24 October 2018 by

What do we mean by "qualifying investor" for investment protection?

In this instalment, Jackwell Feris discusses the concept of "qualifying investor" for purpose of deriving protection for an investment made by a national of one contracting state in the territory of another contracting state to an investment treaty or under certain instances the foreign investment laws of a host state.

For purpose of investment protection flowing from investment treaties the nationality of a claimant determines, on a preliminary basis, whether it is entitled to invoke the treaty protection benefits against the host state. To ascertain whether a person qualifies as an investor the nationality element can be broken down into natural persons or juristic persons. A natural person must hold the nationality of a contracting state other than the State party to the dispute. The nationality of a juristic person under an investment treaty may comprise of the following criteria:

a) the state in which the corporation is incorporated

b) the state where the principal place of business, management and control of the corporation is seated.

For a party intending to invoke an investor-state arbitration where the ICSID Convention is applicable, compliance with article 25 thereof is paramount for the ICSID Secretariat to ensure the claim is progressed.

On the other hand, investment protection provided for in foreign investment laws of a host state usually contains a definition of who is deemed to be an investor under the laws of the host state. Only an investor as contemplated under the foreign investment laws of such host state would be entitled to rely specified incentives and guarantees or invoke an investor-state arbitration (to the extent provided for) against the host state. Foreign investment laws such the South African Protection of Investment Act (2015), the Namibia Investment Promotion Act (2016), the Mozambique Law on Investment (1993) are examples of domestic laws by a host government to provide investment protection to admitted investors. One major difference between rely on an investment treaty as opposed to a foreign investment law is that, in the latter instance, the state has the ability to easily revoke the guarantees or its consent to an investor-state arbitration under domestic laws by repealing or amending such law.

There are a variety of interlinking considerations when considering whether an investor is a "qualifying investors" or how to become a "qualifying investors" of a host government in respect of an existing investment. It is unfortunately not possible to deal with all considerations when discussing the concept of "qualifying investor" in the video insert, such as:

a) claims by duel nationals;

b) claims by juristic persons – 'foreign control';

c) the possibility of restructuring once 'nationality' to take advantage of another states treaty protection;

d) diplomatic protection; and

e) the denial of benefits by host government of an investor.

However, feel free to contact Jackwell should you require further discussion on the concept of 'qualifying investor'


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