Dual Nationality of Investor

Dual nationality refers to simultaneous possession of two nationalities¹ by the same individual investor (natural person) or foreign companies (juridical persons).² The foreignness of the “investment” is determined by the investor’s nationality in order to be subject to investment protections.³ The investor’s nationality determines from which treaties it may benefit.

The problem of dual nationality often arises in investor-State disputes in the jurisdictional phase⁴ and is usually settled through the application of traditional principles of international law,⁵ that do not seem to prohibit dual nationals from bringing claims against their own State.⁶ Nonetheless, the principle of dominant or effective nationality have been referred to in order to determine the nationality of the investor in a case.⁷ Some tribunals have however refused to apply it.⁸ For a more in-depth analysis, see Dominant and Effective Nationality.

Jurisdiction Ratione Personae

Nationality of Investor

Natural Persons

Dominant and Effective Nationality

Genuine and Effective Link

Relevant Date

Continuous Nationality Rule

Ownership/Control

Treaty Shopping

Corporate Restructuring

Corporate Veil Piercing

The ICSID Convention expressly states that the dispute must be between the State and a foreign national so that an investor having the nationality of the State cannot bring a claim against it, even if the investor happens to have, at the same time, the nationality of another State.⁹

Article 25(2)(a) on natural persons contains positive and negative requirements. Positive being that the investor must have the nationality of the other Contracting State at the relevant time. Negative meaning that the investor cannot have the nationality of the host State at the relevant time,¹⁰ or even be controlled by nationals of the host State.¹¹ According to this article, ICSID tribunals are allowed to hear claims by investors holding the nationality of a signatory State on the condition that they do not hold the nationality of the host State against which the claim is being brought. Article 25(2)(b) on juridical persons was interpreted as having the same limitation on dual nationals¹² but this interpretation did not receive a full consensus by arbitral tribunals.¹³

To this extent, tribunals have barred claims from dual nationals having the nationality of the host State.¹⁴ The only exception permitted by the Centre concerns the situation in which, for the purpose of making its investment, a foreign investor was required to create a company under local law but that company is controlled by the foreign investor. In this case, Article 25(2)(b) of the ICSID Convention stipulates that the State may expressly agree to consider this local company as a foreign company.¹⁵ Another exception suggested in practice is if the exclusion of dual nationals would lead to an absurd result (i.e. when the host State applies the jus sanguinis rules for its nationality).¹⁶ See further Nationality of investor, Relevant date and Control/Ownership.

The majority of other arbitration rules do not provide for such a prohibition which is indicated in ICSID Rules. UNCITRAL Arbitration Rules do not regulate the issue of dual nationality. When the applicable rules are silent on the issue, tribunals have turned to the applicable international investment treaty.¹⁷ (See Sections IV and V).

Treaties may stipulate the determinative criterion in order to prevent further interpretations.¹⁸ As the lex specialis, they are considered as the source that trumps regarding the rules surrounding dual nationality.¹⁹ Some BITs incorporate a similar rule as ICSID Convention Article 25(2)(a). For instance, the Canada-Venezuela BIT expressly excludes dual nationals from its realm of protection and stipulates that an investor cannot possess the citizenship of the host State of the investment.

The question arises in case that an investment treaty is silent on the question of standing of dual nationals. In these cases, should dual nationals get protection as “investors” of both treaty parties, protection only as “investors” of the State of “effective” or “dominant” nationality, or no treaty protection at all?²⁰

In Ballantine v. Dominican Republic the Tribunal used the test of “dominant and effective nationality” under the DR-CAFTA. In this case, the dispute revolved around the question of whether the Ballantines could demonstrate that their United States nationality was "dominant and effective." In a majority award, the Tribunal found that the claimants’ dominant and effective nationality was that of the Host State (Dominican Republic) and that the Tribunal therefore lacked jurisdiction to hear the dispute under CAFTA-DR. The DR-CAFTA is one of the few treaties to allow claims by dual nationals against one of the countries of their nationality (the host country) if and only if the claimant’s “dominant and effective nationality” is that of the non-host country (Article 10.28 of the DR-CAFTA).²¹ It should be noted that the Tribunal in this case established that the CAFTA-DR did not “prescribe [specifically] the factors that may be considered to determine the dominance and effectiveness."²² This appeared to be the first time that an international investment arbitral tribunal dealt with the “dominant and effective” test.²³

In Serafin Garcia Armas and Garcia Gruber v. Venezuela, claims by dual nationals against Venezuela under investment treaties prompted various decisions. The arbitral tribunal upheld its jurisdiction over the claims on the basis that this case was not submitted to ICSID arbitration. A referral to the ICSID system in the BIT does not automatically entail an application of the restriction to dual nationals that can be found under Article 25 the of ICSID Convention.²⁴ It was one of the first decisions dealing in detail with investment treaty claims by dual nationals against one of their States of nationality when the treaty is silent on the issue. While a domestic annulment procedure was ongoing before the French courts, the arbitration continued in parallel, and in April 2019 the arbitral tribunal rendered its final award in favor of the Claimants, finding that Venezuela had breached the Treaty.²⁵ However, on 3 June 2020, the Paris Court of Appeal annulled the Serafín García Armas jurisdiction decision in full.²⁶

The Manuel Garcia Armas and others v Bolivarian Republic of Venezuela case with an UNCITRAL tribunal, had a different approach and claimed it did not have jurisdiction to hear claims against Venezuela.²⁷ It interpreted the inclusion of the ICSID institution as one of the possible forums as excluding dual nationals from the definition of “investor” under the Spain-Venezuela bilateral investment treaty.²⁸ Other tribunals followed the same interpretation.²⁹

Dual nationality should not be confused with “Treaty Shopping” or “Corporate Re-structuring” which mostly associated with legal persons which are foreign-incorporated, but majority-controlled by natural or legal persons of host State nationality.

A different case of dual nationality may arise when one of the two States of a dual national claims against a third State and the latter pleads that the other nationality is the effective or dominant nationality. A substantial jurisprudence supports the principle of the inopposibility of the nationality of a third State in an international claim.³⁰