The piercing the corporate veil in ISDS plays a twofold role. From the investors’ perspective, it is instrumental if a tribunal can ignore the difference between the legal personality of the company in which they invested in and the shares that they hold. Per contra, States also invoke this doctrine by trying to convince a tribunal to look at the true personalities involved and not to allow an investor to hide behind the veil of the different legal personalities.
To address these competing interests, the author of this Master Thesis in Chapter II intends to analyse the characteristic pattern and standing of shareholders in bringing indirect claims aimed to persuade the tribunal to ignore the difference between the legal personality of a company and its shareholders and to look at the true interests at stake instead. In Chapter III, the applicability of the piercing the corporate veil doctrine will be approached from the States’ perspective and when they invoke the denial of benefits clauses.
On the basis of the foregoing, this Master Thesis purports to address the intersection between the jurisdiction of the arbitral tribunal in ISDS and the concepts of investor and investment underlying the application of the piercing the corporate veil doctrine. By doing so, the author of this Master Thesis explores the provisions of IIAs commented on by authoritative treatises, contemporary views embodied in articles, and jurisprudence of international investment treaty tribunals. In order to arrive at its findings and conclusions, this Master Thesis utilizes the method of description, method of conceptual analysis, comparative method, and method of evaluation.
Table of Contents
I. INTRODUCTION
II. PIERCING THE CORPORATE VEIL FOR THE PURPOSES OF SHAREHOLDERS’ INDIRECT CLAIMS
A. PROVISIONS OF INTERNATIONAL INVESTMENT AGREEMENTS ON INDIRECT CLAIMS
1. Definition of “Investment” in IIA
(a) ICSID Convention
(b) ECT
(c) NAFTA
(d) BITs
B. STANDING OF SHAREHOLDERS’ ACTION FOR INDIRECT CLAIMS
1. Separate Legal Personality and Derivative Shareholders’ Rights
2. Barcelona Traction and the Development of Shareholders Rights to Bring Investment Claims
3. Shareholders Standing Independent from the Affected Company
4. Standing of Shareholders as a Joint Conception of Jurisdiction and Admissibility
C. STANDING OF SHAREHOLDERS TO BRING INDIRECT CLAIMS IN INVESTMENT TREATY DISPUTES
1. Standing based on the definition of investment under the IIAs
2. Standing based on foreign control requirement
D. THE PROBLEM OF THE AUTONOMOUS NATURE OF SHAREHOLDERS’ INDIRECT CLAIMS
III. PIERCING THE CORPORATE VEIL FOR THE PURPOSES OF DENIAL OF BENEFITS CLAUSES
A. DEFINITION OF NATIONALITY OF INVESTORS IN INTERNATIONAL INVESTMENT TREATIES
1. Criteria of Determination of Nationality of Investors
2. The Meaning of Corporate “Seat” for the Purposes of Coverage under IIAs
B. DISREGARDING THE CORPORATE FORM IN DENIAL OF BENEFITS CLAUSES
1. State’s Invocation of Denial of Benefits Clauses
a) Corporate nationality (“A-B-A scenario”)
b) Continuous nationality
c) Control by foreign nationals (“A-B-C scenario”)
IV. CONCLUSION
Objectives & Themes
This master thesis investigates the intersection between the jurisdiction of arbitral tribunals in investor-state dispute settlement (ISDS) and the application of the "piercing the corporate veil" doctrine. It addresses the central research question of how this doctrine can be utilized to resolve jurisdictional disputes regarding shareholder standing, the definition of an investment, and the invocation of denial of benefits clauses.
- The legal capacity of shareholders to bring indirect claims for reflective loss.
- The criteria for establishing investor nationality and the role of the "corporate seat."
- Application of foreign control tests to determine the legitimacy of investment treaty protections.
- The conflict between formal corporate personality and the economic realities of multijurisdictional structures.
Excerpt from the Book
Standing of Shareholders as a Joint Conception of Jurisdiction and Admissibility
The nature and handling of objections to indirect claims in ISDS is characterised by conceptual uncertainty. Attempts to have indirect claims dismissed in preliminary decisions have been subject to different procedural approaches.
With the development of ISDS jurisprudence, the conception of admissibility and jurisdiction is inevitably applied and interpreted in a quite opposite way. Despite numerous investment arbitration cases that demonstrated that this issue is of great practical importance, the evolving jurisprudence lacks stare decisis and consistency in addressing the distinction between jurisdiction and admissibility.
When shareholders indulge in corporate manoeuvring and treaty shopping, the Host State, in an attempt to counter the IIA claims initiated by such shareholders, may invoke legal mechanisms, including piercing the corporate veil doctrine (the possible outcome of that, for example, denial of benefits clauses, will be addressed in Chapter III of this Thesis). In case of success, the tribunal will find that it lacks jurisdiction rationae personae over the claim, or that the claim is inadmissible. International investment tribunals, however, do not draw a clear line between jurisdiction and admissibility, when the distinction of between the two are equally relevant in addressing the indirect claims of shareholders.
Jan Paulsson noted the conceptual difference between admissibility and jurisdiction important for the tribunal’s power to determine the claim. For example, questions of the existence of a legal dispute, the existence of a legal interest by the claimant, or the nationality of the claim provide grounds to challenge admissibility.
From an international law perspective, Ian Brownlie drew the line as follows: “[o]bjections to the jurisdiction, if successful, stop all proceedings in the case, since they strike at the competence of the tribunal to give rulings as to the merits or admissibility of the claim.
Summary of Chapters
I. INTRODUCTION: Outlines the rise of cross-border investments and the corresponding increase in investor-state disputes, setting the stage for the application of the piercing the corporate veil doctrine.
II. PIERCING THE CORPORATE VEIL FOR THE PURPOSES OF SHAREHOLDERS’ INDIRECT CLAIMS: Analyzes how shareholders use their standing to claim for indirect loss and how tribunals interpret the definitions of "investment" to permit these claims.
III. PIERCING THE CORPORATE VEIL FOR THE PURPOSES OF DENIAL OF BENEFITS CLAUSES: Examines how states invoke denial of benefits clauses to counter treaty shopping and the role of corporate nationality tests in these disputes.
IV. CONCLUSION: Synthesizes the findings, arguing that the doctrine serves as an essential tool for balancing the rights of states and investors while calling for greater consistency in ISDS jurisprudence.
Keywords
ISDS, International Investment Agreements, Piercing the Corporate Veil, Shareholder Standing, Indirect Claims, Investment Treaty Arbitration, Denial of Benefits Clauses, Corporate Nationality, Investor-State Dispute Settlement, Foreign Control, Treaty Shopping, Jurisdictional Objections, Reflective Loss, ICSID, Investment Protection
Frequently Asked Questions
What is the fundamental focus of this thesis?
The thesis explores the application of the "piercing the corporate veil" doctrine within the context of International Investment Agreements (IIAs) and Investor-State Dispute Settlement (ISDS).
What are the primary themes discussed in the work?
Key themes include the legal standing of shareholders to bring indirect claims, the definition of investment, the nationality of investors, and the defensive use of denial of benefits clauses by host states.
What is the core research objective of this study?
The objective is to examine how arbitral tribunals navigate the conflict between strict corporate legal personality and the necessity to look behind that veil to determine true ownership and control for jurisdictional purposes.
Which methodology is employed in this research?
The author utilizes a combination of descriptive, conceptual analysis, comparative, and evaluative methods to synthesize international legal theory and arbitral jurisprudence.
What topics are covered in the main body of the text?
The main body covers the provisions of various IIAs (like ECT, NAFTA, BITs), the historical development of shareholder standing from the Barcelona Traction case, and the application of control tests by tribunals.
Which terms best characterize this work?
Primary terms include ISDS, Piercing the Corporate Veil, Shareholder Standing, Treaty Shopping, and Denial of Benefits.
How does the thesis evaluate the "A-B-A scenario" regarding corporate nationality?
The thesis explains that this scenario often involves corporate restructuring by investors to gain treaty protection against their own Host State, leading tribunals to weigh formal incorporation against substantive control.
What did the tribunal conclude in the SCB v. Tanzania case?
The tribunal ruled that the claimant failed to demonstrate the necessary active relationship with the investment, effectively denying standing by refusing to lift the corporate veil for passive shareholding interests.
- Quote paper
- Anastasiia Dulska (Author), 2017, Piercing the Corporate Veil Doctrine in International Investment Agreements, Munich, GRIN Verlag, https://www.grin.com/document/427445
