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
II. Scenarios & methods
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,9 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,10 otherwise known as forum shopping.11
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