In international investment law, nationality planning refers to the practice by which an investor channels its investment through a country other than the investor’s home State in order to gain access to the more favourable standards of protection available for investors of such third country vis-à-vis the intended host State. Nationality planning is to be contrasted with so-called treaty shopping.
In the context of tax law, corporate planning (known as tax planning) has historically been common among corporations operating internationally. Nationality planning for investment protection purposes is a more recent trend. In fact, prudent companies often frame their investments combining both tax and investment law considerations. For instance, many investments are made through Dutch subsidiaries (typically constituted for tax reasons) in order to benefit from the wide spectrum of investment treaties concluded by the Netherlands.1
II. Is nationality planning permitted? If so, when?
A. Nationality planning in international regulations
Typically, international investment treaties do not prohibit nationality planning. Many simply establish soft nationality requirements to qualify as an investor which could be interpreted, in principle, as a tacit permission for nationality planning. Indeed, several international treaties simply require that a company be incorporated in a State party to benefit from the protections granted under such treaty.2
However, some treaties include limits to nationality planning in practice. They do so, for instance, (i) by narrowing down the definition of investor or (ii) by allowing States to deny benefits to companies owned or controlled by nationals of third States and/or which do not have substantial commercial activity in their State of registration.3
B. Nationality planning in case law
Arbitral tribunals have consistently refused to categorically reject nationality planning, recognizing that “international investors can of course structure upstream their investments […] in a manner that best fits their need for international protection”.4 They have nevertheless set limits to such structuring (i.e., nationality planning) based on considerations such as “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”.5
C. Situations in which arbitral tribunals have accepted nationality planning
Tribunals have accepted nationality planning in situations where:
D. Situations in which arbitral tribunals have denied protection to nationality planning
Tribunals have declined jurisdiction over claims raised by nationality planners or declared such claims inadmissible in situations where:
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