Extension of Jurisdiction Ratione Materiae and Ratione Personae

95 tively. It was therefore not possible to base the claim on the standard with regard to acts that took place before the entry into force of the treaty. When the treaty is not applicable ratione temporis, neither is the MFN clause included in that treaty applicable. Hence, the clause cannot be invoked to extend the application of a treaty ratione temporis.

dent entity in one economy obtaining a lasting interest in an enterprise resident in another economy”³⁷⁶. It is characterized by the influence of the investor on the economic activity of the enterprise and by a certain duration. For example, the German Model BIT does not contain any restriction to investments. However, the BIT with China restricts the term of investments to those investments “made for the purpose of establishing lasting economic relations in connection with an enterprise, especially those which allow to exercise effec-tive influence on its management”³⁷⁷. This formulation explicitly excludes portfolio in-vestment. Even when no such explicit exclusion takes place in an investment treaty, the broad definitions of investment do not necessarily encompass portfolio and other invest-ments in addition to direct investment.³⁷⁸

The condition ratione personae is fulfilled when the dispute exists between the host State and an investor. Regarding the definition of who is an investor under the BIT, the essen-tial criterion is its nationality, as can be derived from Article 25 (2) of the ICSID Conven-tion.³⁷⁹ The exact criteria for establishing the nationality of an individual investor or of a corporation are not laid down in the ICSID Convention, but can be derived from the vari-ous BITs.³⁸⁰ According to the majority of BITs, whether a particular individual has the

376 International Monetary Fund, Balance of Payments Manual (5^th ed. 1993), 86, para. 359.

377 China-Germany BIT 2005, Protocol Ad Article 1.

378 Sornarajah argues that portfolio investment should only be protected in case it is explicitly covered by the definition of foreign investment in the treaty (Sornarajah, The international law on foreign invest-ment, p 9). Krajewski/ Ceyssens restrict the term “investment” in the German Model BIT as requiring the criteria of a certain duration, scope and the assumption of risk (Krajewski/ Ceyssens, Internationaler Investi-tionsschutz und innerstaatliche Regulierung, p. 189). For the contrary view see Parra, Provisions on the Set-tlement of Investment Disputes, p. 294.

379 Art. 25 (2) of the ICSID Convention provides:

“National of another Contracting State” means:

(a) any natural person who had the nationality of a Contracting State other than the State party to the dispute on the date on which the parties consented to submit such dispute to conciliation or arbitration as well as on the date on which the request was registered pursuant to paragraph (3) of Article 28 or paragraph (3) of Ar-ticle 36, but does not include any person who on either date also had the nationality of the Contracting State party to the dispute; and

(b) any juridical person which had the nationality of a Contracting State other than the State party to the dispute on the date on which the parties consented to submit such dispute to conciliation or arbitration and any juridical person which had the nationality of the Contracting State party to the dispute on that date and which, because of foreign control, the parties have agreed should be treated as a national of another Con-tracting State for the purposes of this Convention.

380 As stated by the tribunal in Tokios Tokelés, “Contracting Parties are free to define their consent to jurisdiction in terms that are broad or narrow; they may employ a control-test or reserve the right to deny

97 nationality of a particular state depends on the national legislation of that state.³⁸¹ As a variation of this standard, some BITs combine the standard requirement with that of resi-dence in the territory of the state concerned.³⁸² BITs concluded with former socialist states used to exclude natural persons from the scope of the BIT and covered only eco-nomic organisations of the Contracting States.³⁸³ However, the transition from socialist economies to market economies is reflected in more recent BITs with such countries.³⁸⁴ With regard to corporations, one criterion to establish corporate nationality refers to in-corporation.³⁸⁵ Other BITs refer to the siège social.³⁸⁶ These two criteria do not allow a piercing of the corporate veil since they do not require examining the nationality of the controlling shareholders.³⁸⁷ Other treaties establish the control of the company by nation-als of the contracting state as the decisive element.³⁸⁸ There are also BITs which combine several criteria.³⁸⁹

Even if third-country BITs provide for a broader scope of application ratione personae or ratione materiae, the most-favoured-nation clause cannot be used to invoke a broader def-inition of investment or investor since it offers most-favoured-nation treatment only to

treaty protection to Claimants who otherwise would have recourse under the BIT” (Tokios Tokelés v.

Ukraine, Decision on Jurisdiction, 29 April 2004, ICSID Case No. ARB/02/18, para. 39).

381 Dolzer/Stevens, Bilateral Investment Treaties, p. 31.

382 For example, the 1976 Germany-Israel BIT is applicable to “Israeli nationals being permanent res-idents of the State of Israel”, see Art. 1 (3) (b).

383 See eg Art. 2 (3) of the 1976 UK-Romania BIT, with respect to both Romania and the United Kingdom.

384 Eg Art. 1 (2) (a) of the 1994 Romania-China BIT; Art. 1 (2) (a) of the 1993 Czech Republic-Hungary BIT.

385 Eg Art. 1 (d) of the 1993 UK-Barbados BIT; Art. I (1) (b) of the 1993 US-Ecuador BIT; Art. VII (8) of the 1992 United States-Argentina BIT. However, some of these BITs exclude the protection by the BIT if nationals of a third country control such company, for example, Article II of the 1993 US-Ecuador BIT provides: “Each Party reserves the right to deny to any company the advantages of this Treaty if na-tionals of any third country control such company and, in the case of a company of the other Party, that company has no substantial business activities in the territory of the other Party or is controlled by nationals of a third country with which the denying Party does not maintain normal economic relations.”

386 This is the general German treaty practice. See eg Art 1 (4) (b) of the 1994 Germany-Barbados BIT and Art. 1 (3) of the German Model BIT.

387 Schreuer, The ICSID Convention: A Commentary, Art. 25, para. 460.

388 Eg Art. 1 (b) of the 1990 Jamaica-Switzerland BIT defines: “Sont des ‘sociétés’ (i) en ce qui con-cerne la Confédération suisse, les personnes morales ou sociétés de personnes effectivement contrôlées par des nationaux suisses qui en possèdent une part substantielle en propriété.”

389 Art. 1 (3) (B) (a) of the 1988 treaty between the Belgo-Luxembourg Economic Union (BLEU) and Bulgaria require either incorporation or the fulfillment of the siège social requirement. According to Art. 1 (b) of the 1992 Netherlands-Paraguay BIT, either incorporation or control is required.

investments and investors covered by the basic treaty.³⁹⁰ For the same reason, the re-quirement of acceptance or certification of the asset cannot be overridden if it is a precon-dition for the existence of the investment.³⁹¹

C. Conclusion

The conditions ratione personae, ratione materiae and ratione temporis are conditions which have to be satisfied in order to establish jurisdiction. The right to invoke MFN is only bestowed upon investments of investors within the meaning of the treaty. In case there is no investment or investor under the basic treaty, the most-favoured-nation clause is not applicable. The definition of investment or investor is thus not a form of treatment covered by the most-favoured-nation clause, but the existence of an investment as defined in the basic BIT is a necessary prerequisite for the applicability of the most-favoured-nation clause. Neither is the MFN clause applicable when the condition ratione temporis is not fulfilled since non-fulfilment of that requirement bars the application of the entire treaty.

390 Société Générale v. Dominican Republic, Award on Preliminary Objections to Jurisdiction, 19 September 2008, UNCITRAL arbitration, LCIA Case No. UN 7927, para. 41.

391 For example, Article 1 (1) of the Oman-Yemen BIT provides: „ The term ‘investment’ shall mean every kind of asset that is accepted, by the host Party, as an investment according to its laws and regula-tions, and for which an investment certificate is issued.“ Applicability of the MFN clause to broaden the scope of „investment“ was therefore wrongly suggested as a subsidiary argument by the Claimants in De-sert Line Projects v. Yemen (DeDe-sert Line Projects v. Yemen, Award, 6 February 2008, ICSID Case No.

ARB/05/17, para. 96 (b)). The tribunal did not have to decide on the issue since it wrongly found the re-quirements of Article 1 (1) to be satisfied (paras 97-123). In contrast, the tribunal in the Yaung Chi Oo Case declined jurisdiction under the 1987 ASEAN Framework Agreement due to an unratified approval (Yaung Chi Oo v. Myanmar, Award, 31 March 2003, ASEAN Case No. ARB/01/1, paras 53-63).

It is also possible to connect an investment with its approval by a competent national authority by condi-tioning the applicability of the treaty to this requirement. For example, Art. 2 (1) of the 2002 Thailand-Republic of Korea BIT provides: “The benefits of this Agreement shall apply only in case where the in-vestment of capital by the nationals and companies of one Contracting Party in the territory of the other Contracting Party has been specifically approved in writing by the competent authority of the latter Con-tracting Party.” A similar provision is included in Art. II of the 1987 ASEAN Agreement, which provides in Article 2 (1): “This Agreement shall apply only to investments brought into, derived from or directly con-nected 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 coun-try and upon such conditions as it deems fit for the purposes of this Agreement.” Such regulations exclude the applicability of the treaty provisions and make clear that the asset is not under the ambit of the BIT.

They therefore also exclude the applicability of the most-favoured-nation provision in order to invoke the absence of the requirement of certification in a third-party BIT.

99 Part VI: Application of Most-Favoured-Nation Clauses to Dispute Settlement