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 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). The double-barreled test is mostly applied by tribunals constituted under the ICSID Convention but non-ICSID tribunals have found guidance in the “objective” criteria as well. See further Section IV below.
II. First prong - An objective definition under the ICSID Convention
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.”
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”,6 which requires that the alleged investment cumulatively satisfies the following criteria,7 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.8 A minority of tribunals has adopted a more liberal approach, under which these criteria do not need to be considered cumulatively.9 See further Definition of investment, Salini test.
III. 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.10 Less often, the definition might rather require the asset to be linked to an enterprise,11 or take the form of an exhaustive list,12 or of a general definition combined with a list excluding certain categories of economic operations.13 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.14
For an analysis on how “investor” is defined in investment agreements, see Nationality of investor, Section II.
IV. Application of the double-barreled test by arbitral tribunals
A. ICSID arbitration
1. Tribunals following the double-barreled test
Most arbitral tribunals have followed the double-barreled test, holding that the term “investment” in Article 25(1)15 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.16 A similar dual test has also been followed with respect to tribunals’ jurisdiction ratione personae17 and particularly the nationality requirement expressed in Article 25(2) of the ICSID Convention and investment agreements.18 See further Nationality of investor, Section V.
Although the ICSID Convention may serve as an “outer limit,” the definitions contained in the applicable investment agreement should not be disregarded.19 In cases where the investment seems admissible under the subjective criteria but may not align as per the objective criteria of the ICSID Convention, at least one tribunal has held that the interpretation of the latter “should seek compatibility rather than contradiction.”20
When applying the double-barreled test, it has been argued that tribunals should first verify whether the criteria under the ICSID Convention are met and then move on to verify the investment agreement’s criteria.21 However, other tribunals have disagreed, holding that the analysis of the BIT’s requirements should come first.22
Tribunals have held that the claimant bears the burden of proving that the conditions of both instruments are met.23 See further Burden of proof, Section III.B.
2. Tribunals refusing to apply the double-barreled test
In some cases, however, 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, but not under the Convention.24
B. Non-ICSID arbitration
Some non-ICSID arbitral tribunals applied an objective test similar to the one followed by ICSID tribunals in addition to the subjective test contained in the BIT,25 notably when the applicable investment agreement provided for ICSID arbitration as one of the fora available for dispute resolution26 and when it did not clearly define “investment.”27
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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