Investor Presentaiton
98
INVESTOR-STATE DISPUTE SETTLEMENT: A SEQUEL
Under this approach, the local subsidiary may itself bring a
claim against the host State as long as it is "controlled" by the
foreign investor, i.e. the investor has the power to exercise decisive
influence over the management and operation of the subsidiary."³
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Another technique used to achieve essentially the same result
employed in the NAFTA and a number of subsequent IIAS
is to
allow foreign investors to bring claims not only on their own behalf
but also on behalf of the local enterprises which they own or
control, directly or indirectly. The Australia-Mexico BIT (2005)
provides an example:
"Article 13. Arbitration: Scope and Standing and Time
Periods
An Investor of a Contracting Party on its own, or on behalf of
an enterprise of the other Contracting Party that the
Investor owns or controls, directly or indirectly, may submit
to arbitration a claim that the other Contracting Party has
breached an obligation under this Agreement and that the
Investor or such enterprise has incurred loss or damage by
reason of, or arising out of, that breach." (Emphasis added).
Article 13 effectively enables enterprises that are even partially
foreign-owned (as long as they are foreign-controlled) to recover all
of the damage that has been caused to the enterprise by the IIA
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In order to add further clarity to what constitutes ownership and/or
control, some IIAs specifically define these terms as it is done in Article
1(3) of the Japan-Peru BIT (2008):
"An enterprise is:
(a) 'owned' by an investor if more than 50 percent of the equity interest in
it is owned by the investor;
(b) 'controlled' by an investor if the investor has the power to name a
majority of its directors or otherwise to legally direct its actions"
(emphasis added).
UNCTAD Series on International Investment Agreements IIView entire presentation