Jurisdiction Ratione Personae

An investment dispute may only be brought to a tribunal that holds jurisdiction to decide on the relevant matter. The scope of jurisdiction of investment tribunals consists in mainly three dimensions: i) jurisdiction ratione personae; ii) jurisdiction ratione materiae; and iii) jurisdiction ratione temporis. Jurisdiction of the investment tribunal is thus evidenced only whenever all of these three dimensions are met.¹ (See further Jurisdiction)

As the investment protection regime is based “on the principle that its protections extend to investors who are nationals of a contracting state other than the host state in which the investment is made”,² the nationality³ of a foreign investor⁴ will determine if it is entitled to benefit from the protection granted by the underlying Bilateral Investment Treaty (“BIT”). This, in turn, will determine the jurisdiction ratione personae of an investor-State arbitral tribunal.⁵ See further Nationality of Investor

This Note will go into details on determining jurisdiction ratione personae towards natural persons, juridical persons and States. Other Notes may be relevant:

• Nationality of investor on the definition of nationality, arbitral practice and the different issues that may arise in this context (Dual nationality, Genuine and effective link, Dominant and effective nationality).
• Natural Persons for more specific analysis on the issues related to the nationality of natural persons.
• Relevant Date to determine an investor’s nationality.
• Corporate restructuring, Nationality planning, Treaty shopping and Corporate veil piercing on the extent to which investors can plan their nationality.
• Ownership/Control of the investment.
• Nationality of investment.

In order to determine the ratione personae dimension of jurisdiction, investment treaties have introduced different definitions of investor, including different requirements to qualify as a national of a contracting party. (See further Nationality of Investor)

When looking at these requirements, it is clear that a basic distinction is made between natural and legal persons, showing in each case different requirements to meet the nationality requirement, and thus, the investor definition of the underlying investment treaty⁶ (See Section III and IV below).

If the criterion set out in the investment treaty is met, then the investor will be enabled to claim protection under the investment treaty. Therefore, whenever a claim is initiated by a certain claimant, a tribunal will analyse if said claimant is a national of one of the contracting parties in order to determine if it has jurisdiction ratione personae over the dispute.

Additionally, investors bringing a claim against a certain State will also need to prove that the claim the investor is initiating is directly attributable to the said State.⁷

Arbitral tribunals are empowered to decide on their jurisdiction irrespective of parties’ arguments.⁸ See further Competence-Competence

When determining their jurisdiction ratione personae, tribunals have the power to analyse facts and make definitive findings.⁹

Tribunals have considered differently the relevant date depending on the applicable law, the institution and the circumstances of the case. See further Relevant date

Tribunals do not have jurisdiction ratione personae towards third parties to the applicable investment agreement,¹⁰ except if the arbitration agreement can be extended to third parties.¹¹ See further Direct Claims and Indirect Claims

The definition of nationality of natural personas is normally established by reference to the domestic law of the respective contracting States.¹² Taking this into account, certain investment treaties have included a single definition of a national that applies to both parties,¹³ whereas others include two different definitions applying to each of the contracting parties.¹⁴

Making a reference to the domestic law of the respective contracting party in order to determine nationality is consistent with the concept of State sovereignty in deciding the criteria for identifying its nationals,¹⁵ and it is something that may also be seen when determining the nationality of legal persons.

However, some other investment agreements have also included additional requirements in order to meet the nationality definition, such as a requirement of residence¹⁶ or domicile.¹⁷ In this vein, tribunals largely rely on factual considerations, besides the domestic law.¹⁸

Issues related to dual nationality of natural persons¹⁹ or with their dominant and effective nationality²⁰ may arise whenever determining if a natural person qualifies as a national of a certain contracting party and thus enjoys the protection granted by the underlying treaty.

The qualification of legal or juridical persons as investors may raise more complex issues than the ones presented for natural persons,²¹ especially since the ICSID Convention does not provide a definition of legal persons.²² Investment treaties may define legal persons as investors in different ways. Thus, tribunals have applied both the ICSID Convention and the underlying treaty in order to determine which approach to apply.²³ See further Nationality of Investor, Double-Barrelled Test

In this sense, certain discussions on the scope of these definitions have arisen in practice, especially since tribunals refuse to have their jurisdiction limited by formalities and base their decision on the circumstances of the case.²⁴ 

The term “economic entities” is used in certain investment treaties in order to define legal persons as investors,²⁵ and and it requires additional elements to be proven by the investor.²⁶ Although certain States have promoted a restrictive approach to this term by which State-owned entities or shell companies should be excluded,²⁷ tribunals have consistently understood that the term is expressed in broad terms as it “does not distinguish on the basis of organizational type, business purpose, ownership, or control”.²⁸ Generally, where no restrictions have been included by the underlying investment treaties to the way legal person as investors are defined, tribunals have concluded that there is no basis to include restrictions where none appear to have been intended.²⁹

Another frequently used term to define a juridical person is that it should be “constituted”, which requires the creation of a new legal person.³⁰

State enterprises acting in a commercial capacity abroad may bring claims against a given contracting party as private investors, if they are able to meet the definition of an investor in the underlying investment treaty.³¹ See further State-owned enterprises

Corporations today hold various links to different States, which brought about difficulties in the determination of their nationality. See further Dual Nationality, Dominant and Effective Nationality

In order to solve such difficulties, investment treaties normally regulate the definition of nationality of legal persons by using at least one of these "classical"³² criteria:

1. the notion of incorporation;
2. the seat or siege social of the corporation; and
3. by means of the test of control.³³

The criteria of incorporation, and seat of the corporation, have their origin in the Barcelona Traction³⁴ decision of the International Court of Justice, where the ICJ espoused the place of incorporation and principal seat theories of corporate nationality, rejecting the possibility of performing a control test to determine nationality. 

The incorporation approach is used in the vast majorities of investment treaties. It proposes that investors will meet the nationality definition if the legal person is incorporated or constituted under the laws of one of the contracting parties. For instance:

• The incorporation approach has been adopted by the United Kingdom in its model BIT,³⁵ and it is therefore the approach used in the majority of the UK BITs.³⁶ Similarly, the Ukraine – Lithuania BIT defines a Lithuanian investor as “any entity established in the territory of the Republic of Lithuania in conformity with its laws and regulations”, setting a low threshold in order to meet the nationality requirement.³⁷
• In other BITs, the incorporation approach is placed in the definition of the word “enterprise” and is also extended to a “branch” of the enterprise. This is the case in the Uruguay-Canada BIT.³⁸ Additionally, other BITs set a higher threshold by requiring both the incorporation approach, and the siege social approach (discussed later in this Note).

However, if there is no other element included besides the incorporation requirement, tribunals limit their interpretation³⁹ to whether the “legal entity satisfied the formal definition of investor under the treaty and refuse to incorporate additional requirements that the treaty drafters did not include”.⁴⁰ Arbitral tribunal would then refer to the national law of the host State in order to determine the scope of the term “incorporation”.⁴¹

In that sense, the Tribunal in the Tokios Tokelés v. Ukraine case analysed the nationality of the claimant which was incorporated under the law of one contracting States but controlled by nationals of the host State. The majority of the tribunal understood that the claimant was entitled to bring a claim against Ukraine as it was incorporated in Lithuania – even though it was controlled and 99% owned by Ukraine nationals – as the BIT did not include any additional requirements in order to qualify as an investor. The same approach was used in the Ukraine-Lithuania BIT, and similar decisions of tribunals have followed the same argument.⁴²

This formalistic and low threshold has also been supported by certain scholars who argue that “the natural consequence of the formalistic language of most treaties is that adopting a particular corporate structure for the purpose of attracting the protection of an investment treaty is wholly legitimate.”⁴³ See also Nationality Planning

On the other hand, the President of the tribunal in the Tokios Tokelés v. Ukraine case issued a dissenting opinion, in which it stated that the analysis should be done by establishing if the relevant tribunal had jurisdiction first under the ICSID Convention and latterly under the relevant BIT. Under said analysis, the dissenting opinion stated that the origin of the capital is relevant, and even decisive, in order to ascertaining the international character of an investment.⁴⁴ See further Nationality of Investment

In certain BITs, the nationality definition requires that, in order to qualify as an investor, the legal person should have its “siège social” (head office) and/or effective management in the territory of one of the contracting parties. For example:

• Treaties define eligible companies as having their “seat in the territory” of one of the contracting States.⁴⁵ Other treaties, such as the Cambodia – Turkey BIT, require that the legal person carries out “substantial business activities in the territory of that Contracting Party”⁴⁶ or “real economic activities”.⁴⁷
• This notion is also often included in the “Denial of Benefits” clause, by which some BITs allow a Contracting Party to deny the benefits of the BIT to an investor of the other Contracting Party if the enterprise of that Contracting Party has no substantial business activities in the territory of the Party under whose law it is constituted or organized.

Tribunals usually define the seat as the “effective place of management and central application.”⁴⁸ As such, the tribunal in the Alps Finance v. Slovak Republic case defined the corporate seat as the “effective center of administration” and thus understood that it was required to show evidence of certain elements, such as the place where the company board of director regularly meets; the place where the company has a considerable amount of employees; the company’s address and physical location, among others.⁴⁹ These elements are not cumulative.⁵⁰

In cases where the "siège social” approach is accompanied by the incorporation approach, some tribunals have understood that the term “siège social” should have a substantive meaning, requiring additional evidence other than a purely formal matter of the address of a registered office, such as some sort of actual or genuine corporate activity.⁵¹ This is also the case if the investment treaty specifies that the seat should be permanent.⁵²

The “seat” can be simply the “registered office” or, in other words, “siège statutaire”.⁵³

Other tribunals do not provide any precise meaning of this notion. For instance, the tribunal in the CEAC v. Montenegro⁵⁴ case declined jurisdiction, without defining what should be understood as the “seat”,⁵⁵ as the investor did not prove that the office building was accessible to the public nor that the company’s records were kept in such address, even though CEAC had provided a certificate of registered office issued by the Cypriot authorities. 

For a detailed analysis of this approach, see Ownership/Control.

Under investment arbitration, “it has become more and more pertinent to look at the aspect of the control of a corporation when one wants to determine its nationality”.⁵⁶ Arbitral tribunals usually refer to the control approach in the following cases:

1. to widen the scope of protection of the investment treaty;⁵⁷
2. when the tribunal is established under the ICSID Convention which mentions the control approach at article 25(2)(b);
3. when this requirement is provided for in the applicable BIT or national law.⁵⁸

As discussed above when addressing the Tokios Tokelés v. Ukraine case, the control approach has been more frequently used when analysing the incorporation approach and if there are any additional requirements to meet in order to consider a claimant as an investor.⁵⁹ See further Ownership

Nevertheless, certain investment treaties also include a control requirement to justify the coverage of an investor under the underlying BIT.⁶⁰ In this sense, the control approach is commonly used as an additional requirement, combined with either the incorporation or control approach. For instance, the Switzerland - Iran BIT includes a control test in certain circumstances of the majority ownership or majority voting rights in a company.⁶¹

If the underlying investment treaty is silent on this issue, tribunals have followed different approaches to determine which percentage of control is necessary to establish the requirement:

1. In the Thunderbird v. Mexico case, the Tribunal understood that the claimant exercised de facto control over certain companies in which it had less than 40% of the shares, and that was enough to satisfy the control requirement in the NAFTA Treaty.⁶²
2. On the other hand, the Tribunal in the Aguas del Tunari v. Bolivia understood that the control requirement was accomplished if the claimant had a legal control over the investor.⁶³

Additionally, the number of layers of ownership required to determine control has also been disputed.

1. In the Amco v. Indonesia case, the Tribunal understood that looking at the “second, and possibly third, fourth or xth degree” was not in “accord with the Convention.”⁶⁴
2. On the other hand, in the Soabi v. Senegal case, the tribunal held that ultimate control was sufficient to establish its jurisdiction.⁶⁵ Such decisions may show that investment arbitration tribunals will look through holding companies to determine control, but not look through companies which are actually pursuing activities in the jurisdiction in which they are incorporated.⁶⁶ See further Corporate Veil Piercing 

The dimension of jurisdiction ratione personae of a given tribunal does not only extend into analysing if the investor qualifies as one under the relevant investment treaty. In order for a tribunal to determine if it has jurisdiction ratione personae over the dispute, it will have to also determine if the relevant State was indeed a party to the underlying investment agreement with the investor. Tribunals have analysed this matter by seeking to determine if the alleged breaches may be attributed to the relevant State.⁶⁷

Tribunals consider that claims against sub-State entities or constituent parts of a State party to an investment agreement are only exceptionally permissible⁶⁸ as investment treaties strictly apply to the “Contracting Party”.⁶⁹ For example, this possibility is provided for in the ICSID Convention, as Article 25(1) allows claims against “constituent subdivision or agency of a Contracting State” under the condition that such entities are “designated to the Centre by that State.”⁷⁰ However, tribunals have declined jurisdiction against sub-State entities or constituent if said possibility is not provided within the underlying BIT.⁷¹

See further Attribution.

Attribution may be defined as “the operation or process aimed at identifying and circumscribing the conduct of individuals which is properly to be treated as constituting that of the State”.⁷² In other words, attribution allows to determine the extent, if any, of a given State’s involvement in investment relations.⁷³ See also Attribution

As stated by the Tribunal in the case Gustav F.H Hamester v. Ghana, “[a]s States are juridical persons, the question necessarily arises whether acts committed by natural persons or separate entities, which are allegedly in violation of international law, are attributable to the State”.⁷⁴ To determine if an act may be attributed to a given State, tribunals have often understood that the issue of attribution is to be determined by international law and guided by the Articles on State Responsibility (hereinafter, the “ILC Draft Articles”).⁷⁵

As such, tribunals have identified that the following acts may be attributed to a given State:

1. all acts of State organs (under Article 4 of the ILC Draft Articles);
2. acts of public or private entities or persons exercising governmental authority, if executed in the exercise of such authority (under Article 5 of the ILC Draft Articles); and
3. acts of public or private entities or persons done on the instructions of, or under the direction or control of that State (under Article 8 of the ILC Draft Articles).⁷⁶

Under this analysis, tribunals have often analysed if the claimant’s claim relates to acts which a State committed in the exercise of powers that only the State can exercise.⁷⁷ For example, in Khan Resources Inc., Khan Resources B.V. and CAUC Holding Company Ltd. v. Government of Mongolia and Monatom Co., Ltd the tribunal in found that the acts related to the claim could be attributed to the State of Mongolia as the acts were “obligations shat only a sovereign state could fulfil.”⁷⁸ In order to determine if certain obligations are obligations that only the sovereign State could fulfil, the tribunal stated that it was necessary to analyse the law of Mongolia.⁷⁹

Waibel, M., Investment Arbitration: Jurisdiction and Admissibility, University of Cambridge Faculty of Law, 2014.

McLachlan, C., Shore, L. and Weiniger, M., Nationality, in International Investment Arbitration: Substantive Principles, 2^nd ed., 2017.

Blackaby, N., Partasides, C., Redfern, A. and Hunter, M., Arbitration under Investment Treaties, in Redfern and Hunter on International Arbitration, 6^th ed., 2015.

Yannaca-Small, K., Who is Entitled to Claim?: The Definition of Nationality in Investment Arbitration, in Arbitration Under International Investment Agreements: A Guide to the Key Issues, 2^nd ed., 2010.

Schlemmer, E.C., Investment, Investor, Nationality and Shareholders, in Muchlinski, P., Ortino, F. and Schreuer, C. (eds.), The Oxford Handbook of International Investment Law, 2008.

Wisner, R. and Gallus, N., Nationality Requirements in Investor-State Arbitration, The Journal of World Investment and Trade, 2004, pp. 927-946. 

Kovács, C., Attribution in International Investment Law, International Arbitration Law Library, Vol. 45, Kluwer Law International, 2018.

Olleson, S., Attribution in Investment Treaty Arbitration, ICSID Review, Vol. 31, Issue 2, Oxford University Press, 2016.