UDC 341.641


Korovkina Anastasia Valer'evna
National Research University “Higher School of Economics”
2-d year Master of Law Department

The subject of current research is the standing of State-owned entities in the process of dispute resolution in international investment arbitration. Within the current work the following questions are discussed: to what extent, international investment treaties and international law, as a whole, should regulate SOE investments; whether, tribunals should carry out the same analysis of State-owned and private-owned companies’ standing for purposes of determining they as “investors” in investment arbitration; whether international investment treaties are also available to SOEs as claimants when their actions are considered as of governmental capacity; how to distinguish commercial from governmental conduct by SOEs; whether disputes concerning such investment constitute investor-State disputes falling within, or State-to-State disputes falling outside of, the scope of IITs or ICSID Convention protections. The methodological basis of research includes a general scientific (dialectical) method of obtaining knowledge, formal-logical, systematic, comparative law and also author applies other methods of obtaining scientific knowledge. Scientific novelty of current work is determined by the relevance of the chosen topic in today's international investment law, which is due to the increasing number of investments made by State-owned entities, lawsuits filed by them in the ICSID, which causes a number of questions left without answers in the court practice and requiring clarification. Within the research the author comes to the following conclusions: while disputes arising from investments made by State-owned entities are included in the scope of international investment treaties’ regulation, the disputes, where it is proved that the State-owned entity made the investment in governmental capacity, are excluded from the scope of the ICSID Convention. In conclusion, the author notes that in every particular case the tribunal should take into account the specific circumstances characterized for this case and interpret the applicable investment treaty in accordance with the norms of international law.

Category: Law

Article reference:
State-owned entities in international investment arbitration // Humanities scientific researches. 2016. № 8 [Electronic journal]. URL: https://human.snauka.ru/en/2016/08/16313

View this article in Russian


The activity of State-Owned Enterprises (SOEs) has been attracting more and more intense scrutiny in recent years. We can not assert that SOEs are a new phenomenon within the landscape of world investment, however the amount of investments made by them during last years and the number of claims submitted by such kinds of investors let us name the issue of their standing in investment law of current interest today. The enlargement of SOE investments has led to different reactions: in some cases, it has been endorsed while in others it was met with suspicions.

First of all the main arguable issue here has become the question of whether, and to what extent, international investment treaties and international law, as a whole, should regulate SOE investments. The question covers the standing of SOEs in investment dispute resolution as well as substantive protections or regulations of SOEs in international investment treaties.

Secondly, the increasing number of claims submitted by SOEs to investor-State arbitration raises the issue of whether, tribunals should carry out the same analysis of State-owned and private-owned companies’ standing for purposes of determining they as “investors” in investment arbitration.

Thirdly, we can maintain that the existing bilateral investment treaties (BITs) are available to SOEs as claimants (with only a few particular exceptions) when they act just in a commercial capacity. Notwithstanding, within such statement other questions raise: first, whether those agreements are also available to SOEs as claimants when their actions are considered as of governmental capacity and, second, if not, how to distinguish commercial from governmental conduct by SOEs.

Fourthly, the fact that as a general matter, international investment treaties (IITs) and ICSID Convention establish procedures for the resolution of investor-State, but not State-to-State or national-to-national disputes, leads to some problems appearing in the light of significant and growing amount of foreign investment. It makes arguable the issue of whether disputes concerning such investment constitute investor-State disputes falling within, or State-to-State disputes falling outside of, the scope of IITs or ICSID Convention protections.

The current article focuses on these controversial issues and covers the matters of the SOEs’ status as foreign investors, SOEs’ conduct, which can be or can not be admitted attributable to State, the standing of SOEs under the BITs and ICSID Convention and the coherence between SOEs acting as investors and jurisdictional immunity. Besides, the analysis of some suitable cases including the answers to main questions of the disputable topic let the article describe the problem not just from one side, but look at the various aspects and give justification to different opinions.

State-owned enterprises as foreign investors

The increase of SOEs’ scrutiny may be explained with the amount of SOEs’ involvement in different fields of world economy. Mark Feldman in his article analyzes the numbers of SOEs’ investments and shows how much they enhanced last years. For example, the “assets under management by SWFs alone are projected to increase from approximately US$2 trillion to US$3 trillion in 2008, to US$12 trillion by 2015” [23, p.617]. To provide a few examples of such investments: in 2007 the Abu Dhabi Investment Authority (ADIA) invested nearly US$8 billion in Citigroup [27] and the Singapore State investor Temasek invested about US$4.4 billion in Merrill Lynch, [30] while in 2008, the Kuwait Investment Authority invested roughly US$3 billion in Citigroup and tentatively US$2 billion in Merrill Lynch [22]. In 2009, PetroChina, a subsidiary of the State-owned Chinese National Petroleum Corporation, acquired a 46% stake in Singapore Petroleum Company for US$1.5 billion and a 60% stake in an oil sands project located in Alberta, Canada for US$1.7 billion [26].

Such numbers and great increase of this kind of investment raises the question of its regulation. It should be stressed that by the present moment the SOEs’ investments are regulated at the different levels and in multiple ways. With regard to the international level a number of guidelines have been developed by various international organizations, which point on prescribing best practices for SOEs, including transparency mechanisms, and disclosure practices. Simultaneously at the national level different countries have changed their foreign investment legislation to account for SOE activity by involving tests concerning the national security that must be met by inbound foreign investment [21, p.3]. Moreover SOE investment became the subject of international investment law contained in Bilateral or Multilateral Investment Treaties (BITs or MITs) such as Chapter Eleven of the North American Free Trade Agreement (NAFTA) [6] and the Energy Charter Treaty (ECT) [7].

SOEs and International Investment Treaties (MITs and BITs)

To apply IITs two typical requirements must be met: first, the investor must have made an investment in the host state’s territory (ratione materiae) and, second, the investor must be a national of a State party to the IIT under which the investor is making its claim (ratione personae) [21, p.19]. When an SOE participates in an investment dispute under particular IIT, question of ratione personae is doubtlessly to raise more complicated issues than question of ratione materiae. The fact that an investor is a company controlled or owned by a sovereign state could be very decisive in determining whether the tribunal has jurisdiction ratione personae. It should be noticed that most of IITs were created without special references to SOE “in their mind”. Moreover the purpose of such treaties was to protect private investment, rather than to facilitate transnational flows of sovereign capital.

Nonetheless such uncertainties lead to many unresolved questions. What steps should be followed in interpreting the extent of a tribunal’s jurisdiction ratione personae pursuant to an IIT in respect of a SOE claimant? How should contextual sources be expounded in the event an IIT does not clearly provide for claims by SOEs? In what circumstances will an SOE be rejected to sue before the ICSID?

In general terms, IITs, like the ICSID Convention, provide for investor-State, but not State-to-State, dispute resolution. Nevertheless, the definition of “investor” contained in some IITs does not let us state surely that SOEs are excluded or included within particular IIT. Moreover in some cases the probability to include SOEs in the framework of international law treaty is much more higher than to exclude. According to Art. 31(1) of the Vienna Convention on the Law of Treaties [1] “a treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose”. Therefore when an investment tribunal has to determine whether an SOE has the right to institute investment arbitration under a particular IIT, this interpretive analysis will not seem to be a difficult task.

As general BITs do not distinguish between State-owned and private-owned enterprises, and in many instances expressly provide that a State-owned entity may qualify as an “investor” of a Party. For example Article 201(1) of NAFTA defines “enterprise” as “any entity constituted or organized under applicable law, whether or not for profit, and whether privately-owned or governmentally-owned, including any corporation, trust, partnership, sole proprietorship, joint venture or other association” [6]. Both the 2012 Model U.S. Bilateral Investment Treaty [8], and Canada’s 2004 model for Foreign Investment Promotion and Protection Agreements [9] contain the same definition. More than that, similarly, art. 13(a)(iii) of the Convention establishing the Multilateral Investment Guarantee Agency [4] includes within the definition of investor legal entities “whether or not privately owned”.

Furthermore under some BITs the definition of “investor” expressly provides the ability of State-owned entities to bring claims against a State under the treaty. For instance, in accordance with the provisions of the United States-Panama BIT the State itself (the “Party”) may have a “substantial interest” in a “company of a Party.” Under that definition:

“a “company of a Party” means: a company duly incorporated, constituted, or otherwise duly organized under the applicable laws and regulations of a Party or a political subdivision thereof in which:

(i) natural persons who are nationals of such Party, or

(ii) such Party or political subdivision thereof or their agencies or instrumentalities have a

substantial interest as determined by such Party” [15].

It should be stressed that UNCTAD in its review of the issue of SOEs’ standing has suggested that the presumption in favor of extending protection to SOEs should apply [5]. According to UNCTAD, the term “legal entity” is usually “broadly understood as any kind of juridical entity constituted or organized under the applicable laws of a party”. Such explanation leads us to the following conclusion: unless the IIT states something otherwise, SOEs are normally protected under the IIT [5].

However, we should also take into account the implied provisions of IIT that are not apparent but may potentially conflict with the proposed UNCTAD presumption. First of all, for example, some IIT may contain not only one but multiple definitions of “investor” that diverge significantly in their treatment of SOEs. In the BIT between China and Ghana, definition of “investor” in respect of China includes only “economic entities established in accordance with the laws… of China and domiciled in the territory of… China” while a Ghanaian “investor” is defined to include “state corporations and agencies and companies registered under the laws of Ghana which invest or trade abroad” [10]. Therefore, while the definitions of Chinese investors due to this treaty does not expressly eliminate the standing of Chinese SOEs, the express inclusion of SOEs within the definition of Ghanaian investors denotes that perhaps Chinese SOEs were not implied to be afforded with standing. Secondly, some IIT may contain multiple definitions of “investor” that vary significantly in their construction, but which are all silent as to their treatment of SOEs. In some cases while the IIT keeps silence to the standing of SOEs, it includes other provisions which potentially indirectly relevant to the standing of SOEs. This is called the “subrogation clause”. “Subrogation clause” establishes the right of an investor to allow a third party to bring a claim on its behalf, in respect of matters to which the subrogation applies. Usually such clauses are used to extend subrogation rights only to private entities, such as an investor’s insurance company [13]. However, their inclusion in IITs takes a different approach: they extend subrogation rights to Contracting Parties or any “designated agency”. Notwithstanding, this point of view is not supported by all specialists in investment law and can be apparently argued before Court by parties to the dispute. Thirdly, if we take into account the Preamble of some IIT, we can state that some provisions implied standing of SOEs to sue under the BIT is partially contradicted by it. This is because in most cases the Preamble of, for example BITs, specifically provides that the Treaties were intended to “stimulate private business initiative” [12]. Nevertheless, we might not claim for sure that this is absolute denial of the ability of SOEs to bring claims under the BIT, but we suppose that it imply that any “public” investment made by such entities is not granted sufficient protection.

Nonetheless, taking into considerations all mentioned above we should provide two significant caveats to this analysis. First, in investment arbitration presumptions in favor of jurisdiction are inappropriate. As it was stated by the Court in Inceysa Vallisoletana, S.L. v. Republic of El Salvador, an IIT requires that the scope of their consent to arbitration is scrutinized on an individual basis, free and clear of any presumption either for or against jurisdiction [18]. Secondly, the provision arguing against the ability of SOEs to bring claim under an IIT need not necessarily to be fixed in the pertinent definition of investor in the IIT, nor need it be express directly or indirectly. It may be found in any other provision of the IIT arise by implication. Therefore, if we would like to decide the question of SOEs’ standing in investment arbitration on the basis of the definition of “investor” we need to be sure that standing explicit there does not essentially conflict with other provisions of the IIT either expressly or by implication.

SOEs under ICSID Convention

In accordance with Article 25(1) of the ICSID Convention it does not apply to disputes between States, or to disputes between “nationals” of Contracting States. The ICSID Convention covers only disputes between Contracting States and the “nationals” of other Contracting States. M. Feldman stresses two key factors, which support that limitation:

  1. the ICSID Convention was intended to fill a procedural gap that existed between State-to State disputes (which can be resolved in the International Court of Justice), and disputes between private entities (which can be resolved through domestic courts or commercial arbitration).
  2. the ICSID Convention was intended to facilitate the settlement of disputes arising from private, but not public, foreign investment [23, p.619].

In respect of the filling procedural gap that existed between State-to State and private disputes Mr. Broches, who played the principal role in the development of the ICSID Convention as General Counsel of the World Bank, noticed “there was general agreement” from the inception of the ICSID Convention negotiations that “private vs. private and state vs. state disputes should be excluded from the jurisdiction of the Centre…” [20, p.167]. Professor Schreuer provides additional detail on the reasons why subrogation claims were eliminated from the ICSID Convention:

“Can a State, a State agency administering an investment program, or an international

investment insurance organization become party to ICSID proceedings after having compensated

the investor? The answer is clearly no. There are three main reasons for the denial of party status:

  1. The Convention provides for the settlement of disputes between States and nationals of other States. The clear wording of Art. 25(1) cannot be re-interpreted to cover disputes involving States, State agencies or international organizations on the investor’s side.
  2. One of the Convention’s objectives is to depoliticize disputes. This objective is expressed most clearly in Art. 27 prohibiting diplomatic protection in favor of the investor. This purpose would be defeated if the investor’s State of nationality were to be given standing before the Centre.
  3. The Convention’s travaux préparatoires show unambiguously that a conscious decision was made to exclude States, State agencies or international organizations from access to ICSID proceedings on the investor’s side” [28, p.186-187].

With reference to the purpose of the Convention to be applied just to private, but not public, foreign investments Mr. Broches states “the broad purpose of the Convention is the promotion of private foreign investment and the first preambular clause of the Convention uses the term private international investment” [20, p.202]. At the same time that preambular clause, according to Professor Schreuer, “would indicate that the investor must be a private individual or corporation” and thus “States acting as investors have no access to the Centre in that capacity” [28, p.161].

Within all discussed above one substantial question arises and requires resolution: how to distinguish private foreign investment from public one? The answer is formulated by Mr. Broches in 1972 upon the determining whether there is jurisdiction over claims submitted by State-owned entities against Contracting States under the ICSID Convention. “Broches test” was characterized by Professor Schreuer as “probably” the “best guideline” for determining whether a State-owned entity is qualified as a “national” of a Contracting State under ICSID Convention Article 25(1). Due to this test a State-owned entity “should not be disqualified as a “national of another Contracting State” unless it is acting as an agent for the government or is discharging an essentially governmental function” [20, p.161].

The formulation of the main principle of “Broches test” was made within the considering by the tribunal one of the leading case in international investment practice – Ceskoslovenska Obchodni Banka, A.S. v. The Slovak Republic case [16]. Ceskoslovenska Obchodni Banka, A.S. (CSOB) was a bank owned by the government of the Czech Republic. In 1993, CSOB entered into a Consolidation Agreement with the Ministry of Finance of the Slovak Republic and the Ministry of Finance of the Czech Republic which provided for the assignment by CSOB of certain non-performing loan portfolio receivables to two “Collection Companies” that were to be established by the Czech Republic and the Slovak Republic. When Slovak Republic breached the Consolidation Agreement, CSOB filed a claim for arbitration by an ICSID tribunal under the BIT between the Czech Republic and the Slovak Republic [14,16]. Slovak Republic argued that CSOB did not qualify as an ICSID Convention Art. 25 “national of another Contracting State”, and was in fact an organ of the Czech state [16]. The tribunal in CSOB v. Slovakia stated that Art. 25 leaves no doubt that ICSID tribunals have no jurisdiction over disputes between two Contracting States [16]. Nevertheless, this fact did not mean that the ICSID Convention covered only standing of privately owned companies. Rather, citing the legislative history of the ICSID Convention and a study made by its principal drafter, Aron Broches, the Tribunal held that “for purposes of the Convention a mixed economy company or government-owned corporation should not be disqualified as a “national of another Contracting State” unless it is acting as an agent for the government or is discharging an essentially governmental function”. The test provided was accepted by both the Claimant and the Respondent of this dispute and further got a wide recognition.

Considering the application of “Broches test” P. Blyschak divides its analysis in two parts and discusses this test from the point of “discharging an essentially governmental function” by SOEs and from the point of SOEs’ “acting as an agent for the government” separately.

As for the first condition “discharging an essentially governmental function” there is one problematic issue: what should be taken into account within analysis – nature or the purpose of SOEs’ actions? P. Blyschak [20, p.28] claims that in the described above case the tribunal paid attention only to the nature, not the purposes of CSOB. In other words, the Tribunal held that regardless of if or not CSOB’s actions were taken to “promote the government policies or purposes” of the Czech Republic, the ultimately critical issue was whether the actions themselves “were essentially commercial rather than governmental in nature” [14,16]. The tribunal stipulated that since the actions of CSOB were not within the special and exclusive competency of a sovereign, its sub-state entities or state organs, it could not be said that CSOB’s investments were the discharge of an substantially governmental function.

By taking into considerations only the nature of the CSOB’s actions the tribunal elevated form over substance. This approach apparently has its advantages. First of all, they are certainty and predictability of the decision. Moreover he nature of entities’ investments is more easily determined than the purpose subjacent those investments.  The motivations or purposes behind investment can be much more difficult to decipher: they can be either masked or there will be multiple motivations underlying any one action [20, p.29].

Nonetheless, such interpretation of “Broches test” should not be recognized as the cogent and receive unconditional acceptance by all tribunals. Drawing attention just to the nature of SOEs’ investments may result in incorrect interpretation and wrongful decision. From our point of view the more relevant approach the judges can find in so called “commercial transaction” test that has long been the recognized standard in the domestic law of many states for determining the jurisdiction of courts over the actions of foreign states and their instrumentalities. This test contains the following basic principle: only where the activities of SOEs are deemed to be “commercial” (jure gestionis) rather than sovereign (jure imperii) courts are empowered to exercise jurisdiction over them [29, p.708-714]. Thus the “commercial transaction” test prevents courts from exercising jurisdiction over a state entity and gives exceptions only to the cases where SOE is acting in a commercial non-sovereign manner. Applying this test makes it possible to take into account both the nature of the state entity’s investment and its purpose. In our opinion, such approach allows the tribunal to make much more appropriate conclusion and let it resolve the dispute more accurately.

Article 2(2) of the United Nations Convention on Jurisdictional Immunities of States and their Property, which has not yet entered into force but is nevertheless considered by many to be an expression of international consensus on the matter, provides that: “In determining whether a contract or transaction is a “commercial transaction”… reference should be made primarily to the nature of the contract or transaction, but its purpose should also be taken into account if the parties to the contract have so agreed, or if, in the practice of the state of the forum, that purpose is relevant to determining the non-commercial character of the contract or transaction” [25]. Moreover such approach is accepted by domestic courts of many States because it leads them to more accurately determination of the sovereign or non-sovereign nature of SOEs.

With regard to the second condition “acting as an agent for the government” P. Blyschak raises the following question: under what circumstances will an SOE be “acting as an agent of the government” for the purpose of ICSID Convention Art. 25? The answer for it we can find in Art. 8 of the International Law Commission’s Draft Articles on the Responsibility of States for Internationally Wrongful Acts [2] which stipulates: “The conduct of a person or group of persons shall be considered an act of a State under international law if the person or group of persons is in fact acting on the instructions of, or under the direction or control of, that State in carrying out the conduct” [2]. In the official ILC Commentary to Art. 8 it is explained that while, “as a general principle, the conduct of… entities is not attributable to State under international law… circumstances may arise… where such conduct is nevertheless attributable to the State because there exists a specific factual relationship between the… entity engaging in the conduct and the State” [2].

P. Blyschak claims that reference to ILC Art. 8 and its commentary give a base for the application of the “government agent” of the “Broches test”. Besides, the tribunal within the determining of the status of certain SOE as “government agent” should “identify clear manifestations of the links between the SOE and its home state and the means through which control over the investment is exercised” [20, p.40]. Moreover it should consider whether such control was executed to achieve a particular significant result in respect of the investment or not. These considerations show the difference between two parts of “Broches test”. In particular, while the “essentially governmental function” part concentrates on the extent to which a SOE may perform investment activities with elements of governmental authority, the “government agent” part focuses on the degree to which the state has managed a SOE’s investment actions or activities. Nevertheless such division does not mean that SOE investment cannot satisfy both of these standards simultaneously.

It should be stressed, in no case submitted to ICSID arbitration by a SOE the tribunal has considered the key factors, which support the limitation of Article 25(1) to private investment (the limited role of ICSID in supporting private, not public, foreign investment, and the limited role of ICSID in filling a procedural gap between State-to-State and private disputes). In addition, in no case the purpose, as distinguished from the nature, of a State-owned entity’s activities has been considered when determining whether such entities are enable to submit a claim to ICSID arbitration [23, p.623].

Case analysis: summary of leading cases submitted to ICSID arbitration by SOEs

The analysis of case law lets us see the shortcomings arisen from the lack of clear formulation of the base for determining the goals driving the activities of State-owned claimants. The problems causing by imperfect application of both “Broches test” and  “commercial transaction” test do not allow the judges to formulate persuasive clarifications of SOEs’ standing under ITTs and ICSID Convention. The result of cases’ analysis is discussed below in the context of two claims submitted to ICSID arbitration by SOEs.

Maffezini v. Spain 

The company Emilio Augustin Maffezini invested in the SODIGA (“Sociedad para el Desarrollo Industrial de Galicia”), a company owned by the Kingdom of Spain government. When SODIGA failed in fulfillment its contract obligations Maffezini (Claimant) submitted claim to ICSID arbitration. SODIGA (Respondent) contested the claim and stated that this dispute is not between Kingdom of Spain and Claimant, as alleged Claimant, but between the Claimant and the private corporation SODIGA. However the Claimant argued that the actions and omissions affecting his investment are attributable to en entity owned and operated by the Kingdom of Spain. More than that, SODIGA is “under control of State and operated as an arm of the State for the purposes of the economic development of the region of Galicia” [23]. Due to this fact, its wrongful acts or omissions may be attributed to the State. The Respondent maintained, however, that SODIGA is a private company and its activities are of private entity.

The lack of guiding principles for deciding relevant issues made the tribunal look to the applicable rules of international law in deciding whether SODIGA is a state body. Thus the tribunal had to look to various factors, such as ownership, control, the nature, purposes and objectives of the entity whose actions are under scrutiny, and to the character of the actions taken. The tribunal examined the raised question from formal and structural point of view and made the conclusion that there is a presumption that the corporation is a state entity if it is owned or controlled directly or indirectly by the State. Moreover the tribunal stated that the same presumption arises if an “entity’s purpose and objectives is the carrying out of functions which are governmental in nature or which are otherwise normally reserved to the State, or which by their nature are not usually carried out by private businesses or individuals” [17].

The tribunal notices that the relevance of these standards is much more clearer when State operates directly through section or division of a Ministry and less so when the State acts through the private corporate structure. Nevertheless State must not escape the responsibility for wrongdoing behind corporate veil.

To identify the nature and purpose of the company and to determine the attribution of its actions to the State the tribunal used two instruments: structural and functional tests. The tribunal explained insufficiency of application just structural test due to the fact that State enterprises may take different forms and shape their manners of State action. Therefore it is necessary to carry out also functional test, which lets the tribunal to look at the functions and the role performed by State entity. Considering these two tests the tribunal also referred to the conclusion made by the ICSID Tribunal in CSOB v. the Slovak Republic case and applied “Broches test”.

The tribunal stated that it is complicated to determine when various tests and standards need necessarily be cumulative and when it is enough to apply one of them. But when most or all of these tests result in a finding of State action, the result comes closer to being persuasive.

In current case the tribunal concluded that the following facts:

  1. the SODIGA was created by the decree issued by the Ministry of Industry which authorized the National Institute for Industry, a national State agency , to establish SODIGA
  2. the National Institute for Industry has no less than 51% of SODIGA’s capital
  3. the intent of the Government of Spain was to create an entity to carry out governmental functions

show that SODIGA met both tests (structural and functional) and is admitted as State entity acting on behalf of the Kingdom of Spain.

Noble Ventures Inc v Romania

SOF (or APAPS which replaced SOF at the end of 2000) was owned by the government of Romania and the Prime Minister appointed the board of directors. SOF’s mandate included “accomplishing the entire privatization process” – clearly the governmental function.

Noble Ventures Inc invested in SOF (APAPS). When SOF (APAPS) breached its contractual obligation, Noble Ventures Inc (Claimant) submitted the claim to the ICSID arbitration. Romania (Respondent) argued that SOF and APAPS were legal entities separate from the Respondent and it is not possible to regard them as jure organs and, in accordance with Draft Articles on State Responsibility, attribute their actions and omissions to the State. However the tribunal stated that “the 2001 Draft Articles go on to attribute to a State the conduct of a person or entity which is not a de jure organ but which is empowered by the law of that State to exercise elements of governmental authority provided that a person or entity is acting in that capacity in the particular instance” [19]. Thus the tribunal considered that even SOF (APAPS) was not de jure organ, it acted on the basis of Romanian law which defined their competence and as a governmental agency had to manage the whole legal relationship with investors. So there was no relevant legal distinction between SOF (APAPS) and governmental ministry, “when the one or the other acted as the empowered public institution under the Privatization Law”. According to all facts mentioned above, SOF (APAPS) was entitled by law to represent the Respondent and did so in all their actions and omissions.

The Respondent claimed that the tribunal had to make the distinction between the attribution of governmental conduct and commercial conduct as the latter could not be attributable to the State. Nevertheless, the tribunal stated that the such “distinction plays important role in the field of sovereign immunity when one comes to the question of whether a State can claim immunity before the courts of another State” [19]. In contrast in the context of responsibility it is difficult to say why commercial acts should by definition not to be attributable while the governmental acts should be attributable. Besides, the ILC-Drafts does not support or maintain such distinction.

According to all these considerations the tribunal concluded that the contract between Claimant and SOF (APAPS) were concluded on behalf of Respondent and the breach of contractual obligations performed by SOF (APAPS) is attributable to the State.


The growing amount of SOEs’ investment is followed by significant number of claims submitted by State entities what lead to many unresolved and disputable questions the answer to which is quite complicated to find. The issue whether disputes concerning such investment constitute investor-State disputes and are falling within the scope of IITs and ICSID Convention or they should be admitted as State-to-State disputes and be excluded from international investment treaties and ICSID Convention regulation is likely to arise with greater frequency. The described above analysis let us make the following conclusions.

As for IITs, the character of “investor” ’s definitions stipulated in the most of them let us conclude that there is no reason to exclude the State-owned enterprises form the scope of international investment treaties. However, it should be stressed that such notice is suitable just for SOEs investing abroad in commercial capacity. In exceptional cases when it can be proved that the conduct of State entities making investment could be characterized as governmental – when the actions of SOE must be attributable to the State and/or immune from the jurisdiction of foreign courts – tribunals should identify upon interpreting the treaty whether such governmental conduct prevents a claimant from qualifying as an “investor”.  To draw the distinguishing line between commercial and governmental purposes of SOEs the tribunal should take into considerations well-developed customary international law attribution rules. It should be noted that such rules pay attention not only to the nature, but also to the purpose of an SOE’s activities. Besides, the fact, that some IITs permit to include SOEs acting in commercial capacity in the scope of such treaties’ regulation, does not mean that even benefiting from jurisdictional immunity such entities should be recognized as investor and be able to submit their claims. The granting of jurisdictional immunity automatically lead to attributing the actions of the SOEs received such immunity to the State and it let the tribunal state for sure that this entity invest in governmental capacity.

Unlike IITs where we can find different approaches for interpretation the notion of “investor”, State-to-State disputes, where it is proved beyond reasonable doubts that SOE is acting on behalf of State, are excluded within the scope of ICSID Convention. State cannot qualify as a “national” of a Contracting Party under Art. 25 of the ICSID Convention, even in a subrogation context. Thus, while State entities investing abroad in a governmental capacity may be enable to bring claims against States under particular IITs, they should not be able to do so under the ICSID Convention.

The case analysis allows us to see all the imperfections of application different tests for determining standing of SOEs as investor in practice.  It must be emphasized, that the tribunals taking into account all theoretical conclusions, whatever pay attention to the special circumstances of the case and look for the most effective solution, which sometimes contradict to key guidelines. Nevertheless, the main aim of the tribunal is to find the most appropriate resolution, which can be performed if the tribunal respects differences in treaty practice and be guided primarily by the language of the applicable treaty when determining, in every particular case, whether treaty protections extend to an SOE investing abroad in a governmental capacity or not.

  1. Aron Broches Selected essays: World Bank, ICSID, and other subjects of public and private international law. Martinus Nijho& Publishers. 1995. P. 545;
  2. Paul Blyschak State-Owned Enterprises and International Investment Treaties: When are State-Owned Entities and their Investments Protected? // Journal of International Law and International Relations. 2011. Vol. 6. № 1. P. 1-51;
  3. Eric Dash Big paydays for rescuers in the crisis // New York Times. 2009. <http://dealbook.nytimes.com/2009/12/07/big-paydays-for-rescuers-in-the-crisis/> (последнее посещение – 12 августа 2016 г.);
  4. Mark Feldman The Standing of State-Owned Entities Under Investment Treaties // Yearbook on International Investment Law & Policy 2010-2011 (K. Sauvant, ed.) (OUP). 2012. P. 615-637;
  5. Mark Feldman State-Owned Enterprises as Claimants in International Investment Arbitration // ICSID Review. 2016. Vol. 31. № 1. P.24-35;
  6. Hazel Fox The Law of State Immunity, 2d ed. // New York: Oxford University Press, 2008. P. 704;
  7. Laura King PetroChina Athabaska oil sands // The Wall Street Journal. 2010. <http://www.wsj.com/articles/athabasca-oil-completes-sale-of-stake-in-project-to-petrochina-co-1409338852> (последнее посещение – 12 августа 2016 г.);
  8. Thomas Jr. Landon A growing trophy case // New York Times. 2008. <http://query.nytimes.com/gst/fullpage.html?res=9803E5DE163AF933A25754C0A96E9C8B63> (последнее посещение – 12 августа 2016 г.);
  9. Christoph Schreuer The ICSID Convention: A commentary // Cambridge: Cambridge University Press. 2009. P. 1596;
  10. Malcolm N. Shaw, International Law, 6th ed. // New York: Cambridge University Press, 2008. P. 1063;
  11. Saeed Azhar and Harry Suhatono Temasek says may sell Indonesian BII stake // Reuters. 2008. <http://uk.reuters.com/article/column-deal-temasek-bii-idUKSIN5962120080310> (последнее посещение – 12 августа 2016 г.).

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