CYIL vol. 10 (2019)

MARTINA POHANKOVÁ CYIL 10 ȍ2019Ȏ Nevertheless, the tribunal accepted the respondent’s general submission that “ [...] it is clearly an abuse for an investor to manipulate the nationality of a shell company subsidiary to gain jurisdiction under an international treaty at a time when the investor is aware that events have occurred that negatively affect its investment and may lead to arbitration“ , 16 although it refused to rule that in the particular case the restructuring resulted in the abuse of process. 17 Not only absence of the whole clause, but also of some of its parts may have significant consequences. Most of the provisions link the control to “third parties”. In other words, they do not protect the host states from being sued with regards to investments controlled by the nationals of the host state itself. In the absence of such reference, the tribunal might be reluctant to rule that the control criterion was fulfilled in such a case since there will not be any third-party control. 2.3 Invocation and effect As the Plama tribunal observed, the “existence of a right is distinct from an exercise of that right”. 18 The denial does not occur automatically once the requirements are met, but an act of the state is needed. The tribunal further emphasised the liberal character of the denial, noting that the state might never actually use that right and that the invocation is entirely at its discretion. 19 The need to exercise the right is not the subject of any great disagreement. But doubts emerge once the details of the exercise are being scrutinised. According to the Plama tribunal, the exercise of the right must be made in a public manner reasonably available to investors. Specifically, the tribunal elaborated on the publication of such notice and arrived at the following conclusions: “ […] a declaration in a Contracting State’s official gazette could suffice; or a statutory provision in a Contracting State’s investment or other laws; or even an exchange of letters with a particular investor or class of investors. By itself, Article 17(1) ECT is at best only half a notice; without further reasonable notice of its exercise by the host state, its terms tell investor little; and for all practical purposes, something more is needed.” 20 This reasoning was followed by subsequent decisions concerning the ECT, conditioning the application by a notice made prior to the commencement of the arbitration proceedings, referring also to transparency obligations contained in the ECT. 21 However, it seems that under such interpretation, the clause would be rendered meaningless in most of the cases as it is not feasible for a state to have a full (or actually not even half or hundredth) knowledge of all investments made within its territory. Apart from the knowledge of its existence, the state would also have to keep track of the control of the investments which may change any time. Surely, any clause should be interpreted as bearing practical meaning and, to my mind, such limiting interpretation should not be followed. 22

16 Pac Rim v. El Salvador , Decision on the Respondent’s Jurisdictional Objections para. 2.100. 17 Ibid . 18 Plama v. Bulgaria , Decision on Jurisdiction para. 155. 19 Ibid . 20 Plama v. Bulgaria , Decision on Jurisdiction para. 157. 21 Khan Resources v. Mongolia , Decision on Jurisdiction paras. 427 and 429.

22 This approach was accepted by the Rurelec tribunal: „ As a matter of fact, it would be odd for a State to examine whether the requirements of Article XII [‘denial of benefits’ clause] had been fulfilled in relation to an investor with whom it had no dispute whatsoever. In that case, the notification of the denial of benefits would–per se–be seen as an unfriendly and groundless act, contrary to the promotion of foreign investments. On the other side, the fulfilment of the

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