Investor Presentaiton

99 violation (i.e. the claim is not limited to the damage that is proportionate to the investor's shareholding). In cases brought on behalf of an enterprise, any resulting damages award should be payable to the enterprise itself.94 This might have important tax consequences for the award. If the award is paid to the enterprise, it will be subject to taxation by the jurisdiction whose laws apply to the enterprise; if it is paid to the investor, it will be subject to taxation by the jurisdiction whose laws apply to the investor. It might also have distributional consequences. The controlling entity should not receive the entire amount of the damage; rather, the damaged investment on whose behalf the case was brought should be made whole first, with further distribution of those monies dependent on how the particular enterprise is structured and the relationship among various interest-holders in the investment. All those with ownership interests in that enterprise would thus receive some benefit. H. Frivolous claims An arbitration proceeding can turn into a protracted undertaking that exerts a heavy toll in terms of time, effort, legal fees and other costs. In an attempt to minimize those costs where they are unwarranted, several States have included in their IIAs a procedure to avoid "frivolous claims", that is, claims that evidently lack a sound legal basis. This expedited procedure requires the arbitral tribunal to address and decide, as a preliminary question, any objection by the respondent State that the investor's claim is legally defective. 94 See, for example, Article 10.26(2) of the Central America-Dominican Republic-United States FTA (2004). UNCTAD Series on International Investment Agreements II

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