International Investment Law
Readings 2: Defnitions
Mandatory Reading Material
Schefer, ‘International Investment Law’
Chapter 3: Defintniin
3.1 Introduction
What is an investment and who is an investor? critical elements
in ensuring investment protection because they defne who can
invoke treaty provisions etc.
3.2 What is an investment in international investment law?
3.2.1 The concept of ‘an investment’
If there is no investment, there is no jurisdiction/competence for the
tribunal
Traditional approach (CIL): ‘property, rights and interests’, but
changed by the 1960s ‘investment’
No clarity on the defnition of investment until the 1990s when
questions arose on what IIAs should cover and what then
investments were
3.2.2 Defnition of investment
By defning investment in the treaty, countries had freedom in
defning investment themselves where the term was ambiguous,
tribunals could step in to interpret the precise extent of the host’s
obligations
IIAs defned it general defnition plus an illustrative list of
activities
ICSID no defnition in the convention, so tribunals are free to
determine what an investment contains and whether the provisions
of the IIA should apply alongside the case law defnition of
investment in ICSID
a. International Investment Agreements (IIAs)
1
, Asset-based approach = safeguarding foreigners’ property and
rights, broad and illustrative list, non-exhaustive
Enterprise-based approach = ownership of or control over a
business entity or portion thereof, more limited approach, often
found in FTAs, excluding real estate and portfolio shares
Fedax NV v. Republic of Venezuela
Dutch corporation in Venezuela Fedax got paid by receiving
promissory notes Venezuela refused to pay the interest or the
principal on the notes, to which Fedax objected
Tribunal had to answer whether fnancial instruments qualify as an
investment broad meaning (asset-based), analysis of current
treaty practice and foreign relations of the European Communities
and multilateral institutions
Analysis of the exclusions made by Venezuela and that it had made
them explicit every time it wanted to exclude something
Conclusion: falls within the scope of the investment, with the
investment remaining constant not an occasional arrangements
and are not volatile capital (duration, regularity of proft,
assumption of risk and a substantial commitment and signifcance
for the host State’s development)
Romak SA v. the Republic of Uzbekistan
Romak deliverd 5 deliveries of grain (50.000 tons of wheat) to
Uzkhleboproduct (state-owned company) but refused to pay and
refused to pay award rendered under the Grain and Feed Trade
Association
UNCITRAL Arbitration Rules proceedings instigated, where the
term investment was challenged by Uzbekistan
BIT asset-based approach, non-exhaustive
Not a literal interpretation of the BIT by the tribunal investment
has meaning in itself, literal application disregards Article 31(1) of
the VCLT, distinction between trade and investment
2
Readings 2: Defnitions
Mandatory Reading Material
Schefer, ‘International Investment Law’
Chapter 3: Defintniin
3.1 Introduction
What is an investment and who is an investor? critical elements
in ensuring investment protection because they defne who can
invoke treaty provisions etc.
3.2 What is an investment in international investment law?
3.2.1 The concept of ‘an investment’
If there is no investment, there is no jurisdiction/competence for the
tribunal
Traditional approach (CIL): ‘property, rights and interests’, but
changed by the 1960s ‘investment’
No clarity on the defnition of investment until the 1990s when
questions arose on what IIAs should cover and what then
investments were
3.2.2 Defnition of investment
By defning investment in the treaty, countries had freedom in
defning investment themselves where the term was ambiguous,
tribunals could step in to interpret the precise extent of the host’s
obligations
IIAs defned it general defnition plus an illustrative list of
activities
ICSID no defnition in the convention, so tribunals are free to
determine what an investment contains and whether the provisions
of the IIA should apply alongside the case law defnition of
investment in ICSID
a. International Investment Agreements (IIAs)
1
, Asset-based approach = safeguarding foreigners’ property and
rights, broad and illustrative list, non-exhaustive
Enterprise-based approach = ownership of or control over a
business entity or portion thereof, more limited approach, often
found in FTAs, excluding real estate and portfolio shares
Fedax NV v. Republic of Venezuela
Dutch corporation in Venezuela Fedax got paid by receiving
promissory notes Venezuela refused to pay the interest or the
principal on the notes, to which Fedax objected
Tribunal had to answer whether fnancial instruments qualify as an
investment broad meaning (asset-based), analysis of current
treaty practice and foreign relations of the European Communities
and multilateral institutions
Analysis of the exclusions made by Venezuela and that it had made
them explicit every time it wanted to exclude something
Conclusion: falls within the scope of the investment, with the
investment remaining constant not an occasional arrangements
and are not volatile capital (duration, regularity of proft,
assumption of risk and a substantial commitment and signifcance
for the host State’s development)
Romak SA v. the Republic of Uzbekistan
Romak deliverd 5 deliveries of grain (50.000 tons of wheat) to
Uzkhleboproduct (state-owned company) but refused to pay and
refused to pay award rendered under the Grain and Feed Trade
Association
UNCITRAL Arbitration Rules proceedings instigated, where the
term investment was challenged by Uzbekistan
BIT asset-based approach, non-exhaustive
Not a literal interpretation of the BIT by the tribunal investment
has meaning in itself, literal application disregards Article 31(1) of
the VCLT, distinction between trade and investment
2
