Natural Persons

(The author is grateful to Dano Brossman for his assistance with the research needed to prepare this note.)

International Investment Agreements (“IIAs”) offer protection to individuals or natural persons in addition to juridical persons or legal entities (companies, corporations, etc.). Generally, investor protection is available to natural persons who are nationals of a State other than the State in which the investment is made.¹ In other words, an individual holding the nationality of the host State normally does not have standing to bring a claim against the host State. Therefore, the question of whether a natural person qualifies for protection under an IIA (and is accordingly within the jurisdiction ratione personae of the tribunal) is determined by their nationality.

The question of nationality of natural persons is, in most cases, a formalistic and straightforward matter. Issues regarding the nationality of individuals acting as claimants in investment arbitration tend to arise when the purported investor holds the nationality of more than one State party to the IIA (dual nationals) or invokes a specific nationality for the sole purpose of obtaining protection under an IIA (nationality of convenience).

As a general principle of international law, the question of whether an individual qualifies as a “national” is defined by the laws of each State.² Accordingly, IIAs typically define nationality by reference to the law of the State whose nationality is claimed.³ For example, Article 1(1)(c) of the United States-Argentina BIT (1991) provides that the term “national” means “a natural person who is a national of a Party under its applicable law”. Some treaties include more stringent requirements. For instance, Article 1(3)(b) of the Germany-Israel BIT (1976) provides that the term “nationals” means, with respect to Israel, “Israeli nationals being permanent residents of the State of Israel”.

In assessing the claimant’s nationality, arbitral tribunals typically accord deference to the views of national officials and their interpretation and application of domestic law.⁴ However, when the respondent challenges the claimant’s nationality on grounds of fraud or error, arbitral tribunals have conducted their own assessment of the circumstances surrounding the acquisition of said nationality.⁵ Accordingly, nationality certificates, passports and other official documents are only prima facie evidence of an individual’s nationality.⁶ A respondent challenging the claimant’s nationality bears the onus of showing that the documents produced by the claimant to prove its nationality are inconsistent with the applicable law.⁷

The notion of “dual nationality” typically refers to individuals who hold the nationality of the host State in addition to the nationality of one of the State parties to the IIA. However, it may also include individuals holding two or more nationalities different from that of the host State. With the exception of the ICSID Convention, few treaties include specific rules to address the question of claims brought by dual nationals.⁸ 

The ICSID Convention (Article 25(2)) contains two nationality requirements for natural persons: first, the individual must have the nationality of one of the contracting States on the date on which the parties consented to submit the dispute to arbitration, as well as on the date on which the request was registered (positive requirement).⁹ Second, the individual must not have the nationality of the host State on either of these dates (negative requirement).¹⁰ Accordingly, the ICSID Convention bars claims by dual nationals holding the nationality of the State party to the dispute.¹¹ However, it does not preclude claims by dual nationals who hold the nationality of more than one of the Contracting States to the ICSID Convention, or even the nationality of a State not party to the ICSID Convention.¹²

Applying these criteria, ICSID arbitral tribunals have emphasized that, as lex specialis, Article 25(2) of the ICSID Convention precludes the application of the principle of effective nationality with respect to dual nationals who hold the nationality of the host State.¹³

In turn, ICSID arbitral tribunals have allowed claims by dual nationals not holding the nationality of the host State.¹⁴ However, an ICSID arbitral tribunal warned, in dicta, that in exceptional circumstances, including when a particular nationality has been acquired for the sole purpose of bringing a claim, the application of the principle of effective nationality may be justified in order to determine the claimant’s “real” nationality.¹⁵ 

Outside the realm of ICSID, there is no uniform solution to the issue of claims by dual nationals. In fact, most IIAs are silent in this regard. Dual nationals have sought to interpret this silence to their advantage, arguing that in the absence of an express prohibition in the applicable treaty, dual nationals are allowed to bring claims against the host State.¹⁶ In turn, States have argued that silence regarding the question of claims by dual nationals does not amount to consent and that, in any event, the principle of effective nationality should be applied to establish the relevant nationality of the claimant in such situations.¹⁷ 

Some IIAs allow claims by dual nationals, provided that the nationality of the host State is not dominant and effective. For example, the Dominican Republic – Central American Free Trade Agreement (“DR-CAFTA”) provides that “a natural person who is a dual national shall be deemed to be exclusively a national of the State of his or her dominant nationality”.¹⁸ This language is also present in a number of recent IIAs inspired by, or based on, the 2012 US Model BIT.¹⁹ Mirroring the language of the 2012 US Model BIT, arbitral tribunals have rejected claims by dual nationals who maintain their economic, family and social lives in the host State.²⁰