Mr Dimitrios Andriopoulos

Associate - Koutalidis Law Firm

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Genuine and Effective Link

I. Definition


Having its roots in the public international law field of “diplomatic protection”,1 yet not forming part of customary international law,2 the doctrine of “genuine and effective link” pertains to a test of genuine connection and closeness between a legal or natural person and its home State, in order for such person to be able to invoke the nationality of that State.


In investment treaty law, the “genuine and effective link” doctrine has not been directly discussed in the context of jurisdiction ratione materiae, but it can conceivably be linked to the issue of ownership and control in International Investment Agreements (“IIAs”), and may be relevant in determining whether there exists a required link between an investment and an investor.

II. Permutations of the "genuine and effective" link doctrine in other issues

A. Jurisdiction ratione personae


In international investment law, direct reference to this doctrine has only been made in the context of jurisdiction ratione personae, with respondent States objecting to purported investors invoking the nationality of a State with which they have no actual connection.3 Investment tribunals have so far unanimously rejected such contentions.4

B. Law of the sea

III. Genuine and effective link between investment and investor


To qualify as a “protected investment”, a putative investment must be linked to a qualifying investor, namely, an investor that satisfies the ratione personae jurisdictional requirements of a particular IIA.6 In other words, an investment must be genuinely and effectively linked to an investor, and, by extension, to that investor’s home State.

IV. Treaty practice

V. Indirect investment


While, in principle, investments can be structured through several corporate layers of subsidiaries and other affiliates (“indirect investment”), for the purposes of establishing a genuine and effective link between the investment and the investor, ownership or control must be established in each layer.10 Investment claims with only a “remote connection to the affected company” must be cut off in the sense that they do not comport with the host State’s consent to arbitration.11

VI. Portfolio investment


Baumgartner, J., Treaty Shopping in International Investment Law, 2016, Chapters 4 and 5.

International Law Commission, Draft Articles on Diplomatic Protection – With Commentaries 2006.

McLachlan, C., Shore, L. and Weiniger, M., International Investment Arbitration: Substantive Principles, 2nd ed., 2017, Chapter 6.

Reed, L., Scanlon, Z. and Atanasova, D., Protected Investment, in Fabri, H.R. (ed.), Max Planck Encyclopedia of International Procedural Law, 2018.

United Nations Conference on Trade and Development, World Investment Report 2016 Investor Nationality: Policy Challenges, 2016.

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