The “double-barreled test”, also referred to as “double keyhole test” or “twofold test”, is the test followed by an arbitral tribunal to ascertain both its general and special jurisdiction under both Article 25(1) of the ICSID Convention (the objective test) and the relevant provision in the instrument embodying its consent to ICSID, typically a BIT, but which can also be the national legislation1 or a contract2 (the subjective test). In order to establish its ratione materiae jurisdiction, an arbitral tribunal must therefore respectively assess that an alleged investment qualifies as an “investment” under each prong of this dual test.
The ICSID Convention or other ICSID instruments do not define the term “investment”. Article 25(1) only provides that “(t)he jurisdiction of the Centre shall extend to any legal dispute arising directly out of an investment”.3 On the contrary, investment protection treaties4 or national legislation5 usually provide a definition. This has sometimes sparked uncertainty about the relevant approach to assess the meaning of the term “investment”.
In some cases, it has been construed as reflecting the intent of the Convention’s drafters to leave to parties the broadest discretion to define what disputes they are willing to submit to ICSID. It thereby leaves tribunals the task to assess what constitutes an “investment” only under the BIT, national legislation or contract, and not also under the Convention.6
Most arbitral tribunals, however, have followed the double-barreled test, holding that the term “investment” in Article 25(1)7 sets the objective outer limits within which parties may establish their subjective definition of “investment” without depriving the term of any effect or circumventing its meaning.8
III. First prong - An objective definition under the ICSID Convention
A first approach to ascertain that an alleged investment falls under the definition of the term “investment” in Article 25(1) is referred to as the “Salini test”,10 which requires that the alleged investment cumulatively satisfies the following criteria,11 by encompassing: (1) a contribution (2) of a certain duration, (3) a risk and (4) a contribution to the economic development of the host State, though this last criteria remains debated.12 A minority of tribunals has adopted a more liberal approach, under which these criteria do not need to be considered cumulatively.13
IV. Second prong - A subjective definition
Almost all BITs and national legislation offer a definition of the investment and do so by following different approaches. In most situations, the definition is an asset-based definition and is typically expressed as encompassing: (i) any kind of asset; (ii) taking the form of moveable or immoveable property and the rights attached thereto, any kind of interest held in a company, claims under a contract with a financial value, intellectual property rights, rights held under a contract, such as a concession contract, and (iii) followed by a non-exhaustive list of examples.16 Less often, the definition might rather require the asset to be linked to an enterprise,17 or take the form of an exhaustive list,18 or of a general definition combined with a list excluding certain categories of economic operations.19 Recently, there seems to have been a tendency to include the criteria listed in the objective test under the definition of investment in BITs, thereby reducing the uncertainty around the existence and application of the dual test.20
Dolzer, R., The Notion of Investment in Recent Practice, in Charnovitz, S., Steger, D.P. and Van den Bossche, P., (eds.), Law in the Service of Human Dignity: Essays in Honour of Florentino Feliciano, Cambridge University Press, 2005.
Fadlallah, I., La notion d’investissement: vers une restriction à la compétence du CIRDI?, in Aksen, G. and Briner, R. (eds.), Global Reflections on International Law, Commerce and Dispute Resolution: Liber Amicorum in Honour of Robert Briner, ICC Publishing, 2005.
Gaillard, E., Identify or Define? Reflections on the Evolution of the Concept of Investment in ICSID Practice, in Binder, C. et al. (eds.), International Investment Law for the 21st Century : Essays in Honour of Christoph Schrueur, Oxford, 2009.
Gilles, A., La définition de l’investissement international, Larcier, 2012.
Krishan, D., A Notion of ICSID Investment, in Weiler, T. (ed.), Investment Treaty Arbitration and International Law, Vol. 1, 2008.
Legum, B., Defining Investment and Investor: Who is entitled to Claim?, Arbitration International, Vol. 2, Issue 4, 2006, pp. 521-526.
Matringe, J., La notion d’investissement, in Leben, C. (ed.), Droit international des investissements et de l’arbitrage transnational, Pedone, 2015, pp. 135-160.
Rubins, N., The Notion of “Investment”, in Horn, N. and Kroll, S., (eds.), Arbitrating Foreign Investment Disputes, 2004.
Williams, D. and Foote, S., Recent Developments in the Approach to Identifying an ‘Investment’ pursuant to Article 25 (1) of the ICSID Convention, in Brown, C. and Miles, K. (eds.), Evolution in Investment Treaty Law and Arbitration, Cambridge University Press, 2011.
Yala, F., The Notion of “Investment” in ICSID Case Law: A Drifting Jurisdictional Requirement? Some “Unconventional” Thoughts on Salini, SGS and Mihaly, Journal of International Arbitration, 2005.
Reed, L., Scanlon, Z., and Atanasova, D., Protected Investment, in Ruiz-Fabri, H. (ed.), EiPro Max Planck Encyclopaedia of International Procedural Law, 2019.
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