Abuses of Corporate Structure in Investment Arbitration

International investment law has, at its roots, activity of investors, established in a foreign jurisdiction. A large portion of investments, globally, are made by complex transnational corporate groups. Investors, from such complex structures, are frequently eager to seek for a most favorable legal regime for establishing a company – be it for the ease of product promotion, tax interests or perspectives of legal protection. Of course, such companies use their rights to structure their corporations as freely as possible, with no limitations except for legal administrative regulations of a foreign state. However, at times, a choice of jurisdiction seems like an intentional move in order to enjoy protection of a particular investment treaty. The present paper seeks to find the limits of “legitimate corporate planning” and determine when it turns into an “abuse of rights.” In international investment arbitration, the tribunals use the doctrine of abuse of rights in a welcoming nature. Given the unwelcoming term of an “abuse” and recourse to principles of international law, the tribunals choose to establish their own criteria of a bona fide investor/investment. In that sense, the tribunals would incorporate the good faith in the frame of interpreting the “investment” and “investor” definitions pursuant to a BIT. Following the Salini method of establishing an “investment” wider than a BIT suggests, the tribunals would create criteria on a case by case basis. The current practice has differentiated its approaches to establishing abuse on the grounds of a corporate structure and thus needs a unified test to create a clear map for the investors to act upon their right to restructure a company without losing the possibility of seek protection in investment arbitration. That is inherently important since corporations often engage in mergers and acquisitions on business objectives, but may fall within the tribunals definition of an abuse. Possibly, an abuse would be established with respect to the timing the restructuring took place (against when the challenged measure was introduced), and with respect to the aim of the restructuring. The research aims at finding the current trends in assessing “abuse of rights” when a restructured company or a certain (non-beneficiary) company from the chain of ownership files a claim with an investment arbitration tribunal. The thesis explores the existing criteria to such abuses and how it is proved by the parties to arbitration. In the event there is no single approach to an abuse, the paper will propose a “unified test” in order to create a “map of risks” for investors.