Week 9 Slides

Collapse all

Week 1: Introduction to Investment Treaty Arbitration – Substantive Protections

Week 2: State Responsibility and Principles of Interpretation

Week 3: State Defences

Week 4: Expropriation

Week 5: Reading Week

Week 6: Substantive Protections – Non-Contingent Standards

Week 7: Contingent Standards

Week 8: Umbrella Clauses

Week 9: Other Substantive Standards
Introduction
 Week 9: Learning Outcomes
 Week 9: Welcome by Norah Gallagher
 Week 9: Introductory Forum
Lecture
 Week 9: Lecture Start
 Week 9: Core Reading
Part 1: Admission, Establishment and Promotion of Foreign Investments
 Week 9: Introduction to Part 1
 Week 9: Admission and Establishment
 Week 9: Admission of Investments in Accordance with Local Laws
 Week 9: Promotion of Investments
Part 2: Transfer of Funds
 Week 9: Multilateral Agreements Governing Cross-Border Capital Flows
 Week 9: Transfer Provisions in Investment Treaties
 Week 9: Convertibility
 Week 9: Exceptions to Transfer Rights
Part 3: Prohibition of Arbitrary, Unreasonable or Discriminatory Measures
 Week 9: Case Law on Arbitrariness, Unreasonableness and Discrimination
 Week 9: Lecture Summary
Activities
 Week 9: Challenge Activity
 Week 9: Reflective Journal
 Week 9: Resources
 Week 9: Webinar

Week 10: Quantification, Assessment & Damages

Student Satisfaction Survey
 Student Satisfaction Survey
Week 9: Learning Outcomes
Other Substantive Standards
 Learning Outcomes
By the end of this week, you will be able to explain the purpose and scope of provisions in
investment treaties dealing with:
Rights of admission and establishment for foreign investors in the host State’s territory;
The rights of foreign investors regarding the transfer of funds into and out of the host State;
The prohibition of arbitrary, unreasonable or discriminatory measures by the host State.
Week 9: Welcome by Norah Gallagher

 Watch
13:07
Download the video transcript here

(https://learn.online.qmul.ac.uk/courses/371/files/39668/download?wrap=1)
(https://learn.online.qmul.ac.uk/courses/371/files/39668/download?download_frd=1) .

1 1
Week 9: Introductory Forum
All sections
 Discuss
Do you know the meaning of the term ‘capital controls’?
How, in your opinion, do capital controls affect international trade and investment?
Post your response on the forum, and comment on those of your peers.
Search entries or author

Unread


 
Subscribe

Write a reply...
(https:// Mohamed Mahayni (https://learn.online.qmul.ac.uk/courses/371/users/188) 
Tuesday
Since this is an intro forum, let me cite a non conventional source: Investopedia. It
gives a good explanation, underlining the influence on international trade and
investment:
"What Is Capital Control?
Capital control represents any measure taken by a government, central

(https://www.investopedia.com/terms/c/centralbank.asp) bank, or other regulatory body to
limit the flow of foreign capital in and out of the domestic economy. These controls
include taxes, tariffs, legislation, volume restrictions, and market-based forces. Capital
controls can affect many asset classes such as equities, bonds, and foreign exchange
trades.
Understanding Capital Controls
Capital controls are established to regulate financial flows from capital markets into and
out of a country's capital account. These controls can be economy-wide or specific to a
sector or industry. Government monetary policy can enact capital control. They may
restrict the ability of domestic citizens to acquire foreign assets, referred to as capital
outflow controls, or foreigners' ability to buy domestic assets, known as capital inflow
controls.
Tight controls are most often found in developing economies where the capital reserves
are lower and more susceptible to volatility.
KEY TAKEAWAYS
Capital control represents any measure taken by a government, central
bank, or other regulatory body to limit the flow of foreign capital in and out
of the domestic economy.
Policies may restrict the ability of domestic citizens to acquire foreign
assets, referred to as capital outflow controls.
Capital inflow controls limit foreigners' ability to buy domestic assets.
Critics believe capital control inherently limits economic progress and

efficiency, while proponents consider it prudent because they increase
the economy's safety."
SOURCE: Adam Barone, 'Capital Control', Investopedia, updated 30 December 2020,

available at https://www.investopedia.com/terms/c/capital_conrol.asp
(https://www.investopedia.com/terms/c/capital_conrol.asp)

Reply

Week 9: Lecture Start
Other Substantive Standards
Introduction
In this week, we study other substantive protections commonly found in investment treaties.
Although these protections have given rise to few decisions in investment treaty arbitration, they
remain an integral part of most investment treaties.
In Part 1, we examine investment treaty provisions dealing with the rights of admission and
establishment for foreign investors in the host State’s territory. We also examine a closely related
provision which imposes a general obligation upon the host State to promote or create
favourable conditions for foreign investment in their territory.
In Part 2, we examine investment treaty provisions dealing with the rights of foreign investors
regarding the transfer of funds into and out of the host State.
In Part 3, we examine investment treaty provisions dealing with the prohibition of arbitrary,
unreasonable or discriminatory measures by the host State, and the relationship of these
provisions with the FET standard.
Week 9: Core Reading

Core Reading is essential for understanding the lecture. Before you move on, please take some
time to read the following texts:
Jeswald Salacuse (2015), The Law of Investment Treaties (https://opil-ouplaw-

com.ezproxy.library.qmul.ac.uk/view/10.1093/law/9780198703976.001.0001/law-9780198703976-
chapter-8) (2nd edn, OUP 2015) 213-227
Michael Waibel (2009), ‘BIT by BIT: The Silent Liberalization of the Capital Account
(https://opil-ouplaw-
com.ezproxy.library.qmul.ac.uk/view/10.1093/law/9780199571345.001.0001/law-9780199571345-
chapter-26?rskey=ZqYNzU&result=4&prd=OPIL) ’ in Christina Binder and others (eds),
International Investment Law for the 21st Century: Essays in Honour of Christoph Schreuer
(OUP 2009) 497-518
Christoph Schreuer (2007), ‘Protection against Arbitrary or Discriminatory Measures

(https://www.univie.ac.at/intlaw/94.pdf) ’

The lecture takes an interactive format. As you go through it, spend some time completing
the practical activities, including the guided readings. We will discuss these activities in the
webinar, where you will also have the opportunity to ask questions and share your
thoughts.
Week 9: Introduction to Part 1
Part 1: Admission, Establishment and Promotion of Foreign Investments

As we have learned earlier, international law recognises that States have the sovereign right to
control the admission of foreign investors and investments, and regulate the activities of foreign
investors in their territory. A State is under no general obligation to promote foreign investment
within its territory or to encourage foreign investment by its nationals in other states.
Therefore, in the absence of a treaty or other, voluntary, legal obligations such as foreign
investment contracts, a State is not required to promote, engage in, or allow any particular
investment on its territory.
The sovereign right of States to control the entry and activities of foreign investors manifests
itself in various forms of domestic legislation and regulation. For example, many developing
countries enact ‘foreign investment laws‘, ‘foreign investment codes‘, or ‘joint venture laws‘,
which create a special legal regime for foreign investment1.
This legal regime specifies various aspects of foreign investment, such as:
the types of investments that foreigners are permitted to make;
incentives foreign investors may receive;
regulations to which foreign investors may be specifically subject;

governmental agencies that have special authority for promoting and regulating foreign
investment.
Whereas the stated purpose of investment treaties is to promote and protect investment, the
greater emphasis is on protection. Indeed, most investment treaties impose weak promotion,
admission and establishment obligations upon host States. In particular, most investment
treaties do not provide national treatment or MFN treatment with respect to the admission or
establishment of foreign investors or investment. Neither do they guarantee general,
unconditional rights of entry for foreign investors or investments2.
In Part 1, we study the scope and content of provisions in investment treaties dealing with the
admission, establishment and promotion of foreign investments.
1
Jeswald Salacuse, The Law of Investment Treaties (2nd edn, OUP 2015) 213. See for example India‘s
Consolidated FDI Policy Circular of 2017
(https://dipp.gov.in/sites/default/files/CFPC_2017_FINAL_RELEASED_28.8.17.pdf) , D/o IPP F. No. 5(1)/2017-FC-1, (28
August 2017)
2
Andrew Newcombe and Lluís Paradell, ‘Chapter 3 - Promotion, Admission and Establishment Obligations‘, in
Law and Practice of Investment Treaties: Standards of Treatment (Kluwer Law International 2009) §3.3
Week 9: Admission and Establishment

Introduction
Although we deal with both these concepts in the same section, the terms ‘admission‘ and
‘establishment‘ refer to two distinct notions. Whereas the term ‘admission‘ relates to the right of
entry of the investment in principle, the term ‘establishment‘ refers to the conditions under which
the investor is allowed to carry out its business during the period of the investment1.
As UNCTAD stated in its 2002 report on the issue2:

[…] where some form of permanent business presence is preferred, a right of
establishment ensures that a foreign national, whether a natural or legal person, has
the right to enter the host state and set up an office, agency, branch or subsidiary
(as the case may be) possibly subject to limitations justified on grounds of national
security, public health and safety or other public policy grounds [...] Thus the right to
establishment entails not only a right to carry out business transactions in the host
state but also the right to set up a permanent business presence there.
For a detailed overview of this distinction, please see the following article, also included in this
week‘s Resources page:
Patrick Juillard (2000), ‘Freedom of Establishment, Freedom of Capital Movements,

and Freedom of Investment (https://doi.org/10.1093/icsidreview/15.2.322) ‘, 15 ICSID Rev-
FILJ 322
1
Rudolf Dolzer and Christoph Schreuer, Principles of International Investment Law (2nd edn, OUP 2012) 88
2 UNCTAD, ‘Admission and Establishment (https://unctad.org/en/docs/iteiit10v2_en.pdf) ‘, UNCTAD/ITE/IIT/10
(vol. II) 12


 Enquire / Reflect
Treaty Practice
Please read the following extract before you proceed:
UNCTAD (1999), ‘Admission and Establishment

(https://unctad.org/en/docs/iteiit10v2_en.pdf) ‘, UNCTAD/ITE/IIT/10 (vol. II), pages 15-28
After you have read the extract, please attempt to answer the following:
1. According to UNCTAD, which is the most widely used type of entry and establishment
provisions found in BITs?
2. What is the impact of Article XVI GATS on admission and establishment provisions found in
investment treaties?
3. Can you explain the essential features of the ‘combined national treatment and most-
favoured-nation treatment‘ model? Has this model been adopted in the 2012 United States
Model BIT?
Performance Requirements
The term ‘performance requirements‘ is used to describe requirements that host States have
attempted to impose on investments in order to achieve various public policy objectives. These
include requirements such as the compulsion to use local materials, the duty to export a certain
amount of products, and the obligation to hire local personnel3.
Some BITs have expressly sought to protect investors against such performance requirements.
In particular, Article 8 of the 2012 United States Model BITs provides:

Neither Party may, in connection with the establishment, acquisition, expansion,
management, conduct, operation, or sale or other disposition of an investment of an
investor of a Party or of a non-Party in its territory, impose or enforce any
requirement or enforce any commitment or undertaking:
(a) to export a given level or percentage of goods or services;

(b) to achieve a given level or percentage of domestic content;
(c) to purchase, use, or accord a preference to goods produced in its territory, or to

purchase goods from persons in its territory;
(d) to relate in any way the volume or value of imports to the volume or value of
exports or to the amount of foreign exchange inflows associated with such
investment;
(e) to restrict sales of goods or services in its territory that such investment
produces or supplies by relating such sales in any way to the volume or value of its
exports or foreign exchange earnings;
(f) to transfer a particular technology, a production process, or other proprietary

knowledge to a person in its territory;
(g) to supply exclusively from the territory of the Party the goods that such
investment produces or the services that it supplies to a specific regional market or
to the world market […]
A similarly-worded provision can be found in Article 1106 (1) of NAFTA.
Another variation of this prohibition can be found in Article 7 of the 1987 ASEAN Comprehensive
Investment Agreement, which makes reference to the prohibition on performance requirements
found in the Agreement on Trade-Related Investment Measures, which was adopted in 1994 at
the Uruguay Round of the GATT:

1. The provisions of the Agreement on Trade-Related Investment Measures in
Annex 1A to the WTO Agreement (TRIMs), which are not specifically mentioned in
or modified by this Agreement, shall apply, mutatis mutandis, to this Agreement.
2.Member States shall undertake joint assessment on performance requirements no

later than 2 years from the date of entry into force of this Agreement. The aim of
such assessment shall include reviewing existing performance requirements and
considering the need for additional commitments under this Article.
3. Non-WTO Members of ASEAN shall abide by the WTO provisions in accordance

with their accession commitments to the WTO.
3 Rudolf Dolzer and Christoph Schreuer, Principles of International Investment Law (2nd edn, OUP 2012) 88

Prior Approval or Registration of Investments in the Host State
Several investment treaties contain an express requirement for approval in writing and
registration of a foreign investment. For instance, Articles II (1) and (3) of the ASEAN Agreement
provide:

1. This Agreement shall apply only to investments brought into, derived from or
directly connected with investments brought into the territory of any Contracting
Party by nationals or companies of any other Contracting Party and which are
specifically approved in writing and registered by the host country and upon
such conditions as it deems fit for the purposes of this Agreement.
[…]
3. This Agreement shall also apply to investments made prior to its entry into force,
provided such investments are specifically approved in writing and registered
by the host country and upon such conditions as it deems fit for [the] purpose of
this Agreement subsequent in its entry into force.
This provision was discussed in the first investment treaty arbitration under the 1987 ASEAN
Agreement, Yaung Chi v Myanmar. In that case, the investment was made by a Singaporean
company prior to Myanmar‘s accession to the ASEAN Agreement, although the investor had
fulfilled the procedures necessary to obtain the required permissions under Myanmar‘s national
law. Myanmar challenged the Tribunal‘s jurisdiction, arguing that:

firstly, the investment did not qualify for protection under the ASEAN Agreement
as approval under the Myanmar‘s national law did not constitute approval ‘for the
purposes of this Agreement‘ as required by Article II(1) above;
secondly, the Claimant had failed to obtain specific approval in writing

subsequent to the ASEAN Agreement coming into force in Myanmar as required
by Article II(3) above.
The Tribunal rejected the first limb of the argument, finding that4:

No doubt a Party to the 1987 ASEAN Agreement could establish a separate register
of protected investments for the purposes of that Agreement, in addition to or in lieu
of approval under its internal law. But if Myanmar had wished to draw a distinction
between approval for the purposes of the 1987 ASEAN Agreement and approval for
the purposes of its internal law, it should have made it clear to potential investors
that both procedures co-exist and, further, how an application for treaty protection
could be made. At the least it would be appropriate to notify the ASEAN Secretariat
of any special procedure. None of these things was done. In the Tribunal‘s view, if a
State Party to the 1987 ASEAN Agreement unequivocally and without reservation
approves in writing a foreign investment proposal under its internal law, that
investment must be taken to be registered and approved also for the purposes of
the Agreement.
Turning to the second limb of Myanmar‘s argument, the Tribunal found that as Article II(3) of the
ASEAN Agreement required an ‘express subsequent act amounting at least to a written
approval‘, it could not consider the investment to be protected without such a subsequent act5:

[…] under Article 11(3), a further test has to be met […] It follows from the actual
language of Article lI(3) that investments made before that date are not
automatically covered, even if they were approved in writing and registered under
the law of the host State when they were made. It is not uncommon for investment
protection treaties to apply to pre-existing investments, but the extent to which the
1987 ASEAN Agreement does so is expressly stated in Article lI(3). It is true that the
procedure for giving approval under Article 1I(3) is not spelled out, and there appear
to be no indications to be drawn from ASEAN practice on this point. But effect must
be given to the actual language of Article lI(3), which requires an express
subsequent act amounting at least to a written approval and eventually to
registration of the investment. The mere fact that an approval and registration earlier
given by the host State continued to be operative after the entry into force of the
1987 ASEAN Agreement for that State is not sufficient.
4
Yaung Chi Oo Trading Pte Ltd v Myanmar, ASEAN Case No ARB/01/1, Award (31 March 2003) para 59
5
Ibid at para 60

 Enquire
Can you find out the changes made in the 2009 ASEAN Comprehensive Investment Agreement,
to the provisions on pre-investment approval found in the 1987 version of the agreement?
Week 9: Admission of Investments in
Accordance with Local Laws

Most admission clauses provide for the admission of investments ‘in accordance with‘ the host
State‘s law. For example, Article 2(1) of the 1998 Germany–Antigua and Barbuda BIT provides:

Each Contracting State shall in its territory promote as far as possible investments
by investors of the other Contracting State and admit such investments in
accordance with its legislation.
Similarly, Article 2 of the 1992 Bolivia–Netherlands BIT provides:

Each Contracting Party shall, within the framework of its laws and regulations,
promote economic cooperation […]. Subject to its right to exercise powers
conferred by its laws or regulations, each Contracting Party shall admit such
investments.
The first consequence of such a clause is that it allows the host State to retain a certain degree
of control over the types of foreign capital that it admits on its territory. The host State may
therefore screen investments in accordance with its own public policy objectives and determine
the conditions under which these foreign investments will be permitted. In Aguas del Tunari v
Bolivia, the Tribunal found that by virtue of Article 2 of the 1992 Bolivia–Netherlands BIT
reproduced above, ‘[…] the obligation to admit investments was subject to the decision of Bolivia
to exercise powers conferred by its laws or regulations‘1.
The second consequence of such a clause is that the phrase ‘in accordance with laws and
regulations‘ may be interpreted as a limitation on the host State‘s consent to arbitration under
the investment treaty. In other words, if a treaty protects only investments made in accordance
with the host State‘s law, and an investment is shown not to have been made in accordance with
this law, a tribunal may conclude that it has no jurisdiction to hear the dispute2.
The first case in which a tribunal denied jurisdiction on the basis that an investment was not
made in accordance with the host State‘s laws was Inceysa Vallisoletana v El Salvador, where
the claim was based on a concession granted to the investor by El Salvador.
The Tribunal found that as the Claimant had provided false information in the bidding process for
the concession, the Claimant had not made an investment according to El Salvador law. The
claim was therefore dismissed for lack of jurisdiction, on the basis that El Salvador had only
consented to arbitrate claims arising out of lawful investments3:

[…] the clause "in accordance with law" appears both in the article on "Protection,"
and in the article that regulates "Promotion and Admission," indicating that
investments that do not comply with the requisite of having been made "in
accordance with the laws" of the signatory State will not be admitted (Article II, (1)).
This clearly indicates that the BIT leaves investments made illegally outside of its
scope and benefits. […]
In conclusion, the Tribunal considers that, because Inceysa‘s investment was made
in a manner that was clearly illegal, it is not included within the scope of consent
expressed by Spain and the Republic of EI Salvador in the BIT and, consequently,
the disputes arising from it are not subject to the jurisdiction of the Centre.
Therefore, this Arbitral Tribunal declares itself incompetent to hear the dispute
brought before it.
Similarly, in Fraport v Philippines, the applicable 1997 Germany-Philippines BIT defined

‘investment‘ as ‘any kind of asset accepted in accordance with the respective laws and
regulations of either Contracting State‘. Furthermore, Article 2(1) of the BIT provided that each
Contracting State ‘shall admit such investments in accordance with its Constitution, laws and
regulations‘.
The Tribunal found that Fraport had circumvented restrictions on shareholding and management
by foreigners in public utility enterprises, by resorting to secret shareholder agreements. As a
result of this violation of the host State‘s law, it declined jurisdiction4:

Fraport knowingly and intentionally circumvented the ADL [ie, domestic legislation]
by means of secret shareholder agreements. As a consequence, it cannot claim to
have made an investment ‘in accordance with law‘. Nor can it claim that high
officials of the Respondent subsequently waived the legal requirements and
validated Fraport‘s investment, for the Respondent‘s officials could not have known
of the violation. Because there is no ‘investment in accordance with law‘, the
Tribunal lacks jurisdiction ratione materiae.
1
Aguas del Tunari v Bolivia, ICSID Case No ARB/02/3, Decision on Respondent‘s Objections to Jurisdiction (21
October 2005) para 147
2 Jeswald Salacuse, The Law of Investment Treaties (2nd edn, OUP 2015) 219
3 Inceysa Vallisoletana v El Salvador, ICSID Case No ARB/03/26, Award (2 August 2006) paras 206, 257
4 Fraport v Philippines, ICSID Case No ARB/03/25 (Award) (16 August 2007) para 401
Week 9: Promotion of Investments

Most investment treaties impose a general obligation upon host States to ‘promote‘ or otherwise
‘encourage‘ investment. For example, Article 2 of the 1992 Argentina-Netherlands BIT provides:

Either Contracting Party shall, within the framework of its laws and regulations,
promote economic co-operation through the protection in its territory of investment
of investors of the other Contracting Party [...]
Similarly, Article 3(1) of the 2001 Australia-Egypt BIT provides:

Each Party shall encourage and promote investments in its territory by investors of
the other Party […]
Additionally, investment treaties may also impose a general obligation upon host States to
‘create favourable conditions‘ for investment. For example, Article 2(1) of the 1997 Azerbaijan-
United Kingdom BIT provides:

Each Contracting Party shall encourage and create favourable conditions for
nationals and companies of the other Contracting Party to invest capital in its
territory […]
Similarly, Article 3(1) of the 1994 India-United Kingdom BIT provides:

Each contracting state shall encourage and create favourable conditions for
investors of the other Contracting party to make investments in its territory.
Commentators have found that such clauses do not create specific substantive rights for
investors1. However, these clauses may restrict the right of State parties to take certain types of
economic measures against its treaty partners, unless they are expressly permitted under a
special regime, such as, for example, in the case of sanctions imposed by the United Nations
Security Council2. In particular, a State may violate the clause by engaging in a concerted and
systematic campaign of discouraging foreign investment or creating an inhospitable climate for
foreign investment, thereby defeating the object and purpose of the treaty3.
A rare investment treaty case in which such a clause was invoked by the Claimant was White
Industries v India. In this case, the Claimant invoked, inter alia, a breach of Article 3(1) of the
Australia-India BIT, which provided that:

Each Contracting Party shall encourage and promote favourable conditions for
investors of the other Contracting Party to make investments in its territory [...]
According to the Claimant, the above provision imposed an obligation upon India to:
create a suitable governance framework for supervising the action of state-owned

corporations in their dealings with foreign investors;
ensure that its arbitration laws are administered in line with India‘s New York Convention
obligations;
take steps to reduce the backlog of cases in its courts.
The Tribunal found that the clause did not give rise to any of these obligations4:

[…] commentators seem to agree that such provisions in BITs do not give rise to
substantive rights. […]
The Tribunal is inclined to agree with India‘s position that the pre-establishment
obligations set out in the first sentence in Article 3(1) of the BIT lack sufficient
content to be treated as a stand-alone, positive commitment giving rise to
substantive rights. However, it is not necessary to construe the first sentence of
Article 3(1) so broadly, since the Tribunal is satisfied that the language used in
Article 3(1) is far too general to support the three specific obligations contended for
by White […]
1 See for example Andrew Newcombe and Lluís Paradell, ‘Chapter 3 - Promotion, Admission and Establishment
Obligations‘, in Law and Practice of Investment Treaties: Standards of Treatment (Kluwer Law International 2009)
§3.6, §3.7; Jeswald Salacuse, The Law of Investment Treaties (2nd edn, OUP 2015) 216
2 Andrew Newcombe and Lluís Paradell, ‘Chapter 3 - Promotion, Admission and Establishment Obligations‘, in
Law and Practice of Investment Treaties: Standards of Treatment (Kluwer Law International 2009) §3.6
3
Ibid
4
White Industries v India, UNCITRAL, Final Award (30 November 2011) paras 9.2.7–9.2.12
Part 2: Transfer of Funds

The ability to transfer funds in and out of the host State is an inherent requirement of foreign
investment. While foreign investors need to transfer funds into the host State to establish,
maintain and expand their investments, they also need to transfer funds out of the host State to
pay for business expenses, engage in other investment activities and repatriate profits. This is
one of the principle reasons the investment will have been made by the investor at the outset. As
one commentator has noted, ‘[t]he aim of all foreign investors is not just to make a profit, but to
make a profit that can be freely transferred to its home country or elsewhere’1.
Host States, on the other hand, may have legitimate reasons to restrict these transfers. In
particular, in the present-day monetary system, large flows of capital can destabilise national
economies.
For example, large inflows can cause the appreciation of the host State’s currency and in turn,
have negative effects on exports from the host State, which can create a balance of payments
problem.
Similarly, large outflows may cause the depreciation of the host State’s currency, shrink the host
State’s monetary reserves and thereby impact the State’s ability to import or honour its
pecuniary obligations. It may be noted in this regard that States’ pecuniary obligations, and
particularly their sovereign bonds, are often denominated in foreign currencies.
Further reasons for restricting cross-border capital flows can be found in the host State’s policy
objectives, such as preventing cross-border crime, facilitating the collection of taxes, and
protecting domestic creditors.
Under customary international law, States had a nearly absolute right to impose restrictions on
the transfer of funds across their borders. This right was only qualified by the rules of customary
international law regarding the protection of foreigners’ property. Under the minimum standard of
treatment, valuation and exchange restrictions imposed by host States could give rise to
expropriation and discrimination claims2.
After World War II, cross-border movements of capital are governed by a complex international
monetary regime, composed of a network of multilateral treaties. These include, in particular, the
Articles of Association of the International Monetary Fund (IMF), adopted at the Bretton Woods
Conference. In addition, two legally binding Codes of Liberalisation were adopted by member
States of the Organisation for Economic Co-operation and Development (OECD) and rules
regarding transfers of funds are found in the General Agreement on Trade in Services (GATS).
The right to repatriate or transfer funds out of the host state is considered central to the
investment protection regime. As a result, further protections regarding the transfer of funds are
also found in almost all bilateral and multilateral investment treaties. China has, for example, in
all three versions of her Model BIT, included a freedom of transfer provision. Out of 2571
investment treaties mapped by UNCTAD, 2559 treaties include provisions regarding the transfer
of funds3. These provisions supplement the rules we find in the instruments mentioned above.
In Part 2, we examine:
the principal multilateral agreements governing cross-border capital flows in modern-day

international law;
provisions regarding transfer rights found in investment treaties and the relatively sparse
case law on these provisions.
2 Andrew Newcombe and Lluís Paradell, ‘Chapter 8 – Transfer Rights, Performance Requirements and
Transparency', in Law and Practice of Investment Treaties: Standards of Treatment (Kluwer Law International 2009)
§8.2
3
UNCTAD, ‘Mapping of IIA Content (https://investmentpolicy.unctad.org/international-investment-agreements/iia-
mapping) ’ (last accessed 14 June 2019)
Week 9: Multilateral Agreements
Governing Cross-Border Capital Flows


A detailed examination of the rules regarding capital transfers in international monetary law is
beyond the scope of this module. It is, however, important that we understand the guiding
principles of this regime, as they constitute the lex generalis against the background of which
corresponding provisions in investment treaties must be drafted, negotiated and applied.
The IMF’s Articles of Association
For the purposes of our lecture, we note that Article VIIII, Section 2(a) of the IMF’s Articles of
Association provides:

[…] no member shall, without the approval of the Fund, impose restrictions on the
making of payments and transfers for current international transactions.
Article XXX(d) of the Articles of Association defines the term ‘payments for current transactions’
as:

[…] payments which are not for the purpose of transferring capital, and includes,
without limitation:
(1) all payments due in connection with foreign trade, other current business,
including services, and normal short-term banking and credit facilities;
(2) payments due as interest on loans and as net income from other investments;
(3) payments of moderate amount for amortization of loans or for depreciation of
direct investments; and
(4) moderate remittances for family living expenses

UNCTAD (2000), ‘Transfer of Funds’ (https://unctad.org/en/docs/psiteiitd20.en.pdf) ,

UNCTAD/ITE/IIT/20, pages 11-18
After you have read the extract, please attempt to answer the following questions:
1. What is the meaning of ‘current international transactions’ under the IMF’s Articles of
Association?
2. What are the principal rules governing restrictions on current international transactions
under these rules?
3. To what aspects of a foreign investment would these rules usually apply?

4. Would these rules be applicable to payments arising from the investor’s liquidation of
his original capital?
As you may have noticed after reading the above extract, the IMF’s Articles of Association have
several limitations on transfers related to foreign investments. These may be summarised in the
following manner1:
Under Article VI, Section 3 of the IMF’s Articles of Association, Member States are allowed to
impose restrictions on international capital movements. As a result, whether financial transfer
restrictions are permitted depends on whether the transfer is categorised as a current
transaction or a capital movement;
The prohibition on restrictions relating to current transactions does not apply when the
restrictions are either approved by the IMF or the State in question is subject to transitional
arrangements;
The IMF’s Articles of Association are essentially concerned with outward flows. In other
words, they do not regulate inward transfers for capital investments;
The prohibition on restrictions relating to current transactions applies only to international
transactions. It does not cover transactions between a locally incorporated investment
vehicle and other local companies.
1
Andrew Newcombe and Lluís Paradell, ‘Chapter 8 - Transfer Rights, Performance Requirements and
§8.3

The OECD’s Liberalization Codes
UNCTAD (2000), ‘Transfer of Funds (https://unctad.org/en/docs/psiteiitd20.en.pdf) ’,

1. To what extent are the OECD’s Codes applicable to cross-border transfers?

2. What are the restrictions on transfers permitted by these Codes?
3. What are the principal differences between the transfer regime established by the OECD’s
Codes and the regime established under the IMF’s Articles of Association?

Rules Regarding the Transfer of Funds Under GATS

1. What is the importance of ‘specific commitments’ in the context of applying transfer rules
under GATS?
2. What is the relationship between transfer rules under GATS and the IMF’s Articles of
Association?
Week 9: Transfer Provisions in
Investment Treaties

Introduction
As we saw on the earlier page, although provisions on transfers found in the international
monetary regime may serve to protect investments, the primary purpose of these agreements is
not investment protection.
As a result, further provisions on the topic are found in almost all investment treaties. As the
Tribunal in Continental Casualty v Argentina has observed1:

[…] the guarantee that a foreign investor shall be able to remit from the investment
country the income produced, the reimbursement of any financing received or
royalty payment due, and the value of the investment made, plus any accrued
capital gain, in case of sale or liquidation, is fundamental to the freedom to make a
foreign investment and an essential element of the promotional role of BITs.
A provision on the transfer of funds can be found in the very first BIT between Pakistan and
Germany of 1959. Article 4 of this BIT provides:

Either Party shall in respect of all investments guarantee to nationals or companies
of the other Party the transfer of the invested capital, of the returns there-from and
in the event of liquidation, the proceeds of such liquidation.
As we noted earlier, these provisions generally constitute a lex specialis which supplement other
applicable rules such as the IMF’s Articles of Association or the provisions of GATS2.
These provisions typically deal with the following issues, which we examine on this page3:
the scope of the investor’s right to transfer funds;

the types of transfers that are covered by these rights;
convertibility, ie the currency in which payments may be made and the applicable exchange
rate;
exceptions to the investor’s transfer rights.
Despite their ubiquity in international investment law, these provisions have rarely led to doctrinal
controversies in investment treaty arbitration. The Notice of Intent to Arbitrate in Calmark
Commercial Development Inc. v Mexico referred to a breach of Article 1109 of the NAFTA. The
Notice of 11 January 2002 alleges that Mexico was in breach of this provision by preventing the
repatriation of funds from the sale of the investment. As this case did not proceed to arbitration,
no determination was ever made. It has been suggested that this is because unlike other
standards such as FET or national treatment, which consist of statements of general norms,
provisions on monetary treatment and transfers are fairly specific and detailed4.
1
Continental Casualty Company v Argentina, ICSID Case No. ARB/03/9, Award (5 September 2008) para 239
2 Rudolf Dolzer and Christoph Schreuer, Principles of International Investment Law (2nd edn, OUP 2012) 214;
Continental Casualty Company v Argentina, ICSID Case No. ARB/03/9, Award (5 September 2008) para 244
3
Andrew Newcombe and Lluís Paradell, ‘Chapter 8 - Transfer Rights, Performance Requirements and
§8.7; Jeswald Salacuse, The Law of Investment Treaties (2nd edn, OUP 2015) 285
Scope of the Right to Transfer Funds
The scope of most transfer provisions in investment treaties is limited to transfers in relation to
investments in the host State. Some treaties further include a non-exclusive list of transactions
that are covered by the provision5.
In Continental Casualty v Argentina, Article V(1) of the applicable 1991 United States-Argentina
BIT provided:

Each Party shall permit all transfers related to an investment to be made freely
and without delay into and out of its territory. Such transfers include a) returns; (b)
compensation pursuant to Article IV; (c) payments arising out of an investment
dispute; (d) payments made under a contract, including amortization of principal and
accrued interest payments made pursuant to a loan agreement directly related to an
investment; (e) proceeds from the sale or liquidation of all or any part of an
investment; and (f) additional contributions to capital for the maintenance or
development of an investment.
In this case, the Claimant argued that a decree adopted by Argentina, in the wake of a financial
emergency, prevented its subsidiary from transferring funds held in a local bank account out of
the country. The Tribunal found that the transfer in question was not related to the Claimant’s
investment6:

The first issue is to determine which transfers are “related to the investment.” […]
Guidance is to be found in the detailed (though non-exclusive) list in Art. V(1) and
the purpose identified above of this kind of provision […]
The type of transfer at issue here does not fall into any of these categories, nor
specifically does it represent the “proceeds from the sale or liquidation of all or any
part of an investment.” It was merely a change of type, location and currency of part
of an investor’s existing investment, namely a part of the freely disposable funds,
held short term at its banks by CNA, in order to protect them from the impending
devaluation, by transferring them to bank accounts outside Argentina.
The transfer did not correspond to, nor was it required to satisfy any payment
obligation of CNA, commercial, financial or other; nor would it involve the transfer of
ownership of the funds involved to some different entity. It was clearly a legitimate
operation from a business point of view, permissible under the convertibility regime
of Argentina until the [decree]. This does not mean that it would fall within the
“transfers related to an investment” under Art. V [...]
Similarly, in White Industries v India, the Claimant argued that the retention of bank guarantees
by a State-owned company, in violation of an arbitral award, was a violation of India's obligation
under Article 9 of the applicable 1999 Australia-India BIT to:

[…] permit all funds of an investor of the other Contracting Party related to an
investment in its territory to be freely transferred, without unreasonable delay and
on a non-discriminatory basis.
The Tribunal found that the argument was untenable, as the provision could not apply to the
assertion of contractual rights by the State-owned company. Furthermore, the acts of this
company could not be attributed to the Respondent State7:

The Tribunal concludes this claim must fail.
Apart from the fact that Article 9 is clearly aimed at restrictions on the movement of
capital and exchange of currency imposed by a Contracting Party, rather than the
assertion of a contractual right to funds provided for in a bank guarantee, the claim
is entirely based on the conduct of Coal India.
Accordingly, the Tribunal having determined that the conduct of Coal India is not
attributable to the Republic, there is no basis for a claim that India acted in any way
in breach of its obligations created by Article 9 of the BIT.
Some investment treaties may only provide for an express right to conduct outgoing transfers.
For instance, Article 6(1), of the 1996 Belgo-Luxembourg Economic Union (BLEU)-Hong Kong
BIT provides:

Each Contracting Party shall in respect of investments guarantee to investors of the
other Contracting Party the unrestricted right to transfer their investments and
returns abroad.
In the Biwater v Tanzania case, the investor argued the Respondent State had breached its right
of transfer contained in Article 6 of the 1994 Tanzania-United Kingdom BIT, which provided:

Each Contracting Party shall in respect of investments guarantee to nationals or
companies of the other Contracting Party the unrestricted transfer of their
investments and returns. Transfers shall be effected without delay in the convertible
currency in which the capital was originally invested or in any other convertible
currency agreed by the investor and the Contracting Party concerned. Unless
otherwise agreed by the investor transfers shall be made at the rate of exchange
applicable on the date of transfer pursuant to the exchange regulations in force.
The Respondent asserted that in fact the investor had no funds to transfer as the entity had no
funds and would therefore not pay any dividends. The Tribunal concluded8:

The Arbitral Tribunal agrees with the Republic that Article 6 of the BIT is not a
guarantee that investors will have funds to transfer. It rather guarantees that if
investors have funds, they will be able to transfer them, subject to the conditions
stated in Article 6. The free transfer principle is aimed at measures that would
restrict the possibility to transfer, such as currency control restrictions or other
measures taken by the host State which effectively imprison the investors’ funds,
typically in the host State of the investment. No such measures have been taken in
the present case. BGT’s claims are therefore unfounded.
5 See for example Article 14 of the ECT and Article 1109 of NAFTA
6 Continental Casualty Company v Argentina, ICSID Case No. ARB/03/9, Award (5 September 2008) paras 240-
242
7 White Industries v India, UNCITRAL, Final Award (30 November 2011) paras 13.2.2-13.2.4
8 Biwater Gauff v Tanzania, ICSID Case No. ARB/05/22, Award (24 July 2008) para 735
Types of Permitted Transfers
Investment treaties generally permit a wide variety of transfers related to an investment. As we

saw above, the types of transfers permitted under the treaty are often stated in a non-exclusive,
illustrative list. This is the dominant approach in modern investment treaties9. An example of this
approach is Article V of the 1991 Argentina-United States BIT reproduced above.
Another example of this approach can be found in Article 4 of the 1991 Czechoslovakia-
Netherlands BIT, which provided:

Each Contracting Party shall guarantee that payments related to an investment may
be transferred. The transfers shall be made in a freely convertible currency, without
undue restriction or delay. Such transfers include in particular though not
exclusively:
(a) profits, interests, dividends, royalties, fees and other current income;
(b) funds necessary
i. for the acquisition of raw or auxiliary materials, semi-fabricated or

finished products, or
ii. for the development of an investment or to replace capital assets in

order to safeguard the continuity of an investment;
(c) funds in repayment of loans;
(d) earnings of natural persons;
(e) the proceeds of sale or liquidation of the investment.
A few investment treaties opt instead for a ‘closed list’ approach, which specifies the types of
transfers that are permitted, without a general reference to all transfers related to an investment.
For instance, Article 8 of the 2001 Cuba-Denmark BIT provides:

(1) Each Contracting Party shall with respect to investments in its territory by
investors of the other Contracting Party allow the free transfer in and out of its
territory of:
(a) the initial capital and any additional capital for the maintenance and
development of the investment;
(b) the investment capital or the proceeds from the sale or liquidation of all or
any part of an investment;
(c) interests, dividends, profits and other returns realized;
(d) payments made for the reimbursement of the credits for investments, and
interests due;
(e) payments derived from rights enumerated in Article 1, section 1, v of this

Agreement;
(f) unspent earnings and other remunerations of personnel engaged in

connection with an investment;
(g) compensation, restitution, indemnification or other settlement pursuant to

Articles 6 and 7.
Some of the treaties entered into by China have something similar, with the inclusion of a ‘China
clause’. The 1986 China-United Kingdom BIT provides at Article 6(4):

In respect of the People’s Republic of China, transfers of convertible currency by a
national or company of the United Kingdom under paragraphs (1) to (3) above shall
be made from the foreign exchange account of the national company transferring
the currency. Where that foreign exchange account does not have sufficient foreign
exchange for the transfer, the People’s Republic of China shall permit the
conversion of local currency into convertible currency for transfer, in the following
cases:
(a) proceeds resulting from the total or partial liquidation of an investment,
(b) royalties derived from assets in Article 1 (1)(a)(iv);
(c) payments made pursuant to a loan agreement in connection with any

investment guaranteed by the Bank of China;
(d) profits, interest, capital gains, dividends, fees and any other form of return
of a national or company specifically permitted by the competent authority of
the People’s Republic of China to carry out economic activities in the territory
of the People’s Republic of China.
Week 9: Convertibility

Most investment treaties allow transfers to be made in a ‘freely convertible currency’. However,
not all treaties define the term ‘freely convertible currency’. Exceptions include:
Article 1(14) of the ECT, which defines the term as ‘currency which is widely traded in
international foreign exchange markets and widely used in international transactions’;
Article 1(5) of the 1992 Hong Kong-Netherlands BIT, which defines ‘freely convertible’ to
mean ‘free of all currency exchange controls and transferable abroad in any currency’;
Several Australian BITs, which refer to ‘a convertible currency as classified by the IMF or any
currency that is widely traded in international foreign exchange markets1
In this regard, we note that Article XXX(f) of the IMF’s Articles of Association defines the term
‘freely usable currency’ as:

[…] a member's currency that the Fund determines (i) is, in fact, widely used to
make payments for international transactions, and (ii) is widely traded in the
principal exchange markets.
As of June 2019, the IMF considers the Japanese yen, the pound sterling, the US dollar, the
euro and the Chinese renminbi to be freely usable currencies2. The Chinese yuan was only
added in 2016, with the previous addition of the euro made in 1999.
Another element of convertibility is the exchange rate at which the funds are converted into
foreign currency. Investment treaties often specify that the funds must be converted at the rate of
exchange prevailing on the day of the transfer.
Since host States sometimes set ‘official’ exchange rates, some treaties specifically provide that
transfers are to be made on the basis of the market rate of exchange. For instance, Article 6 of
the 2002 Austria-Philippines BIT provides that:

[…]
(2) The payments referred to in this Article shall be effected at the market rate of
exchange prevailing on the day of the transfer.
(3) The rates of exchange shall be determined according to the quotations on the
stock exchanges or in the absence of such quotations according to the spot
transactions conducted through the respective banking system in the territory of the
respective Contracting Party.
Other treaties refer to the IMF rate for the conversion of the currency into the IMF’s Special
Drawing Rights on the date of payment. For instance, Article 6 of the 2002 China-Brunei BIT
provides that:

Transfers shall be made at the market rate of exchange of the Contracting Party
accepting the investment on the day of transfer. In the event that the market rate
of exchange does not exist, the rate of exchange shall correspond to the
cross rate obtained from those rates which would be applied by the
International Monetary Fund on the date of the payment for conversions of the
currencies concerned into Special Drawing Rights.
A similar approach can be found in several German BITs. For example, Article 6(2) of the 1995
Germany-Zimbabwe BIT provides:

Transfers under Article 4, 5, or 7 shall be made without delay in a freely convertible
currency at the rate of exchange applicable on the date of transfer.
This rate of exchange shall not substantially deviate from the cross rate obtained
from those rates which would be applied by the International Monetary Fund on the
date of payment for conversion of the currencies concerned into Special Drawing
Rights.

A more nuanced approach can be found at Article 14(3) of the ECT, which provides
for conversion at the more favourable rate between (i) the most recent rate applied
to inward investments or (ii) the applicable rate for conversion into the IMF’s Special
Drawing Rights:
[…] In the absence of a market for foreign exchange, the rate to be used will be the
most recent rate applied to inward investments or the most recent exchange rate for
conversion of currencies into Special Drawing Rights, whichever is more favourable
to the Investor.
1 Article 1(1)(f) of the 1995 Argentina-Australia BIT; Article 1(1)(f) of the 1995 Australia-Peru BIT; Article 1(b) of the
1999 Australia-India BIT
2
IMF (2018) ‘Special Drawing Rights (https://doi.org/10.5089/9781484330876.071) ’ (last accessed 14 June 2019)
Week 9: Exceptions to Transfer Rights

Investment treaty provisions dealing with exceptions to investors’ transfer rights can be divided
into two categories.
The first category of exceptions is aimed at helping countries confronting economic

emergencies, including, in particular, balance-of-payments crises. For instance, Article 17 of the
2002 Japan-South Korea BIT provides:

1. A Contracting Party may adopt or maintain measures not conforming with its
obligations under paragraph 1 of Article 2 relating to cross-border capital
transactions and Article 12 of this Agreement:
(a) in the event of serious balance-of-payments and external financial

difficulties or threat thereof; or
(b) in cases where, in exceptional circumstances, movements of capital cause

or threaten to cause serious difficulties for macroeconomic management, in
particular, monetary and exchange rate policies.
2. Measures referred to in paragraph 1 of this Article:
(a) shall be consistent with the Articles of Agreement of the International

Monetary Fund so long as the Contracting Party taking the measures is a
party to the said Articles of Agreement;
(b) shall not exceed those necessary to deal with the circumstances set out in
paragraph 1 of this Article;
(c) shall be temporary and shall be eliminated as soon as conditions permit;

and (d) shall be promptly notified to the other Contracting Party.
[...]
It is clear after the global financial crisis that these exceptions may become more relevant and
perhaps more common in newly negotiated treaties, as they give the State a carve out for
exceptional circumstances Similar provisions can be found in several French BITs. For example,
Article 3 of the 2003 France-Uganda BIT provides:

[…]
In case of a serious balance of payments difficulties and external financial difficulties

or the threat thereof, each contracting party may temporarily restrict transfers,
provided that this restriction: i) shall be promptly notified to the other party; ii) shall
be consistent with the articles of agreement with the International Monetary Fund;
iii) shall not exceed in any case six months; iv) would be imposed in an equitable,
non discriminatory and in good faith basis
The second category of exceptions is designed more generally to facilitate economic

governance and includes exceptions for matters such as bankruptcy proceedings, enforcement
of penal and tax laws, and the protection of judgment creditors under local law. For example,
Article 7(4) of the 2005 United States-Uruguay BIT provides:

Notwithstanding paragraphs 1 through 3, a Party may prevent a transfer through the
equitable, non-discriminatory, and good faith application of its laws relating to:
(a) bankruptcy, insolvency, or the protection of the rights of creditors;
(b) issuing, trading, or dealing in securities, futures, options, or derivatives;
(c) criminal or penal offenses;
(d) financial reporting or record keeping of transfers when necessary to assist law
enforcement or financial regulatory authorities; or
(e) ensuring compliance with orders or judgments in judicial or administrative

proceedings.
Article 14(6) of the 2005 Canada-Peru BIT specifically creates an exception relating to the
regulation by the host State of its financial sector:

Notwithstanding the provisions of paragraphs 1, 2 and 4, and without limiting the
applicability of paragraph 5, a Party may prevent or limit transfers by a financial
institution to, or for the benefit of, an affiliate of or person related to such institution,
through the equitable, non-discriminatory and good faith application of measures
relating to maintenance of the safety, soundness, integrity or financial responsibility
of financial institutions.
Finally, it may be noted that the investment treaty may equally envisage procedural
requirements for transfers. In Metalpar v Argentina, Article V of the applicable Chile-Argentina
BIT provided1:

Each Contracting Party shall guarantee to nationals or companies of the other
Contracting Party the free transfer of payments related to an investment […]
The transfer shall be made without delay according to the procedures

established in the territory of each Contracting Party, in freely convertible
currency and at the current price in each case, which shall be equivalent to the most
favourable exchange rate.
The Claimants argued that this provision had been violated, as they were prohibited from
transferring funds out of the country by their local bank. The Tribunal found that the argument
was untenable, as the Claimants were required to request an authorisation from the central bank
of Argentina, and not from their local bank2:

The Tribunal concludes that Claimants, who knew the regulations on this matter
well, as indicated in the file, did not comply with the established procedure, which
consisted of requesting authorization from the Central Bank, not [the Claimants’
bank], and that Argentina did not breach article 5(b) of the BIT, which guarantees
the transfer of funds abroad. Should it be concluded that the events were the result
of incorrect advice provided by [the Claimants’ bank] to Claimants, the
consequences of that error could not be charged to Argentina either.
It is clear these transfer provisions in investment treaties are central to the promotion and
protection of foreign investment. It is not common for the repatriation provisions to grant an
absolute right to transfer funds relating to an investment. States want to retain some control, and
the clauses aim to balance the competing interests of the investor and host nation.
Finally, there was an interesting point that arose over transfer clauses in older BITs, which the
EU Commission felt were in contravention of EU law. The Commission commenced enforcement
proceedings against Denmark, Austria, Finland and Sweden, as some of their older treaties did
not include a 'Regional Economic Integration Organization' exception that would allow EU law to
take priority. The relevant BITs provided unconditional rights for investors from non-EU countries
to free international transfers. The ECJ ultimately confirmed the treaties would to the extent
possible have to be denounced or amended to be compatible with EU law3.
1 Translated from the original in Spanish

2 Metalpar v Argentina, ICSID Case No. ARB/03/5, Award (6 June 2008) para 179
3 Commission of the European Communities v Kingdom of Sweden, Case C-249/06 (ECJ, 3 March 2009);
Commission of the European Communities v Republic of Austria, Case C-205/06 (ECJ, 3 March 2009); Commission
of the European Communities v Republic of Finland, Case C-118/07 (ECJ, 19 November 2008)

Investment treaties generally contain a clause prohibiting host States from impairing protected
investments by taking unreasonable, discriminatory, or arbitrary measures. For instance, Article
2(3) of the 2003 China-Germany BIT provides:

Neither Contracting Party shall take any arbitrary or discriminatory measures
against the management, maintenance, use, enjoyment and disposal of the
investments by the investors of the other Contracting Party.
Similarly, Article II(1)(b) of the 1991 Argentina-United States BIT provides:

Neither Party shall in any way impair by arbitrary or discriminatory measures the
management, operation, maintenance, use, enjoyment, acquisition, expansion, or
disposal of investments.
The prohibition against arbitrary or discriminatory treatment is often combined with the FET
clause. For example, Article 3(1) of the 1992 Netherlands-Argentina BIT provides:

Each Contracting Party shall ensure fair and equitable treatment to investments of
investors of the other Contracting Party and shall not impair, by unreasonable or
discriminatory measures, the operation, management, maintenance, use,
enjoyment or disposal thereof by those investors.
We examine the relationship between such a clause and the FET standard on this page, before
proceeding to examine the meaning of arbitrary and discriminatory measures in greater detail on
the following page.
Relationship with the FET standard
Prohibitions of arbitrary and discriminatory measures are theoretically separate standards of

treatment, independent of the FET standard1. The distinction between these standards and the
FET standard has been recognised by some investment treaty tribunals. For example, the
Tribunal in Duke Energy v Ecuador held2:

In view of the structure of the provisions of the BIT, the Tribunal has difficulty
following Ecuador’s argument that there is only one concept of fair and equitable
treatment which encompasses a non-impairment notion. The Tribunal will thus
make a separate determination to decide whether the contested measures were
arbitrary […]
Similarly, in LG&E v Argentina, the Tribunal stated3:

[...] characterizing the measures as not arbitrary does not mean that such measures
are characterized as fair and equitable […] it was not arbitrary, though unfair and
inequitable, not to restore the Gas Law or the other guarantees related to the gas
distribution sector and to implement the contract renegotiation policy.
However, it is generally accepted that in cases where discrimination or arbitrariness amounts to

unfairness or inequity, the FET standard will also be breached4. As a result, tribunals have often
applied the prohibition against arbitrary or discriminatory treatment as a part of the FET
standard. For instance, in Fouad Alghanim v Jordan, the Tribunal found5:

[…] the protection from arbitrary treatment is also included within the more general
requirement in Article 4(1) to afford ‘fair and equitable treatment’ […] the protection
in Article 3(1) from ‘discriminatory’ measures – an element that is also comprised
within the Article 4(1) assurance of fair and equitable treatment.
Similarly, in CMS v Argentina, the Claimant relied upon Article II(2) of the United States-
Argentina BIT reproduced above, which, as we have seen, protects the investor against
‘arbitrary or discriminatory measures’. The Tribunal found that6:

The standard of protection against arbitrariness and discrimination is related to that
of fair and equitable treatment. Any measure that might involve arbitrariness or
discrimination is in itself contrary to fair and equitable treatment.
In contrast, the Tribunals in Enron7 and Sempra8 found a breach of FET but not a breach of
arbitrary or discriminatory treatment. In the former case, the investor alleged that Argentina had
violated Article II(2)(b) of the Argentina United States BIT of 1991 which provided that:


disposal of investments. For the purposes of dispute resolution under Articles VII
and VIII, a measure may be arbitrary or discriminatory notwithstanding the
opportunity to review such measure in the courts or administrative tribunals of a
Party.
In practice, the contours of the distinction between the two standards depend upon their precise
formulation in the applicable treaty, particularly when they exist as independent and stand-alone
provisions. As Christoph Schreuer has noted9:

There is no good reason to assume that treaty drafters used two different terms
when they meant one and the same thing. It is difficult to see why one standard
should be part of the other when the text of the treaties lists them side by side as
two standards without indicating that one is merely an emanation of the other.
In this context, it may be observed that the prohibition against arbitrariness or discrimination
generally refers to ‘measures’ as opposed to ‘treatment’10. Similarly, the clause generally
requires the ‘impairment’ of an investment, which suggests that there has to be a detrimental
impact on the investment11.
1 See Rudolf Dolzer and Christoph Schreuer, Principles of International Investment Law (2nd edn, OUP 2012)
194; Jeswald Salacuse, The Law of Investment Treaties (2nd edn, OUP 2015) 272; Dr Markus Burgstaller, ‘Fair
and equitable treatment in international investment law’ (Practical Law Company 2019)
2
Duke Energy v Ecuador, ICSID Case No. ARB/04/19, Award (18 August 2008), para 377
3 LG&E v Argentina, ICSID Case No. ARB/02/1, Decision on Liability (3 October 2006) paras 162-163
4 Dr Markus Burgstaller, ‘Fair and equitable treatment in international investment law’ (Practical Law Company
2019); See also Andrew Newcombe and Lluís Paradell, ‘Chapter 6 - Minimum Standards of Treatment', in Law
and Practice of Investment Treaties: Standards of Treatment (Kluwer Law International 2009) § 6.35
5 Fouad Alghanim v Jordan, ICSID Case No. ARB/13/38, Award (14 December 2017) paras 482-483
6 CMS v Argentina, ICSID Case No. ARB/01/8, Award (12 May 2005) para 290
7 Enron v Argentina, ICSID Case No. ARB/01/3, Award (22 May 2019) para 283
8 Sempra v Argentina, ICSID Case No. ARB/02/16, Award (28 September 2007) paras 318 - 320
9 Christoph Schreuer (2007), ‘Protection against Arbitrary or Discriminatory Measures’ at 11; Rudolf Dolzer and
Christoph Schreuer, Principles of International Investment Law (2nd edn, OUP 2012) 194
10 Andrew Newcombe and Lluís Paradell, ‘Chapter 6 - Minimum Standards of Treatment', in Law and Practice of
Investment Treaties: Standards of Treatment (Kluwer Law International 2009) § 6.34; Jeswald Salacuse, The Law
of Investment Treaties (2nd edn, OUP 2015) 273
Investment Treaties: Standards of Treatment (Kluwer Law International 2009) § 6.34


Investment treaties generally contain a clause prohibiting host States from impairing protected
investments by taking unreasonable, discriminatory, or arbitrary measures. For instance, Article
2(3) of the 2003 China-Germany BIT provides:

Neither Contracting Party shall take any arbitrary or discriminatory measures
against the management, maintenance, use, enjoyment and disposal of the
investments by the investors of the other Contracting Party.
Similarly, Article II(1)(b) of the 1991 Argentina-United States BIT provides:

disposal of investments.
The prohibition against arbitrary or discriminatory treatment is often combined with the FET
clause. For example, Article 3(1) of the 1992 Netherlands-Argentina BIT provides:

Each Contracting Party shall ensure fair and equitable treatment to investments of
investors of the other Contracting Party and shall not impair, by unreasonable or
discriminatory measures, the operation, management, maintenance, use,
enjoyment or disposal thereof by those investors.
We examine the relationship between such a clause and the FET standard on this page, before
proceeding to examine the meaning of arbitrary and discriminatory measures in greater detail on
the following page.
Relationship with the FET standard

treatment, independent of the FET standard1. The distinction between these standards and the
FET standard has been recognised by some investment treaty tribunals. For example, the
Tribunal in Duke Energy v Ecuador held2:

In view of the structure of the provisions of the BIT, the Tribunal has difficulty
following Ecuador’s argument that there is only one concept of fair and equitable
treatment which encompasses a non-impairment notion. The Tribunal will thus
make a separate determination to decide whether the contested measures were
arbitrary […]
Similarly, in LG&E v Argentina, the Tribunal stated3:

[...] characterizing the measures as not arbitrary does not mean that such measures
are characterized as fair and equitable […] it was not arbitrary, though unfair and
inequitable, not to restore the Gas Law or the other guarantees related to the gas
distribution sector and to implement the contract renegotiation policy.
However, it is generally accepted that in cases where discrimination or arbitrariness amounts to

unfairness or inequity, the FET standard will also be breached4. As a result, tribunals have often
applied the prohibition against arbitrary or discriminatory treatment as a part of the FET
standard. For instance, in Fouad Alghanim v Jordan, the Tribunal found5:

[…] the protection from arbitrary treatment is also included within the more general
requirement in Article 4(1) to afford ‘fair and equitable treatment’ […] the protection
in Article 3(1) from ‘discriminatory’ measures – an element that is also comprised
within the Article 4(1) assurance of fair and equitable treatment.
Similarly, in CMS v Argentina, the Claimant relied upon Article II(2) of the United States-
Argentina BIT reproduced above, which, as we have seen, protects the investor against
‘arbitrary or discriminatory measures’. The Tribunal found that6:

The standard of protection against arbitrariness and discrimination is related to that
of fair and equitable treatment. Any measure that might involve arbitrariness or
discrimination is in itself contrary to fair and equitable treatment.
In contrast, the Tribunals in Enron7 and Sempra8 found a breach of FET but not a breach of
arbitrary or discriminatory treatment. In the former case, the investor alleged that Argentina had
violated Article II(2)(b) of the Argentina United States BIT of 1991 which provided that:


disposal of investments. For the purposes of dispute resolution under Articles VII
and VIII, a measure may be arbitrary or discriminatory notwithstanding the
opportunity to review such measure in the courts or administrative tribunals of a
Party.
In practice, the contours of the distinction between the two standards depend upon their precise
formulation in the applicable treaty, particularly when they exist as independent and stand-alone
provisions. As Christoph Schreuer has noted9:

There is no good reason to assume that treaty drafters used two different terms
when they meant one and the same thing. It is difficult to see why one standard
should be part of the other when the text of the treaties lists them side by side as
two standards without indicating that one is merely an emanation of the other.
In this context, it may be observed that the prohibition against arbitrariness or discrimination
generally refers to ‘measures’ as opposed to ‘treatment’10. Similarly, the clause generally
requires the ‘impairment’ of an investment, which suggests that there has to be a detrimental
impact on the investment11.
1 See Rudolf Dolzer and Christoph Schreuer, Principles of International Investment Law (2nd edn, OUP 2012)
194; Jeswald Salacuse, The Law of Investment Treaties (2nd edn, OUP 2015) 272; Dr Markus Burgstaller, ‘Fair
and equitable treatment in international investment law’ (Practical Law Company 2019)
2
Duke Energy v Ecuador, ICSID Case No. ARB/04/19, Award (18 August 2008), para 377
3 LG&E v Argentina, ICSID Case No. ARB/02/1, Decision on Liability (3 October 2006) paras 162-163
4 Dr Markus Burgstaller, ‘Fair and equitable treatment in international investment law’ (Practical Law Company
2019); See also Andrew Newcombe and Lluís Paradell, ‘Chapter 6 - Minimum Standards of Treatment', in Law
and Practice of Investment Treaties: Standards of Treatment (Kluwer Law International 2009) § 6.35
5 Fouad Alghanim v Jordan, ICSID Case No. ARB/13/38, Award (14 December 2017) paras 482-483
6 CMS v Argentina, ICSID Case No. ARB/01/8, Award (12 May 2005) para 290
8 Sempra v Argentina, ICSID Case No. ARB/02/16, Award (28 September 2007) paras 318 - 320
9 Christoph Schreuer (2007), ‘Protection against Arbitrary or Discriminatory Measures’ at 11; Rudolf Dolzer and
Christoph Schreuer, Principles of International Investment Law (2nd edn, OUP 2012) 194
Investment Treaties: Standards of Treatment (Kluwer Law International 2009) § 6.34; Jeswald Salacuse, The Law
of Investment Treaties (2nd edn, OUP 2015) 273

Week 9: Case Law on Arbitrariness,
Unreasonableness and Discrimination

Use of the Disjunctive or the Conjunctive
Most investment treaties use the disjunctive ‘or’ and refer to ‘arbitrary or discriminatory’,
‘unreasonable or discriminatory’ or ‘unjustifiable or discriminatory’ measures. For example,
Article 10(1) of the ECT refers to ‘unreasonable or discriminatory measures’.
In such a case, the protection is twofold. In other words, a violation of the standard requires a
demonstration of:
either arbitrary or unreasonable measures;
or discriminatory measures.
In Azurix v Argentina, where the Tribunal was applying Article II(2) of the United States-
Argentina BIT, which protects the investor against ‘arbitrary or discriminatory measures’, it was
held that1:

The Tribunal agrees with the interpretation of the Claimant that a measure needs
only to be arbitrary to constitute a breach of the BIT. This interpretation has not been
contested by the Respondent and it follows from the alternative way in which the
term “measures” is qualified by the adjectives “arbitrary or discriminatory”.
Other investment treaties use the conjunctive ‘and’ instead. This formulation, which was
adopted in the 1994 United States Model BIT, also appeared in Article II(2)(b) of the 1991 United
States-Czechoslovakia BIT, which provided:

Neither Party shall in any way impair by arbitrary and discriminatory measures the
disposal of investment [...]
In Lauder v Czech Republic, the Tribunal, applying this provision, found that the impugned
measure must be both arbitrary and discriminatory to breach the treaty2:

The Arbitral Tribunal considers that a violation of Article II(2)(b) of the Treaty
requires both an arbitrary and a discriminatory measure by the State. It first results
from the plain wording of the provision, which uses the word “and” instead of the
word “or” [...]
Some treaties impose an additional stipulation that the non-discrimination and/or arbitrariness be
'without prejudice' to local law. This gives a certain degree of control to the State to change or
impose conditions in its national awls. The 2004 China-Latvia BIT provides at Article 2(3):

Without prejudice to its laws and regulations, neither Contracting Party shall take
any unreasonable or discriminatory measures against the management,
maintenance, use, enjoyment and disposal of the investments by the investors of
the other Contracting party.
In the first ECT case, Nykomb v Latvia, the Tribunal had to consider whether there had been a
breach of Article 10 (1) which provides that:

[...] no Contracting Party shall in any way impair by [...] unreasonable or
discriminatory measures their [the Investor’s Investments] [...] use, enjoyment or
disposal.
The Tribunal in Nykomb confirmed that3:

[...] in evaluating whether there is discrimination in the sense of the Treaty one
should only “compare like with like”. However, little if anything has been
documented by the Respondent to show the criteria or methodology used in fixing
the multiplier, or to what extent Latvenergo is authorized to apply multipliers other
than those documented in this arbitration. On the other hand, all of the information
available to the Tribunal suggests that the three companies are comparable, and
subject to the same laws and regulations. In particular, this appears to be the
situation with respect to Latelektro-Gulbene and Windau. In such a situation, and in
accordance with established international law, the burden of proof lies with the
Respondent to prove that no discrimination has taken or is taking place. The Arbitral
Tribunal finds that such burden of proof has not been satisfied, and therefore
concludes that Windau has been subject to a discriminatory measure in violation of
Article 10 (1).
It is worth noting that the Tribunal, having found one breach, did not find it necessary to decide
on the other Treaty violations asserted by the Claimant.
1
Azurix v Argentina, ICSID Case No. ARB/01/12, Award (14 July 2006) para 391
2 Lauder v Czech Republic, UNCITRAL, Final Award (3 September 2001) para 219
3 Nykomb Synergetics Technology Holding AB v The Republic of Latvia, SCC, Award (16 December 2003)
Arbitrary Measures, ‘Unreasonable’ or ‘Unjustified’ Measures and Discriminatory

Measures
Arbitrary Measures 
As we saw in Week 6 of this module, an oft-cited definition of arbitrariness in

international law is found in the decision of the ICJ Chamber in the ELSI case, where it
was stated that4:

Arbitrariness is not so much something opposed to a rule of law, as
something opposed to the rule of law [...] It is a wilful disregard of due
process of law, an act which shocks, or at least surprises, a sense of
judicial propriety.
This standard has been adopted by investment treaty tribunals. For instance, the
Tribunal in Azurix v Argentina found5:

In its ordinary meaning, “arbitrary” means “derived from mere opinion”,
“capricious”, “unrestrained”, “despotic.” Black’s Law Dictionary defines the
term, inter alia, as “done capriciously or at pleasure”, “not done or acting
according to reason or judgment”, “depending on the will alone.” [...] The
Tribunal finds that the definition in ELSI is close to the ordinary meaning of
arbitrary since it emphasizes the element of wilful disregard of the law.
Consequently, the threshold for findings of arbitrariness in investment treaty arbitration

is relatively high6. For instance, in Enron v Argentina, the Tribunal found that in the
absence of 'some important measure of impropriety', Argentina's actions in response to
a financial crisis were not arbitrary7:

[...] a finding of arbitrariness requires that some important measure of
impropriety is manifest, and this is not found in a process which although
far from desirable is nonetheless not entirely surprising in the context it
took place.
‘Unreasonable’ or ‘Unjustified’ Measures 
Although some investment treaties do not use the term ‘arbitrary’ but refer to ‘unjustified
or discriminatory action’ or to ‘unreasonable or discriminatory action’, it has been
suggested that8:

[…] it would be difficult to identify a difference between ‘arbitrary’ and
‘unjustified’ or ‘unreasonable action’, and presumably the terms are
interchangeable.
This was the position taken by the Tribunal in National Grid v Argentina, where it was
held that9:

The first issue for the Tribunal is to determine whether “unreasonable” and
“arbitrary” have distinct or similar meanings. The Black’s Law Dictionary
defines “unreasonable” as “irrational; foolish; unwise; absurd; silly;
preposterous; senseless; stupid.” The same source defines “arbitrary”
variously as something done “capriciously or at pleasure,” “without
adequate determining principle,” “non-rational” or “not done or acting
according to reason or judgment.” It is the view of the Tribunal that the
plain meaning of the terms “unreasonable” and “arbitrary” is substantially
the same in the sense of something done capriciously, without reason.
Other scholars have disagreed, finding that unlike the notion of unreasonableness,
‘arbitrariness involves a manifest impropriety, such as the absence of a legitimate
purpose, capriciousness, bad faith, or a serious lack of due process’10 .
Tribunals taking this view have assimilated the notion of unreasonableness into the
FET standard. For instance, the Tribunal in CME v Czech Republic, interpreting the
term ‘unreasonable or discriminatory measures’ in the applicable BIT, found11:

[…] As with the fair and equitable standard, the determination of
reasonableness is in its essence a matter for the arbitrator’s judgment.
That judgment must be exercised within the context of asking what the
parties to bilateral investment treaties should jointly anticipate, in advance
of a challenged action, to be appropriate behaviour in light of the goals of
the Treaty
The Tribunal in Saluka Investments v Czech Republic, interpreting the same BIT,
arrived at a similar conclusion12:

The standard of “reasonableness” has no different meaning in this context
than in the context of the “fair and equitable treatment” standard with which
it is associated; and the same is true with regard to the standard of “non-
discrimination”. The standard of “reasonableness” therefore requires, in
this context as well, a showing that the State’s conduct bears a reasonable
relationship to some rational policy, whereas the standard of “non-
discrimination” requires a rational justification of any differential treatment
of a foreign investor.
Discriminatory Measures 
As we have seen in Week 7 of this module, investment treaties generally contain

express prohibitions on discrimination on the basis of nationality by including national
treatment and most-favoured-nation (MFN) treatment provisions.
As the most frequent form of discrimination, in the context of the treatment of foreign
investment, is based on the nationality of the investor most of the cases on the topic
focus on the above provisions13.
However, discrimination can also take other forms. As Newcombe and Paradell have
noted14:

[...] discrimination with respect to the treatment of foreign investors and
investment could involve:
(i) discrimination contrary to international human rights, such as

discrimination based on race or sex;
(ii) unjustifiable or arbitrary regulatory distinctions made between things

that are like or treating unlike things in the same way;
(iii) conduct targeted at specific persons or things motivated by bad faith or

with an intent to injure or harass;
(iv) discrimination in the application of domestic law; and
(v) nationality-based discrimination.
With respect to the categories (i) to (iv) above, discriminatory measures will often
overlap with the prohibition of unreasonable, unjustifiable or arbitrary measures.
Category (iv) above overlaps with national and MFN treatment15.
As a result, the framework of analysis for discrimnation is similar to the framework used
for applying FET, national treatment or MFN treatment provisions. For instance, the
Tribunal in Saluka Investments v Czech Republic, having equated the protection
against discrimination with FET protections16, found17:

State conduct is discriminatory, if (i) similar cases are (ii) treated differently
(iii) and without reasonable justification.
Similarly, the Tribunal in Nykomb Synergetics v Latvia, interpreting Article 10(1) of the
ECT prohibiting 'unreasonable or discriminatory measures', found that only investors in
like situations could be compared when applying the provision18:

The Arbitral Tribunal accepts that in evaluating whether there is
discrimination in the sense of the Treaty one should only “compare like
with like”.
Just as we saw with the national treatment standard, tribunals have found that in order
to demonstrate a violation of national treatment provisions, the Claimant need not show
discriminatory intent on the part of the host country. In Siemens v Argentina, the
Tribunal found19:

[...] intent is not decisive or essential for a finding of discrimination, and that
the impact of the measure on the investment would be the determining
factor to ascertain whether it had resulted in non-discriminatory treatment.
On the other hand, where the existence of an intention to discriminate can be shown by
the investor, that might be sufficient to demonstrate a violation of the standard. As the
Tribunal in LG&E v Argentina stated20:

In the context of investment treaties, and the obligation thereunder not to
discriminate against foreign investors, a measure is considered
discriminatory if the intent of the measure is to discriminate or if the
measure has a discriminatory effect.
4 Elettronica Sicula SpA (ELSI) (United States of America v Italy) [1989] ICJ Rep 15, 76
5 Azurix v Argentina, ICSID Case No. ARB/01/12, Award (14 July 2006) para 392

8 Dolzer Rudolf Dolzer and Christoph Schreuer, Principles of International Investment Law (2nd edn, OUP 2012)
191
9 National Grid v Argentina, UNCITRAL, Award (3 November 2008) para 197
10
Andrew Newcombe and Lluís Paradell, ‘Chapter 6 - Minimum Standards of Treatment', in Law and Practice of
11
CME v Czech Republic, UNCITRAL, Partial Award, 13 September 2001 para 158
12 Saluka Investments v Czech Republic, UNCITRAL, Partial Award (17 March 2006) para 460
13 Christoph Schreuer (2007), ‘Protection against Arbitrary or Discriminatory Measures’ at 12

15 Ibid; See also BG Group v Argentina, UNCITRAL, Award (24 December 2007) para 355
16 Saluka Investments v Czech Republic, UNCITRAL, Partial Award (17 March 2006) para 460 (reproduced above)
17 Ibid at 313
18 Nykomb Synergetics v Latvia, SCC, Award (16 December 2003) para 64
19 Siemens v Argentina, ICSID Case No. ARB/02/8, Award (6 February 2007) para 321
20 LG&E v Argentina, ICSID Case No. ARB/02/1, Decision on Liability (3 October 2006) para 146
Week 9: Lecture Summary

 Test Yourself
Quiz time: How much can you remember from the lecture? (Note: This short quiz does
not count towards your final grade. You will also have unlimited tries for each question.)
Question 1
The following category of investment treaty provision generally does not confer any substantive
rights or impose any obligations upon investors:
 The admission and establishment clause
 Clauses dealing with ‘performance requirements’
 Promotion of investment clauses
 Clauses requiring prior approval or registration of the investment
 Check 

 Reflect Back
This marks the end of the lecture for Week 9. Here are some key points:
International law recognises that States have the sovereign right to control the admission of
foreign investors and regulate the activities of foreign investors in their territory;
In the absence of a treaty or other voluntary, legal obligations such as foreign investment
contracts, a State is not required to promote, engage in, or allow any particular investment
relationship on its territory;
The terms ‘admission‘ and ‘establishment‘ refer to two distinct notions. Whereas the term
‘admission‘ relates to the right of entry of the investment in principle, the term ‘establishment‘
refers to the conditions under which the investor is allowed to carry out its business during
the period of the investment;
Most admission clauses provide for the admission of investments ‘in accordance with‘ the
host State‘s law;
Many investment treaties also impose a general obligation upon host States to ‘promote‘ or
otherwise ‘encourage‘ investment. Such clauses do not create specific substantive rights for
investors;
The ability to transfer funds in and out of the host State is an inherent requirement of foreign
investment;
Under customary international law, States had a nearly absolute right to impose restrictions
on the transfer of funds across their borders;
After World War II, cross-border movements of capital are governed by a complex
international monetary regime, composed of a network of multilateral treaties. These include,
in particular, the Articles of Association of the International Monetary Fund (IMF), two legally
binding Codes of Liberalisation adopted by member States of the Organisation for Economic
Co-operation and Development (OECD) and rules regarding transfers of funds found in the
General Agreement on Trade in Services (GATS);
Further provisions regarding the transfer of funds are also found in almost all bilateral and
multilateral investment treaties. These provisions supplement the rules we find in the
instruments mentioned above;
Investment treaty provisions dealing with exceptions to investors’ transfer rights can be
divided into two categories: the first category of exceptions is aimed at helping countries
confront economic emergencies and the second category of exceptions is designed more
generally to facilitate economic governance;
Investment treaties generally contain a clause prohibiting host States from impairing
protected investments by taking unreasonable, discriminatory, or arbitrary measures. The
prohibition against arbitrary or discriminatory treatment is often combined with the FET
clause;

treatment, independent of the FET standard. However, it is generally accepted that in cases
where discrimination or arbitrariness amounts to unfairness or inequity, the FET standard will
also be breached;

 Coming Up
Complete this week with the following activities:
Challenge Activity – Apply what you have learned this week with your peers, and get
feedback from your Tutor and/or Module Leader.
Reflective Journal – Look back on your learning this week, record your thoughts and
identify any gaps and misunderstandings.
Resources – Further readings to reinforce this week's topic.
Webinar – For questions and thoughts about this week's topic. Use the forum to post
questions prior to the live session.
Next week, we study the methods of quantification and assessment of damages in investment
treaty arbitration.

Week 9: Challenge Activity

All sections

 Reflect / Discuss

The Infinite Casino Corporation is a company from the Republic of Callisto. It plans to
set up and operate a gaming facility on a coastal town of the Republic of Mimas,
known for its tourist attractions.
The Republic of Callisto is negotiating a BIT with the Republic of Mimas. The Republic
of Mimas has faced a series of financial crises in the last three decades. During its last
crisis In 2011, the Republic of Mimas stopped all capital transfers and devalued its
currency by 50% within a span of three weeks.
The General Counsel of the Infinite Casino Corporation has requested you to prepare
a one-page brief which he could send to Callisto’s chief negotiator, indicating the
nature and scope of the transfer of funds protections that the Corporation would like to
see included in the BIT being negotiated between Callisto and Mimas.
What are the relevant factors that you must take into consideration while drafting this brief?
What are the types of protections that you would include in the brief?
Post your response on the forum, and comment on those of your peers.

Unread


 
Subscribe

Write a reply...
Week 9: Reflective Journal


Although this does not count towards your final grade, the weekly critical reflection is an
invaluable exercise for your learning journey. It helps you to gather together what you have just
learned, organise your thoughts and identify any gaps in your knowledge.
Recording your reflections will also help you track issues on which you are unclear or have
doubts, and to revert to them as you progress in this module.
Spend at least two hours looking at your notes from the lecture and readings, as well as this
week’s forums, and write down your reflections.
Reflect on this week's learning:
What has challenged you?

What has surprised you?
What do you feel you have learned?

What questions do you have now?
What other resources do you now need to explore?

What can you prepare for this week's webinar?
Reflect further on this question:
Do you think that provisions dealing with arbitrary and discriminatory treatment are
superfluous in cases where the treaty contains an FET provision?
At the end of the module, you can review your reflections again to see how your feelings and
ideas have changed.
Week 9: Resources

Below are readings cited in the lecture and additional, optional resources. Please read those you
were asked to read. Reading the others will help you better understand the lecture and broaden
your view on the topic.
In-Lecture Resources
Patrick Juillard, ‘Freedom of Establishment, Freedom of Capital Movements, and

Freedom of Investment (https://doi.org/10.1093/icsidreview/15.2.322) ’, 15 ICSID Rev-FILJ
322 (2000)
Additional Resources
UNCTAD (2002), ‘Admission and Establishment

(https://unctad.org/en/docs/iteiit10v2_en.pdf) ’, UNCTAD/ITE/IIT/10 (vol. II)

UNCTAD/ITE/IIT/20
Matthias Ruffert (2014), ‘Capital, Free Flow of (https://opil-ouplaw-

com.ezproxy.library.qmul.ac.uk/view/10.1093/law:epil/9780199231690/law-9780199231690-
e1506?prd=OPIL#law-9780199231690-e1506-div1-1) ’, in Max Planck Encyclopedia of Public
International Law (OUP 2014)
Veijo Heiskanen (2008) ‘Arbitrary and Unreasonable Measures
(https://www.lalive.law/data/publications/vhe_Arbitrary_and_Unreasonable_Measures_2008.pdf)
’ in August Reinisch (ed), Standards of Investment Protection (OUP 2008)

2 2
Week 9: Webinar
All sections
 Discuss
In this webinar, we will go over what we have covered this week.
You will have the opportunity to ask questions, share your thoughts and receive feedback
from your tutor and your peers. We will also cover some of the lecture activities.
Please see the Calendar for information on the date and time of the webinar.

The forum below is where you can submit questions and share thoughts on this
week's learning prior to the webinar. In this way, we hope the webinar will be a more
personalised and useful experience for you. It is also an alternative space for those
who cannot make the webinar.
Occasionally, the tutor may post announcements and directly address questions here.
Please check this space regularly.

Unread


 
Subscribe

Write a reply...
(https:// Esther Grenness (https://learn.online.qmul.ac.uk/courses/371/users/859) 
11 Jul 2021
I'm hopelessly confused. The ECT has an MFN clause in Article 10(7). How is the MFN clause
in the Ireland-Freeland BIT relevant? To which MFN clause does question 2 refer? Is it asking
us whether Renua can utilize the MFN clause in the Ireland-Freeland BIT or the ECT's MFN
clause?

Reply

(http Mohamed Mahayni (https://learn.online.qmul.ac.uk/courses/371/users/188) 
12 Jul 2021
Good question, Esther. But, unfortunately, we cannot comment on it.
On behalf of the team
m.

Reply


Week 9 Slides

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Week 9 Slides

Uploaded by

Copyright:

Available Formats

Collapse all

 Week 9: Learning Outcomes

 Week 9: Welcome by Norah Gallagher

 Week 9: Introductory Forum

 Week 9: Lecture Start

 Week 9: Core Reading

Part 1: Admission, Establishment and Promotion of Foreign Investments

 Week 9: Introduction to Part 1

 Week 9: Admission and Establishment

 Week 9: Admission of Investments in Accordance with Local Laws

 Week 9: Promotion of Investments

Part 2: Transfer of Funds

 Week 9: Introduction to Part 2

 Week 9: Multilateral Agreements Governing Cross-Border Capital Flows

 Week 9: Transfer Provisions in Investment Treaties

 Week 9: Exceptions to Transfer Rights

Part 3: Prohibition of Arbitrary, Unreasonable or Discriminatory Measures

 Week 9: Introduction to Part 3

 Week 9: Case Law on Arbitrariness, Unreasonableness and Discrimination

 Week 9: Lecture Summary

 Week 9: Challenge Activity

 Week 9: Reflective Journal

 Student Satisfaction Survey

Week 9: Learning Outcomes

Other Substantive Standards

Download the video transcript here

Search entries or author

(https:// Mohamed Mahayni (https://learn.online.qmul.ac.uk/courses/371/users/188) 

"What Is Capital Control?

Capital control represents any measure taken by a government, central

Critics believe capital control inherently limits economic progress and

SOURCE: Adam Barone, 'Capital Control', Investopedia, updated 30 December 2020,

Week 9: Lecture Start

Other Substantive Standards

Jeswald Salacuse (2015), The Law of Investment Treaties (https://opil-ouplaw-

Christoph Schreuer (2007), ‘Protection against Arbitrary or Discriminatory Measures

the types of investments that foreigners are permitted to make;

incentives foreign investors may receive;

regulations to which foreign investors may be specifically subject;

As UNCTAD stated in its 2002 report on the issue2:

Patrick Juillard (2000), ‘Freedom of Establishment, Freedom of Capital Movements,

Please read the following extract before you proceed:

UNCTAD (1999), ‘Admission and Establishment

(a) to export a given level or percentage of goods or services;

(c) to purchase, use, or accord a preference to goods produced in its territory, or to

(f) to transfer a particular technology, a production process, or other proprietary

A similarly-worded provision can be found in Article 1106 (1) of NAFTA.

2.Member States shall undertake joint assessment on performance requirements no

3. Non-WTO Members of ASEAN shall abide by the WTO provisions in accordance

Prior Approval or Registration of Investments in the Host State

secondly, the Claimant had failed to obtain specific approval in writing

Similarly, Article 2 of the 1992 Bolivia–Netherlands BIT provides:

Similarly, in Fraport v Philippines, the applicable 1997 Germany-Philippines BIT defined

Similarly, Article 3(1) of the 2001 Australia-Egypt BIT provides:

Similarly, Article 3(1) of the 1994 India-United Kingdom BIT provides:

create a suitable governance framework for supervising the action of state-owned

take steps to reduce the backlog of cases in its courts.

the principal multilateral agreements governing cross-border capital flows in modern-day

The IMF’s Articles of Association

(4) moderate remittances for family living expenses

UNCTAD (2000), ‘Transfer of Funds’ (https://unctad.org/en/docs/psiteiitd20.en.pdf) ,

3. To what aspects of a foreign investment would these rules usually apply?

The OECD’s Liberalization Codes