A phenomenon originally known in the field of international tax matters,1 treaty shopping (sometimes called treaty or nationality planning2) has also gained ground in investment arbitration. It is perceived as investors’ reaction to situations when the host State of their current or potential investment and the State of their nationality either do not have any investment protection treaty or have a treaty with only dissatisfying provisions. In either scenario, investors may seek to route their investment through a third State in order to secure (or shop) the most advantageous procedural or substantive protection of a treaty, usually by altering their nationality or by creating specific investment vehicles.3
Schreuer, C., Nationality Planning, in A. W. Rovine (ed.), Contemporary Issues in International Arbitration and Mediation (The Fordham Papers 2012, Martinus, 2013), pp. 17-28; Voon, T., Mitchell, A., Munro, J., Legal Responses to Corporate Maneuvering in International Investment Arbitration, Journal of International Dispute Settlement, 2014, 5, pp. 41-67; Van Os, R., Knottnerus, R., Dutch Bilateral Investment Treaties – A gateway to ‘treaty shopping’ for investment protection by multinational companies, SOMO, October 2011, p. 4; Henquet, T., Dutch Bilateral Investment Treaties and Investment Protection in the European Union: Some Observations on Non-Discrimination and Investment Restructuring, in N. Lavranos, R. Kok, et al. (ed.), Hague Yearbook of International Law (2010), p. 199; Chieh, L., Resolving Nationality Planning Issue through the Application of the Doctrine of Piercing the Corporate Veil in International Investment Arbitration, (2016/9(1)) Contemporary Asia Arbitration Journal, pp. 99 et seq.
II. Scenarios & Methods
Treaty shopping has been common in the context of corporate (re)structuring. However, natural persons can also resort to treaty shopping by changing their nationality or acquiring another one.
In the context of corporate restructuring, two methods are usually used:
III. Encouraging Factors
There are several factors that may encourage investors to practice treaty shopping:
V. Perception in Investment Case Law
Generally, in the case of no specific treaty limits, arbitral tribunals have considered that treaty shopping is not per se prohibited or illegitimate,6 unless it is done in bad faith, i.e., with the sole purpose to gain access to international arbitration when a dispute with the host State is already foreseeable.7
Aguas del Tunari v. The Republic of Bolivia, ICSID Case No. ARB/02/3, Decision on Respondent’s Objections to Jurisdiction, 21 October 2005, paras. 328-333 (“Respondent objects to Claimant’s assertion of jurisdiction implying that the availability of the BIT is the result of strategic changes in the corporate structure that somehow rise to the level of fraud or abuse of corporate form. The Tribunal observes that […] it is not uncommon in practice, and — absent a particular limitation — not illegal to locate one’s operations in a jurisdiction perceived to provide a beneficial regulatory and legal environment in terms, for examples, of taxation or the substantive law of the jurisdiction, including the availability of a BIT.”); Tidewater Inc., Tidewater Investment SRL, Tidewater Caribe, C.A., Twenty Grand Offshore, L.L.C., Point Marine, L.L.C., Twenty Grand Marine Service, L.L.C., Jackson Marine, L.L.C. and Zapata Gulf Marine Operators, L.L.C. v. The Bolivarian Republic of Venezuela, ICSID Case No. ARB/10/5, Decision on Jurisdiction, 8 February 2013, paras. 183-198 (“[I]t is a perfectly legitimate goal, and no abuse of an investment protection treaty regime, for an investor to seek to protect itself from the general risk of future disputes with a host state in this way. But the same is not the case in relation to preexisting disputes between the specific investor and the state.”); Bureau Veritas, Inspection, Valuation, Assessment and Control v. The Republic of Paraguay, ICSID Case No. ARB/07/9, Further Decision on Objections to Jurisdiction, 9 October 2012, para. 94 (“The fact that international groups of companies put in place different strategies and legal structures cannot of itself be considered to be inappropriate or even illegitimate, and cannot as such justify any suspicions of a hidden agenda as to a future litigation strategy, as alleged by Respondent”); HICEE B.V. v. The Slovak Republic, PCA Case No. 2009-11, Partial Award, 23 May 2011, para. 103 (“HICEE’s investment in the Slovak health insurance market is a structured one. This is not unusual, nor is there anything in the least reprehensible about it; structured investments are commonplace. The purpose is to secure advantages from incorporation or operation in a particular jurisdiction”); Mera Investment Fund Limited v. Republic of Serbia, ICSID Case No. ARB/17/2, Decision on Jurisdiction, 30 November 2018, para. 153 (“In any event, even if, as the Respondent suggests, the Claimant's sole aim had been to seek investment protection, this would in the view of the Arbitral Tribunal still be irrelevant. To structure an investment with the aim to seek protection of a BIT is not per se in breach of the good faith expected of an investor. It is ‘not uncommon in practice, and - absent a particular limitation - not illegal to locate one's operations in a jurisdiction perceived to provide a beneficial regulatory and legal environment in terms, for examples [sic], of taxation or the substantive law of the jurisdiction, including the availability of a [bilateral investment treaty].”); Orascom TMT Investments S.a.r.l. v. People's Democratic Republic of Algeria, ICSID Case No. ARB/12/35, Award, 31 May 2017, para. 542 (“It goes without saying that structuring an investment through several layers of corporate entities in different states is not illegitimate. Indeed, the structure may well pursue legitimate corporate, tax, or pre-dispute BIT nationality planning purposes. In the field of investment treaties, the existence of a vertical corporate chain and of treaty protection covering ‘indirect’ investments implies that several entities in the chain may claim treaty protection, especially where a host state has entered into several investment treaties. In other words, several corporate entities in the chain may be in a position to bring an arbitration against the host state in relation to the same investment. This possibility, however, does not mean that the host state has accepted to be sued multiple times by various entities under the same control that are part of the vertical chain in relation to the same investment, the same measures and the same harm.”); (“The Tribunal considers that, in principle it is for the investor to decide how it wishes to structure its investment and what corporate organisation it wishes to adopt for the investment, including the manner in which resources, activities and control are allocated between different corporate vehicles. The corporate structure of the investment is indeed part of the investor's prerogatives and responsibility. Depending on the structure adopted, the corporate vehicle used for the investment which becomes party to the investment contract may rely on the resources of the group to which it belongs to secure the investment, including funding, technology or other contributions. Distinct corporate identities serve a legitimate function in the cross-border mobilisation of investment. As long as the contracting parties are not mislead about the corporate structure and no laws and regulations are violated, there should be no objection to the choice made by the investor in this respect.”).
Phoenix Action LTD. v. The Czech Republic, ICSID Case No. ARB/06/5, Award, 15 April 2009, paras. 100 (“The purpose of the international mechanism of protection of investment through ICSID arbitration cannot be to protect investments made in violation of the laws of the host State or investments not made in good faith, obtained for example through misrepresentations, concealments or corruption, or amounting to an abuse of the international ICSID arbitration system. In other words, the purpose of international protection is to protect legal and bona fide investments.”); 142-144 (“The evidence indeed shows that the Claimant made an ‘investment’ not for the purpose of engaging in economic activity, but for the sole purpose of bringing international litigation against the Czech Republic. This alleged investment was not made in order to engage in national economic activity, it was made solely for the purpose of getting involved with international legal activity. The unique goal of the ‘investment’ was to transform a pre-existing domestic dispute into an international dispute subject to ICSID arbitration under a bilateral investment treaty. This kind of transaction is not a bona fide transaction and cannot be a protected investment under the ICSID system [...]. The conclusion of the Tribunal is therefore that the Claimant’s initiation and pursuit of this arbitration is an abuse of the system of international ICSID investment arbitration. [...] It is the duty of the Tribunal not to protect such an abusive manipulation of the system of international investment protection under the ICSID Convention and the BITs. It is indeed the Tribunal’s view that to accept jurisdiction in this case would go against the basic objectives underlying the ICSID Convention as well as those of bilateral investment treaties. The Tribunal has to ensure that the ICSID mechanism does not protect investments that it was not designed for to protect, because they are in essence domestic investments disguised as international investments for the sole purpose of access to this mechanism.’’); Gustav F W Hamester GmbH & Co KG v. Republic of Ghana, ICSID Case No. ARB/07/24, Award, 18 June 2010, paras. 123-124 (“The Tribunal considers, as was stated for example in Phoenix v. Czech Republic, that: "States cannot be deemed to offer access to the ICSID dispute settlement mechanism to investments not made in good faith." An investment will not be protected if it has been created in violation of national or international principles of good faith; by way of corruption, fraud, or deceitful conduct; or if its creation itself constitutes a misuse of the system of international investment protection under the ICSID Convention. It will also not be protected if it is made in violation of the host State’s law (as elaborated, e.g. by the tribunal in Phoenix'). […] These are general principles that exist independently of specific language to this effect in the Treaty.”); Cervin Investments S.A. & Rhone Investissements S.A. v. Republic of Costa Rica, ICSID Case No. ARB/13/2, Decision on Jurisdiction, 15 December 2014, paras. 287-292 (“Las Demandantes no contradicen, en cuanto a su principio, el argumento de la Demandada de que una reestructuración dentro de un mismo grupo realizada con el único propósito de manipular la jurisdicción del CIADI respecto de una controversia previsible constituiría un abuso de derecho. […] El punto medular de la objeción a la competencia planteada por la Demandada es que los accionistas mexicanos del Grupo Zeta realizaron la cesión de las acciones de GNZ y Tropigás a compañías suizas por ellos controladas, con el sólo propósito de poder beneficiarse del APPRI y plantear un arbitraje ante el CIADI con respecto a una controversia anterior o previsible.”); Renée Rose Levy and Gremcitel S.A v. Republic of Peru, ICSID Case No. ARB/11/17, Award, 9 January 2015, paras. 180-195 (“[A] restructuring carried out with the Intention to invoke the treaty’s protections at a time when the dispute is foreseeable may constitute an abuse of process depending on the circumstances. […] [T]he Tribunal considers that a global evaluation of the facts of this case patently confirms that the Claimants’ restructuring constitutes an abuse.”); Lao Holdings N.V. v. Lao People’s Democratic Republic, ICSID Case No. ARB(AF)/12/6, Decision on Jurisdiction, 21 February 2014, paras. 69-83 (“The Tribunal considers that it is clearly an abuse for an investor to manipulate the nationality of a company subsidiary to gain jurisdiction under an international treaty at a time when the investor is aware that events have occurred that negatively affect its investment and may lead to arbitration. In particular, abuse of process must preclude unacceptable manipulations by a claimant acting in bad faith who is fully aware prior to the change in nationality of the ‘legal dispute’, as submitted by the Respondent.”); Philip Morris Asia Limited v. The Commonwealth of Australia, PCA Case No. 2012-12, Award on Jurisdiction and Admissibility, 17 December 2015, paras. 535-588 (“For the Tribunal, the key question is whether a dispute about plain packaging was reasonably foreseeable before the restructuring, in line with jurisprudence, the Tribunal considers that a dispute in the legal sense is a disagreement about rights, not merely about policy. It is clear that the dispute contemplated here was a dispute about rights. […] [T]he Tribunal finds that the Claimant has not been able to prove that tax or other business reasons were determinative for the restructuring. From all the evidence on file, the Tribunal can only conclude that the main and determinative, if not sole, reason for the restructuring was the intention to bring a claim under the Treaty, using an entity from Hong Kong. […] [T]he Tribunal cannot but conclude that the initiation of this arbitration constitutes an abuse of rights, as the corporate restructuring by which the Claimant acquired the Australian subsidiaries occurred at a time when there was a reasonable prospect that the dispute would materialise and as it was carried out for the principal, if not sole, purpose of gaining Treaty protection. Accordingly, the claims raised in this arbitration are inadmissible and the Tribunal is precluded from exercising jurisdiction over this dispute.”); Caratube International Oil Company LLP, Mr. Devincci Salah Hourani v. Republic of Kazakhstan, ICSID Case No. ARB/13/13, Award, 27 September 2017, para. 395 (“Based on the foregoing, and in light of the fact that the Tribunal has found that it must adopt a cautious approach when applying the abuse of process doctrine and a high threshold regarding the burden of proof, the Tribunal concludes that the Respondent has not convincingly shown that the Claimants are committing an abuse of process by asserting their claims based on the Contract and the FIL in this Arbitration.”); Mobil Corporation, Venezuela Holdings B.V. and others v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/07/27, Decision on Jurisdiction, 10 June 2010, paras. 167-207 (“It thus appears to the Tribunal that the main, if not the sole purpose of the restructuring was to protect Mobil investments from adverse Venezuelan measures in getting access to ICSID arbitration through the Dutch-Venezuela BIT. […] Such restructuring could be "legitimate corporate planning" as contended by the Claimants or an "abuse of right" as submitted by the Respondents. It depends upon the circumstances in which it happened. […] With respect to pre-existing disputes, the situation is different and the Tribunal considers that to restructure investments only in order to gain jurisdiction under a BIT for such disputes would constitute, to take the words of the Phoenix Tribunal, "an abusive manipulation of the system of international investment protection under the ICSID Convention and the BITs". The Claimants seem indeed to be conscious of this, when they state that they "invoke ICSID jurisdiction on the basis of the consent expressed in the Treaty only for disputes arising under the Treaty for action that the Respondent took or continued to take after the restructuring was completed" […] The Tribunal thus: b. has no jurisdiction under the ICSID Convention and the BIT with respect to any dispute born before those dates.”); Transglobal Green Energy, LLC & Transglobal Green Panama, S.A. v. Republic of Panama, ICSID Case No. ARB/13/28, Award, 2 June 2016, paras. 100-119 (“To determine whether an abuse of rights has occurred, tribunals have considered all the circumstances of the case, including, for instance, the timing of the purported investment, the timing of the claim, the substance of the transaction, the true nature of the operation, and the degree of foreseeability of the governmental action at the time of restructuring. For purposes of the analysis of this objection, the Tribunal will consider the timing of the alleged investment, the terms of the transaction in which it was to be effected, and some relevant incidents in the course of this proceeding. […] [T]he Tribunal upholds Respondent’s objection to its jurisdiction on the ground of abuse by Claimants of the investment treaty system by attempting to create artificial international jurisdiction over a pre-existing domestic dispute.”); Pac Rim Cayman LLC v. The Republic of El Salvador, ICSID Case ARB/09/12, Decision on the Respondent’s Jurisdictional Objections, 1 June 2012, paras. 2.96-2.100 (“The Tribunal first considers the point in time when a change of nationality can become an abuse of process. […] [T]he Tribunal accepts the Respondent’s general submission that: "... it is clearly an abuse for an investor to manipulate the nationality of a shell company subsidiary to gain jurisdiction under an international treaty at a time when the investor is aware that events have occurred that negatively affect its investment and may lead to arbitration." In particular, abuse of process must preclude unacceptable manipulations by a claimant acting in bad faith and fully aware of an existing or future dispute”.); Milicom International Operations B.V., Sentel GSM SA v. The Republic of Senegal, ICSID Case No. ARB/08/20, Decision of Jurisdiction of the Arbitral Tribunal, 16 July 2010, para. 84 (“It is a fact that the protection afforded by an agreement of the type which is invoked and by the ICSID Convention must be refused if contrary to good faith. […] [T]he choice of the subsidiaries was also made considering the protection that their domicile could afford them, this fact alone could not constitute an abusive solution, as long as circumstances have not been established which would demonstrate that such choice was made unknown to the other party and under artificial conditions; all conditions are not met in the present case.”); ConocoPhillips Petrozuata B.V., ConocoPhillips Hamaca B.V. and ConocoPhillips Gulf of Paria B.V. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/07/30, Decision on Jurisdiction and the Merits, 3 September 2013, paras. 279-280 (“It is the case, […] that the only business purpose of the restructuring, […] was to be able to have access to ICSID proceedings. […] According to its evidence, which was not challenged, ConocoPhillips invested approximately U.S.$ 434 million on the three projects after the decision to restructure was made in mid-2005. The total ConocoPhillips’ expenditure after the enactment of the Investment Law was U.S.$ 5.3 billion. For the Tribunal, this continued substantial involvement in the development and operation of the projects is evidence telling strongly against any finding of treaty abuse.”); MNSS B.V. and Recupero Credito Acciaio N.V. v. Montenegro, ICSID Case No. ARB(AF)/12/8, Award, 4 May 2016, para. 182 (“As held by other tribunals, to structure an investment with the aim to seek protection of a BIT is not per se in breach of the good faith expected of an investor. Tribunals have found that an investor would not qualify for the protection of the BIT concerned only if the nationality is changed after the dispute has arisen or "when the relevant party can see an actual dispute or can foresee a specific future dispute as a very high probability and not merely as a possible controversy." […] In the instant case, the dispute with MNSS arose after the Assignment Agreement and the Respondent was party to the Assignment Agreement.”); Cementownia “Nowa Huta” S.A. v. Republic of Turkey (I), ICSID Case No. ARB(AF)/06/2, Award, 17 September 2009, para. 117 (“As other tribunals have found, treaty shopping per se is not in principle to be disapproved of, but in some instances it has been found to be a mere artifice employed to manufacture an international dispute out of a purely domestic dispute.”).
Several limits to treaty shopping can be envisaged:
Gambia – Turkey BIT (2013), Art. 1(2) (“The term ‘investor’ means: (a) natural persons having the nationality of a Contracting Party according to its laws, (b) companies, corporations, firms, business partnerships incorporated or constituted under the law in force of a Contracting Party and having their registered offices together with substantial activities in the territory of that Contracting Party […]”); India – Lithuania BIT (2011), Art. 1(2) (“The term ‘investor’ means any natural person or entity of one of the Contracting Parties that has made an investment in the territory of the other Contracting Party in accordance with its national legislation […] ii) An ‘entity’ means in particular, though not exclusively, a company, an enterprise, a corporation or association incorporated or constituted in accordance with the laws of that Contracting Party and engaged in substantial activities in the territory of that Contracting Party”); Burundi – Turkey BIT (2017) (“The term ‘investor’ means: (a) natural persons having the nationality of a Contracting Party according to its laws, (b) companies, corporations, firms, business partnerships incorporated or constituted under the law in force of a Contracting Party and having their registered offices together with substantial activities in the territory of that Contracting Party”); Poland – Switzerland BIT (1989), Art. 1 (“The term ‘investor’ refers with regard to either Contracting Party to: a) natural persons having thee nationality of that Contracting Party; b) legal entities, including companies, corporations, business associations and other organisations, which are constituted or otherwise duly organised under thee law of that Contracting Party and have their seat, together with real economic activities, in the territory of that same Contracting Party; c) legal entities established under the law of any country which are, directly or indirectly, controlled by nationals of that Contracting Party or by legal entities having their seat, together with real economic activities, in the territory of that Contracting Party; it being understood that control requires a substantial part in the ownership.”); Montenegro – Switzerland BIT (2005), Art. 1 (“(2) The term ‘investor’ means with regard to either Contracting Party: (a) natural persons who, according to the law of that Contracting Party, are considered to be its nationals; (b) legal entities, including companies, corporations, business associations and other organisations, which are constituted or otherwise duly organised under the law of that Contracting Party and have their seat, together with real economic activities, in the territory of the same Contracting Party.”); Qatar – Romania BIT (1996), Art. 1 (“(1) The term ‘investor’ refers with regard to either Contracting Party to: a) natural persons who, according to the law of that. Contracting Party, are considered to be its cit1zens: b) - in respect of Romania: legal entities, including companies, corporations, business associations and other organizations, which are constituted or otherwise duly organized under the law of Romania and have their seat, together with real economic activities in the territory of Romania. In respect of the State of Qatar: the Government. and legal entitles, including companies, corporations, business associations and other organizations, which are constituted or otherwise duly organized under the law of the State of Qatar and have their seat, together with real economic activities in the territory of the State of Qatar.”); Argentina – Romania BIT (1993), Art. 1(2) (“The term ‘investor’ means […] b) any legal person constituted in accordance with the laws and regulations of a Contracting Party and having its seat together with real economic activities in the territory of that Contracting Party.”).
Albania – Arzerbaijan BIT (2012), Art. 11 (“Contracting Party may deny the benefits of this Agreement, including the right to commence or to continue dispute settlement proceedings, to an investor of the other Contracting Party and to the investments of that investor, if: - the investor is owned or controlled by persons having the nationality of a State that is not a Contracting Party or of the denying Party; - or the investor conducts no substantial business activities in the state territory of the other Contracting Party […]”); Central America-Dominican Republic-United States Free Trade Agreement (DR-CAFTA) (2004), Art. 10.12: Denial of Benefits. 2. (“Subject to Articles 18.3 (Notification and Provision of Information) and 20.4 (Consultations), a Party may deny the benefits of this Chapter to an investor of another Party that is an enterprise of such other Party and to investments of that investor if the enterprise has no substantial business activities in the territory of any Party, other than the denying Party, and persons of a non-Party, or of the denying Party, own or control the enterprise.”); Azerbaijan – UAE BIT (2006), Art. 15 (“Subject to consultations a Contracting Party may deny the benefit of this Agreement to the investors and the investments of the other Contracting Party if such State or investors have no substantial business activities in the territory of the other Contracting Party.”); Austria – Bosnia and Herzegovina BIT (2000), Art. 10 (“A Contracting Party may deny the benefits of this Agreement to an investor of the other Contracting Party and to its investments, if investors of a Non-Contracting Party own or control the first mentioned investor and that investor has no substantial business activity in the territory of the Contracting Party under whose law it is constituted or organized.”); Austria – Malta BIT (2002), Art. 10 (“A Contracting Party may deny the benefits of this Agreement to an investor of the other Contracting Party and to its investments, if investors of a Non-Contracting Party own or control the first mentioned investor and that investor has no substantial business activity in the territory of the Contracting Party under whose law it is constituted or organized.”); Cyprus – Hungary BIT (1989), Art. XII (“Each Contracting Party reserves the right to deny to a company of the other Contracting Party the benefits of this Treaty if nationals of a third country own or control the company and: a. the denying Contracting Party does not maintain normal economic relations with the third country; or b. the company has no substantial business activities in the territory of the Contracting Party under whose laws it is constituted or organized.”); Rwanda – United States of America BIT (2008), Art. 17(2) (“A Party may deny the benefits of this Treaty to an investor of the other Party that is an enterprise of such other Party and to investments of that investor if the enterprise has no substantial business activities in the territory of the other Party and persons of a non-Party, or of the denying Party, own or control the enterprise.”); Agreement Establishing The African Continental Free Trade Area (2018), Protocol on Trade in Services Art. 24 (“Subject to prior notification and consultation, a State Party may deny the benefits of this Protocol to service suppliers of another State Party where the service is being supplied by a juridical person of a non-State Party, without real and continuous link with the economy of the State Party or with negligible or no business operations in the territory of the other State Party or any other State Party.”).
Phoenix Action Ltd v. Czech Republic, ICSID Case No. ARB/06/5, Award, 15 April 2009, paras. 77 (“Also, international agreements like the ICSID Convention and the BIT have to be analyzed with due regard to the requirements of the general principles of law, such as the principle of non-retroactivity or the principle of good faith, also referred to by the Vienna Convention. This has been stated for the WTO law stemming from the Marrakech Agreements of 1994: ‘States in their treaty relations, can contract out of one, more or in theory, all rules of general international law (other than those of jus cogens), but they cannot contract out of the system of international law. As soon as States contract with one another, they do so automatically and necessarily within the system of international law.’ This has been stated also with force by the Appellate Body of the WTO Dispute Settlement Mechanism in its first rendered decision, where it stated: ‘The General Agreement is not to be read in clinical isolation from public international law.’”), 100–110 (“The purpose of the international mechanism of protection of investment through ICSID arbitration cannot be to protect investments made in violation of the laws of the host State68 or investments not made in good faith, obtained for example through misrepresentations, concealments or corruption, or amounting to an abuse of the international ICSID arbitration system. In other words, the purpose of international protection is to protect legal and bona fide investments. […]”), 136–140 (“The timing of the investment is a first factor to be taken into account to establish whether or not the Claimant's engaged in an abusive attempt to get access to ICSID. Phoenix bought an ‘investment’ that was already burdened with the civil litigation as well as the problems with the tax and customs authorities. The civil litigation was ongoing since fourteen months, the criminal investigation was ongoing since twenty months, and the bank accounts had been frozen for eighteen months. The Claimant was therefore well aware of the situation of the two Czech companies in which it decided to ‘invest’. In other words, all the damages claimed by Phoenix had already occurred and were inflicted on the two Czech companies, when the alleged investment was made. […]”), 142–144 (“The evidence indeed shows that the Claimant made an ‘investment’ not for the purpose of engaging in economic activity, but for the sole purpose of bringing international litigation against the Czech Republic. This alleged investment was not made in order to engage in national economic activity, it was made solely for the purpose of getting involved with international legal activity. The unique goal of the ‘investment’ was to transform a pre-existing domestic dispute into an international dispute subject to ICSID arbitration under a bilateral investment treaty. This kind of transaction is not a bona fide transaction and cannot be a protected investment under the ICSID system.”); Cementownia “Nowa Huta” S.A. v. Republic of Turkey, ICSID Case No. ARB(AF)/06/2, Award, 17 September 2009, paras. 117 (“The Claimant was frank about the reasoning underlying its claim. According to Mr. Uzan, he transferred the shares because he feared that ‘the government would unilaterally take at least the transmission rights of the companies’ and he ‘wanted to protect our interests.’ (Kemal Uzan witness statement, para. 32). The way in which he claimed to have protected his interests was to transfer his shares to a foreign company that his family's company, the Rumeli Group, in turn controlled. This, if true, is unabashedly treaty shopping. As other tribunals have found, treaty shopping per se is not in principle to be disapproved of, but in some instances it has been found to be a mere artifice employed to manufacture an international dispute out of a purely domestic dispute. Given the dispute's history and the temporal aspects of the case (a mere twelve days elapsed between the claimed acquisition of shares in companies already on notice of potential termination of the concessions and the actual termination measures themselves), had the Tribunal found that the share transfers actually did occur on May 30, 2003, it would have held that this case fell within the category of an artifice. Even if they did occur, the share transfers would not have been bona fide transactions, but rather attempts (in the face of government measures dating back some years about to culminate in the concessions' termination) to fabricate international jurisdiction where none should exist.”), 154–157 (“[…] Here the Claimant’s conduct is not even close to proper conduct. Had Cementownia actually proven that on May 30, 2003 it legally acquired the shares of CEAS and Kepez, there would still be the question of whether this was treaty shopping of the wrong kind, in the words of Phoenix Action, ‘a transfer of the national economic interests to a foreign company in an attempt to seek protections under a BIT.’ The problem for the Claimant is that the evidence shows that it did not even interpose itself between Mr. Kemal Uzan and the Republic of Turkey. The transaction that would pose the issue of whether the corporate veil should be pierced was fabricated. The Claimant’s conduct in bringing the instant claim fails to meet the requisite standard of good faith conduct. The claim is manifestly ill-founded.”); Mobil Cerro Negro Holding, Ltd., Mobil Cerro Negro, Ltd., Mobil Corporation and others v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/07/27, Decision on Jurisdiction, 10 June 2010, para. 169 (“The Tribunal first observes that in all systems of law, whether domestic or international, there are concepts framed in order to avoid misuse of the law. Reference may be made in this respect to "good faith" ("bonne foi"), "détournement de pouvoir" (misuse of power) or "abus de droit" (abuse of right).”).
Mihaly International Corporation v. Sri Lanka, ICSID Case No. ARB/00/2, Award, 15 March 2002, para. 24 (“It follows that as neither Canada nor Mihaly (Canada) could bring any claim under the ICSID Convention, whatever rights Mihaly (Canada) had or did not have against Sri Lanka could not have been improved by the process of assignment with or without, and especially without, the express consent of Sri Lanka, on the ground that nemo dat quod non habet or nemo potiorem potest transfere quam ipse habet. That is, no one could transfer a better title than what he really has. Thus, if Mihaly (Canada) had a claim which was procedurally defective against Sri Lanka before ICSID because of Mihaly (Canada)'s inability to invoke the ICSID Convention, Canada not being a Party thereto, this defect could not be perfected vis-à-vis ICSID by its assignment to Mihaly (USA). To allow such an assignment to operate in favour of Mihaly (Canada) would defeat the object and purpose of the ICSID Convention and the sanctity of the privity of international agreements not intended to create rights and obligations for non-Parties. Accordingly, a Canadian claim which was not recoverable, nor compensable or indeed capable of being invoked before ICSID could not have been admissible or able to be entertained under the guise of its assignment to the US Claimant. A claim under the ICSID Convention with its carefully structured system is not a readily assignable chose in action as shares in the stock-exchange market or other types of negotiable instruments, such as promissory notes or letters of credit. The rights of shareholders or entitlements of negotiable instruments holders are given different types of protection which are not an issue in this case before the Tribunal. This finding is without prejudice to the right of Mihaly (Canada) to pursue its claims, if any, before another otherwise competent forum.”); Banro American Resources, Inc. and Société Aurifère du Kivu et du Maniema S.A.R.L. v. Democratic Republic of the Congo, ICSID Case No. ARB/98/7, Award, 1 September 2000, paras. 5–6 (“Even if we admit –that which, as we have demonstrated, has not been established by the case file– that Banro American was an original shareholder of SAKIMA S.A.R.L. and that the transfer of…shares of SAKIMA made for its benefit…by Banro Resource was valid, Banro American could not nonetheless avail itself, on a derived basis, of the consent to ICSID arbitration provided by Banro Resource under Article 35. In order to consider the right of access to ICSID arbitration, available under Article 35, as ‘extended' or ‘transferred' to Banro American by applying other provisions of the Mining Convention, it would still be necessary that such right existed first for the benefit of the entity Banro Resource. Such is not the case, given that Banro Resource, a Canadian company, never had, at any time, jus standi before ICSID. Having never existed for the benefit of Banro Resource, the right of access to ICSID cannot be viewed as having been ‘extended' or ‘transferred' to its affiliate, Banro American. The Tribunal is certainly aware of the general principle of interpretation whereby a text ought to be interpreted in the manner that gives it effect - ut magis valeat quam pereat. However, this principle of interpretation should not lead to confer, a posteriori, to a provision deprived of its object and purpose a result that goes against its clear and explicit terms. Due to its Canadian nationality, Banro Resource did not have -and does not have- access to ICSID arbitration: the clause under Article 35 is, and has always been, without effect in its regard. Given that it is inapplicable vis-à-vis the beneficiary that it expressly mentions -Banro Resource-, this clause cannot take effect and apply vis-à-vis another entity -Banro American- to which it would have been ‘extended' or ‘transferred.'”); African Holding Company of America, Inc. and Société Africaine de Construction au Congo S.A.R.L. v. Democratic Republic of the Congo, ICSID Case No. ARB/05/21, Sentence sur les déclinatoires de compétence et la recevabilité, 29 July 2008, para. 61 («Les deux parties conviennent également que le cédant ne peut pas céder plus de droits qu'il n'en a. Les limites de la cession étaient devenues manifestes dans l'affaire Mihaly c. Sri Lanka et ont aussi été examinées par les parties à la présente affaire dans le contexte de l'affaire Banro c. Congo, qui porte également sur une réclamation contre la RDC devant le CIRDI. Dans cette affaire, un investisseur canadien avait cédé à une filiale américaine les actions qu'il détenait dans une société locale dont les avoirs avaient été saisis, et cette cession était intervenue après la saisie. Dans cette affaire, le tribunal s'était déclaré incompétent du fait que la RDC n'avait accepté l'arbitrage qu'avec la société canadienne et sa filiale locale, et non pas avec une filiale américaine. Étant donné que le Canada n'est pas partie à la Convention du CIRDI, la société canadienne n'avait pas le droit d'engager cette procédure d'arbitrage et ne pouvait donc pas céder à la filiale américaine des droits qu'elle n'avait pas. La Défenderesse a affirmé à juste titre à l'audition que le tribunal dans l'affaire Banro a rejeté la cession d'actions comme étant un « montage juridique. ») ; Société Générale v. Dominican Republic, LCIA Case No. UN 7927, Award on Preliminary Objections to Jurisdiction, 19 September 2008, para. 111 (“Another limit that has implications in this matter is the consent of the Respondent to the extension of the arbitration clause or agreement to a different beneficiary. While in this case apparently no arbitration clause under a treaty benefited AES, and thus, none could be transferred to the Claimant, there is a question about the consent to the transaction and related information available to the Respondent. Just as the Respondent cannot ignore that the Claimant became a protected investor following its purchase of the assets from AES, it cannot be held to have accepted that such protected investor could become entitled to claim for acts and events that took place before it actually became eligible under the Treaty. The principle upheld in Mihaly to the effect that no one can transfer a better title than he actually has without the consent of the host State is equally applicable here to a situation in which no one can claim without such consent a retroactive application of treaty rights to acts that occurred before the Claimant became an investor under the Treaty.”); Douglas, The International Law of Investment Claims (2009), pp. 461, 869.