A.

DEFINITIONS, CONCEPTS, AND PRINCIPLES

Investment, defined.

a. an enterprise;
b. an equity security of an enterprise;
c. a debt security of an enterprise;
d. a loan to an enterprise;
e. an interest in an enterprise that entitles the owner to share in income or profits of the enterprise;
f. an interest in an enterprise that entitles the owner to share in the assets of that enterprise on
dissolution, other than a debt security or a loan excluded from subparagraph (c) or (d);
g. real estate or other property, tangible or intangible, acquired in the expectation or used for the
purpose of economic benefit or other business purposes; and
h. interests arising from the commitment of capital or other resources in the territory of a Party to
economic activity in such territory.1

Investor, defined.

Normally includes natural persons and artificial or legal persons (or juridical entities). With respect of
natural persons, it includes the determination of the relevant link between the investor and the home State
party to an agreement. Legal entities, on the other hand, generally may be excluded because of their legal
form, their purpose or their ownership.2

For example, an investment agreement may exclude non-commercial entities, such as educational,
charitable or other entities not operated for profit. 3

Territory, defined.

In respect of each Contracting Party the territory under its sovereignty, including the exclusive economic
zone and the continental shelf where that Contracting Party exercises, in conformity with international law,
sovereign rights or jurisdiction.4

Returns, defined.

Essentially the earnings from an investment.5

Other relevant terms

1. Bilateral Investment Treaty (BIT) – are international agreements establishing the terms and
conditions for private investment by nationals and companies of one country to another country. 6
2. International Investment Agreement (IIA) – are bilateral or multilateral treaties that commit
state-parties to afford specific standards of treatment to foreign investors from the other state-
parties.7
3. National Treatment (NT) – is the commitment of a country to accord to foreign investors and to
foreign controlled enterprises in its territory treatment no less favourable than that accorded in
similar situations to domestic enterprises.8
4. International Monetary Systems (IMS) – a complex framework within which a very large
number of countries seek to attain simultaneously, by a combination of policy instruments, an
appropriate balance among a number of internal and external objectives. 9

1. NAFTA, article 1139(h), from UNCTAD, 1996a, volume II, pp. 93-94.
2. UN New York and Geneva, 2004, International Investment Agreements. p. 117
3. Ibid. par 2
4. Article 1 (3) of the Chilean model BIT
5. Supra note. p. 133
6. https://www.law.cornell.edu
7. https://ccsi.columbia.edu
8. OECD. National Treatment Restrictions and Review of Bilateral Investment Treaties. p. 12
9. https://www.elibrary.imf.org
 5. Most-Favoured-Nation (MFN) – is one of the oldest standards of international economic
relations.10
6. Fair and Equitable Treatment (FET) – is a very broad standard of protection and generally aims
to protect foreign investors against unfair treatment by a host government in the absence of more
specific protection standards.11

Two Pillars of Contemporary International Investment Law

1. Customary international law standards

It plays a significant role in investment arbitration disputes. Parties frequently rely on customary
international law as a secondary source of law under a bilateral investment treaty (BIT) or a State
contract. In some cases, arbitral tribunals have accepted a more prominent role of customary law,
i.e., as a self-standing source of international law. By doing so, arbitral tribunals have arguably
helped with the development and crystallization of customary international law. 12

2. Treaty-based standards (incorporated in bilateral agreements)

These standards are set in order to attract foreign investment and to encourage to investment in safe
and stable situation for investor in the territory of the host state. It includes fair and equitable
treatment, full protection and security, national treatment and most-favored-nations treatment.
These standards cause that the host state acts in good-faith with foreign investors without violating
its sovereignty. Accordingly, the common point of these standards is that non-compliance with
obligations arising from them leads to loss of the host state favorableness for foreign investment. 13

Principles Related to the International Law of Investments

1. Principle of Sovereign Equality

The most important principle of state sovereignty is economic sovereignty.14 The Charter of
Economic Rights and Duties of States (CERDS)15 of 1974 passed by the UN indicates under Art.
2; (1) “Every State has and shall freely exercise full permanent sovereignty, including possession,
use and disposal, over all its wealth, natural resources and economic activities.”
(2) “Each State has the right:
(A) To regulate and exercise authority over foreign investment within its national jurisdiction in
accordance with its laws and regulations and in conformity with its national objectives and
priorities. No State shall be compelled to grant preferential treatment to foreign investment; and
(B) To regulate and supervise the activities of transnational corporations within its national
jurisdiction and take measures to ensure that such activities comply with its laws, rules and
regulations and conform with its economic and social policies. Transnational corporations shall not
intervene in the internal affairs of a host State.”

2. Principle of Cooperation

The principle also claims that special efforts should be taken to encourage foreign investments in
the least developed countries. The importance of international cooperation also increases in the
circumstances that an increasing number of countries uses policies focused on the promotion of
investments. More international coordination, particularly on regional level, can also contribute to
the generation of synergies for investment projects that would be too complex and costly for a
single country.16
10. OECD. International Investment Law: A Changing Landscape. Chapter 4: Most-Favoured-Nation Treatment in
International Investment Law. p. 127.
11. https://www.lexology.com
12. https://www.acerislaw.com
13. Mahyari and Raisi. International Standards of Investment In International Arbitration Procedure And Investment
Treaties. 2018. p. 30-31
14. Cristina Elena Popa. Principles of International Law on Investments, Recognition and Trajectory. 2017. p. 154
15. The Charter of Economic Rights and Duties of States (CERDS) of 1974. Article 2.
16. Cristina Elena Popa. Principles of International Law on Investments, Recognition and Trajectory. 2017. p. 157
3. Principles related to the treatment and protection of international investments

According to the official source, this principle acknowledges that the protection of investments,
despite being only one of the numerous determinant factors of foreign investments, can be an
important policy instrument to attract investments. Therefore, it interacts closely with the principle
of promotion and facilitation of investments.17

4. Other principles18 found in the international law of foreign investments

4.1 Principle of self-determination

4.2 Principle of not resorting to force or threatened use of force
4.3 Principle of peaceful settlement of differences
4.4 Principle of non-intervention in the internal affairs of other states
4.5 Principle of observance of international obligations in good faith (pacta sunt servanda)
4.6 Principle of observance of human rights and fundamental freedoms
4.7 Principle of protection of the environment and of responsible investments
4.8 Principle of special civil, criminal, tort and administrative international responsibility
4.9 Principle of complete protection and security, including the protection of legitimate
expectations
4.10 Principle of the most favoured nation and the principle of national treatment
4.11 Principle to promote international investment, fair and equal treatment
4.12 Principle of reciprocity

17. Ibid. p. 158

18. Ibid. p. 159