The Nationality of Natural and Juridical Persons in International Investment Law

This chapter addresses the role of the home state of the investor as negotiator and drafter of its international investment agreements (IIAs) with regard to the definition of “national”. Such a treaty definition comprises natural and juridical persons and is determinative of the jurisdiction ratione personae of international investment tribunals. As to individuals, the principle of effectiveness in single nationality determinations is critically investigated, whereas in dual nationality cases tribunals have usually applied the customary principle of dominant and effective nationality. However, Article 25(2)(a) of the International Centre for the Settlement of Investment Disputes (ICSID) Convention, which categorically prohibits claims by dual nationals of both the home and the host state, represents a relevant exception to the general rule under customary international law. As to corporations, the vast majority of international investment agreements (IIAs) adopts the incorporation test as sufficient and exclusive criteria for the definition of nationality. When confronted with such treaty provisions, arbitral tribunals have traditionally interpreted and applied them without requiring any thresholds of substantive bond between putatively covered investors and their alleged home state. Therefore, this chapter focuses on questionable phenomena of treaty shopping, including by shell companies and round tripping, which have been tolerated by arbitrators and nonetheless accepted in the legal scholarship. Finally, the author provides various types of treaty provisions that may be stipulated by states when negotiating or renegotiating their IIAs with a view to appropriately accommodate the policy concerns that are raised in this chapter.