Individual Investors In The Context Of Icsid

I) DETERMINATION OF THE NATIONALITY OF A NATURAL PERSON

Natural Person Investor in the Context of ICSID: The determination of nationality is of jurisdictional importance in arbitration proceedings. Pursuant to Article 25 of the ICSID Convention, jurisdiction exists only if the investor is a national of a contracting state and not a national of the host state.

When a dispute arises regarding the determination of an individual’s nationality, it is stated that the dispute shall be resolved by applying the law of the country whose nationality is claimed and the rules of international law.[1]

In the Sofraki v. UAE[2] case, it was stated that the determination of the nationality of a natural person is not solely bound by the national law of the relevant state, and that the arbitral tribunal is competent to determine whether the nationality link is genuine and to investigate whether the nationality was acquired in violation of the law.

II) DUAL NATIONALITY AND EFFECTIVE NATIONALITY

a) Dual Citizenship

If the investor holds dual citizenship, the defendant states may raise a jurisdictional objection in the event of a dispute. This situation generally arises when one of the dual citizenships is that of a third state outside the source state or when one of the citizenships is that of the host state where the investment was made.[3]

If the investor has dual citizenship and one of these citizenships is that of a third state outside the source state, the investor may apply for ICSID arbitration in accordance with this citizenship. In this case, it is necessary to determine whether the investor has a genuine link with the source state and whether they are an effective citizen. If there is no clarity in the bilateral investment agreement, the issue must be resolved in accordance with domestic law or general principles of international law.[4] In the Olguin v. Paraguay[5] case, the investor was a citizen of both Peru and the US and applied for arbitration based on the bilateral investment agreement between Paraguay and Peru. The arbitral tribunal stated that both citizenships of the investor were effective and rejected the host state’s objections regarding jurisdiction.[6]

When an investor has dual nationality and one of these nationalities is that of the host state in which the investment was made, the states being sued raise a jurisdictional objection based on the person. The underlying reason for this is that, in the ICSID context, natural persons cannot initiate arbitration proceedings against their own states. Champion Trading v. Egypt[7], the arbitral tribunal declared that it had no jurisdiction to hear the dispute because the investor was a citizen of both Egypt and the US.[8] It follows from this decision that ICSID does not recognize as investors persons who are citizens of both the host state and another state party to the treaty at the same time.

In such cases of dual citizenship, if the claimant, who is a natural person, renounces their nationality of the host state before the host state consents to arbitration, there will be no jurisdictional issue under ICSID.[9]

b) Effective Citizenship

One of the objections raised by respondent states in arbitration proceedings is that the claimant is not genuinely connected to the source state. The effective citizenship criterion applies when the investor has dual citizenship and this citizenship is different from that of the host state. The key issue here is determining which state’s citizenship takes precedence.[10]

If it is specified in bilateral investment agreements that the theory of effective citizenship will be applied, an assessment can be made in this context. The basis for the criterion of effective citizenship is the Nottebohm decision[11] rendered by the International Court of Justice in 1955. In the dispute that was the subject of Nottebohm, the lawsuit was filed by the State of Liechtenstein against the State of Guatemala.

In the relevant decision, it was stated that, for citizenship to have consequences under international law, there must be a genuine link between the state and the individual; this is possible if there are concrete links that confirm the citizenship relationship and place the individual in a close relationship with the state of which he or she is a citizen.[12]

The criterion of genuine connection put forward in the Nottebohm decision is unlikely to be used in the ICSID context and will not be taken into account even in very exceptional cases.[14] The decisions in Micula v. Romania[15] and Siag & Vecchi v. Egypt[16] stated that there were no valid grounds for applying the criterion of effective citizenship and that it could not be applied in any way.

In cases of dual citizenship, if one of the citizenships belongs to the host state, the question of which citizenship is more effective or takes precedence is not considered.[17] Furthermore, in cases where only a single state citizenship is involved, the effective citizenship criterion and the real connection will not be taken into account.[18]

Year: 2025

Application: Individual Investors In The Context Of Icsid

Lawyers: Mehmet Said Sarıbaş & Bilal Akbaba

E-mail: info@saribasakbaba.av.tr

Website: saribasakbaba.av.tr

[1] Erkan, M., Milletlerarası Tahkimde Yetki Sorunları, Ankara, 2013, s. 230.

[2] Hussein Nuaman Soufraki v. The United Arab Emirates, ICSID Case No. ARB/02/7, Award, 07.07.2004.

[3] Erkan, s. 233.

[4] Erkan, s. 233.

[5] Olguin v. Republic of Paraguay, ICSID Case No. ARB/98/5, Decision on Jurisdiction, 08.08.2000.

[6] Olguin v. Republic of Paraguay, para. 25-31.

[7] Champion Trading Company, Ameritrade International, Inc., James T. Wahba, John B. Wahba, Timothy T. Wahba v. Arab Republic of Eygpt, ICSID Case No. ARB/02/9, Decision on Jurisdiction, 21.10.2003.

[8] Champion Trading Company, et.all v. Arab Republic of Eygpt, bölüm 4.3.1. s. 17 (naklen; Erkan, s. 234)

[9] Romanetti, Antoine, “Defining Investors: Who Is Eligible to Claim?”, Journel of International Arbitration, 2012, V. 29, No:3, s. 241 (naklen; Erkan, s. 234)

[10] Erkan, s. 236.

[11] Nottebohm (Lihtenştayn v. Guatemala), ICJ, 06.04.1995.

[12] Nottebohm, s. 23.

[13] Erkan, s. 237.

[14] Demirkol, Berk, Uluslararası Hukukta Dikkate Alınan Vatandaşlık: Gerçek Kişilerde “Etkin Vatandaşlık” Sorunsalı, Galatasaray Üniversitesi Hukuk Fakültesi Dergisi-2015/2, 159-193, s. 173.

[15] Ioan Micula & Viorel Micula v. Romanya, ICSID Case No. ARB/05/20, 24.09.2008, para. 98.

[16] Waguih Elie George Siag & Clorinda Vecchi v. Mısır Arap Cumhuriyeti, ICSID Case No. ARB/05/15, 11.04.2007, para. 196.

[17] Bu yönde bkz; Champion Trading Company et. al. v. Arab Republic of Eygpt.

[18] Erkan, s. 237.