Groups of companies and subject-matter jurisdiction in investor-state arbitration: Investment 'unveiled'?

Abstract

Increasingly, investor-state arbitral tribunals have found themselves faced with claims by holding companies, subsidiaries or ultimate beneficiaries within “corporate groups,” where the basis of the claim concerns property acquired in, or from, a fellow group member. Whilst the primacy of the state of incorporation for the purposes of nationality jurisdiction remains fundamentally intact, the question remains as to whether the shifting of assets entirely within a group can be considered an ‘investment’ in terms of a tribunal’s ratione materiae jurisdiction. This paper offers an analysis of corporate groups predicated on their observed economic behaviour, with a view to how this might impinge on the economic conception of investment proffered in the jurisprudence of arbitral tribunals since Salini v Morocco. The author suggests that the activities of closely-held subsidiaries cannot technically be classed as investments, lacking a sufficient independent contribution and expectation of a pecuniary return. However, the outcome which is more consistent with the purposes and the consensus of prior awards is that such transactions still amount to an investment by reference to the underlying commitment of the parent company. This paper concludes with a brief discussion of whether such claims nevertheless represent an abuse of process.