Table Of Contenti
TREATY SHOPPING IN INTERNATIONAL
INVESTMENT LAW
ii
INTERNATIONAL ECONOMIC LAW SERIES
International Economic Law series, established by the late Professor John
H Jackson, addresses a range of issues in international economic law, which
includes international trade law, international investment law, and the global
financial order. The series aims to encourage interest in the broad contours of
international economic law, heightening awareness of its significance across
the globe as well as its continuous interactions with other areas. The series edi-
tors encourage quality submissions from a wide range of perspectives, includ-
ing doctrinal, theoretical, empirical, and interdisciplinary viewpoints. Novel
and cutting edge research is particularly welcome, as are contributions from
both emerging and established scholars from around the world.
Series Editors
ANDREW D. MITCHELL
Professor at Melbourne Law School,
The University of Melbourne
TANIA VOON
Professor at Melbourne Law School,
The University of Melbourne
recent titles in the series
Good Faith and International Economic Law
Edited by Andrew D. Mitchel, M Sornarajah, and Tania Voon
Development at the WTO
Sonia E. Rolland
The BRIC States and Outward Foreign Direct Investment
David Collins
iii
Treaty Shopping
in International
Investment Law
JORUN BAUMGARTNER
1
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1
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First Edition published in 2016
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v
To my dad, who has always encouraged me to discover new horizons
May this book encourage Luca in a similar way later on
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Series Editors’ Preface
This is the first book to be published in the Oxford University Press Series on
International Economic Law since the passing of its first editor, the great Professor
John H Jackson. Professor Jackson was a warm and generous friend and mentor
with a keen intellect and unending energy, who is recognized as the founder of the
field of international economic law. We pay our respects to his family and friends
and wish to acknowledge the enormous contribution he made to this field over
his lifetime. As we continue our role as editors of the series, we cannot but feel his
absence and only hope to be able to honour his legacy in small ways.
As relative newcomers to this role, our ambitions are modest. We hope to
encourage interest in the broad contours of international economic law, heighten-
ing awareness of its significance across the globe as well as its continuous inter-
actions with other areas, such as public policy concerning public health and the
environment, international dispute settlement and other aspects of public inter-
national law, sustainable development, and other disciplines, including economics
and political science. We encourage submissions to the series from senior scholars as
well as newer voices, academics as well as practitioners, from doctrinal, theoretical
and empirical perspectives, and from countries around the world.
While several of the debates today concerning international economic law perpet-
uate those of many decades, we believe that the current moment offers particularly
exciting opportunities for thoughtful and rigorous scholarly contributions to have
a meaningful impact on national and international law and policy. Developments
in the World Trade Organization, new approaches to regional and plurilateral nego-
tiations, and reform proposals in relation to investment treaty arbitration all offer
room for a diversity of views that will benefit from engagement and collaboration.
The current volume gets to the heart of a key legitimacy concern with international
investment arbitration (and particularly investor–S tate dispute settlement): ‘treaty
shopping’, which Baumgartner defines:
to include all legal operations aimed at invoking or creating a qualifying nationality and/o r
a qualifying investment, eg by structuring or restructuring an investment or by otherwise
conferring an entitlement or property right to an investment, with a view to benefitting
from a particular international investment agreement granting an investor direct standing[.]
Treaty shopping in international investment law is surprisingly under-r esearched,
with Baumgartner’s work providing the first comprehensive English language study
of the area. In particular, she delves into the complex problem of distinguishing
between legitimate and illegitimate forms of treaty shopping, carefully analysing
the principle of ‘good faith’ as a possible touchstone, as well as articulating various
approaches to treaty drafting that may help minimize abusive practices.
Baumgartner’s examination concerns a perennial problem in international
investment law, while being all the more relevant today given increasing public
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viii Series Editors’ Preface
scrutiny of investment treaties and investor– State dispute settlement (ISDS), the
continuing accumulation of such treaties and disputes, and the uncertainty sur-
rounding the current law. As an example of the current significance of treaty shop-
ping in international investment law, awards of two tribunals only made public
since the finalization of this manuscript accepted jurisdictional objections on the
basis of ‘abuse of process’ in connection with corporate restructuring related to pre-
existing disputes. In a jurisdictional award released to the public on 16 May 2016,
the tribunal in Philip Morris Asia Limited v Australia, discussed in this book, found
that the restructuring was undertaken when the claimant’s dispute with Australia
concerning standardized tobacco packaging was foreseeable, ‘for the principal, if
not sole, purpose of gaining Treaty protection’. Similarly, in an award dispatched
to the parties on 2 June 2016, the tribunal in Transglobal Green Energy LLC and
Transglobal Green Panama SA v Panama upheld Panama’s jurisdictional objection
‘on the ground of abuse by Claimants of the investment treaty system by attempting
to create artificial international jurisdiction over a pre-e xisting domestic dispute’.
Such disputes are sure to continue. Baumgartner’s piercing analysis offers valu-
able insights into the way in which they have been and are best handled, as well
as suggestions for reducing uncertainty as to which side of the line particular con-
duct falls. The implications of the book also go further, given its consideration of
broader public international law questions, and the growing potential for cross-
treaty disputes, not only in the context of international investment law, but also
extending to international trade law. These kinds of complications are likely to
increase in both frequency and intensity as countries continue their fervour for
negotiating more and bigger agreements, including the ‘mega- regionals’ such as
the Trans- Pacific Partnership, Transatlantic Trade and Investment Partnership, and
Regional Comprehensive Economic Partnership. This book provides an in- depth
exploration of the issues surrounding treaty shopping to help better equip arbi-
trators, policy- makers, negotiators, and litigants in dealing with such issues at a
crucial time.
Andrew D. Mitchell and Tania Voon
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Acknowledgements
This book is a slightly revised and updated version of the doctoral thesis I defended
at the University of Lausanne (Switzerland) in June 2015 under the same title. To
see it published at Oxford University Press is an immense reward both to me as well
as the persons who have contributed to making this a successful project.
I am indebted and sincerely grateful to many persons I have met along the way of
this endeavour and who have contributed in one way or another, not least Professor
Andreas Ziegler, my thesis supervisor, for the support and flexibilities granted dur-
ing the period of writing, as well as Professor Marc Bungenberg, member of the
PhD defence committee, for having always stood by with precious comments and
advice. My gratitude extends to the other members of the PhD defence commit-
tee, Professor Christina Binder, Professor Andrea Bonomi and Professor Tarcisio
Gazzini, for their valuable comments and for making my thesis defence a pleasur-
able and memorable experience.
I am also very thankful to my friends and colleagues who, over the years, have
provided emotional support, reviewed drafts or given comments on the manuscript,
in particular Tristan Gianora, Dr. Jörn Griebel, Caterina Arias Hernandez, Felix
Imhof, Dr. Wolfgang Alschner, Ömer Keskin, Azadi Öztürk and Elisabeth Türk.
Many thanks are also due to the editorial team at Oxford University Press for
their guidance, support and efficiency in bringing the book to press, to the Series
Editors Professors Tania Voon and Andrew Mitchell for their kind support of the
manuscript, as well as to the anonymous peer reviewers for their valuable comments.
This book has been revised to include investment arbitral jurisprudence until
May 2016 (redacted Philip Morris Asia v Australia award). The opinions expressed
in this book were written in my capacity as research fellow and are not necessarily
those of my current, or any future, employer.
Finally, words are not enough to thank my family—my partner Pancho, our son
Luca, my parents Viktor and Sylvia and my brother Peter—for the love, support
and patience shown over these past years, without which this endeavour would not
have been possible.
Geneva, October 2016
