in the oversizing or sub-scaling of the PV system depending on the time period for which the investor claims full coverage. With an average daily EV consumption of 10 kWh/day, the overproduction of electricity may be at 8620 kWh per year if it is required to fully cover PV systems in January. Conversely, for the installation of PVs for full coverage in August, the year-round electricity deficit will be 1500 kWh per year. For the analyzed geographical conditions, i.e., Latitude 48.8, the optimum performance of PV system for one-day electricity storage is 3.585 kW. This corresponds to the full coverage of EV consumption in March, the price of the whole system varies from EUR 9000 to EUR 20,000 depending on the type of battery. In addition to the battery price, the required accumulation time for electricity to overcome adverse weather increases the required performance of a photovoltaic system (PVS), which again results in system overshooting and financial loss by not using the generated electricity. This cycle of interdependencies is usually very difficult to adjust optimally. In the contribution, we analyzed the mutual relationships of calculating the performance of a PVS according to the daily consumption of EV and required time of overcoming adverse weather. The input data for the analyses were normal average EV consumption and the number of daily km traveled from 10 to 100 km/day scaled to 10. The optimization process consisted of determining the necessary performance of the PVS and its production in the event of a requirement to ensure full energy demand in each month. In addition, different types of batteries that influence the investment price enter into optimization analyses. This depends on the energy density of a given battery, the depth of discharge, capacity, and type. The result of this research is a computational model for determining a new indicator—we called it the monthly deviation factor. This indicates the degree of oversizing or undersizing of the PV system in relation to the stated factors.

ICSID, Jurisdictional Basis, and Its Arbitral Perspectives: The Arbitral Tales of Umbrella Clause and Its Future

The development of international investment law in the last 50 years changed the paradigm of the standing before international law that individual investors have the right to directly institute investment claims even without having any contractual relationship with the host state. This non-privity nature of arbitration is more developed through a jurisprudence of arbitration tribunal adjudications. In this regard, the role played by ICSID is very pivotal. Among the jurisdictional basis of ICSID tribunals, the umbrella clause is one of a common basis of jurisdiction that frequently existed in the majority of Bilateral Investment Disputes. But, the heyday of this century seems not a time of both ICSID as well as umbrella clauses after 50 years' ups and downs of the development of international investment law. Two situations can be easily grasped. On the one hand, ICSID has now faced different critiques, such as lack of consistency of decisions and predictability, and on the other hand, the prominent umbrella clause also faced such inconsistency of application and interpretation before ICSID tribunals. The way outs employed by the stakeholders seems that reforming ICSID, and retreating from adopting the umbrella clause in BITS. Therefore, the paper argued that centric approach should be adopted to heal out of the ill syndrome of the international investment legal regime and adjudication.

Dispute by Design? Legalisation, Backlash and the Drafting of Investment Agreements

International legal regimes are currently experiencing a broad backlash. In the investment regime, this reaction has been labelled a 'legitimacy crisis,' and has resulted in multiple reform proposals. In this paper I focus on how states have approached reform in the drafting of investment agreements. I ask: What is the link between the legal content of agreements and investor claims for arbitration? Drawing on the legalisation literature and using novel data on the contents of over 2500 investment agreements, I analyse how key drafting dimensions affect the risk of claims. I find that the presence of substantive obligations is associated with increased risk for investor claims, and that these effects are not offset by precision, flexibility or legal delegation levels in the agreements. These findings draw into question some of the current reform narratives pushed by states and international organisations, and speak to recent research suggesting that drafting innovations do not necessarily lead to changes in arbitral jurisprudence. More generally, these findings should feed into discussions around the balancing of costs and benefits of investment agreements at the state level, and the role of legalisation in the backlash against the international judiciary.

UNCLOS and Investor Claims for Deep Seabed Mining in the Area: An Investment Law of the Sea?

Foreign capital has increasingly become involved in the exploration for deep sea minerals in the Area. Foreign-owned companies have received the sponsorship of their state of incorporation, as required by UNCLOS to be granted an exploration contract by the International Seabed Authority. Sponsoring states’ policies toward such foreign-owned entities may go further than the mere implementation of UNCLOS obligations by pursuing national objectives such as better environmental protection or greater financial benefits for the local population. However, international law confers certain protections to foreign investment by binding states to respect an international minimum standard of treatment. Various UNCLOS provisions incorporate those guarantees, which could consequently be litigated through the dispute settlement system in Part XI of the convention. Yet, only the contractors’ state of nationality and the Authority have, under the convention, the required standing to do so.

Not all Rights are Created Equal: A Loss-Gain Frame of Investor Rights and Human Rights

International investment tribunals often use the language of ‘rights’ to characterize foreign investors’ claims against host states, evoking the language of human rights and, in some cases, appearing to conflate the two concepts. We investigate the cognitive framing of the relationship between investor rights and human rights in investor-state dispute settlement (ISDS), as characterized by investment tribunals. We first establish that arbitrators (and scholars and counsel) tend to characterize investor claims as rights claims in general and property rights in particular, even if this normative basis is far from precise. Second, building on behavioral economics and cognitive psychology, we argue that this characterization places human rights considerations at a structural disadvantage in ISDS. Investor rights are perceived by arbitrators as endowments that are possessed and that risk being lost, while the human rights of host state populations are viewed as aspirational demands that might only be fully realized in the future. Thus, governmental actions interfering with investments are perceived by arbitrators as actual losses, while competing human rights claims are perceived as potential gains, or demands. Following prospect theory, the former (certain losses) will usually be weighed more heavily in a decision-making calculus than the latter (possible gains). This loss-gain frame provides a cognitive explanation for the prevalence of arbitral decisions that prefer investor claims over human rights, a phenomenon that is highly problematic in times in which the legitimacy of the ISDS system rests on its ability to consider the rights of non-investors.

Appealing the Applicability of the Indian Arbitration Act 1996 to Non-ICSID Investment Arbitrations

Non-ICSID investment arbitrations have been held by Delhi High Court to be outside the scope of the Indian Arbitration Act of 1996. They have been considered fundamentally different as their roots are in public international law, in addition to their non-commercial nature. However, the court escaped a proper analysis of the hybrid foundations of an investor-State relationship, the seat theory, and issues of applicable law – which persuasively establish the applicability of the 1996 Act. In other words, the issue at the heart may be considered to be the nature of an investor’s substantive rights under an investment treaty and how they accommodate with India’s national law principles, when an investor has invoked arbitration against the host-State, which both parties accept, is subject to the law governing at the seat of arbitration. Besides the ongoing cases, India is now potentially facing two enforcement proceedings as an award debtor, in the near future, that may arise from investment claims by Cairn Energy PLC and Cairn UK Holdings Limited (under the UK-India BIT) and by Vodafone Group PLC (under the Netherlands-India BIT). Thus, the question of the applicability of the 1996 Act in respect of these non-ICSID arbitrations is foreseeable and may be addressed by the Supreme Court of India finally in the near future.