INVESTMENT

6.53

ARBITRATION
Presented by Kiran Nasir Gore, Esq.

Winter Couse on International Commercial Arbitration and

Willem C. Vis International Moot Competition
For Pakistan
January 16 – 18, 2024
MEET THE SPEAKER

Kiran is an Intermitted Expert on ADR/ Legal Adviser at

CLDP.
She has fifteen years of experience in international
dispute resolution. She was previously at Three Crowns
LLP in Washington, DC and DLA Piper LLP in New York
City. Today, Kiran runs The Law Offices of Kiran N
Gore PLLC, the only female-led boutique law firm
focused on international dispute resolution in
Washington, DC.
Her current and past clients include governments,
corporations, and private individuals.
She frequently works on legislative reform and the
development of ADR systems in various countries,
including Pakistan. 2

Kiran draws on her professional experiences as an

educator at the George Washington University Law
School.
Reko Diq case at ICSID

Link to Video

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Legal Basics
• Public international law
• Generally treaties may mention investment as a means of
promoting foreign direct investment (FDI)
• International Investment Agreements (IIAs) have their main focus
on promoting investment and protecting investors

• January 2024: More than 3,000 IIAs concluded

• BITs (More than 2,800 concluded, More than 2,500 in force)

• Other IIAs include Free Trade Agreements or Economic

Partnership Agreements
• Customary international law
• General principles of law
• National law?
• Link to all of Pakistan’s BITs 4
 Germany - Pakistan BIT (1959)

Original full document

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Stock of IIAs signed and in force, 1959–2022
 First BIT: Germany-Pakistan (1959) and huge proliferation in the 1990s

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Why do States enter into IIAs?
• Economic benefits for capital importing
States
• Economic benefits for capital exporting
States
• How does FDI play into the development
of the host State?
• Direct benefits
• Indirect benefits / horizontal spillover
• Vertical spillover
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Objective of Investment Treaties: Economic
Growth

 Through promotion and protection of reciprocal foreign

direct investment in the Contracting States.

 Set baseline standards for State conduct in order to

safeguard a stable and favorable investment climate

 International arbitration as neutral dispute resolution

option

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Investment Treaty Planning

 Allows international investors (in cross-border mergers or greenfield

projects) to access substantive and procedural protections of investment
treaties that may otherwise be unavailable to them, by introducing a
suitable investment vehicle into the corporate structure
 Just like tax planning, investment treaty planning should be done at the
onset of the investment or, in any event, prior to a dispute arising
 “Dutch sandwich”:

Kyrgyzstan Dutch BV Egypt

(Home State) (Investment Vehicle) (Host State)

No Kyrgyzstan – Egypt BIT

Egypt – Netherlands BIT (1996)

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Advantages of Investment Treaty Protection
 Confers additional advantages over contractual agreements
and political risk insurance
– Contractual agreements:
• Limited to what you can negotiate
• Subject to governing law, which often contains exceptions
for state conduct (e.g., executive necessity doctrine)
– Political risk insurance:
• Compensation under insurance is quicker and less
uncertain
• Treaty protection typically offers more expansive coverage
• Insurance is typically limited to book values of the assets
and subject to policy limits. Treaty protection can extend to
fair market value of the investment
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State-Individual Relationship
• Historically, the State is a subject of
international law and an individual is
protected by his State
• International investment law
rebalances this equilibrium –
empowers individuals
• Individual becomes an actor in
treaties which he did not negotiate or
have prior involvement
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Why?
• Historically, the State is a subject of international
law and an individual is protected by his State
• International investment law rebalances this
equilibrium – empowers individuals
• Individual becomes an actor under treaties which
he did not negotiate or have prior involvement
• Consent to dispute resolution?
• State grants consent by ratifying the IIA
• Individual does so by lodging a notice of
arbitration
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Dispute Resolution
• State immunity would normally prevent litigants
from addressing investment grievances in the
courts of another State
• Even if they were to hear these disputes, there is
risk of bias
• Investment arbitration aims at providing a neutral
forum for justice
• Usually initiated by an investor, State can assert
counterclaims
• Public law elements clash with private law
elements
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How Treaty Claims Work

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Dispute Resolution Clause

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International Centre for Settlement of
Investment Disputes (ICSID)
 Established in 1966 as an international organization by a multilateral
convention (ICSID Convention)
– Member of the World Bank Group
– 158 Contracting States (Angola joined on 21 October 2022)
 Provides facilities for conciliation and arbitration of investment
disputes
 ICSID Arbitration Rules are specially designed
for disputes between foreign investors and States

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Other Common Arbitration Options

 Ad Hoc arbitration under UNCITRAL arbitration

 Institutional Arbitration
– Permanent Court of Arbitration
– Arbitration Institute of the Stockholm Chamber of Commerce
– International Court of Arbitration of the International Chamber of
Commerce

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ICSID v not ICSID Investment Arbitration

 ICSID awards are not subject to appeal or review by national

courts.
 Monetary awards must be recognized and enforced as if they are
final judgments of domestic courts (ICSID Convention, Article 54)
 ICSID arbitration only permits limited review of awards by way of
interpretation, revision and annulment. No power to revise an
award on the merits or to re-open the tribunal's decision on the
evidence (ICSID Convention, Article 52)

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Known Investment Treaty Cases, 1987-2022

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 Challenges
 External perspectives
 Sovereign right to regulate – environment, health, safety
 Primacy of EU law – do BITs among EU member States (intra-EU BITs) contradict EU
Law on free movement of capital, non discrimination etc?
 Public interests
 Environment, health
 Transparency
 Amounts in dispute
 Internal perspectives
 Limited access to justice for only certain kinds of investors?
 Relationship to general international law?
 Arbitral precedent?

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Jurisdiction & Standards of Protection

Must have a qualified investor making a qualified investment

• Many claims fail at this stage
Standards of protection
• Prohibition against unlawful expropriation
• International minimum standard of treatment
• National treatment
• MFN treatment
• Fair and Equitable Treatment (FET)
• Full Protection and Security
• [Umbrella clause]
Different Generations of IIAs

Old generation of BITs concluded in the 70s to late 90s typically

at the initiative of capital-exporting States with the objective of
protecting their investors abroad
• Asymmetric character – give rights to foreign investors, no
obligations and no preservation of the regulatory space of the
host States
• Example: UK Model BIT 2008
New generation of BITs, i.e. US Model BITs 2004 and 2012, CETA
• More detailed provisions preserving the regulatory space of the
host State
• Detailed definitions of standards of protection, including
expropriation, FET
• References to non-economic considerations such as protection of
the environment and human rights
Definitions of Investment & Investor

• Difference between economic and legal definition of

‘investment’
• Important in defining the scope of protection of investment
treaties and the availability of ISDS
• No single definition of ‘investment’: differing approaches in
investment treaties, further complicated by Art. 25(1)(a) ICSID
and the differing interpretations of investment tribunals
• Investment treaties often contain broad asset-based legal
definitions typically covering both FDI and portfolio investments
• Definition of ‘investor’ also involves controversies surrounding
legal entities acting as investors
Example of ‘Investment’

UK Model BIT 2006

For the purposes of this Agreement:
(a) “investment” means every kind of asset, owned or controlled directly or
indirectly, and in particular, though not exclusively, includes:
(i) movable and immovable property and any other property rights
such as mortgages, liens or pledges;
(ii) shares in and stock and debentures of a company and any other
form of participation in a company;
(iii) claims to money or to any performance under contract having a
financial value;
(iv) Intellectual property rights, good will, technical processes and
know-how;
(v) business concessions conferred by law or under contract,
including concessions to search for, cultivate,extract or exploit natural
resources.
‘Investment’ under the ICSID Convention

Article 25 ICSID Convention:

(1) The jurisdiction of the Centre shall extend to any legal dispute
arising directly out of an investment, between a Contracting State
(or any constituent subdivision or agency of a Contracting State
designated to the Centre by that State) and a national of another
Contracting State, which the parties to the dispute consent in
writing to submit to the Centre.
Examples of Investment – through case law

• construction and operation of hotels and factories

• the mining of minerals n the exploration, exploitation and distribution of
petroleum products
• the conversion, equipping and operation of fishing vessels
• maritime transport of minerals
• banking, the provision of loans, etc.
• Examples of transactions which were found not to constitute an investment:
• letters of guarantee issued by Egypt in relation to a commercial contract for
providing equipment for a mining project in Joy Mining (Machinery v Egypt)
• 5-month contract for delivery of wheat (Romak v Uzbekistan) (UNCITRAL)
• Global Trading v Ukraine dismissed a claim that the sale of chicken was an
investment.
Defining ‘Investor’

“Investors are either individuals (natural persons) or

companies (juridical persons).”
Does it include intermediary holding companies?
Minority investors?
Would/Could States have a clear view on who benefits/is
protected under the IIA?
Standards of Protection
Standards of Protection
Standards of Protection
Whose Actions Trigger Protection?

Actions by the Executive / Ministries

Cancellation of concessions for mining, oil and gas exploration and
production, etc.
Seizure of an investor’s assets by the State
Imposition of arbitrary or discriminatory taxation
Actions by Regulatory Agencies
Arbitrary or discriminatory regulatory measures such as the withdrawal of
industry subsidies
Revocation of licenses to operate in industries such as telecommunications
Whose Actions Trigger Protection?

Actions by the Judiciary

Denial of justice and lack of due process before domestic
courts
Actions by Local Municipalities
Revocation of or refusal to provide permits necessary for the
investor to conduct its business in the host State
Actions by Police/Security Forces
Arbitrary or discriminatory criminal proceedings against an
investor
Failure to protect investors and their investments from physical
harm arising from insurrection and political upheaval
IIAs don’t act as insurance policies!

Need to comply with several conditions to qualify for treaty

protection
Threshold to establish a treaty breach is high (and may be
getting higher) – States have defenses including very
legitimate ones
Preserving a State’s ability to regulate is key, as long as
regulation complies with the standards of international law
Investment treaties must be an additional tool that an
investor should have in its hands when investing in any
country – not the only tool.
And some States are removing investment arbitration as a
remedy of first resort as they renegotiate their IIAs, many of
which are now out of date.
Circling Back: Reko Diq case at ICSID
Circling Back: Reko Diq case at ICSID
Circling Back: Reko Diq case at ICSID
Circling Back: Reko Diq case at ICSID
Circling Back: Reko Diq case at ICSID
ISDS Reform

The UNCITRAL Working Group Consensus:

Reform is “desirable” to address concerns of consistency,
coherence, predictability, and correctness of arbitral rulings;
independence, impartiality, and diversity of decision-makers;
and costs and duration of proceedings.
ISDS Reform, Replace, or Status Quo?
Some of the issues:
Standing body for the selection of arbitrators
Lack of diversity among arbitrators
Lack of independence and impartiality (eg, double hatting)
Code of Conduct for Arbitrators
Increasing time/cost efficiency
Appellate mechanism / Multilateral Investment Court (MIC)
Third Party Funding
Some of the choices:
Reform individual treaties as they expire or become out of date
Multilateral systemic change
THANK YOU!
Ms. Kiran Nasir Gore, Esq.

• International Arbitrator
• Disputes Management
Consultant & Counsel
• Lecturer

Washington, DC USA
Email: kng@gorelaw.com
Mobile: +1 917 589 8714

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