SCHOOL OF LAW

DEPARTMENT: Comparative Business law

PROGRAM: REGULAR

GROUP ASSIGNMENT

On
Ever-Expanding scope of International Investment law: The Notion of
investment and investor
Group member`s list
Name ID.No:
1. Adamu Addisu--------------------ECSU2401016
2. Berhanu Araya------------------ECSU2401015
3. Kebed Kelaye--------------------ECSU2401014
4. Biniyam Duguma--------------- ECSU2401013

Submitted to Mohamed Ibrahim (Ass.Prof)

Course Name: - Comparative Investment Law

Nov 2024, Addis Ababa.

Table of Contents
1.Introduction .................................................................................................................................. 1

Key Points ................................................................................................................................ 2

2. The Concept and Definition of investment and International Investment Law .......................... 2

2.1 Criteria to define investment ................................................................................................. 3

a. Objective Criteria ................................................................................................................. 3

b. Subjective Perspectives ....................................................................................................... 4

3. The Concept of "Investor" in International Law ......................................................................... 5

3.1 Natural Persons as Investors ................................................................................................. 5

3.2 Legal Entities as Investors..................................................................................................... 6

3.3 Complexities in Investor-State Relationships ....................................................................... 6

4. Expanding Scope and Implications ............................................................................................. 7

4.1 Evolving Definitions ............................................................................................................. 8

4.2 Challenges and Critiques ....................................................................................................... 8

5. Conclusion and Recommendations ............................................................................................. 9

References ..................................................................................................................................... 10

i
Introduction
The objectives of the work are: To Clarify Key Legal Concept, Analyze Key Cases: Address
Sovereignty Issues and Propose Future Reforms.
This assignment explores the evolution of international investment law, which has grown
significantly in response to globalization and the integration of economies. At its core,
international investment law governs the relationship between foreign investors and host states,
aiming to promote cross-border investment while protecting investor rights. This legal
framework is supported by over 3,000 bilateral investment treaties (BITs) and various free trade
agreements.1 The goals of international investment law are twofold. First, it seeks to protect
foreign investors from political and economic risks such as expropriation, discriminatory
treatment, and breaches of fair and equitable treatment. Second, it aims to foster economic
cooperation by promoting cross-border investment.
Central to the field are the concepts of "investment" and "investor," which determine the scope
of protections under treaties. However, these definitions have been contentious and evolving.
Key cases, such as Salini Costruttori S.p.A. v. Morocco, have shaped the definition of
"investment," emphasizing criteria like resource contribution, duration, and risk.2
The idea of "investor" has similarly broadened to include both individuals and corporate entities,
leading to complications in cases involving dual nationality and indirect ownership, as seen in
Tokios Tokelės v. Ukraine.3
Historically, the evolution of international investment law reflects changing global economic
dynamics. Its origins can be traced to customary international law principles, particularly the
duty of states to provide "minimum standards of treatment" to foreign nationals and their
property. These principles were formalized in BITs starting in the mid-20th century, such as the
1959 Germany-Pakistan BIT, which served as a model for many subsequent agreements4

1
Dolzer, R., & Schreuer, C. (2012). Principles of International Investment Law. Oxford
University Press, p. 5
2
Id P.68

3
UNCTAD. (2012). Investment Policy Framework for Sustainable Development. UN Publications, p. 35.

4
Supra note 1, p. 14.

1
A defining feature of this legal framework is its reliance on enforceable standards of investor
protection. Which are Fair and Equitable Treatment (FET): Protection from Expropriation and.
National and Most-Favored-Nation (MFN) Treatment5
International investment law has also established mechanisms for resolving disputes between
investors and states. The Investor-State Dispute Settlement (ISDS) system, administered by
forums like ICSID or ad hoc tribunals under UNCITRAL rules, allows investors to directly bring
claims against states for alleged treaty violations. While ISDS is lauded for offering a neutral
platform to resolve disputes, it has drawn criticism for undermining state sovereignty and
disproportionately favoring corporate interests6
Moreover, the expanding scope of international investment law has raised concerns about its
implications for public policy. For example, treaties often contain broad definitions of
"investment" and "investor," leading to disputes over jurisdiction and claims challenging
environmental regulations, public health measures, or labor protections. Such cases have sparked
debates about the balance between protecting investors and preserving states' regulatory
autonomy7
In general, international investment law plays a crucial role in shaping the modern global
economy. However, its dual objectives of protecting investors and fostering sustainable
development necessitate a careful balance. By examining its foundational principles and
addressing its challenges, this assignment work can provide a little bit of important ideals by
exploring different sources of information about issues.
Key Points
Broader Definitions of Investment, Expansion of the Investor Concept, Challenges to State
Sovereignty, Investor-State Disputes:

2. The Concept and Definition of investment and International Investment

Law

5
UNCTAD, 2015, p. 34; Muchlinski, 2008, p. 92.
6
Van Harten, 2007, p. 49; Sornarajah, 2017, p. 145.
7
(Muchlinski, 2008, p. 150; Van Harten, 2007, p. 62).

2
International investment law constitutes important components of international economic
governance which regulates the relationship between foreign investors and host states. It helps as
a legal framework that facilitates and protects foreign direct investment (FDI) while balancing
the interests of states and investors.8 This body of law primarily operates through bilateral
investment treaties (BITs), regional agreements, and multilateral conventions, such as the Energy
Charter Treaty and the Convention on the Settlement of Investment Disputes between States and
Nationals of Other States (international center for settlement of investment disputes, ICSID
Convention). 9
The notion of "investment" is central to international investment law as it determines the
applicability of treaty protections and dispute settlement mechanisms. Despite its importance,
there is no universally agreed definition of "investment." Treaties and legal interpretations often
provide varying approaches to define what qualifies as an investment under international law.
This ambiguity has given rise to extensive legal debates, particularly in arbitration contexts,
where tribunals have played a significant role in shaping its meaning.
Two primary approaches are used to define investment: objective criteria, which focus on
measurable characteristics, and subjective perspectives, which emphasize the intentions and
agreements of the involved parties. These approaches are not mutually exclusive and are often
combined in practice, depending on the treaty language and specific circumstances of a case.

2.1 Criteria to define investment

a. Objective Criteria
The objective approach defines "investment" through a set of tangible characteristics that
distinguish investment from ordinary commercial activities. One of the most influential
interpretations of investment came from the ICSID tribunal in the Salini Costruttori S.p.A. v.
Morocco case. The tribunal articulated four main criteria that an economic activity must satisfy
to qualify as an investment under the ICSID Convention:
1. Contribution of Resources: The investor must contribute assets such as capital, labor,
technology, or expertise to the project.

8
Schreuer, C. (2001). The ICSID Convention: A Commentary. Cambridge University Press, p. 4

9
Muchlinski, P. (2008). Multinational Enterprises and the Law. Oxford University Press, p. 65
3
 2. Duration of Engagement: The investment must involve a long-term commitment,
typically extending over several years.
3. Risk Assumption: The investor must bear financial, operational, or market risks inherent
in the activity.
4. Contribution to Development: The project must provide some economic or social
benefit to the host state, such as infrastructure development, job creation, or technology
transfer10 .
This framework, often referred to as the "Salini test," has become a benchmark in international
investment law. However, its application has not been universal. Some tribunals, such as in
Phoenix Action v. Czech Republic, have chosen to adopt more flexible interpretations of these
criteria to address the evolving nature of investment activities United nations conference on trade
and development11
Critics of the Salini test argue that its rigidity may exclude certain types of modern investments,
such as financial instruments, short-term projects, or intellectual property, which do not always
meet all four criteria. This limitation has sparked calls for a more adaptable approach to defining
investment in international law12 as mentioned as follow. This limitation has generated demands
for a more flexible approach to defining investment in international law as mentioned as follow
by subject criteria perspectives.
b. Subjective Perspectives
In contrast to the objective approach, some treaties and legal frameworks adopt a more flexible
and inclusive definition of "investment." This subjective approach focuses on the intent and
mutual agreement of the parties involved. Many bilateral investment treaties (BITs), for
example, define investment broadly to include "every kind of asset," encompassing physical
property, financial instruments, intellectual property, and contractual rights 13
This expansive approach reflects the diversity of modern investments and allows states and
investors to tailor their agreements to specific projects or industries. For instance, investments in
renewable energy or digital technologies may not align with traditional notions of investment but
are nonetheless significant in contemporary economic contexts. Treaties like the Energy Charter

10
Dolzer & Schreuer, 2012, p. 61; Schreuer, 2001, p. 122.
11
UNCTAD, 2015, p. 35.
12
Muchlinski, 2008, p. 89,
13
UNCTAD, 2015, p. 41

4
Treaty and regional agreements such as the Comprehensive and Progressive Agreement for
Trans-Pacific Partnership (CPTPP) demonstrate this trend by providing broad definitions that
adapt to changing economic realities14
However, the subjective approach has its own challenges. Broad treaty definitions may invite
jurisdictional disputes, with investors attempting to stretch the meaning of "investment" to
include speculative or marginal economic activities. For example, in Abaclat v. Argentina, the
tribunal controversially deemed sovereign bonds to be investments despite their financial and
non-physical nature15. Such cases illustrate the need for careful treaty drafting to balance
flexibility with legal certainty.

3. The Concept of "Investor" in International

Law
The term "investor" is fundamental to international investment law, as it determines the parties
eligible to claim protections and benefits under investment treaties. Investors are typically
categorized as either natural persons or legal entities, with eligibility criteria varying across
treaties. Over the years, the understanding of who qualifies as an investor has expanded,
reflecting changes in the global economic environment. However, this expansion has also
introduced legal uncertainties, particularly concerning issues like nationality, ownership
structures, and non-traditional investment actors16.
Who are the actors as an investor are described & analyzed bellow.

3.1 Natural Persons as Investors

Natural persons qualify as investors under international law if they are nationals of a contracting
state at the time of making the investment. Nationality is typically determined by the domestic
laws of the state in question. Treaties often require proof of a genuine link between the
individual and their home state to confirm eligibility.17

14
Sornarajah, 2017, p. 123
15
Schreuer, 2001, p. 143
16
Dolzer & Schreuer, 2012, p. 123
17
Dolzer & Schreuer, 2012, p. 123.

5
However, challenges arise in cases involving individuals with dual citizenship or prolonged
residency in a non-contracting state. For instance, in Soufraki v. United Arab Emirates, the
tribunal dismissed the claimant's case after determining that he had lost his Italian nationality
under domestic law, even though he claimed it elsewhere18 such cases underscore the importance
of ensuring consistency between domestic nationality laws and treaty requirements.
Moreover, the issue of dominant and effective nationality has become relevant in cases involving
dual citizens. This principle, derived from customary international law, evaluates which
nationality is more predominant in determining the investor's eligibility19

3.2 Legal Entities as Investors

Legal entities, including corporations, partnerships, and other business organizations, qualify as
investors if they are incorporated or organized under the laws of a contracting state. Generally,
this determination is straightforward when a company is registered and operates in its home
country. However, complexities arise when ownership and control involve foreign nationals or
when companies use treaty shopping to gain advantages.
A prominent example is the Tokios Tokelės v. Ukraine case, where the tribunal upheld the
claimant’s status as a Lithuanian investor despite its majority ownership by Ukrainian nationals.
20
The tribunal ruled that incorporation under Lithuanian law was sufficient for eligibility while
this decision affirmed formal criteria, it sparked criticism for allowing companies to manipulate
their structures to benefit from investment treaties.
To prevent such practices, some treaties include provisions that require a company to have a
"substantial business presence" in the home state or exclude entities controlled by nationals of
the host state. These provisions aim to ensure that treaty protections are reserved for genuine
foreign investors with meaningful ties to the contracting state. 21

3.3 Complexities in Investor-State Relationships

18
Schreuer, 2001, p. 98
19
Sornarajah, 2017, p. 212
20
UNCTAD, 2015, p. 59
21
Muchlinski, 2008, p. 75

6
The definition of "investor" has broadened to include non-traditional actors, such as state-owned
enterprises (SOEs), non-governmental organizations (NGOs), and hybrid entities. These actors
blur the lines between public and private interests, raising questions about their eligibility for
treaty protections.
SOEs are particularly challenging as they may function as commercial entities while also
advancing state interests. In CSOB v. Slovakia, the tribunal recognized a state-owned bank as an
investor, emphasizing its commercial activities over its government affiliation22 Critics,
however, argue that SOEs may exploit their dual role to gain unfair advantages, undermining the
principle of neutrality in investment law23.
NGOs and public-private partnerships are also increasingly recognized as investors, particularly
in sectors such as infrastructure and renewable energy. For example, hybrid entities participating
in public-private initiatives may qualify for treaty protections depending on the specific terms of
their agreements with host states24. While this inclusiveness reflects the diversity of modern
economic activities, it also creates a need for clearer treaty language to minimize disputes over
jurisdiction.
Generally, the evolving concept of "investor" highlights the dynamic nature of international
investment law. While broader definitions accommodate the complexities of the global economy,
they also introduce challenges, such as treaty shopping and disputes over eligibility. Addressing
these issues requires precise treaty drafting and consistent interpretation to ensure that
investment law remains fair and effective.

4. Expanding Scope and Implications

The scope of international investment law has grown substantially over time, adapting to the
complexities of modern economic activities. While it was initially focused on safeguarding
traditional forms of investment, such as physical assets and monetary contributions, the
framework now covers a wide range of new activities. This expansion has improved investor
protections and supported economic growth, but it has also led to concerns about its impact on
state sovereignty, public policy, and the balance of interests among stakeholders.

22
Dolzer, R., & Schreuer, C. 2012, Principle of international investment law. Oxford University press p. 142
23
Van Harten, 2007, p. 112
24
Sornarajah, M., 2017, The International law on foreign investment (4 th Ed.) Cambridge University press p.278

7
4.1 Evolving Definitions
The modern interpretation of investment has extended far beyond conventional notions,
encompassing intellectual property, corporate shares, contractual entitlements, and public
concessions. Many treaties adopt inclusive definitions, describing investment broadly as "any
kind of asset," which includes tangible and intangible items like patents, trademarks, and even
rights to public infrastructure projects.25

4.2 Challenges and Critiques

The widening scope of investment law has drawn criticism for its potential to infringe on states’
regulatory authority. Critics argue that broader definitions allow foreign investors to challenge
state actions aimed at advancing public interests, such as environmental conservation, public
health, and workers’ rights26
Additionally, the fear of arbitration claims has led to concerns over "regulatory chill," where
states hesitate to adopt necessary policies to avoid disputes with powerful investors. This issue is
particularly pressing for developing nations that may lack the financial resources to defend
themselves in international arbitration27. As a result, scholars and policymakers advocate for
reforms to balance the rights of investors with the ability of states to govern in the public interest.

25
UNCTAD, 2015. Investment policy framework for sustainable development. Un publications, p.92
26
Dolzer, R., & Schreuer, C. 2012, Principle of international investment law. Oxford University press p. 178
27
Sornarajah, M., 2017, The International law on foreign investment (4 th Ed.) Cambridge University press p. 312

8
5. Conclusion and Recommendations
The evolution of international investment law reflects the changing nature of global economic
activities and the increasing diversity of investments. By expanding the definitions of
"investment" and "investor," the legal framework has adapted to protect a broader range of
economic actors and transactions. However, this expansion has also introduced significant
challenges, particularly concerning the balance between investor protections and state
sovereignty.
To address these challenges, there is a growing consensus on the need for clearer and more
precise definitions in treaties. Ambiguities in existing frameworks contribute to inconsistent
interpretations and disputes, undermining the stability of the investment regime. Additionally,
integrating principles of sustainable development into investment treaties can help ensure that
economic growth aligns with broader global objectives, such as environmental conservation and
social equity28
Recent treaty reforms, such as those found in agreements like the Comprehensive and
Progressive Agreement for Trans-Pacific Partnership (CPTPP), illustrate how carve-outs for
public policy measures can protect states’ regulatory space. These innovations signal a shift
towards a more balanced approach, where the rights of investors and the responsibilities of states
are harmonized. The future of international investment law will depend on its ability to adapt to
these competing interests while fostering a fair and predictable legal framework.

28
UNCTAD, 2015. Investment policy framework for sustainable development. Un publications, p. 120

9
References

➢ Dolzer, R., & Schreuer, C. (2012). Principles of International Investment Law. Oxford
University Press.
➢ Muchlinski, P. (2008). Multinational Enterprises and the Law. Oxford University Press.
➢ Schreuer, C. (2001). The ICSID Convention: A Commentary. Cambridge University
Press.
➢ Sornarajah, M. (2017). The International Law on Foreign Investment (4th Ed.).
Cambridge University Press.
➢ UNCTAD. (2012). Investment Policy Framework for Sustainable Development. UN
Publications.
➢ Van Harten, G. (2007). Investment Treaty Arbitration and Public Law. Oxford University
Press.

10