The existence of a protected investment requires that the investor has made or is making an economic contribution to the host State.1 An investor’s contribution was initially identified by the tribunal in Salini v. Morocco as one of the four elements of the definition of “investment” under Article 25(1) of the ICSID Convention.2 It has since been acknowledged also by non-ICSID arbitral tribunals as part of the inherent meaning of the term “investment.”3
In conducting the double-barrel test (or two-fold test) to ascertain the existence of an investment pursuant to the BIT and the ICSID Convention, ICSID tribunals have read the notion of “contribution” developed with regard to Article 25 of the ICSID Convention in conjunction with the definition of investment provided in the BIT.7 See further Definition of investment, Salini test, Double-barreled test.
The elements commonly accepted to constitute an investment are not free-standing. The contribution requirement is interdependent with the certain duration and risk requirements in the sense that an investor’s commitment of capital to an economic undertaking implies, in itself, a certain duration to the contribution in question and a risk of loss for the contributed resources.8 However, the requirement of an economic contribution is to be distinguished from the more specific and often ancillary element of a contribution to the development of the host State economic activities.
The notion of contribution is not rigid. A flow of capital into the host State is not necessary, provided that an investor has committed economic resources to a particular undertaking.9 Such resources need not be limited to financial commitments (such as purchases of land or the acquisition of shares),10 but may consist of any contribution in money, in kind and in industry with an economic value.11 Arbitral tribunals have accepted inter alia investor contributions consisting of technology, know-how, equipment and production tools, personnel or services.12
Arbitral tribunals have also held that commitments to make a contribution without an actual contribution having been made may also be accepted,13 but this seems to depend on the specific transaction at hand, taking into consideration all elements of the alleged investment holistically.14 The same principle applies for investment projects that did not reach their term.15 See also Pre-investment expenditure.
However, the mere ownership of shares16 or transfer of funds17 may be insufficient in proving a contribution when the alleged investor did not actively allocate resources. The investor bears the burden of proving that it made a valid contribution.18 See further Burden of proof, Section III.B.
To constitute an investment, a number of arbitral tribunals have required that an investor’s contribution of money or other assets be “substantial,” “significant,” or of a certain minimum size.20 The basis of this qualification is unclear. Neither the final wording of Article 25(1) of the ICSID Convention or the original Salini test include a quantitative limit for an investor’s contribution. In those cases, arbitral tribunals and parties have primarily relied on the commentary of Prof. Christoph Schreuer in this regard.21
Other arbitral tribunals have rejected a fixed numerical threshold of an investor’s contribution to not exclude smaller investors from investment protection. Instead, such tribunals have assessed the totality of the circumstances in which a contribution was made and the elements of the economic goal pursued by the investor.24
The tribunal in Société Civile Immobilière de Gaëta v. Republic of Guinea took an intermediate position. It accepted that the investor’s contribution must be substantial but dismissed any minimum threshold of a capital contribution in favor of a holistic consideration of the economic operation.25
While an investor may make its contribution directly or indirectly in the host State,26 the investor is not prevented from committing parts of its contribution from inside its home State. Initial expenses incurred by an investor at home to prepare the project and the worksite abroad may qualify as contributions insofar they are destined for the host State and the investment later comes into fruition.27
Bischoff, J.A. and Happ, R., Ratione Materiae, in Bungenberg, M., Griebel, J., Hobe, S. and Reinisch, A. (eds.), International Investment Law, A Handbook, 2015, pp. 1-149.
Castro de Figueiros, R., Chapter 3: The Notion of Investment and Economic Development under the ICSID Convention, in Baltag, C., ICSID Convention after 50 years: Unsettled Issues, 2016.
Gaillard, E. and Banifatemi, Y., The Long March towards a Jurisprudence Constance on the Notion of Investment, in Kinnear, M. (ed.), Building International Investment Law, The First 50 Years of ICSID, 2015.
Gaillard, E., Identify or Define? Reflections on the Evolution of the Concept of Investment in ICSID Practice, in Binder, C., Kriebaum, U., Reinisch, A. and Wittich, S. (eds.), International Investment Law for the 21st Century, Oxford University Press, 2009, pp. 403-416.
McLachlan, C., Shore, L. and Weiniger, M., International Investment Arbitration: Substantive Principles, Oxford University Press, 2nd ed., 2017.
Mortenson, J.D., The Meaning of Investment: ICSID’s Travaux and the Domain of International Investment Law, Harvard International Law Journal, 2010, pp. 257-318.
Nakajima, K., Parallel Universes of Investment Protection? A Divergent Finding on the Definition of Investment in the ICSID Arbitration on Greek Sovereign Debts, Law and Practice of International Courts and Tribunals, 2016, pp. 472-490.
Rubins, N., The Notion of “Investment” in International Investment Arbitration, in Horn, N. (ed.), Arbitrating Foreign Investment Disputes, Kluwer Law International, 2004, pp. 283-324.
Schreuer, C., The ICSID Convention: A Commentary, Cambridge University Press, 2009.
Yala, F., The Notion of “Investment” in ICSID Case Law: A Drifting Jurisdictional Requirement?, Journal of International Arbitration, 2005, pp. 105-125.
Yannaca-Small, K. and Katsikis, D., The Meaning of “Investment” in Investment Treaty Arbitration, in Yannaca-Small, K. (ed.), Arbitration under International Investment Agreements: A Guide to the Key Issues, Oxford University Press, 2nd Edition, 2018, pp. 266-301.
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