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I. Overview


The majority of international investment cases involve companies as investors.1 While international and municipal laws generally regard companies as distinct from their shareholders,2a wrong done to the company frequently causes prejudice to its shareholders.”3 (See further Indirect Loss Claims)


Historically, shareholders had to rely on the discretionary right of the State of their nationality to exercise diplomatic protection in disputes arising from State measures against the shareholders’ companies. International law did not provide an autonomous right of action for shareholders to bring claims for adverse interference by a host State against the shareholder’s company.4 


With the proliferation of international investment treaties, however, shareholder claims “against measures taken by a State vis-à-vis the company in which they hold shares is a common occurrence in modern investor-State arbitration.”5 Diplomatic protection has become a last resort solution in cases where treaty protection remains unavailable.6


In the case of investment treaties, arbitral tribunals have consistently interpreted these treaties as lex specialis granting shareholders wide access to investor-State dispute settlement to claim for their affected interest, independently from the corporate entity.7 (See further Direct Claims)

II. Locus Standi of shareholders


It is jurisprudence constante that shareholders have standing to bring autonomous investment treaty claims against host States for interference with their companies,8 whether the investor is a foreign legal person, an individual, or an entity locally incorporated in the host State.9


The legal standing of shareholders to submit claims against host States depends on the wording of the legal instrument under which the arbitral tribunal is constituted.10 By contrast, municipal law is not authoritative, but operates by renvoi to assist arbitral tribunals in defining the contours of the shareholding rights and deciding whether the shareholder claims meet treaty requirements.11

A. Shareholders as investors - ratione personae

1. Common features of shareholding

2. Nationality of shareholders


Notably, under ICSID treaty-based arbitration, Article 25 of the ICSID Convention establishes a two-fold regime with regard to the jurisdictional requirement of “national of another Contracting State”:

  1.  Natural persons who had the nationality of a Contracting State other than the State party on the day they file for arbitration are entitled to bring a claim.16
  2. Upon consent between the Contracting States as reflected in the wording of the applicable treaty, locally incorporated corporations may bring claims against host States provided that on the date they file for dispute they were subject to foreign control.17 ICSID tribunals have recognized this exception without obstacle.18 (See further Relevant Date and Foreign Control)

B. Investment of shareholders - ratione materiae


In this respect, the majority of bilateral or multilateral investment treaties operate with permissive definitions of what constitutes an "investment" for the purpose of jurisdiction, often referring to "every kind of asset" including "shares,"20 or encompassing a direct reference to "shares of stock, bond interest or participation" in corporations.21 A protected investment thus may concern minority or majority shareholdings,22 which may be direct or indirect through another company,23 and controlling or non-controlling.24


Accordingly, absent any specific treaty restrictions, shareholders typically have legal standing irrespective of the amount of shares they own or the effective mode of corporate control.27 In addition to shares, the foreign shareholder’s protected investment can also be composed of (i) contractual rights, possibly co-owned with the local company,28 and (ii) direct contribution in the form of money or physical assets.29 (See further Contribution of Money or Assets)

C. Timing of shareholding - ratione temporis

For further analysis, see Jurisdiction Ratione Temporis.


Unless expressly stated otherwise in the applicable instrument, treaties do not apply retroactively under customary international law.31 For an arbitral tribunal to have jurisdiction ratione temporis, the dispute must fall within the period of validity of the treaty invoked. In the context of shareholder claims, the dispute must stem from a conduct of the host State having affected the shareholder at the time the applicable treaty is into force.32

III. Admissibility of shareholder claims

A. Grounds of shareholder claims


A foreign shareholder may bring claims against host States for loss in their capacity as (i) shareholder, (ii) party to a contract, and (iii) direct owner of property or other assets.


ISDS practice shows that foreign shareholders typically argue violations of the following standards: fair and equitable treatment;36 full protection and security;37 and expropriation,38 under three scenarios.

  1. First, foreign shareholders may bring claim for direct interference affecting the rights connected to the shareholding, namely the shareholder’s administrative rights (to attend general meetings, vote and appoint board members) and economic rights (to receive dividends and a proportionate share of the company’s residual value upon liquidation).39 (See further Direct Claims)
  2. Second, foreign shareholders may bring claim for reflective or indirect loss incurred by way of direct adverse interference by the host State with the local company. Here, the shareholder is suing for the consequential diminution of the value of its shares caused by acts directed to the company itself.40
  3. Lastly, foreign shareholders may bring claims in lieu of the local company in which they hold shares, irrespective of any personal loss. This type of indirect claim is commonly referred to as “representative claim” and entails that the applicable treaty expressly provides for it, such as Article 1117 of the NAFTA.41

B. Limits to the admissibility of shareholder claims


Limits to the admissibility of shareholder claims have progressively emerged from the ISDS practice in attempt to prevent abusive proceedings. As a primary rule, the scope of compensation of the shareholders is limited to the value of their equity participation in the company or direct assets,42 exclusive of these owned by the locally incorporated company.43 (See further Indirect Ownership, Section IV)


Further, some tribunals have discussed the application of a “cut-off point” from the protection under investment treaties whenever the foreign shareholder’s interest in a company is too miniscule or remote.44


Other tribunals have ruled that the acquisition of shareholding for a nominal price does not pass the “contribution” test to qualify as an investment under the ICSID Convention.45


Another limit flows from the timing of the shareholding acquisition, which must not be fraudulent for the purpose of jurisdiction.46 Similarly, arbitral tribunals have refused to exercise jurisdiction over shareholder claims if the sole purpose of a corporate restructuring was to access investment treaty protections.47 (See further Abuse of Process and Treaty Shopping.) 


The distinction between beneficial48 and nominal ownership of shares may also come into play depending on the treaty provisions.49


Arato, J., Claussen, K., Lee, J. and Zarra, G., Reforming Shareholder Claims in ISDS, 2019

Alexandrov, S.A., The “Baby Boom” of Treaty-Based Arbitrations and the Jurisdiction of ICSID Tribunals – Shareholders as “Investors” under Investment Treaties, The Journal of World Investment and Trade, 2005

Baumgartner, J., The Significance of the Notion of Dispute and Its Foreseeability in an Investment Claim Involving a Corporate Restructuring, The Journal of World Investment & Trade 18, 2017

Bentolila, D., Shareholders’ Action to Claim for Indirect Damages in ICSID Arbitration, Trade Law and Development, 2010.

Bottini, G., Chapter 15: Indirect Shareholder Claims, in Kinnear, M., Fischer, G.R., Almeida, J.M., Torres, L.F. and Bidegain, M.U. (eds.), Building International Investment Law: The First 50 years of ICSID, Kluwer Law International, 2015.

Bottini, G., Admissibility of Shareholder Claims under Investment Treaties, Cambridge University Press, 2020.

Clodfelter, M.A., and Klingler, J.D., Reflective Loss and its Limits under International Investment Law, in Beharry, C. L. (ed.), Contemporary and Emerging Issues on the Law of Damages and Valuation in International Investment Arbitration

Cohen Smutny, A., Claims of Shareholders in International Investment Law, in Binder, B. and Others (eds.), International Investment Law for the 21st Century: Essays in Honour of Christoph Schreuer, 2009

Demirkol, E.C., Admissibility of Claims for Reflective Loss Raised by the Shareholders in Local Companies in Investment Treaty Arbitration, ICSID Review, Vol. 30, No. 2, 2015.

Dumberry, P., The Legal Standing of Shareholders before Arbitral Tribunals: Has Any Rule of Customary International Law Crystallised?, Michigan State Journal of International Law, 2010

Gaukrodger, D., Investment Treaties as Corporate Law: Shareholder Claims and Issues of Consistency, OECD Working Papers on International Investment, OECD Publishing, 2013/03.

Kaufmann-Kohler, G., Multiple proceedings – New Challenges for the Settlement of Investment Disputes, in Rovine, A. W. (ed.), Contemporary Issues in International Arbitration and Mediation - The Fordham Papers 2013, 2014.

Laird, I.A., A Community of Destiny – The Barcelona Traction Case and the Development of Shareholder Rights to Bring Investment Claims, in Weiler, T. (ed.), International Investment Law and Arbitration: Leading Cases from the ICSID, NAFTA, Bilateral Treaties and Customary International Law, 2005.

Müller, D., La protection de l’actionnaire en droit international : L’héritage de la Barcelona Traction, 2015.

Orrego Vicuña, F., The Protection of Shareholders under International Law: Making State Responsibility More Accessible, in Ragazzi, M. (ed.), International Responsibility Today: Essays in Memory of Oscar Schachter, 2005.

Pellet, A., The Case Law of the ICJ in Investment Arbitration, ICSID Review,-Foreign Investment Law Journal, 2013.

Sasson, M., Chapter 5: Shareholders’ Rights, Substantive Law in Investment Treaty Arbitration: The Unsettled Relationship between International Law and Municipal Law, International Arbitration Law Library, Volume 21, Kluwer Law International, 2nd ed., 2017.

Schreuer, Ch., The ICSID Convention: A Commentary, Cambridge University Press, 2nd ed., 2001. 

Schreuer, Ch., Shareholder Protection in International Investment Law, in Dupuy, P.-M., and Fassbender, B., Shaw, M. N. and Sommermann, K.P. (eds.), Common Values in International Law – Essays in Honour of Christian Tomuschat, 2006.

Skjold Hansen, J., “Missing Links” in Investment Arbitration: Quantification of Damages to Foreign Shareholders, The Journal of World Investment and Trade, 2013.

Valasek, M.J. and Dumberry, P., Developments in the Legal Standing of Shareholders and Holding Corporations in Investor-State Disputes, ICSID Review - Foreign Investment Law Journal, 2011

Douglas, Z., The International Law of Investment Claims, 2009

Douglas, Z., Can a Doctrine of Precedent Be Justified in Investment Treaty Arbitration?, 25 ICSID Review Foreign Investment Law Journal, 2010.

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