Nationality Planning and Abuse of Process: A Coherent Framework 

Nationality Planning and Abuse of Process: A Coherent Framework  Abstract Prudent investors seek to structure their investments so as to obtain investment treaty protection. But the crucial line between legitimate ‘nationality planning’ and illegitimate restructuring which renders an investment treaty arbitration an abuse of process is a blurry one. In particular, recent Awards have introduced a foreseeability element to the abuse of process analysis, the scope of which remains largely undefined. This article surveys arbitral practice in the area, and proposes potential refinements to the test. I. INTRODUCTION ‘Treaty-shopping’ and ‘nationality-planning’, in the sense of investors and corporate groups structuring (or restructuring) their holdings so as to secure investment treaty protection, is a fixture of international commerce. More than 3000 bilateral investment treaties (BITs) are presently in force. Landscape-altering multilateral investment treaties are in various stages of finalization. Investors are increasingly aware of the power of the investor-state dispute settlement (ISDS) mechanism; prudence and fiduciary obligations, dictate that they at least give thought to obtaining access to that mechanism.3 At the same time, however, ISDS clauses continue to stoke political controversy. One aspect of that controversy is the extent to which multinational corporations can game the system—for example, by shifting assets and investments into ‘corporations of convenience’ deliberately to fall under the protection of an investment treaty. To address this perceived mischief, the power of international tribunals to dismiss a claim on the basis that it is an abuse of process4 has developed substantially over the last 15 years. Philip Morris—the high profile dispute over Australia’s plain cigarette packaging legislation—falls at the intersection of these issues. The Tribunal in that case held that it was precluded from exercising jurisdiction over the claim, specifically because the Philip Morris Group’s restructuring, consummated before the claim crystallised, rendered it inadmissible as an abuse of process. The Award contains a valuable discussion of the abuse of process doctrine in the context of a corporate restructuring: it sought to reconcile the jurisprudence on the topic, and set out an authoritative statement as to when a corporate restructuring becomes abusive. In this article, we assess the extent to which the Philip Morris Tribunal succeeded in that aim. First, we trace the development of the abuse of process doctrine in arbitral practice, and explain how different tribunals have approached the same problem. Secondly, we consider the test for establishing an abuse of process in the context of a corporate restructuring. Finally, we tease out some still-unresolved aspects of that test, including the nature of the ‘foreseeability’ element, how to approach a restructuring undertaken for both legitimate and illegitimate reasons, and the relevance of ‘bad faith’. The abuse of process doctrine is now well-entrenched in the jurisprudence; and it will likely play an increasingly important role in policing access to the investment treaty arbitration system. However, key aspects of the doctrine remain poorly defined—in particular, the very aspect of the doctrine which makes it most powerful, namely, its application to restructurings which occur before a dispute arises. In this article, we do not grapple with the underlying policy debate, or seek to reverse the tide.5 Rather, we seek to reconcile the existing arbitral practice, consolidate principles which appear to have been widely accepted, and propose refinements in pursuit of a more coherent framework for the doctrine. II. THE DEVELOPMENT OF THE ABUSE OF PROCESS DOCTRINE The notion of abuse of rights (or related doctrines, such as abuse of process) has long existed in public international law.6 Its application to instances of investment restructurings has had a late but rapid gestation. In this section, we review decisions of international tribunals which consider the issue. An understanding of the facts of each case is necessary to tease out the differences and inconsistencies between them, which we do in subsequent sections. Initially, tribunals approached the issue through the lens of various treaty provisions, including the definitions of investor and covered investment. In Autopista Concesionada de Venezuela, CA v Venezuela,7 the Claimant was a company incorporated in Venezuela which was awarded a concession to design, build and collect tolls generated by a major new highway. At all relevant times, 99 percent of its shares were ultimately owned by a Mexican conglomerate, referred to as ICA Holdings. In April 1997, one week after the concession agreement became effective, the Claimant sought Venezuela’s permission to transfer 75 percent of its shares to a company registered in the USA, referred to as Icatech (a wholly-owned subsidiary of ICA Holdings). Permission was granted, and the shares were transferred to Icatech in August 1998. A dispute arose between the parties in early 2000, and the Claimant submitted the dispute to ICSID in June 2000. By Article 64 of the concession agreement, the parties agreed that, if the claimant came to be majority owned by a national of an ICSID Contracting State, disputes between them may be submitted to ICSID. The Claimant relied on Icatech’s majority ownership to bring it within Article 64. (The USA is an ICSID Contracting State; Mexico is not.) Venezuela objected to the Tribunal’s jurisdiction, inter alia on the ground that it had not consented to ICSID jurisdiction ‘on the basis of a fictional control relationship’.8 The Tribunal rejected that objection. The US entity had been incorporated ‘well before … the emergence of the present dispute’, and had substantial interests worldwide.9 The Tribunal accepted that the purpose of the restructuring was to enhance the Claimant’s ability to obtain financing through a connection to the USA, and noted that Venezuela had consented to the share transfer.10 Accordingly, it held that the US entity was not ‘a corporation of convenience’, and that the assertion of ICSID jurisdiction on the basis of Icatech’s shareholding was not ‘an abuse of the Convention purposes’.11 In Aguas del Tunari SA v Bolivia,12 the Claimant was a Bolivian company, 55 percent of which was initially ultimately owned by a US company (Bechtel Holdings, Inc.). In September 1999, it was awarded a concession to provide water, sewerage and electricity services to the city of Cochabamba. There was immediate public opposition to the granting of the concession. In late November 1999, Bechtel sought permission from the Waters Superintendency of Bolivia for a restructuring, which would interpose two Dutch companies between it and the Claimant. Permission was granted, and the re-organization was completed in late December 1999. The concession was terminated a few months later. The Claimant submitted a dispute to ICSID under the Netherlands–Bolivia BIT (which permits claims made by local companies ‘controlled by’ foreign nationals).13 Bolivia objected to the Tribunal’s jurisdiction on multiple grounds, including that the Claimant was not controlled by nationals of the Netherlands. The Tribunal dismissed Bolivia’s objections. In addition, the Tribunal made a final ‘concluding observation’ concerning Bolivia’s suggestion that the restructuring was done ‘in anticipation of the events to follow’.14 The Tribunal noted that the ‘severity of the particular events’ in early 2000 was not ‘foreseeable’ when the restructuring took place. It did not make positive findings as to the purpose of inserting the Dutch entities into the Claimant’s corporate structure, but noted that: it is not uncommon in practice, and—absent a particular limitation—not illegal to locate one’s operations in a jurisdiction perceived to provide a beneficial regulatory and legal environment in terms, for example, of taxation or the substantive law of the jurisdiction, including the availability of a BIT.15 The Tribunal held there was no basis to ‘support an allegation of abuse of the corporate form or fraud’.16 In the seminal case, Phoenix Action Ltd v The Czech Republic,17 the focus was on the nature of the investment, not the investor or claimant.18 The claim concerned two Czech companies engaged in the trading of ferro-alloys. The first had been declared bankrupt following a dispute with an unrelated Czech company; the second had been engaged in ongoing disputes with the Czech criminal authorities regarding two frozen bank accounts. The latter’s Chief Executive Officer, a Mr Beňo, was the subject of criminal investigation in the Czech Republic and it was determined that the company’s funds were the proceeds of crime. Mr Beňo fled to Israel, incorporated the Claimant, which subsequently acquired ownership of the two Czech companies, and filed for arbitration. The Tribunal held, in a single paragraph, that it had no jurisdiction ratione temporis in respect of the events which occurred prior to the Claimant’s acquisition of the two Czech companies.19 The analysis then turned to whether the Claimant had made an investment protected by the BIT. The Tribunal set out six elements to be taken into account in determining whether an alleged investment is protected by international law; the sixth was ‘assets invested bona fide’.20 In that respect, the Tribunal held that, as a general principle, ‘States cannot be deemed to offer access to the ICSID dispute settlement mechanism to investments not made in good faith’.21 It then considered a number of factors to determine if the Claimant’s investment ‘deserves protection’.22 Relevantly, the investment had been made at a point in time when ‘all the damages claimed by Phoenix had already occurred’, and the request for arbitration was initially based on claims said to have been assigned by the two Czech companies to the Claimant.23 The Claimant notified the Czech Republic of its investment dispute a mere two months after its acquisition of the local companies, which ‘shows that Phoenix’s “investment project” was made simply to assert a claim under the BIT’.24 The transaction itself was ‘a mere redistribution of assets’ within Mr Beňo’s family, and the Tribunal considered that ‘no economic activity’ was either performed or intended by the Claimant.25 In short, the transaction was intended ‘to transform a pre-existing domestic dispute into an international dispute subject to ICSID arbitration’.26 This was an ‘abuse of the system’, which risked making access to the investment arbitration mechanism ‘virtually unlimited’.27 The Tribunal reasoned it was under a duty to ensure that the ‘ICSID mechanism does not protect investments that it was not designed … to protect’, and dismissed the claim on the basis that there was no valid investment.28 Phoenix Action was closely followed by two related cases, each of which was dismissed as an abuse of process. The two cases—Europe Cement Investment and Trade SA v Turkey29 and Cementownia ‘Nowa Huta’ SA v Turkey30—both concerned the same two Turkish companies, involved in the generation, transmission and sale of electricity pursuant to concession agreements executed in 1998. By a regulation which took effect in November 2002, the two companies were required to transfer all of their transmission facilities to a government entity, failing which the concession agreements would be terminated in their entirety. In June 2003, Turkey terminated the concession agreements. The claimants in both cases alleged that they had acquired shares in the two Turkish companies in May 2003 (less than two weeks before the concession agreements were terminated).31 However, in both cases the Tribunal concluded that no such acquisition took place; accordingly, there was no relevant investment and the claimant was not an investor covered by the Energy Charter Treaty.32 The Tribunals did not stop there. Again in both cases, it was found that the alleged transaction was ‘fabricated’33 and based on ‘inauthentic documents’.34 The claims were ‘fraudulent’, and an ‘abuse of process’.35 Relevantly for the purposes of this article, the Cementownia Tribunal also considered the hypothetical scenario in which the Claimant had been able to prove its investment. Following Phoenix, it held that an investment made ‘not for the purpose of engaging in commercial activity, but for the sole purpose of gaining access to international jurisdiction … is deemed not to be a protected investment’.36 It held that the timing of the alleged investment showed that it would have been ‘treaty shopping of the wrong kind’.37 In the cases discussed to this point, Tribunals grappled with allegations of abuse of process by way of treaty definitions of investor and investment. This approach attracted criticism for unjustifiably narrowing such definitions, in a way that confounded the autonomy and intention of the States party.38 Subsequent cases appear to treat abuse of process (or similar concepts) as a free-standing doctrine, detached from the language of the relevant treaty. In Mobil Corporation v Venezuela,39 the Claimants were various members of the Mobil corporate group, incorporated in the USA, the Bahamas and the Netherlands. They held interests in two oil production ventures in Venezuela, pursuant to agreements with Venezuela’s State-owned petroleum company executed in 1996 and 1997. In April 2005, the Venezuelan Minister of Energy and Mines announced that such agreements were illegal, and would need to be ‘migrated’ to a new form. In May 2006, an extraction tax of 33⅓ percent was enacted; in August 2006 it was increased to 50 percent; and in January 2007, the President of Venezuela announced that the Mobil projects (among others) would be nationalised. Throughout this period, the Mobil group had corresponded with Venezuela with respect to the ongoing ‘investment dispute’. For example, by a letter dated 20 June 2005, the Mobil parties noted their consent to ICSID jurisdiction over the dispute and ‘any other investment disputes … that may arise in the future, including without limitation any dispute arising out of any expropriation or confiscation of all or any party of the investment’.40 In the meantime, the Mobil group established a new entity in the Netherlands in October 2005, and inserted that entity into the corporate structure for the two projects in February and November 2006 respectively. The Claimants admitted that the purpose of the restructuring was to obtain BIT protection.41 The Request for Arbitration was submitted to ICSID on 6 September 2007. Venezuela objected to the Tribunal’s jurisdiction on the ground that, inter alia, the Dutch entity was a ‘corporation of convenience’ which could not attract the protection of the Netherlands–Venezuela BIT. The Tribunal disagreed. It noted that significant economic investments were made in the projects in 2005–06, and further investments were projected. It held that restructuring investments to obtain BIT protection ‘was a perfectly legitimate goal as far as it concerned future disputes’42 (as opposed to ‘pre-existing disputes, [where] the situation is different’, citing Phoenix43). It reasoned that, because the dispute concerning Venezuela’s nationalization measures arose after the restructuring, there was no abuse of process.44 The Tribunal did not consider whether that dispute was foreseeable at the time the restructuring occurred. The Tribunal in Pac Rim Cayman LLC v El Salvador45 took a different approach. In April 2002, Pacific Rim Mining Corp, a Canadian company, acquired all of the shares in an El Salvador company subsequently referred to as Pacific Rim El Salvador (or ‘PRES’). PRES held exploration licences over certain areas and, having expended more than US$77 million in exploration activities, verified substantial gold deposits in those areas. In September 2004, it applied for licences to exploit those gold deposits. Those licences were never issued. In November 2004, Pacific Rim Mining Corp transferred all of its shares in PRES to the Claimant, its subsidiary, which was at that time incorporated in the Cayman Islands. The Central American Free Trade Agreement came into force on 1 March 2006. The Claimant became a US company on 13 December 2007. It admitted that one of the factors in favour of the re-organization was ‘[t]he ability … to bring claims under CAFTA, if a dispute with El Salvador were to arise in the future’.46 (The USA is a party to CAFTA; the Cayman Islands and Canada are not.) In March 2008, the President of El Salvador announced that no further licences would be granted to PRES. The Claimant notified El Salvador of its intention to commence arbitration proceedings in December 2008, and its Notice of Arbitration was submitted to ICSID on 30 April 2009. El Salvador objected to the Tribunal’s jurisdiction on a number of grounds. Relevantly, it argued that the renationalization of the Claimant rendered the arbitration an abuse of process. The Tribunal considered that it ‘must first ascertain whether the relevant measure(s) or practice’ took place before or after the date the Claimant’s nationality changed.47 The Claimant’s initial pleadings had complained of a number of measures in relation to El Salvador’s failure to grant the licences. It said that the State’s opposition to its mining venture ‘first manifested’ in late 2005; and that, since the end of 2006, it was ‘increasingly apparent’ that the Government’s aim was ‘preventing their operations altogether’.48 On the basis of this description of the claim, the Tribunal was ‘minded to accept’ the submission was an abuse of process.49 However, in subsequent pleadings, the Claimant refined its complaint to focus on El Salvador’s ‘de facto ban on mining operations’, which, it said, was revealed by the President’s speech in March 2008.50 It said that, until then, it had been led to understand that its applications were still under consideration.51 On that basis, the Tribunal characterised the measures as a ‘continuing act under international law’, which started before the Claimant’s change of nationality and continued after that time.52 The Tribunal then set out its views as to when a corporate restructuring amounts to an abuse of process: ‘the dividing line occurs when the relevant party can see an actual dispute or can foresee a specific future dispute as a very high probability and not merely as a possible controversy’.53 The dividing line, it said, ‘will include a significant grey area’.54 The Tribunal further elucidated the test by reference to El Salvador’s submission that: it is clearly an abuse for an investor to manipulate the nationality of a shell company subsidiary to gain jurisdiction under an international treaty at a time when the investor is aware that events have occurred that negatively affect its investment and may lead to arbitration.55 The Tribunal concluded that, on the basis of the claim ‘as finally pleaded’,56 the Claimant’s change of nationality was not an abuse of process. Tidewater Inc v Venezuela57 was another case arising out of changes to Venezuela’s approach to its oil industry. The Tidewater group, through its Venezuelan entity referred to as SEMARCA, had been providing support services to Venezuelan State-owned oil enterprises in Lake Maracaibo since 1957 (and, in particular, to the enterprise referred to as PDVSA). SEMARCA was initially owned by a series of Tidewater companies registered in Venezuela, the Cayman Islands and, ultimately, the USA. By June 2008, monies owed to SEMARCA began to accrue, such that, by February 2009, it threatened not to renew its contracts until its arrears were paid in full.58 On 6 March 2009, the Minister of Energy and Petroleum announced that Venezuela would not allow ‘one service supplier [to] paralyze industry activities’,59 and in early May 2009 SEMARCA’s operations in Lake Maracaibo were expropriated.60 Its remaining assets were expropriated in July 2009.61 In the meantime, in February–March 2009, the Tidewater group incorporated a company in Barbados and inserted that new entity into SEMARCA’s ownership structure.62 The Claimants submitted their Request for Arbitration under the Barbados–Venezuela BIT63 on 16 February 2010. Venezuela objected to the Tribunal’s jurisdiction on the basis that, among other things, the restructuring amounted to an ‘abuse of the Treaty’.64 The Claimant admitted that one purpose of the re-organization was ‘risk-mitigation’, by obtaining treaty protection, in view of other nationalisations conducted by Venezuela in 2007–08.65 (The other purpose was ‘advantages under US tax law’.66) Drawing on Mobil and Phoenix, the Tribunal considered that obtaining treaty protection is a ‘perfectly legitimate goal’ in some circumstances;67 and so considered that the ‘heart’ of the issue was when the present dispute ‘arose or could reasonably have been foreseen’ as a matter of fact.68 The Tribunal held that the dispute between SEMARCA and PDVSA which pre-dated the restructuring was ‘an ordinary commercial dispute’,69 quite separate from the treaty-based claims made in the arbitration. It further held that, at the time of the restructuring, the ‘acts of expropriation that gave rise to the present dispute were not reasonably foreseeable’, either when the restructuring commenced or was consummated,70 at least in part because PDVSA’s actions evinced a ‘continuing will to trade’.71 Consequently, there was no ‘abuse of the Treaty’.72 ST-AD GmbH v Bulgaria73 was effectively on all fours with Phoenix. The dispute concerned land in Bulgaria, which had been nationalised in 1947 and re-instituted to its pre-nationalization owners in 1992. The State-owned company which had managed and used the property in that period (LIDI-R) disputed the validity of the restitution of the land and commenced proceedings in the Bulgarian courts claiming that it continued to own (at least) the buildings on the land. That litigation concluded on 16 June 2000 in an order of Bulgaria’s highest court dismissing LIDI-R’s claim and upholding the validity of the restitution (Decision 1153). LIDI-R was privatised in 2004. Its new owner—a Mr Balev, a Bulgarian individual—caused it to commence proceedings in Bulgaria to set aside Decision 1153. On 22 May 2006, Bulgaria’s highest court rejected LIDI-R’s petition. On 25 May 2006, the Claimant—a German company of which Mr Balev was also majority owner74—acquired 40 percent of the shares in LIDI-R. On 30 May 2006, the Claimant sent a letter to Bulgarian officials warning of a possible international arbitration. On 2 March 2008, the Claimant acquired a further 40 percent stake in LIDI-R, and on 15 March 2008 wrote again to Bulgarian officials threatening arbitration. In March 2010, LIDI-R applied again to set aside Decision 1153, which also failed. The Tribunal held that it had no jurisdiction ratione temporis over the dispute, as the key events happened long before the Claimant made its investment(s), and the March 2010 litigation was merely an ‘illusion’ designed to give the impression of measures occurring after the investment was made.75 In addition, the Tribunal held that the ‘main purpose’ of the transfer of shares to the Claimant was to ‘open the possibility for a recourse to international arbitration’.76 Following Phoenix, and given that the ‘damaging facts’ had occurred long before the transfer and the close timing between the share transfers and the threats of arbitration, the Tribunal held that the arbitration was an abusive attempt to manufacture international jurisdiction over a pre-existing domestic dispute.77 ConocoPhillips Petrozuata BV v Venezuela,78 by contrast, is analogous to both Mobil and Tidewater. It concerned two major oil production projects in the Orinoco Oil Belt. The ConocoPhillips group held a majority interest in both projects, through two companies incorporated in Venezuela. In June–August 2005, ConocoPhillips incorporated Dutch subsidiaries, and inserted them into the projects’ ownership structure.79 From 2005 to 2007, Venezuela took the measures described above in the context of the Mobil Corporation Case, culminating in the nationalisation of the two projects in June 2007.80 The Tribunal discussed a number of the Arbitral Awards set out above (though not, perhaps strangely, Pac Rim). It noted that those decisions entertained jurisdictional challenges on a ‘distinct broader basis’, even where formal requirements under the relevant treaties had been met—namely, where there had been a ‘misuse of power conferred by law’.81 A finding that the ‘good faith … standard’ was breached was rare, it said: the ‘standard is a high one’.82 The Claimants admitted that the ‘only business purpose’ of the restructurings was to gain access to treaty protection and ICSID arbitration.83 However, the Tribunal found that ‘no claim had been made’ and, with minor exceptions, ‘none was in prospect’ at the time the Dutch entities were inserted into the corporate structure.84 ConocoPhillips invested more than US$400 million in the projects after the restructurings, a factor the Tribunal considered to be ‘very weighty’, and which was ‘evidence telling very strongly against any finding of treaty abuse’.85 In Lao Holdings NV v Laos,86 the Respondent disavowed any challenge to jurisdiction on the basis of an abuse of process; but the Tribunal considered the scope of the doctrine in any event, in order to distinguish it from jurisdiction ratione temporis. The case concerned the development of hotels and casinos in Laos. In 2007, Sanum Investments Ltd, a Macao company (Sanum), entered into a joint venture agreement with a Laotian company. Sanum held a 40 percent interest in at least two major projects. In 2009, the Laotian Government granted one of those projects a ‘Flat Tax Agreement’, by which it would pay a capped amount of annual tax for five years. In 2011, the parties entered into negotiations to extend the agreement; but in December 2011, Laos enacted an 80 percent tax on casino revenues (not profit). Negotiations for an extension of the Flat Tax Agreement continued through to March 2012, but were unsuccessful. In the meantime, in July 2011, Sanum began looking into a potential corporate restructuring. On 17 January 2012, an ‘off the rack’ company registered in Aruba acquired all of the share capital in Sanum. The Tribunal considered that it would be ‘clearly an abuse’ if an investor manipulates its corporate structure to obtain treaty protection ‘at a time when [it] is aware that events have occurred that negatively affect its investment and may lead to arbitration’.87 Citing Pac Rim, the Tribunal noted that, while a restructuring which takes place when a dispute is ‘highly probable’ may be an abuse of process, the ‘solution is different’ with respect to jurisdiction ratione temporis: the dispute must have already occurred.88 For the purposes of that analysis, the Tribunal held that the dispute arose in March 2012 (the date it became clear the Flat Tax Agreement would not be extended). This was after the restructuring, and so the Tribunal had jurisdiction. The Tribunal ultimately made no findings in respect of abuse of process because the Respondent did not plead it. Levy and Gremcitel SA v Peru89 illustrates this crucial difference between the two doctrines. It concerned three valuable and historically significant parcels of land near Lima, where the Claimants proposed to develop a tourism and real estate ‘megaproject’.90 In 1995, a company referred to as Gremco acquired the three parcels of land, variously from the local public authority and private sellers. In 2003-04 the second Claimant, Gremcitel SA (a Peruvian company), acquired the land. Both Gremco and Gremcitel were part of the ‘Levy Group’.91 On 9 October 2007, the first Claimant, Ms Renee Levy, acquired a controlling share in Gremcitel.92 Ms Levy, a French national, acquired the shares from her brother.93 From at least 2001, Gremco and Gremcitel had dealings with various State authorities as to the use that could be made of the land, given its historical significance. In February 2005, the National Institute of Culture (INC) formed a Historical Commission to propose the delimitation of the ‘intangible historical area’.94 Its report was issued in July 2005. On 10 October 2007, one day after Ms Levy acquired her direct stake in Gremcitel,95 the INC issued a resolution formally delimiting the historical area. The Claimants argued that the resolution made their proposed property development ‘meaningless’.96 The Tribunal concluded that, because Ms Levy’s investment pre-dated the dispute (even by a few short days), the requirements of jurisdiction ratione temporis were met.97 Turning to the Respondent’s contention that the ‘investment [was] abusive’,98 the Tribunal considered it to be ‘well-established, and rightly so’, that structuring or re-structuring an investment to obtain treaty protection is not, in itself, objectionable.99 On the other hand, it agreed with the Pac Rim Tribunal’s formulation that a restructuring to procure protection for a ‘specific future dispute’ which was ‘foresee[able] … as a very high probability’ may amount to an abuse of process.100 The Tribunal noted that ‘the closer the acquisition of the investment is to the act giving rise to the dispute, the higher the degree of foreseeability will normally be’, and that there was ‘striking proximity’ between Ms Levy’s investment and the relevant events.101 It held that, in light of the parties’ dealings since the Historical Commission was established in 2005, and given that the transfer of shares to Ms Levy was brought about ‘in a great hurry’,102 the Claimants foresaw the passage of the 2007 Resolution ‘as a very high probability’.103 The Claimants could give no other reason for Ms Levy being inserted into the ownership structure of the project, and accordingly the Tribunal concluded that its only purpose was to obtain access to ICSID arbitration where that remedy was otherwise unavailable.104 Finally, the Tribunal considered that the Claimant’s failed attempt to prove that Ms Levy indirectly owned and controlled Gremcitel from 2005, which had relied on backdated documents, ‘evinces a pattern of manipulative conduct that casts a bad light on their actions’.105 It concluded that the restructuring was an ‘abuse of process’, and so the Tribunal was ‘precluded’ from exercising jurisdiction.106 Philip Morris concerned Australian legislation which, among other things, essentially prohibited cigarettes from being sold in branded packages—the ‘plain packaging legislation’. The Claimant was a company registered in Hong Kong, which had been part of the Philip Morris corporate group since it was incorporated in 1994. In September 2010, the group approved a restructuring by which the Claimant would become the (direct and indirect) sole owner of the group’s Australian subsidiaries. The restructuring was consummated on 23 February 2011. Following a long gestation, the plain packaging legislation was passed by the Australian Parliament in November 2011.107 The Framework Convention on Tobacco Control entered into force for Australia in 2005; it obliges State Parties to implement measures including a ‘comprehensive ban on tobacco advertising, promotion and sponsorship’.108 In October 2008, a Government Taskforce published a position paper suggesting mandatory plain packaging; its final report in June 2009 recommended implementing plain packaging legislation.109 In September 2009, Australia’s Health Minister launched the National Preventative Health Strategy and released a paper proposing plain packaging laws. In October 2009 and January 2010, Philip Morris and its advisers warned the Government that such laws might be unconstitutional, and would be ‘tantamount to expropriation’.110 In April 2010, Australia’s Prime Minister and Health Minister jointly announced proposed tobacco control measures, including plain packaging legislation very similar to what was finally enacted. In June 2010, Prime Minister Rudd was replaced by Prime Minister Gillard, and in July 2010 the Government published a timetable for the implementation of plain packaging laws. Also in July 2010, a Federal election was called and Parliament was dissolved. The election was held on 21 August 2010, and on 14 September 2010 Prime Minister Gillard formed a minority government. In October and November 2010, the Health Minister confirmed that the Government intended to introduce plain packaging legislation. The legislation was introduced into the Federal Parliament in April 2011 and was passed by both Houses of Parliament on 21 November 2011. The Claimant filed its Notice of Arbitration the same day. The Respondent objected to the Tribunal’s jurisdiction on a number of grounds. The Tribunal held that, for the purposes of jurisdiction ratione temporis, the ‘critical date’ is the date on which the State adopts the relevant measure; in this case, when the plain packaging legislation was enacted.111 Because the restructuring had taken place before that date, the requirements for jurisdiction ratione temporis were met. The Tribunal then reviewed in some detail the arbitral practice concerning allegations of abuse of process in the context of corporate restructurings.112 It was ‘clear’ to the Tribunal that the ‘threshold for finding an abusive initiation of an investment claim is high’, but does not require a finding of bad faith.113 The Tribunal noted that restructuring to obtain treaty protection is not abusive in and of itself; but may be where the restructuring occurs at a time when a specific dispute exists or is foreseeable.114 It noted that different Tribunals have articulated the test differently, but that they were all ‘broadly analogous’: In the Tribunal’s view, foreseeability rests between the two extremes posited by the tribunal in Pac Rim v. El Salvador—‘a very high probability and not merely a possible controversy’. On this basis, the initiation of a treaty-based investor-State arbitration constitutes an abuse of rights (or an abuse of process, the rights abused being procedural in nature) when an investor has changed its corporate structure to gain the protection of an investment treaty at a point in time when a specific dispute was foreseeable. The Tribunal is of the opinion that a dispute is foreseeable when there is a reasonable prospect, as stated by the Tidewater tribunal, that a measure which may give rise to a treaty claim will materialise.115 On the facts of the case, the Tribunal found that from at least the April 2010 joint announcement by the Prime Minister and Health Minister, ‘there was no uncertainty about the Government’s intention to introduce plain packaging’ and, consequently, ‘there was at least a reasonable prospect that legislation equivalent to the Plain Packaging Measures would eventually be enacted, which would trigger a dispute’.116 The Tribunal dismissed the substantial delay between the announcement and the final passage of the legislation as ‘not a decisive factor in determining whether the legislation is foreseeable’.117 The Tribunal then considered the reasons for the restructuring, noting that ‘it would not normally be an abuse of right to bring a BIT claim in the wake of a corporate restructuring, if the restructuring was justified independently of the possibility of bringing such a claim’.118 It was unpersuaded by the Claimant’s purported reasons for the re-organization (including alleged tax benefits, aligning ownership with management, and optimising cash flow), at least in part because the people most closely involved with the decision to implement the restructuring did not give evidence.119 It concluded that the ‘main and determinative, if not sole’ reason for the restructuring was to bring a claim under the Hong Kong–Australia BIT.120 The Tribunal held that the arbitration amounted to an ‘abuse of rights’, the claims raised were inadmissible and accordingly the Tribunal was precluded from exercising jurisdiction.121 Most recently, in Transglobal Green Energy, LLC v Panama122 jurisdiction was rejected on the basis of a transaction which does not appear to have been an inter-group or inter-family restructuring. It concerned a concession agreement to design, build and operate a hydroelectric plant in Panama. In 2005, the concession was granted to a local company (referred to as La Mina) owned by a Panamanian national, a Mr Lizac. In December 2006, the local authority (referred to as ASEP), terminated the concession agreement, on the basis that construction had not commenced within twelve months as required. In 2008, ASEP granted a new concession agreement for the same project to a different, unrelated, company. In the meantime, La Mina had pursued tortuous litigation in Panama, which culminated on 11 November 2010 with a judgment of the Supreme Court, ruling that the termination of the concession agreement with La Mina was invalid, and the agreement remained on foot. A month later, Mr Lizac signed a Memorandum of Understanding with Transglobal Green Energy, LLC (the first Claimant, Transglobal), an apparently unrelated company incorporated in Texas. By the MOU, Mr Lizac agreed to provide documentation on the project, and Transglobal agreed to perform due diligence.123 In September 2011, Transglobal and Mr Lizac signed a further agreement, the purposes of which were to collaborate to seek mechanisms by which to bring about compliance with the Supreme Court’s judgment (which, to that point, ASEP had failed to effect). They agreed to incorporate a local company, of which Transglobal would own 70 percent, in return for its investment of $50,000. However, the agreement further provided that Mr Lizac would exercise effective control of the local subsidiary and would enjoy 80 percent of its financial return. In 2012, the Cabinet authorised the rescission of the concession agreement and the project was handed back to the alternative concessionaire. The Tribunal held that, in determining whether ‘an abuse of rights has occurred’, all of the circumstances of the case must be considered, including: the timing of the purported investment, the timing of the claim, the substance of the transaction, the true nature of the operation, and the degree of foreseeability of the governmental action at the time of restructuring.124 The Tribunal reviewed the timing and terms of the second agreement between Transglobal and Mr Lizac, and noted that the Claimants had, on a number of occasions, requested that the arbitration be suspended when it appeared that the local courts would enforce the Supreme Court judgment. It held that ‘Mr. Lizac inserted TGGE and TGGE Panama into the process of pursuing the execution of the Third Chamber Judgment at a time when it was clear that there was a problem with its implementation’.125 The arbitration amounted to an abuse of the ‘investment treaty system’ by the Claimants, ‘by attempting to create artificial international jurisdiction over a pre-existing domestic dispute’.126 In the fifteen years since the Autopista Award, international arbitral jurisprudence on abuse of process has developed rapidly, but inconsistently. In the following sections, we draw together the threads of the various decisions to identify and elucidate the core elements of the abuse of process test, and provide suggestions as to how the test can be refined. III. THE TEST FOR WHEN A CORPORATE RESTRUCTURING RENDERS A CLAIM AN ABUSE OF PROCESS A. Abuse of Process is a Broad and Indefinable Doctrine The notion of an abuse of process, or abuse of rights, is a broad one. It is not susceptible of precise definition, and is likely to adapt to unforeseen circumstances in the future as tribunals flex their powers. It is certainly broader than the specific topic of this article. For example, although the Cementownia Award contains some discussion as to when a genuine corporate restructuring may amount to an abuse of process, its ultimate finding had a different basis. Like Europe Cement, it held that the investment had not in fact taken place: the Claimant had attempted a fraud on the Tribunal by relying on fabricated documents, which itself rendered the proceedings abusive. In Ampal-American Israel Corp v Egypt, the Tribunal held that it would be an abuse of process for the same party in interest to pursue claims, on the merits, in respect of the same investment before two different Tribunals.127 A comprehensive survey and analysis of the doctrine of abuse of process in investment arbitration is beyond the scope of this article.128 Our focus is specifically on the operation of the doctrine in the context of investment restructurings. Consequently, we will not consider issues such as whether tribunals have or should exercise the power to dismiss claims over which they otherwise have jurisdiction;129 or whether such an objection relates to jurisdiction or admissibility.130 B. The Underlying Rationale It has been said that the underlying rationale of a tribunal’s power to dismiss arbitration as an abuse of process is as follows: If it were accepted that the Tribunal has jurisdiction to decide Phoenix’s claim, then any pre-existing national dispute could be brought to an ICSID tribunal by a transfer of the national economic interests to a foreign company in an attempt to seek protections under a BIT. Such transfer from the domestic arena to the international scene would ipso facto constitute a ‘protected investment’—and the jurisdiction of BIT and ICSID tribunals would be virtually unlimited. It is the duty of the Tribunal not to protect such an abusive manipulation of the system of international investment protection under the ICSID Convention and the BITs. It is indeed the Tribunal’s view that to accept jurisdiction in this case would go against the basic objectives underlying the ICSID Convention as well as those of bilateral investment treaties. The Tribunal has to ensure that the ICSID mechanism does not protect investments that it was not designed for to protect, because they are in essence domestic investments disguised as international investments for the sole purpose of access to this mechanism. 131 Other tribunals have expressed similar sentiments.132 C. Two Necessary Elements Tribunals have held that there are two elements of this type of abuse of process: that the restructuring was (i) undertaken at a time when a specific dispute existed or was foreseeable;133 and (ii) motivated by a desire to obtain treaty protection for that dispute.134 Subject to the proposal below, it would ordinarily be for the respondent to prove both elements.135 The two elements are necessarily interdependent: the cases are clear that, without more, a restructuring intended to secure treaty protection is unobjectionable.136 A pre-existing or foreseeable dispute must be established. The cases are less clear as to whether the second element is necessary. In Philip Morris, the Respondent accepted that the two elements were ‘key factors’ to be taken into consideration,137 but appeared to contend that the first element alone was sufficient: ‘[t]he abuse … resides in the manipulation of corporate nationality at a time when the dispute is in existence or is foreseeable to a sufficient degree’.138 The better analysis, however, is that the first element alone is not sufficient to establish an abuse of rights. In each of the cases discussed above in which an abuse was found, the Tribunal made a specific determination as to the intention or motivation behind the restructuring.139 That makes sense. Although a finding of ‘bad faith’ or ‘fraud’ is not necessary to establish an abuse of process,140 some quality of ‘abusiveness’ is required. That is in keeping with the stated underlying rationale—to reserve the treaty arbitration mechanism for genuine claims of the sort envisioned by the Contracting States—and the broader doctrine of abuse of rights or abuse of process. If the claimant did not restructure its investment for the proscribed purpose, then there is nothing abusive about its conduct; the dispute remains a genuine one. A mere coincidence of timing—a restructuring which happens to take place when a treaty claim is objectively foreseeable—should not be enough to deprive a claimant of its right to bring an otherwise valid claim, however unlikely such a coincidence may be in practice. For that reason, it is suggested that the Philip Morris Tribunal was not quite right to describe it as an ‘objective test’.141 Likewise, the Tidewater Tribunal’s reference to the ‘objective purpose’142 of the restructuring is apt to mislead. A better analysis is that the test is objective as to the first element, and subjective as to the second. That is, the tribunal must be satisfied that: (i) the restructuring occurred at a time when, objectively, a specific dispute had crystallised or was foreseeable; and (ii) the claimant, subjectively, intended to secure treaty protection for that dispute by means of its restructuring.143 Breaking down the test in that way better reflects the arbitral jurisprudence—in many instances, the claimant itself admitted that it was motivated by the prospect of obtaining treaty protection144—and strikes a better balance between the stated rationale, and allowing valid claims to proceed. If the test were purely objective, then there is a prospect of the extraordinary power to dismiss valid claims as an abuse being wielded against claimants guilty of nothing more than unfortunate timing.145 That would be a step too far. The subjective element of the test has its own difficulties. Some claimants may manage to establish some form of ‘plausible deniability’ as to any improper motivation behind a restructuring. Findings as to subjective intention may still, of course, be made by inference in view of all of the circumstances of the case, including the factors already identified by tribunals. Such factors include the proximity in time between the restructuring, the measures in question, and the threats of arbitration.146 There is some artificiality to this approach. The innocent claimant who benefits from a coincidence of timing is perhaps highly unlikely in practice. However, it is better to trust in the ability of tribunals to draw inferences on the facts, and get at the true motivation behind a restructuring, rather than making the test entirely objective or abandoning the intention element altogether. As discussed above, a subjective proscribed intention provides the necessary quality of abusiveness; and, as discussed below, approaching the second element subjectively allows for a conceptually coherent approach to resolving a number of outstanding questions. However, there may be another way to address these difficulties—and particularly to address the risk that well-advised claimants may be able to make an otherwise abusive restructuring appear entirely innocent. By this approach, tribunals would first determine whether the restructuring occurred147 at a time when a dispute was on foot or reasonably foreseeable. Secondly, if that element is established, a rebuttable presumption would arise that the restructuring was intended to secure treaty protection for that dispute. The onus would then be on the claimant to displace that presumption.148 It is, of course, the claimant who is best able to adduce evidence of its intention; whereas a respondent is unlikely to be in a position to do so. Further, the unlikelihood of a claimant obtaining treaty protection in these circumstances by dumb luck means that the risk of the presumption doing an injustice is low. Indeed, a tribunal is likely to be highly sceptical of a claimant’s plea that, although a dispute was objectively foreseeable at the time it restructured its investment, it did not in fact foresee that dispute. Reversing the burden in this manner may therefore not have significant practice effect: where the first element is proven, a tribunal may readily infer the requisite intention even where the respondent bears the burden of proving it. Having established the core elements of the test applied by Tribunals to date, the following sections discuss aspects of both limbs which remain obscure, and suggest ways of clarifying those ambiguities. IV. ISSUES WHICH REMAIN TO BE CLARIFIED A. The First Element: Foreseeability It is now well-established that a restructuring designed to enable a treaty claim to be brought on the basis of an existing dispute will amount to an abuse of process.149 However, that aspect of the doctrine overlaps completely with the requirements of jurisdiction ratione temporis: if the claimant had not made its investment before the dispute crystallised, its claim will be dismissed in any event.150 The more interesting, and powerful, aspect of the doctrine is that which allows a claim to be dismissed even where the requirements of jurisdiction ratione temporis are met. However, large questions remain as to the boundaries of the foreseeability requirement. Some of these open questions caused the Claimant in Philip Morris to argue that the ‘entire concept of foreseeability as a standard of abuse is ultimately unworkable’.151 There are certainly difficulties with the concept.152 After all, a restructuring intended to procure treaty protection, without more, is unobjectionable. However, a claimant presumably undertakes such a restructuring because it foresees at least some risk that it will need to call upon that protection in the future; that a dispute may arise. The boundary is therefore an exceedingly grey one. It may be that it would be better to do away with the foreseeability element altogether, and only impugn restructurings which took place after a dispute has crystallised. However, in light of the fact that some Tribunals have included this element in their analysis, and that it appears unlikely to be abandoned altogether, the remainder of this section proposes ways to make the boundaries of it clearer. (i) What has to be foreseeable? ‘[I]t is perfectly legitimate … for an investor to seek to protect itself from the general risk of future disputes’:153 therefore, a key question is what specific risks must be foreseeable to satisfy the first element of the test. It is unclear precisely what must be foreseeable. At a high level, it is clear that the subject matter of the subsequent arbitration must have been foreseeable. However, some cases conclude that the dispute must be foreseeable; others, the measures underlying the dispute. The latter should be preferred. However, the weight of the authorities suggests that it is the dispute which must be (existing or) foreseeable.154 That begs the question: What constitutes a ‘dispute’ for these purposes? The definition of ‘dispute’ is relatively settled in other areas of public international law. In the Mavrommatis Palestine Concessions case, the Permanent Court of International Justice held that a ‘dispute is a disagreement on a point of law or fact, a conflict of legal views or of interests between two persons’.155 In Teinver v Argentina, the Tribunal further explained that ‘for a dispute to exist, it must have crystallized into an actual disagreement’.156 In Maffezini v Spain, the Tribunal teased out the difference between the underlying events and the dispute, and described the ‘natural sequence of events’ between them, including the ‘formulation of legal claims’ and the communication of those claims between the parties.157 If it is this conception of ‘dispute’ which must be either pre-existing or foreseeable, then real problems may arise. The danger is seen most acutely in Pac Rim. In that case, the Tribunal appeared to conclude that it was the pleaded case that must have been foreseeable at the time of the restructuring. In the Claimant’s early pleadings, it had ‘focus[ed] primarily on events’ prior to its restructuring, being the failure of the El Salvador authorities to issue mining licences.158 The Tribunal would, apparently, have concluded that the restructuring was an abuse of process on the basis of that version of the claim.159 However, the Claimant subsequently changed tack, emphasising the relevance of the President’s 2008 speech to characterising prior events. The speech post-dated the restructuring but had occurred by the time the Claimant filed its original pleadings. The Tribunal concluded that, on the basis of the ‘claims as finally pleaded’,160 the restructuring was not an abuse of process. This apparent focus on the precise way in which a claimant formulates its legal claims may allow a claimant to craft its pleadings in a way that avoids the abuse of process doctrine, just as the Claimant in Pac Rim was able to do. (The Pac Rim Tribunal itself warned of such a possibility.161) That would arguably not serve the stated underlying purpose of protecting the investment treaty arbitration system from manipulation; it would simply expose it to a different kind of manipulation. A second difficulty with this approach is that it opens the door for arguments as to when a claimant formed the intention to sue, or took an outward position which crystallised the disagreement. For example, in Philip Morris, the Respondent identified two outward acts of the Philip Morris group which were ‘critical to the formation of the dispute’.162 Such an argument allows a claimant to dispute when it formed its intention to sue (as the Claimant in Philip Morris did163). These factors are also open to manipulation. For instance, a claimant could remain entirely silent until after its restructuring was complete, thereby preventing a dispute or disagreement from arising or appearing foreseeable until the right moment.164 A more objective approach is to consider the foreseeability of the measures giving rise to the dispute.165 That appears to have been the approach adopted by the Tidewater Tribunal: despite formulating the enquiry in terms of the ‘dispute’, it asked whether there was ‘a reasonable prospect … such a nationalization [ie, the measures in question] was imminent’.166 Likewise, the Gremcitel Tribunal set out to determine whether the ‘dispute’ was foreseeable, but did so by concluding that the Claimants could foresee the 2007 Resolution which underpinned it.167 The Philip Morris Tribunal held that ‘a dispute is foreseeable when there is a reasonable prospect … that a measure which may give rise to a treaty claim will materialize’.168 And in Transglobal, the Tribunal held that a relevant circumstance was the ‘degree of foreseeability of the governmental action’.169 Applying this test, Pac Rim may have been decided differently. The Tribunal characterised El Salvador’s measures in that case as a ‘continuing act’, which began long before the restructuring.170 Accordingly, the wrongful measures were not only foreseeable at the relevant time171 they had begun—arguably making the claim a classic example of an abuse of process. To some extent, this may in practice be a distinction without a difference: if a claimant takes steps to obtain treaty protection at a time when it is foreseeable that a State may take measures in breach of its investment treaty obligations, then it may be reasonable to infer that the claimant took such steps because it foresaw that it would initiate a dispute with respect to those measures. However, the analysis is clearer if the focus is squarely on the government measures, and not the claimant’s attitude towards them. (ii) How specific? Another difficult issue is just how specific the foreseeable events need to be. Some cases appear to require a high degree of specificity; in others, it appeared to be enough that unlawful measures of some kind or other were foreseeable. At one end of the spectrum lie the cases against Venezuela. In those cases, it might be thought that it was clearly foreseeable at the time of the relevant restructurings that Venezuela’s regulation of its oil resources was on a path inexorably leading to breaches of its treaty obligations.172 There was a ‘ticking clock’, in the sense of the impending deadline for migration to the new style of agreement; the level of extraction tax was quickly being ratcheted up; and the Claimant in Mobil Corporation specifically wrote to the Government in respect of potential expropriation or nationalization measures. The restructurings in Mobil Corporation, Tidewater and ConocoPhillips each occurred after the clock had started to run; but they were held not to be abuses of process. The Tidewater Tribunal considered that the specific ‘acts of expropriation that gave rise to the present dispute’ were not foreseeable (at least ‘imminently’); the ConocoPhillips Tribunal held that ‘no claim … was in prospect’; and the Mobil Corporation Tribunal did not consider foreseeability at all (which may have been, in light of other Awards, an error). A high degree of specificity and timeliness appears to have been required. Transglobal sits towards the middle of the spectrum. In that case, the Tribunal held that the restructuring occurred at a time ‘when it was clear that there was a problem’ in implementing the Supreme Court’s judgment—which appears to have been enough to amount to an abuse of process.173 (There was no suggestion that the Cabinet’s formal authorization of the rescission of the concession agreement was foreseeable at the relevant time.) This appears to set a much lower threshold: it was enough that some ‘problem[s]’ were foreseeable. The Philip Morris Tribunal might be seen to have staked out a position at the far end of the spectrum: a dispute is foreseeable if there is a prospect that ‘a measure which may give rise to a treaty claim will materialise’.174 Arguably, this test simply requires that any unlawful measure be foreseeable: a measure, rather than the measure which eventuates. Read in context, however, that is not what the Tribunal intended: the measure must be referable to the ‘specific dispute’ which forms the basis of the subsequent claim.175 The better test (albeit an imperfect one) lies somewhere in the middle of that spectrum. It should be sufficient that measures of a kind which eventually form the basis of the claim are foreseeable, or reasonably in prospect—though not necessarily their precise form or timing. It need not be foreseeable that the measures are ‘imminent’ (per Tidewater), as that would reward a claimant for restructuring earlier than another, even though the eventual measures were just as foreseeable. There does not appear to be any good justification for such a distinction. A restructuring which occurs when it is foreseeable that an expropriation is three years away may be just as abusive as if the expropriation were likely to take place in the next few months.176 This test is necessarily vague and flexible and its application will be fact-dependent. Applying it, the Venezuelan cases may have been determined differently. (iii) How foreseeable? The Pac Rim Tribunal appeared to require a high degree of foreseeability: the specific dispute must be a ‘very high probability and not merely … a possible controversy’.177 Subsequent tribunals have specifically cited that test, while at the same time retreating from it. The Philip Morris Tribunal did so most explicitly, reasoning that the foreseeability threshold lay ‘between [those] two extremes’—while that description provides little guidance, it makes clear that a ‘very high probability’ is not required.178 Reasonable foreseeability is enough. (iv) When does it have to be foreseeable? Recent cases have drawn out an important, but overlooked, question: At what point in time is foreseeability to be assessed? In particular, is it when the restructuring is set in motion, or when it is consummated?179 The question may be important, as a complex corporate restructuring may take many months to document and complete, by which stage the situation in the host State may have changed considerably. By way of illustration, in Transglobal, the Memorandum of Understanding was signed very soon after the Supreme Court judgment was rendered, at which stage it may not have been foreseeable that the executive would refuse to implement it. The second agreement, however, was signed almost a year later, at which point the measures were foreseeable. If the Tribunal had assessed the position at the first date and not the second, its decision may well have been different. Most cases assess foreseeability at the time the restructuring completed,180 without any substantive discussion as to which is the critical date. However, it is respectfully suggested that foreseeability should be assessed at the time the restructuring is set in motion, not when it is consummated. That is when the decision to restructure is made—it follows that that is the time at which the claimant’s motivation behind the restructuring should be assessed. It is difficult to justify, conceptually, a holding that a restructuring was motivated to gain protection for a foreseeable dispute if that dispute was not foreseeable at the time the decision to restructure was made. This suggestion raises evidential difficulties: it will generally be easier to determine the date on which a restructuring was completed, than the date it was first decided upon. This necessitates a flexible approach to the critical date. One possible solution is to assume that the dates coincide, unless the claimant establishes to the contrary. B. The Second Element: Intention (i) Bad faith? The Claimant in Philip Morris argued that a finding of bad faith was ‘critical’ to dismissing a claim as abuse of process.181 It appeared to argue that, in the absence of bad faith, a restructuring undertaken at a time when a dispute was reasonably foreseeable would not be an abuse of process. It is true that a number of tribunals have referred to concepts of good and bad faith in their analysis.182 However, the Philip Morris Tribunal was right to dismiss it as a necessary element.183 No previous tribunal has considered a finding of bad faith to be essential to the abuse of process doctrine. In Ampal-American, the Tribunal ‘wishe[d] to make it very clear that this resulting abuse of process is in no way tainted by bad faith on the part of the Claimants’.184 To some extent, this is merely a matter of semantics. Some quality of ‘abusiveness’ must be shown. But that is satisfied by the two elements discussed above whether that is labelled ‘bad faith’ or not. (ii) A ‘dominant purpose’ test? The cases are unclear as to whether a restructuring can be saved from being an abuse of process if it was additionally motivated by other, legitimate, reasons. In Phoenix Action, the Tribunal emphasised that the investment treaty arbitration system would not protect transactions ‘undertaken and performed with the sole purpose of taking advantage of the rights in such instruments’.185 The Cementownia Tribunal adopted that reasoning.186 In Mobil Corporation, the Respondent submitted that the ‘sole purpose’ of the restructuring was to gain treaty protection;187 the Tribunal found that that was indeed the ‘main, if not the sole purpose’.188 Subsequent tribunals picked up on the Mobil Corporation Tribunal’s nuancing of the test. In Pac Rim, the Tribunal found that ‘one of the principal purposes’ of the restructuring was to obtain access to CAFTA remedies.189 In Tidewater, the Claimant argued that its restructuring had two purposes: tax advantages and treaty protection. The Tribunal reasoned that: it suffices for the Tribunal to accept for present purposes that one of the two reasons for the reorganization was a desire to protect Tidewater from the risk of expropriation by incorporation of an investment vehicle in a state having investment treaty arrangements with Venezuela.190 In ST-AD, the Tribunal found that the ‘essential purpose’ of the restructuring was creating international jurisdiction;191 although that is better viewed as a finding on the facts, rather than a ruling that an abuse of process will only be found where the only or essential purpose of the restructuring is the proscribed purpose. Likewise, the Claimant’s admission in ConocoPhillips that the ‘only business purpose of the restructuring’ was to access ICSID arbitration,192 and the Gremcitel Tribunal’s finding that the ‘only purpose’ of the transfer was to bring a treaty arbitration.193 In Philip Morris, the Tribunal echoed Mobil Corporation in finding that the ‘main and determinative, if not sole’ reason for the restructuring was to obtain BIT protection.194 Interestingly, it went further and said: it would not normally be an abuse of right to bring a BIT claim in the wake of a corporate restructuring, if the restructuring was justified independently of the possibility of bringing such a claim.195 This seems to support the notion that a restructuring may not render a claim an abuse of process, even if it was brought about partly to obtain treaty protection for an existing or foreseeable claim, if it also had an ‘independent’ justification. That would contradict the reasoning of the Pac Rim and Tidewater Tribunals, which suggested it would be sufficient if the proscribed purpose was only one of a number of motivating reasons for restructuring. In no case was this issue determinative, and so it remains open for future tribunals to reach their own view. However, the tension in the authorities discussed above may be resolved by introducing a dominant purpose test. That is, if the proscribed purpose is the dominant, ‘main’ (per Mobil Corporation) or ‘principal’ (per Pac Rim) purpose of the restructuring, then it will be an abuse. However, if obtaining treaty protection is merely ‘an ancillary consequence’196 of a restructuring with an unrelated dominant purpose, or a subsidiary motivation, then it will not be abusive. Such a test would strike a fairer balance between the stated rationale of protecting the integrity of the investment arbitration system, and the interests of claimants who have not set out to abuse it.197 On the other hand, the Philip Morris Tribunal’s apparent suggestion that any other ‘independent justification’ for the restructuring would save it from being an abuse of process would arguably tip the balance too far in favour of claimants.198 If the burden-shifting suggestion made above is accepted, the onus would be on the claimant to establish that the restructuring was not done for the dominant purpose of obtaining treaty protection for the dispute. In any case, a claimant should be prepared to submit evidence in respect of the purpose of the restructuring, ideally in the form of contemporaneous corporate documents and witness statements from the true decision-makers. (The Philip Morris Tribunal made particular mention of the absence of such evidence in finding that the alternative reasons for the restructuring proffered by the Claimant were unpersuasive.199) C. Other Factors? Finally, some of the cases appear to suggest that the two stage test described above is merely one factor to consider in determining whether a restructuring renders arbitration an abuse of process. In other words, they leave open the possibility that, even if a restructuring meets the test, other factors may save the claim from being an abuse of process. The most obvious such factor is the degree to which the claimant increased its investment after the restructuring. The ConocoPhillips Tribunal considered that the Claimant’s $400+ million post-restructuring investment was a ‘very weighty’ factor ‘telling very strongly against any finding of treaty abuse’.200 The Mobil Corporation Tribunal noted that one of the Claimants re-committed, after the restructuring, to invest more than $1 billion.201 In neither case was the restructuring an abuse of process even though, as discussed above, the dispute in question was arguably reasonably foreseeable at the relevant time. There are at least two ways to conceptualise the relevance of post-restructuring investment. Some tribunals have analysed it in terms of the second element of the test—that is, as evidence supporting a conclusion that the restructuring was not motivated to obtain protection for a foreseeable dispute.202 Alternatively, post-restructuring investment may be considered as a relevant factor that sits entirely outside the two stage test.203 At first blush, this argument is problematic. If the two stage test is satisfied, then arguably no mitigating circumstances should permit a claimant nevertheless to bring a claim; that hard-line position would certainly be easier to police. However, it would not best serve one of the objects and purposes of the investment arbitration mechanism—namely, to attract investment—at least in the case of foreseeable, rather than existing, disputes. A foreseeable unlawful measure is not a certainty: it is a risk. All investments have risks. The investment arbitration mechanism is, in essence, a standing offer by States to provide a remedy if the risk of an unlawful measure crystallises, in order to thereby encourage investment. If a claimant foresees such a measure and is willing to take that risk and continue investing on the condition that it have access to the arbitration mechanism—rather than, say, pulling out of the country altogether—then that purpose is served, not subverted. If it is accepted that post-restructuring investment is an independent consideration, then it will be a matter of fact and judgment as to how much subsequent investment is sufficient. For instance, the $50,000 sum paid by the Claimant in Transglobal was clearly considered not to be sufficient to prevent a finding of abuse of process. Accordingly, the better view is that the two step test is just one factor in the abuse of process analysis, albeit a very weighty one. The relevance of other factors, if any, should be left for future cases in which those factors are raised. V. CONCLUSION There is no doubt that tribunals have the power to dismiss a claim on the basis of an abusive restructuring. In this article, we have explored the developing arbitral jurisprudence in respect of that extraordinary power. We have sought to identify and resolve inconsistencies in the decisions, and bring clarity to a difficult area which is becoming increasingly important to investors, their advisers, and arbitration practitioners. In short, the test may be restated as follows. Subject to the caveat set out in Section IV.C above, a restructuring may render a subsequent claim an abuse of process where the restructuring was: i) set in motion at a time when a specific dispute existed or when measures of a kind which form the basis of the eventual dispute were reasonably foreseeable; and ii) undertaken for the dominant purpose of obtaining treaty protection for that dispute. It is hoped that this paper has assisted to develop a rigorous framework in which to analyse these issues as they come up, whether that be when a restructuring is being considered, or after a claim has been made. Footnotes 3 See eg Christoph Schreuer, ‘Nationality Planning’ in Arthur Rovine (ed), Contemporary Issues in International Arbitration and Mediation: The Fordham Papers (Brill | Nijhoff 2012). 4 Two preliminary comments on terminology need to be made. As will be seen later in this article, rightly or wrongly, parties and tribunals have variously used the phrases ‘abuse of rights’ and ‘abuse of process’ to refer to the doctrine with which we are concerned (in some instances interchangeably). This article will use the former. De Brabandere has argued that ‘abuse of process’ is a particular feature of the broader principle of ‘abuse of rights’, denoting cases where the right in question is procedural in nature: Eric De Brabandere ‘“Good Faith”, “Abuse of Process” and the Initiation of Investment Treaty Claims’ (2012) 3(3) J Intl Disp Settlement 609–36. The difficulties in drawing that distinction—and the relative lack of utility in doing so—may be a good reason to prefer the more general term, ‘abuse of rights’: see Tania Voon, Andrew Mitchell and James Munro, ‘Legal Responses to Corporate Maneuvering in International Investment Arbitration’ (2014) 5 J Intl Disp Settlement 41, 61. In Philip Morris Asia Limited v The Commonwealth of Australia, PCA Case No 2012-12, Award on Jurisdiction and Admissibility (17 December 2015) (Philip Morris), the Tribunal considered the terms to be essentially interchangeable for the purposes of the topic of this article: ‘abuse of rights (or an abuse of process, the rights abused being procedural in nature)’ (para 554). By contrast, John Gaffney has argued that an aggrieved investor’s right of recourse under an investment treaty should not be equated with States’ substantive rights. Gaffney argues that, because the international law doctrine of ‘abuse of rights’ is traditionally associated with the abuse by States of their substantive sovereign rights, it does not underpin the power of tribunals to dismiss abusive claims by investors. Instead, he argues, that power is derived from the inherent power of a tribunal to regulate its own procedure: John Gaffney, ‘“Abuse of Process” in Investment Treaty Arbitration’ (2010) 11(4) J World Inv & Trade 515, 523–24. Without entering into that debate, this article will adopt the ‘abuse of process’ terminology. In addition, the ‘right’ or ‘process’ being ‘abused’ for the purposes of the topic of this article is the right to bring a claim in arbitration. A restructuring may render a claim abusive; but the restructuring itself does not constitute the abuse of rights (cf Renée Rose Levy and Gremcitel SA v Republic of Peru, ICSID Case No ARB/11/17, Award (9 January 2015) para 195, concluding that ‘the corporate restructuring … constitutes an abuse of process’). 5 We note in this regard the contribution to that debate made by Stephen Jagusch and others, ‘Restructuring Investments to Achieve Investment Treaty Protection’ in Meg Kinnear and others (eds), Building International Investment Law: The First 50 Years of ICSID (Kluwer Law International 2015), 175–76; 189–90. In particular, those authors raise the concern that a foreseeability test is difficult for investors to apply in ‘real time’, and that further clarification would be welcome from future tribunals in this regard. 6 For an interesting discussion of the history of the abuse of rights doctrine in domestic and international law, see Michael Byers, ‘Abuse of Rights: An Old Principle, A New Age’ (2002) 47 McGill L J 389, 389–404. Byers observes that the abuse of rights principle appears in the early case law of the Permanent Court of International Justice and the International Court of Justice. For example, in the Case concerning certain German interests in Polish Upper Silesia (The Merits) (1926) PCIJ (Ser A) no 7, 30, it was acknowledged that a misuse of Germany’s right to dispose of property could amount to a breach of the Treaty of Versailles. In the Fisheries Case (United Kingdom v Norway) [1951] ICJ Rep 116, 150–51, Alvarez J observed that states demarcating their territorial seas must do so in a way that does not constitute an abuse of rights. In the Barcelona Traction Case [1970] ICJ Rep (vol 1) 3, 17, Belgium argued that Spain had abused its powers to bring about the transfer of control of certain assets (while Spain in turn argued that the claim for reparation was itself ‘an abuse of the right of diplomatic protection’: 15). In the Nuclear Tests Case (Australia v France) [1974] ICJ Rep 253, 362, Australia argued that if France was determined to have a right to conduct atmospheric nuclear tests, its exercise of that right would have constituted an abuse of rights. See also GDS Taylor, ‘The Content of the Rule Against Abuse of Rights in International Law’ (1972–73) 46 BYBIL 323, 323–52; Martins Paparinskis, ‘Inherent Powers of ICSID Tribunals: Broad and Rightly So’ in Ian A Laird and Todd J Weiler (eds), Investment Treaty Arbitration and International Law, vol 5 (JurisNet 2012). 7 Autopista Concesionada de Venezuela, CA v Bolivarian Republic of Venezuela, ICSID Case No ARB/00/5, Decision on Jurisdiction (27 September 2001) (Autopista). 8 Autopista (n 7) heading before para 47. 9 Autopista (n 7) para 123. 10 Autopista (n 7) paras 17, 123–24. 11 Autopista (n 7) para 126. 12 Aguas del Tunari SA v Republic of Bolivia, ICSID Case No ARB/02/3, Decision on Respondent’s Objections to Jurisdiction (21 October 2005) (Aguas del Tunari). 13 Article 9(6) of the Agreement on Encouragement and Reciprocal Protection of Investments between the Kingdom of the Netherlands and the Republic of Bolivia (signed 10 March 1992, entered into force 1 November 1994) extracted at Aguas del Tunari (n 12) para 79. 14 Aguas del Tunari (n 12) paras 328–33. 15 Aguas del Tunari (n 12) para 330(d). 16 Aguas del Tunari (n 12) para 331. 17 Phoenix Action Ltd v Czech Republic, ICSID Case No ARB/06/5, Award (15 April 2009) (Phoenix Action). 18 It was accepted that the Claimant was incorporated in Israel, and that the Agreement between the Government of the Czech Republic and the Government of the State of Israel for the Reciprocal Promotion and Protection of Investments (signed 23 September 1997, entered into force 16 March 1999) contained the Respondent’s consent to ICSID arbitration in such circumstances: ibid, paras 65–66. 19 Phoenix Action (n 17) para 67. 20 Phoenix Action (n 17) para 114. 21 Phoenix Action (n 17) para 106. The Tribunal relied primarily on two cases concerning the ‘international principle of good faith as applied to the international arbitration mechanism of ICSID’ (para 113): Inceysa Vallisoletana SL v Republic of El Salvador, ICSID Case No ARB/03/26, Award (2 August 2006) (Inceysa), and Plama Consortium Limited v Republic of Bulgaria, ICSID Case No ARB/03/24, Award (27 August 2008) (Plama). Inceysa did not involve a corporate restructuring; rather, the Claimant in that case had relied on false representations to secure the government contract in issue. The Tribunal held that El Salvador’s consent to ICSID’s jurisdiction ‘presuppos[ed] good faith behavior on the part of future investors’ (at para 238), and therefore could not apply to the case before it. In Plama, the Claimant made misrepresentations as to its ultimate ownership in the course of obtaining government approval for its investment; had the truth been known, approval would not have been granted. The Tribunal held that the investment had been procured in a manner ‘contrary to the principle of good faith’ and that, therefore, the substantive provisions of the Energy Charter Treaty did not apply to it: paras 144–46. 22 Phoenix Action (n 17) para 135. 23 Phoenix Action (n 17) paras 136–37. 24 Phoenix Action (n 17) para 138. 25 Phoenix Action (n 17) paras 139–40. 26 Phoenix Action (n 17) para 142. 27 Phoenix Action (n 17) para 144. 28 Phoenix Action (n 17) paras 144–45. 29 Europe Cement Investment and Trade SA v Republic of Turkey, ICSID Case No ARB(AF)/07/2, Award (13 August 2009) (Europe Cement). 30 Cementownia ‘Nowa Huta’ SA v Republic of Turkey, ICSID Case No ARB(AF)/06/2, Award (17 September 2009) (Cementownia). 31 Cementownia (n 30) para 16; Europe Cement (n 29) para 84. 32 Cementownia (n 30) para 149; Europe Cement (n 29) para 145. 33 Cementownia (n 30) para 156. 34 Europe Cement (n 29) para 163. 35 Cementownia (n 30) para 159; Europe Cement (n 29) paras 167, 175. 36 Cementownia (n 30) para 154. 37 Cementownia (n 30) para 156. 38 See eg Charbel A Moarbes, ‘Introductory Note To The International Centre For Settlement Of Investment Disputes: Malaysian Historical Salvors Sbn., Bhd. V. Government Of Malaysia & Phoenix Action Ltd. v. Czech Republic’ (2009) 48(5) ILM 1081, 1085. 39 Mobil Corporation and others v Bolivarian Republic of Venezuela (now known as Venezuela Holdings BV and others v Bolivarian Republic of Venezuela), ICSID Case No ARB/07/27, Decision on Jurisdiction (10 June 2010) (Mobil Corporation). 40 Mobil Corporation (n 39) para 201. 41 Mobil Corporation (n 39) para 204. 42 Mobil Corporation (n 39) para 204. 43 Phoenix Action (n 17) para 205. 44 Mobil Corporation (n 39) paras 203–05. 45 Pac Rim Cayman LLC v Republic of El Salvador, ICSID Case No ARB/09/12, Decision on the Respondent’s Jurisdictional Objections (1 June 2012) (Pac Rim). 46 Pac Rim (n 45) para 2.22. ‘CAFTA’ is the Central America Free Trade Agreement (signed 5 August 2004) (2004) 43 ILM 514. 47 Pac Rim (n 45) para 2.52. 48 Pac Rim (n 45) para 2.81, citing the Notice of Intent. 49 Pac Rim (n 45) para 2.82. 50 Pac Rim (n 45) para 2.55. 51 Pac Rim (n 45) para 2.83. 52 Pac Rim (n 45) para 2.94. 53 Pac Rim (n 45) para 2.99. 54 Pac Rim (n 45) para 2.99. 55 Pac Rim (n 45) para 2.100 (emphasis added). 56 Pac Rim (n 45) para 2.110. 57 Tidewater Investment SRL and Tidewater Caribe, CA v Bolivarian Republic of Venezuela, ICSID Case No ARB/10/5, Decision on Jurisdiction (8 February 2013) (Tidewater). 58 Tidewater (n 57) paras 154, 163. 59 Tidewater (n 57) para 167. 60 Tidewater (n 57) para 173. 61 Tidewater (n 57) para 181. 62 Tidewater (n 57) para 166. 63 Claims were also made under the Venezuelan Investment Law. 64 Tidewater (n 57) para 144. 65 Tidewater (n 57) para 183. 66 Tidewater (n 57) para 183. 67 Tidewater (n 57) paras 146, 184. 68 Tidewater (n 57) para 145. 69 Tidewater (n 57) para 190. 70 Tidewater (n 57) para 197. 71 Tidewater (n 57) para 195. 72 Tidewater (n 57) para 198. 73 ST-AD GmbH v The Republic of Bulgaria, UNCITRAL, PCA Case No 2011-06, Award on Jurisdiction (18 July 2013) (ST-AD). 74 ST-AD (n 73) para 209. 75 ST-AD (n 73) paras 317, 333. 76 ST-AD (n 73) para 415. 77 ST-AD (n 73) paras 421–23. 78 ConocoPhillips Petozuata BV, ConocoPhillips Hamaca BV and ConocoPhillips Gulf of Paria BV v Bolivarian Republic of Venezuela, ICSID Case No ARB/07/30, Decision on Jurisdiction and the Merits (3 September 2013) (ConocoPhillips). 79 ConocoPhillips (n 78) paras 140, 183. 80 ConocoPhillips (n 78) paras 6, 227. 81 ConocoPhillips (n 78) paras 272–73. 82 ConocoPhillips (n 78) para 275. 83 ConocoPhillips (n 78) para 279. 84 ConocoPhillips (n 78) para 279. 85 ConocoPhillips (n 78) para 280. 86 Lao Holdings NV v Lao People’s Democratic Republic, ICSID Case No ARB(AF)/12/6, Decision on Jurisdiction (21 February 2014) (Lao Holdings). 87 Lao Holdings (n 86) para 70. 88 Lao Holdings (n 86) paras 76–78. 89 Renée Rose Levy and Gremcitel SA v Republic of Peru, ICSID Case No ARB/11/17, Award (9 January 2015) (Gremcitel) 90 Gremcitel (n 89) para 18. 91 The precise structure of the group is not made clear in the Award. 92 The Tribunal rejected the Claimants’ contention that Ms Levy had owned an indirect interest in Gremcitel from an earlier date, in part because the documents submitted in support of that contention were ‘so full of inconsistencies that they cannot be relied upon’: Gremcitel (n 89) para 152. 93 Gremcitel (n 89) para 158. Mr Levy’s nationality is unclear from the Award, but it can be inferred that he did not qualify for BIT protection, while his sister did. 94 Gremcitel (n 89) para 35. 95 The resolution was published in Peru’s Official Journal on 18 October 2007. The Claimants contended the dispute arose on that date. 96 Gremcitel (n 89) para 37. 97 The BIT, the Agreement between the Government of the Republic of France and the Government of the Republic of Peru for the Promotion and Reciprocal Protection of Investments dated 6 October 1993, permitted Gremcitel itself also to bring a claim, on the basis that it was under French ‘control’. The Tribunal appears to have equated ‘majority ownership’ with ‘control’, holding that Ms Levy’s ‘ownership of the shares [was] sufficient to establish “foreign control”’: para 71. 98 Gremcitel (n 89) para 174. 99 Gremcitel (n 89) para 184. 100 Gremcitel (n 89) para 185. 101 Gremcitel (n 89) paras 187–88. 102 Gremcitel (n 89) para 190. 103 Gremcitel (n 89) para 191. 104 Gremcitel (n 89) paras 189–91. 105 Gremcitel (n 89) para 194. 106 Gremcitel (n 89) para 195. Ms Levy was the Claimant in another ICSID arbitration against Peru during this period: Renée Rose Levy de Levi v Republic of Peru, ICSID Case No ARB/10/17, Award (26 February 2014). The arbitration concerned an entirely different investment from that considered by the Gremcitel Tribunal, being shares in the Peruvian company, Banco Nuevo Mundo. Ms Levy acquired her shares in that company from her father without charge in 2005; however, the relevant Peruvian regulator had ordered the company to be dissolved and liquidated in 2001, which had been the subject of various legal challenges in the intervening period. A few months after Ms Levy acquired her shares, the Supreme Court of Justice of Peru confirmed the validity of the original dissolution order. Peru contested jurisdiction on the basis that Ms Levy’s acquisition of shares was merely an attempt to manufacture ICSID jurisdiction. The Tribunal rejected that contention for two reasons: firstly, the mere fact that Ms Levy acquired her shares for no consideration did not evidence an abuse, because it was a transfer between family members; and second, because the Claimant did not file proceedings until five years after she acquired her shares: para 154. The Tribunal did not consider whether the dispute pre-existed the acquisition, or was foreseeable at that time: the reasoning was clearly inadequate on this issue, and so this case will not be considered further. It also appears that no objection was made on the basis of lack of ratione temporis jurisdiction. The claim failed on the merits. 107 Philip Morris (n 4) para 176. 108 See WHO Framework Convention on Tobacco Control, art 13. 109 Philip Morris (n 4) paras 105–06. 110 Philip Morris (n 4) para 111. 111 Philip Morris (n 4) para 533. 112 The Tribunal members themselves were steeped in the issue: Prof Böcksteigel sat on the Autopista Tribunal; Prof Kaufmann-Kohler heard Autopista, Mobil Corporation and Gremcitel; and Prof McRae sat on the Europe Cement Tribunal. 113 Philip Morris (n 4) para 539. 114 Philip Morris (n 4) para 536. 115 Philip Morris (n 4) para 554. 116 Philip Morris (n 4) para 566. 117 Philip Morris (n 4) para 567. 118 Philip Morris (n 4) para 570. 119 Philip Morris (n 4) para 582. 120 Philip Morris (n 4) para 584. 121 Philip Morris (n 4) para 588. 122 Transglobal Green Energy, LLC and Transglobal Green Panama, SA v Republic of Panama, ICSID Case No ARB/13/28, Award (2 June 2016) (Transglobal). 123 Transglobal (n 122) para 105. 124 Transglobal (n 122) para 103. 125 Transglobal (n 122) para 116. 126 Transglobal (n 122) para 118. 127 Ampal-American Israel Corporation and others v Arab Republic of Egypt, ICSID Case No ARB/12/11, Decision on Jurisdiction (1 February 2016) para 331 (Ampal-American). The abuse of process did not ‘crystallise’ until both Tribunals determined that they had jurisdiction over the claim. 128 See eg Martins Paparinskis (n 6), ‘Inherent Powers of ICSID Tribunals: Broad and Rightly So’ in Ian A Laird and Todd J Weiler (eds), Investment Treaty Arbitration and International Law, vol 5 (JurisNet 2012); Hervé Ascensio, ‘Abuse of Process in International Investment Arbitration’ (2014) 13 Chinese J Intl Law, 763. 129 The former issue has been resolved in practice, while the latter potentially remains a fruitful avenue for further analysis. The doctrine is an exceedingly powerful one: ‘Marshalled as it is as an objection at this preliminary stage, this is evidently a proposition of a very farreaching character; it would entail an ICSID tribunal, after having determined conclusively (or at least prima facie) that the parties to an investment dispute had conferred on it by agreement jurisdiction to hear their dispute, deciding nevertheless not to entertain the application to hear the dispute’ [The Rompetrol Group NV v Romania, ICSID Case No ARB/06/3, Decision on Respondent’s Preliminary Objections on Jurisdiction and Admissibility (18 April 2008) para 115]. 130 This has been described as a ‘distinction without a difference’: see Pac Rim (n 45) para 2.10, Gremcitel (n 89) para 181. Cf Eric De Brabandere (n 4). 131 Phoenix Action (n 17) para 144. 132 Mobil Corporation (n 39) para 205; Cementownia (n 30) para 154; ST-AD (n 73) para 423; ConocoPhillips (n 78) paras 273–74; Lao Holdings (n 86) paras 69–70; Gremcitel (n 89) para 183; Transglobal (n 122) para 102. 133 As discussed below and elsewhere [see eg Jagusch and others (n 5), 188–90], the foreseeability element has real difficulties that cannot be entirely solved merely by refinement. It may not be possible to determine, with real certainty, whether any proposed restructuring would subsequently be held abusive. The inability to advise ‘in real time’ may be a strong argument in favour of abandoning the foreseeability element altogether. That approach would be a substantial departure from current arbitral practice. Accordingly, this article proceeds to consider ways to improve the foreseeability element assuming that it will not be wholly abandoned by subsequent Tribunals. 134 See eg Phoenix Action (n 17) para 142; Cementownia (n 30) para 154; ST-AD (n 73) para 415; Lao Holdings (n 86) para 70; Gremcitel (n 89) para 185; Philip Morris (n 4) para 539. 135 See eg Philip Morris (n 4) para 495, where the Tribunal observed that ‘… it is for the Claimant to allege and prove facts establishing the conditions for jurisdiction under the Treaty; for the Respondent to allege and prove the facts on which its objections are based; and, to the extent the Respondent has established a prima facie case, for the Claimant to rebut this evidence’. In Pac Rim (n 45) paras 211–14 the Tribunal observed that it is for the Respondent to prove any positive objections to jurisdiction, including abuse of process [and quoted Chevron Corporation (USA) and Texaco Petroleum Company (USA) v The Republic of Ecuador, UNCITRAL, PCA Case No 34877, Interim Award (1 December 2008) paras 138–39]. See also Cervin Investissements SA and Rhone Investissements SA v Republic of Costa Rica, ICSID Case No ARB/13/2, Decision on Jurisdiction (15 December 2014) paras 294–95 (Cervin Investissements). 136 See eg Aguas del Tunari (n 12) para 330(d); Mobil Corporation (n 39) para 204; Tidewater (n 57) paras 146, 184; Gremcitel (n 89) para 184; Philip Morris (n 4) para 540. 137 Philip Morris (n 4) para 402. 138 Philip Morris (n 4) para 420, quoting from the Respondent’s First Post-Hearing Brief. The parties’ Memorials have not been made public, so it is possible that the Respondent did not contend that the second element was, alone, sufficient to amount to an abuse. The Tribunal’s summary of the parties’ arguments deals separately with what are described as the ‘foreseeability’ and ‘motivation’ criteria apparently on the basis that timing alone may be sufficient. 139 Phoenix Action (n 17), para 142; Cementownia (n 30) para 154; ST-AD (n 73) para 415; Gremcitel (n 89) paras 191–92; Philip Morris (n 4) para 587; Transglobal (n 122) para 118. 140 See Philip Morris (n 4) para 539, and discussion below. 141 Philip Morris (n 4) para 539. 142 Tidewater (n 57) para 150, citing Zachary Douglas, The International Law of Investment Claims (CUP 2009) 465. 143 It may be that this is what was intended by the Tidewater (n 57) and Philip Morris (n 4) Tribunals—ie that the claimant’s subjective intention must be determined objectively: that is, by reference to all the evidence rather than merely the claimant’s submissions as to its subjective intention. It is not clear how a party’s intention could otherwise be ‘objective’. Teasing out this distinction should assist to bring clarity to the analysis. Furthermore, it is acknowledged that, if this element is a subjective one, it essentially requires that the dispute not only be ‘foreseeable’ but ‘foreseen’. That is, in practice, how the Philip Morris Tribunal appears to have approached the analysis: see its formulation of the test at para 536 (‘motivated … by a desire to gain access to protection in order to bring a claim in respect of a specific dispute that … exists or is foreseeable’—for a foreseeable dispute to have motivated the restructuring, it must also have been foreseen), and its conclusion at para 584 (‘the Tribunal can only conclude that the main and determinative, if not sole, reason for the restructuring was the intention to bring a claim under the Treaty’). 144 See eg Mobil Corporation (n 39) paras 189–90, 204; Tidewater (n 57) paras 183, 194; ConocoPhillips (n 78) para 279. Even the Philip Morris (n 4) Tribunal made findings as to the Claimant’s (subjective) motivation: para 584. 145 And perhaps naïve luck in obtaining protection for a reasonably foreseeable claim that it had not foreseen. 146 See eg the factors considered in Mobil Corporation (n 39) paras 199–205; Phoenix Action (n 17) paras 136–40; ST-AD (n 73) paras 412–23; ConocoPhillips (n 78) paras 278–80; Gremcitel (n 89) paras 188–94. 147 See below the discussion as to when foreseeability should be assessed. 148 The Philip Morris (n 4) Tribunal may have taken this approach, albeit not explicitly. It noted at para 495 that it is ‘for the Respondent to allege and prove the facts on which its objections are based; and, to the extent that the Respondent has established a prima facie case, for the Claimant to rebut this evidence’. It first considered the ‘key question’ of ‘whether a dispute about plain packaging was reasonably foreseeable before the restructuring’: para 566; and concluded that this requirement was satisfied: paras 566, 569. The Tribunal then considered the Claimant’s ‘alleged other reasons for restructuring’ (see paras 570–83), and concluded at para 584 that ‘the Claimant has not been able to prove that tax or other business reasons were determinative for the restructuring’ (emphasis added). The Tribunal was critical of the Claimant’s failure to present key evidence as to its intention in restructuring (see paras 582–83), which perhaps further supports the view that the Tribunal considered the Claimant bore the burden of establishing its subjective intention. The Tribunal in Gremcitel (n 89) at paras 187–93 appears to discuss foreseeability and motivation together. However, the Tribunal commenced with an analysis of facts going to foreseeability, and then turned to consider (and criticise) the Claimant’s stated rationales for the restructure. By contrast, in Cervin Investissements (n 135) paras 294–95, the Tribunal firmly held that it was not for the Claimant to give a positive explanation of its reasons for the restructuring (though, in that case, the Claimant had provided a number of general motivations apart from obtaining treaty protection): it put the burden squarely on the Respondent to prove the proscribed motivation. 149 See eg Phoenix Action (n 17) paras 139–40; ST-AD (n 73) paras 421–23; Transglobal (n 122) para 118. 150 The Philip Morris (n 4) Tribunal specifically recognised this overlap: para 539. 151 Philip Morris (n 4) para 434. 152 See Jagusch and others (n 5), 188–90. 153 Tidewater (n 57) para 184 (emphasis added). See also Pac Rim (n 45) para 2.99; Philip Morris (n 4) paras 541, 547. 154 See eg Pac Rim (n 45) para 2.99; Tidewater (n 57) para 193; ConocoPhillips (n 78) para 279 (a ‘claim’ rather than a ‘dispute’); Lao Holdings (n 86) para 83; Gremcitel (n 89) para 185; Philip Morris (n 4) para 554. Cf Transglobal (n 122) para 103. 155 Mavrommatis Palestine Concessions, Judgment No 2 (1924) PCIJ Rep Series A No 2, 11. 156 Teinver SA, Transportes de Cercanías SA and Autobuses Urbanos del Sur SA v Argentine Republic, ICSID Case No ARB/09/1, Decision on Jurisdiction (21 December 2012), para 119. 157 Emilio Agustín Maffezini v Kingdom of Spain, ICSID Case No ARB/97/7, Decision of the Tribunal on Objections to Jurisdiction (25 January 2000) paras 94–96. 158 Pac Rim (n 45) paras 2.80–2.81. 159 Pac Rim (n 45) para 2.82. 160 Pac Rim (n 45) para 2.110. 161 Pac Rim (n 45) para 2.100. The Respondent in Philip Morris (n 4) also argued that this was not determinative: para 375. 162 Philip Morris (n 4) para 447. 163 Philip Morris (n 4) para 454. 164 Access to the claimant’s legal advice (or at least logs of its privileged communications), as in the Philip Morris case, may go some way to avoiding this risk—but this material will not always be available. 165 Tania Voon, Andrew Mitchell and James Munro, ‘Legal Responses to Corporate Manoeuvring in International Investment Arbitration’ (2014) 5 J Intl Disp Settlement 41, approach this slightly differently. They propose a distinction between a ‘narrow or broad view of the boundaries of the dispute’, rather than the dispute and its underlying facts. They note that, in Tidewater (n 57) para 149, the Tribunal adopted the test set out in Industria Nacional de Alimentos, SA and Indalsa Perú, SA (formerly Empresas Lucchetti, SA and Lucchetti Perú, SA) v Republic of Peru, ICSID Case No ARB/03/4, Award (7 February 2015) (Lucchetti), being a ‘broad’ notion of what constitutes the ‘dispute’. However, in Lucchetti, the question was whether the Tribunal had jurisdiction ratione temporis, which turned on whether there was ‘one or two separate disputes’: if the arbitration was merely a continuation of an earlier dispute, rather than in respect of a fresh dispute, then the Tribunal had no jurisdiction. For the purposes of that analysis, the Tribunal considered that the key question was whether the two alleged disputes concerned the same underlying subject matter. That is quite different from the analysis with which this article is concerned. The Lucchetti Tribunal did not purport to (re)define what constituted a ‘dispute’ for the purposes of international law more generally; indeed, it specifically noted that the concept of a ‘dispute’ had an ‘accepted meaning’, citing (among other cases) Mavrommatis Palestine Concessions: para 48. Rather, it simply enunciated principles to determine whether two purportedly separate disputes are one and the same for the purposes of jurisdiction ratione temporis. Accordingly, it is both simpler and more in keeping with the arbitral practice on the point to distinguish between the dispute and the measures underlying it (and perhaps accept that tribunals which focused on the existence or foreseeability of the dispute, rather than the measures, slightly missed the mark), rather than to attempt to parse out different definitions of ‘dispute’. 166 Tidewater (n 57) para 194. 167 Gremcitel (n 89) para 189. 168 Philip Morris (n 4) para 554. 169 Transglobal (n 122) para 103. In Aguas del Tunari (n 12) para 329(c), the Tribunal noted that the ‘severity of the particular events that would erupt in the Spring of 2000’ was not foreseeable. This appears to have been a reference to the popular opposition to the project in question, rather than the State measures taken in response to that opposition. As one led to the other, this decision might also be read as considering the foreseeability of the measures, rather than the dispute. 170 Pac Rim (n 45) para 294. 171 It is notable that the restructuring occurred more than three years after the mining licence application had been made—but a mere three months before the President of El Salvador’s speech which became central to the characterisation of the claim. Cf the discussion in Gremcitel (n 89) paras 187–88 as to the relevance of such ‘striking proximity’. 172 The Claimant in Philip Morris (n 4) certainly argued that the measures in question in Mobil Corporation (n 39), Tidewater (n 57), Pac Rim (n 45) and ConocoPhillips (n 78) were all at least reasonably foreseeable at the relevant time: paras 438–39. 173 Transglobal (n 122) para 116. 174 Philip Morris (n 4) para 554. 175 Philip Morris (n 4) para 554. 176 The Philip Morris (n 4) Tribunal made this point in a slightly different way: see para 567, noting that 19 months passed between the announcement of the legislation and its passage. Long democratic processes do ‘not make the outcome any less foreseeable than in the case of a State that does not have the same sort of democratic oversight of the legislative process and might enact legislation almost overnight’. 177 Pac Rim (n 45) para 2.99. 178 Philip Morris (n 4) para 554. 179 In Philip Morris (n 4), the Claimant argued that it was the latter, while the Respondent argued that it was the former: para 429. 180 See Pac Rim (n 45) para 2.45: the Tribunal in that case did not discuss any steps that were taken in preparation for the restructuring that occurred on 13 December 2007. In Mobil Corporation (n 39) the Tribunal focused on the time of the transfer of the shares, not earlier relevant dates such as the incorporation of the new Dutch holding company (see paras 187, 206). Even in the Philip Morris (n 4) case, the focus was on when the restructuring ‘occurred’. The Tribunal held that it was enough that, from 29 April 2010, ‘long before the restructuring’, there was a reasonable prospect that plain packaging measures would be enacted: see paras 566, 568. However, the first approval for the eventual restructuring appears to have occurred earlier in time: para 557. Cf Tidewater (n 57) paras 194–95, where the Tribunal focuses its analysis on the time when the Claimant commenced restructuring, not its consummation some three months later. In Gremcitel (n 89) the Tribunal focused upon the acts that set in motion the investment: see paras 188, 190. 181 Philip Morris (n 4) paras 414–19, 537. 182 See eg Mobil Corporation (n 39) paras 169–70; Phoenix Action (n 17) paras 106–13, 142–43; Pac Rim (n 45) para 2.100; ConocoPhillips (n 78) paras 273–74; Lao Holdings (n 86) para 70. 183 Philip Morris (n 4) para 539. 184 Ampal-American (n 127) para 331. 185 Phoenix Action (n 17) para 93, emphasis in original. The Phoenix Action (n 17) Tribunal reached this conclusion having reviewed the arbitration jurisprudence on purported assignment of claims: Banro American Resources, Inc and Société Aurifère du Kivu et du Maniema, SARL v Democratic Republic of the Congo, ICSID Case No ARB/98/7, Award (1 September 2000); and Mihaly International Corporation v Democratic Socialist Republic of Sri Lanka, ICSID Case No ARB/00/2, Award (15 March 2002). See also Caratube International Oil Company LLP v Republic of Kazakhstan, ICSID Case No ARB/08/12, Award (5 June 2012). In that case, the Tribunal drew on the six elements of a protected investment set out in the Phoenix Action Award. It concluded that, because the shareholder of the Claimant through which BIT protection was claimed had paid a nominal US$6,500 sum for his 92% stake, whereas the claim was for more than US$1 billion, there was insufficient financial contribution or risk taking to constitute an investment. This conclusion survived an annulment application [see Caratube International Oil Company LLP v Republic of Kazakhstan, ICSID Case No ARB/08/12, Decision on the Annulment Application (21 February 2014)]. The Respondent also contended that the investment was not bona fide for the purposes of the sixth element of the Phoenix Action test. However, the Tribunal held that there was ‘not sufficient proof … that the nationality shelter was the exclusive motivation for the transaction’ (para 465, emphasis added). See also Malicorp Limited v Arab Republic of Egypt, ICSID Case No ARB/08/18, Award (7 February 2011) para 116. 186 Cementownia (n 30) para 154. 187 Mobil Corporation (n 39) para 27. 188 Mobil Corporation (n 39) para 190. 189 Pac Rim (n 45) para 2.41. 190 Tidewater (n 57) para 183, emphasis in original. 191 ST-AD (n 73) paras 421, 423. 192 ConocoPhillips (n 78) para 279. 193 Gremcitel (n 89) para 191. 194 Philip Morris (n 4) para 584. 195 Philip Morris (n 4) para 570. 196 Philip Morris (n 4) para 570. 197 As noted above, the requirement to establish a subjective intention should serve to protect claimants who have not foreseen a reasonably foreseeable dispute. Similarly, the ‘dominant purpose’ aspect of this element should protect claimants who bring about restructurings primarily for genuine, unrelated reasons, but do so at a time when a dispute is reasonably foreseeable. 198 Philip Morris (n 4) para 570. 199 Philip Morris (n 4) para 582. 200 ConocoPhillips (n 78) para 280. 201 Mobil Corporation (n 39) para 196. 202 This appears to be at least one way in which the post-restructuring investments were found to be relevant in Tidewater (n 57) para 194 and ConocoPhillips (n 78) para 280. 203 In Mobil Corporation (n 39) the Tribunal observed at paras 190–91 that ‘… the main, if not the sole purpose of the restructuring was to protect Mobil investments from adverse Venezuelan measures in getting access to ICSID arbitration… Such restructuring could be ‘legitimate corporate planning’ as contended by the Claimants or an ‘abuse of right’ as submitted by the Respondents. It depends upon the circumstances in which it happened.’ The Tribunal considered the timing of the Claimant’s investments as one such circumstance. © The Author(s) 2018. Published by Oxford University Press on behalf of ICSID. All rights reserved. For permissions, please email: journals.permissions@oup.com This article is published and distributed under the terms of the Oxford University Press, Standard Journals Publication Model (https://academic.oup.com/journals/pages/about_us/legal/notices) http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png ICSID Review: Foreign Investment Law Journal Oxford University Press

Nationality Planning and Abuse of Process: A Coherent Framework 

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Oxford University Press
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© The Author(s) 2018. Published by Oxford University Press on behalf of ICSID. All rights reserved. For permissions, please email: journals.permissions@oup.com
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0258-3690
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2049-1999
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10.1093/icsidreview/six020
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Abstract

Abstract Prudent investors seek to structure their investments so as to obtain investment treaty protection. But the crucial line between legitimate ‘nationality planning’ and illegitimate restructuring which renders an investment treaty arbitration an abuse of process is a blurry one. In particular, recent Awards have introduced a foreseeability element to the abuse of process analysis, the scope of which remains largely undefined. This article surveys arbitral practice in the area, and proposes potential refinements to the test. I. INTRODUCTION ‘Treaty-shopping’ and ‘nationality-planning’, in the sense of investors and corporate groups structuring (or restructuring) their holdings so as to secure investment treaty protection, is a fixture of international commerce. More than 3000 bilateral investment treaties (BITs) are presently in force. Landscape-altering multilateral investment treaties are in various stages of finalization. Investors are increasingly aware of the power of the investor-state dispute settlement (ISDS) mechanism; prudence and fiduciary obligations, dictate that they at least give thought to obtaining access to that mechanism.3 At the same time, however, ISDS clauses continue to stoke political controversy. One aspect of that controversy is the extent to which multinational corporations can game the system—for example, by shifting assets and investments into ‘corporations of convenience’ deliberately to fall under the protection of an investment treaty. To address this perceived mischief, the power of international tribunals to dismiss a claim on the basis that it is an abuse of process4 has developed substantially over the last 15 years. Philip Morris—the high profile dispute over Australia’s plain cigarette packaging legislation—falls at the intersection of these issues. The Tribunal in that case held that it was precluded from exercising jurisdiction over the claim, specifically because the Philip Morris Group’s restructuring, consummated before the claim crystallised, rendered it inadmissible as an abuse of process. The Award contains a valuable discussion of the abuse of process doctrine in the context of a corporate restructuring: it sought to reconcile the jurisprudence on the topic, and set out an authoritative statement as to when a corporate restructuring becomes abusive. In this article, we assess the extent to which the Philip Morris Tribunal succeeded in that aim. First, we trace the development of the abuse of process doctrine in arbitral practice, and explain how different tribunals have approached the same problem. Secondly, we consider the test for establishing an abuse of process in the context of a corporate restructuring. Finally, we tease out some still-unresolved aspects of that test, including the nature of the ‘foreseeability’ element, how to approach a restructuring undertaken for both legitimate and illegitimate reasons, and the relevance of ‘bad faith’. The abuse of process doctrine is now well-entrenched in the jurisprudence; and it will likely play an increasingly important role in policing access to the investment treaty arbitration system. However, key aspects of the doctrine remain poorly defined—in particular, the very aspect of the doctrine which makes it most powerful, namely, its application to restructurings which occur before a dispute arises. In this article, we do not grapple with the underlying policy debate, or seek to reverse the tide.5 Rather, we seek to reconcile the existing arbitral practice, consolidate principles which appear to have been widely accepted, and propose refinements in pursuit of a more coherent framework for the doctrine. II. THE DEVELOPMENT OF THE ABUSE OF PROCESS DOCTRINE The notion of abuse of rights (or related doctrines, such as abuse of process) has long existed in public international law.6 Its application to instances of investment restructurings has had a late but rapid gestation. In this section, we review decisions of international tribunals which consider the issue. An understanding of the facts of each case is necessary to tease out the differences and inconsistencies between them, which we do in subsequent sections. Initially, tribunals approached the issue through the lens of various treaty provisions, including the definitions of investor and covered investment. In Autopista Concesionada de Venezuela, CA v Venezuela,7 the Claimant was a company incorporated in Venezuela which was awarded a concession to design, build and collect tolls generated by a major new highway. At all relevant times, 99 percent of its shares were ultimately owned by a Mexican conglomerate, referred to as ICA Holdings. In April 1997, one week after the concession agreement became effective, the Claimant sought Venezuela’s permission to transfer 75 percent of its shares to a company registered in the USA, referred to as Icatech (a wholly-owned subsidiary of ICA Holdings). Permission was granted, and the shares were transferred to Icatech in August 1998. A dispute arose between the parties in early 2000, and the Claimant submitted the dispute to ICSID in June 2000. By Article 64 of the concession agreement, the parties agreed that, if the claimant came to be majority owned by a national of an ICSID Contracting State, disputes between them may be submitted to ICSID. The Claimant relied on Icatech’s majority ownership to bring it within Article 64. (The USA is an ICSID Contracting State; Mexico is not.) Venezuela objected to the Tribunal’s jurisdiction, inter alia on the ground that it had not consented to ICSID jurisdiction ‘on the basis of a fictional control relationship’.8 The Tribunal rejected that objection. The US entity had been incorporated ‘well before … the emergence of the present dispute’, and had substantial interests worldwide.9 The Tribunal accepted that the purpose of the restructuring was to enhance the Claimant’s ability to obtain financing through a connection to the USA, and noted that Venezuela had consented to the share transfer.10 Accordingly, it held that the US entity was not ‘a corporation of convenience’, and that the assertion of ICSID jurisdiction on the basis of Icatech’s shareholding was not ‘an abuse of the Convention purposes’.11 In Aguas del Tunari SA v Bolivia,12 the Claimant was a Bolivian company, 55 percent of which was initially ultimately owned by a US company (Bechtel Holdings, Inc.). In September 1999, it was awarded a concession to provide water, sewerage and electricity services to the city of Cochabamba. There was immediate public opposition to the granting of the concession. In late November 1999, Bechtel sought permission from the Waters Superintendency of Bolivia for a restructuring, which would interpose two Dutch companies between it and the Claimant. Permission was granted, and the re-organization was completed in late December 1999. The concession was terminated a few months later. The Claimant submitted a dispute to ICSID under the Netherlands–Bolivia BIT (which permits claims made by local companies ‘controlled by’ foreign nationals).13 Bolivia objected to the Tribunal’s jurisdiction on multiple grounds, including that the Claimant was not controlled by nationals of the Netherlands. The Tribunal dismissed Bolivia’s objections. In addition, the Tribunal made a final ‘concluding observation’ concerning Bolivia’s suggestion that the restructuring was done ‘in anticipation of the events to follow’.14 The Tribunal noted that the ‘severity of the particular events’ in early 2000 was not ‘foreseeable’ when the restructuring took place. It did not make positive findings as to the purpose of inserting the Dutch entities into the Claimant’s corporate structure, but noted that: it is not uncommon in practice, and—absent a particular limitation—not illegal to locate one’s operations in a jurisdiction perceived to provide a beneficial regulatory and legal environment in terms, for example, of taxation or the substantive law of the jurisdiction, including the availability of a BIT.15 The Tribunal held there was no basis to ‘support an allegation of abuse of the corporate form or fraud’.16 In the seminal case, Phoenix Action Ltd v The Czech Republic,17 the focus was on the nature of the investment, not the investor or claimant.18 The claim concerned two Czech companies engaged in the trading of ferro-alloys. The first had been declared bankrupt following a dispute with an unrelated Czech company; the second had been engaged in ongoing disputes with the Czech criminal authorities regarding two frozen bank accounts. The latter’s Chief Executive Officer, a Mr Beňo, was the subject of criminal investigation in the Czech Republic and it was determined that the company’s funds were the proceeds of crime. Mr Beňo fled to Israel, incorporated the Claimant, which subsequently acquired ownership of the two Czech companies, and filed for arbitration. The Tribunal held, in a single paragraph, that it had no jurisdiction ratione temporis in respect of the events which occurred prior to the Claimant’s acquisition of the two Czech companies.19 The analysis then turned to whether the Claimant had made an investment protected by the BIT. The Tribunal set out six elements to be taken into account in determining whether an alleged investment is protected by international law; the sixth was ‘assets invested bona fide’.20 In that respect, the Tribunal held that, as a general principle, ‘States cannot be deemed to offer access to the ICSID dispute settlement mechanism to investments not made in good faith’.21 It then considered a number of factors to determine if the Claimant’s investment ‘deserves protection’.22 Relevantly, the investment had been made at a point in time when ‘all the damages claimed by Phoenix had already occurred’, and the request for arbitration was initially based on claims said to have been assigned by the two Czech companies to the Claimant.23 The Claimant notified the Czech Republic of its investment dispute a mere two months after its acquisition of the local companies, which ‘shows that Phoenix’s “investment project” was made simply to assert a claim under the BIT’.24 The transaction itself was ‘a mere redistribution of assets’ within Mr Beňo’s family, and the Tribunal considered that ‘no economic activity’ was either performed or intended by the Claimant.25 In short, the transaction was intended ‘to transform a pre-existing domestic dispute into an international dispute subject to ICSID arbitration’.26 This was an ‘abuse of the system’, which risked making access to the investment arbitration mechanism ‘virtually unlimited’.27 The Tribunal reasoned it was under a duty to ensure that the ‘ICSID mechanism does not protect investments that it was not designed … to protect’, and dismissed the claim on the basis that there was no valid investment.28 Phoenix Action was closely followed by two related cases, each of which was dismissed as an abuse of process. The two cases—Europe Cement Investment and Trade SA v Turkey29 and Cementownia ‘Nowa Huta’ SA v Turkey30—both concerned the same two Turkish companies, involved in the generation, transmission and sale of electricity pursuant to concession agreements executed in 1998. By a regulation which took effect in November 2002, the two companies were required to transfer all of their transmission facilities to a government entity, failing which the concession agreements would be terminated in their entirety. In June 2003, Turkey terminated the concession agreements. The claimants in both cases alleged that they had acquired shares in the two Turkish companies in May 2003 (less than two weeks before the concession agreements were terminated).31 However, in both cases the Tribunal concluded that no such acquisition took place; accordingly, there was no relevant investment and the claimant was not an investor covered by the Energy Charter Treaty.32 The Tribunals did not stop there. Again in both cases, it was found that the alleged transaction was ‘fabricated’33 and based on ‘inauthentic documents’.34 The claims were ‘fraudulent’, and an ‘abuse of process’.35 Relevantly for the purposes of this article, the Cementownia Tribunal also considered the hypothetical scenario in which the Claimant had been able to prove its investment. Following Phoenix, it held that an investment made ‘not for the purpose of engaging in commercial activity, but for the sole purpose of gaining access to international jurisdiction … is deemed not to be a protected investment’.36 It held that the timing of the alleged investment showed that it would have been ‘treaty shopping of the wrong kind’.37 In the cases discussed to this point, Tribunals grappled with allegations of abuse of process by way of treaty definitions of investor and investment. This approach attracted criticism for unjustifiably narrowing such definitions, in a way that confounded the autonomy and intention of the States party.38 Subsequent cases appear to treat abuse of process (or similar concepts) as a free-standing doctrine, detached from the language of the relevant treaty. In Mobil Corporation v Venezuela,39 the Claimants were various members of the Mobil corporate group, incorporated in the USA, the Bahamas and the Netherlands. They held interests in two oil production ventures in Venezuela, pursuant to agreements with Venezuela’s State-owned petroleum company executed in 1996 and 1997. In April 2005, the Venezuelan Minister of Energy and Mines announced that such agreements were illegal, and would need to be ‘migrated’ to a new form. In May 2006, an extraction tax of 33⅓ percent was enacted; in August 2006 it was increased to 50 percent; and in January 2007, the President of Venezuela announced that the Mobil projects (among others) would be nationalised. Throughout this period, the Mobil group had corresponded with Venezuela with respect to the ongoing ‘investment dispute’. For example, by a letter dated 20 June 2005, the Mobil parties noted their consent to ICSID jurisdiction over the dispute and ‘any other investment disputes … that may arise in the future, including without limitation any dispute arising out of any expropriation or confiscation of all or any party of the investment’.40 In the meantime, the Mobil group established a new entity in the Netherlands in October 2005, and inserted that entity into the corporate structure for the two projects in February and November 2006 respectively. The Claimants admitted that the purpose of the restructuring was to obtain BIT protection.41 The Request for Arbitration was submitted to ICSID on 6 September 2007. Venezuela objected to the Tribunal’s jurisdiction on the ground that, inter alia, the Dutch entity was a ‘corporation of convenience’ which could not attract the protection of the Netherlands–Venezuela BIT. The Tribunal disagreed. It noted that significant economic investments were made in the projects in 2005–06, and further investments were projected. It held that restructuring investments to obtain BIT protection ‘was a perfectly legitimate goal as far as it concerned future disputes’42 (as opposed to ‘pre-existing disputes, [where] the situation is different’, citing Phoenix43). It reasoned that, because the dispute concerning Venezuela’s nationalization measures arose after the restructuring, there was no abuse of process.44 The Tribunal did not consider whether that dispute was foreseeable at the time the restructuring occurred. The Tribunal in Pac Rim Cayman LLC v El Salvador45 took a different approach. In April 2002, Pacific Rim Mining Corp, a Canadian company, acquired all of the shares in an El Salvador company subsequently referred to as Pacific Rim El Salvador (or ‘PRES’). PRES held exploration licences over certain areas and, having expended more than US$77 million in exploration activities, verified substantial gold deposits in those areas. In September 2004, it applied for licences to exploit those gold deposits. Those licences were never issued. In November 2004, Pacific Rim Mining Corp transferred all of its shares in PRES to the Claimant, its subsidiary, which was at that time incorporated in the Cayman Islands. The Central American Free Trade Agreement came into force on 1 March 2006. The Claimant became a US company on 13 December 2007. It admitted that one of the factors in favour of the re-organization was ‘[t]he ability … to bring claims under CAFTA, if a dispute with El Salvador were to arise in the future’.46 (The USA is a party to CAFTA; the Cayman Islands and Canada are not.) In March 2008, the President of El Salvador announced that no further licences would be granted to PRES. The Claimant notified El Salvador of its intention to commence arbitration proceedings in December 2008, and its Notice of Arbitration was submitted to ICSID on 30 April 2009. El Salvador objected to the Tribunal’s jurisdiction on a number of grounds. Relevantly, it argued that the renationalization of the Claimant rendered the arbitration an abuse of process. The Tribunal considered that it ‘must first ascertain whether the relevant measure(s) or practice’ took place before or after the date the Claimant’s nationality changed.47 The Claimant’s initial pleadings had complained of a number of measures in relation to El Salvador’s failure to grant the licences. It said that the State’s opposition to its mining venture ‘first manifested’ in late 2005; and that, since the end of 2006, it was ‘increasingly apparent’ that the Government’s aim was ‘preventing their operations altogether’.48 On the basis of this description of the claim, the Tribunal was ‘minded to accept’ the submission was an abuse of process.49 However, in subsequent pleadings, the Claimant refined its complaint to focus on El Salvador’s ‘de facto ban on mining operations’, which, it said, was revealed by the President’s speech in March 2008.50 It said that, until then, it had been led to understand that its applications were still under consideration.51 On that basis, the Tribunal characterised the measures as a ‘continuing act under international law’, which started before the Claimant’s change of nationality and continued after that time.52 The Tribunal then set out its views as to when a corporate restructuring amounts to an abuse of process: ‘the dividing line occurs when the relevant party can see an actual dispute or can foresee a specific future dispute as a very high probability and not merely as a possible controversy’.53 The dividing line, it said, ‘will include a significant grey area’.54 The Tribunal further elucidated the test by reference to El Salvador’s submission that: it is clearly an abuse for an investor to manipulate the nationality of a shell company subsidiary to gain jurisdiction under an international treaty at a time when the investor is aware that events have occurred that negatively affect its investment and may lead to arbitration.55 The Tribunal concluded that, on the basis of the claim ‘as finally pleaded’,56 the Claimant’s change of nationality was not an abuse of process. Tidewater Inc v Venezuela57 was another case arising out of changes to Venezuela’s approach to its oil industry. The Tidewater group, through its Venezuelan entity referred to as SEMARCA, had been providing support services to Venezuelan State-owned oil enterprises in Lake Maracaibo since 1957 (and, in particular, to the enterprise referred to as PDVSA). SEMARCA was initially owned by a series of Tidewater companies registered in Venezuela, the Cayman Islands and, ultimately, the USA. By June 2008, monies owed to SEMARCA began to accrue, such that, by February 2009, it threatened not to renew its contracts until its arrears were paid in full.58 On 6 March 2009, the Minister of Energy and Petroleum announced that Venezuela would not allow ‘one service supplier [to] paralyze industry activities’,59 and in early May 2009 SEMARCA’s operations in Lake Maracaibo were expropriated.60 Its remaining assets were expropriated in July 2009.61 In the meantime, in February–March 2009, the Tidewater group incorporated a company in Barbados and inserted that new entity into SEMARCA’s ownership structure.62 The Claimants submitted their Request for Arbitration under the Barbados–Venezuela BIT63 on 16 February 2010. Venezuela objected to the Tribunal’s jurisdiction on the basis that, among other things, the restructuring amounted to an ‘abuse of the Treaty’.64 The Claimant admitted that one purpose of the re-organization was ‘risk-mitigation’, by obtaining treaty protection, in view of other nationalisations conducted by Venezuela in 2007–08.65 (The other purpose was ‘advantages under US tax law’.66) Drawing on Mobil and Phoenix, the Tribunal considered that obtaining treaty protection is a ‘perfectly legitimate goal’ in some circumstances;67 and so considered that the ‘heart’ of the issue was when the present dispute ‘arose or could reasonably have been foreseen’ as a matter of fact.68 The Tribunal held that the dispute between SEMARCA and PDVSA which pre-dated the restructuring was ‘an ordinary commercial dispute’,69 quite separate from the treaty-based claims made in the arbitration. It further held that, at the time of the restructuring, the ‘acts of expropriation that gave rise to the present dispute were not reasonably foreseeable’, either when the restructuring commenced or was consummated,70 at least in part because PDVSA’s actions evinced a ‘continuing will to trade’.71 Consequently, there was no ‘abuse of the Treaty’.72 ST-AD GmbH v Bulgaria73 was effectively on all fours with Phoenix. The dispute concerned land in Bulgaria, which had been nationalised in 1947 and re-instituted to its pre-nationalization owners in 1992. The State-owned company which had managed and used the property in that period (LIDI-R) disputed the validity of the restitution of the land and commenced proceedings in the Bulgarian courts claiming that it continued to own (at least) the buildings on the land. That litigation concluded on 16 June 2000 in an order of Bulgaria’s highest court dismissing LIDI-R’s claim and upholding the validity of the restitution (Decision 1153). LIDI-R was privatised in 2004. Its new owner—a Mr Balev, a Bulgarian individual—caused it to commence proceedings in Bulgaria to set aside Decision 1153. On 22 May 2006, Bulgaria’s highest court rejected LIDI-R’s petition. On 25 May 2006, the Claimant—a German company of which Mr Balev was also majority owner74—acquired 40 percent of the shares in LIDI-R. On 30 May 2006, the Claimant sent a letter to Bulgarian officials warning of a possible international arbitration. On 2 March 2008, the Claimant acquired a further 40 percent stake in LIDI-R, and on 15 March 2008 wrote again to Bulgarian officials threatening arbitration. In March 2010, LIDI-R applied again to set aside Decision 1153, which also failed. The Tribunal held that it had no jurisdiction ratione temporis over the dispute, as the key events happened long before the Claimant made its investment(s), and the March 2010 litigation was merely an ‘illusion’ designed to give the impression of measures occurring after the investment was made.75 In addition, the Tribunal held that the ‘main purpose’ of the transfer of shares to the Claimant was to ‘open the possibility for a recourse to international arbitration’.76 Following Phoenix, and given that the ‘damaging facts’ had occurred long before the transfer and the close timing between the share transfers and the threats of arbitration, the Tribunal held that the arbitration was an abusive attempt to manufacture international jurisdiction over a pre-existing domestic dispute.77 ConocoPhillips Petrozuata BV v Venezuela,78 by contrast, is analogous to both Mobil and Tidewater. It concerned two major oil production projects in the Orinoco Oil Belt. The ConocoPhillips group held a majority interest in both projects, through two companies incorporated in Venezuela. In June–August 2005, ConocoPhillips incorporated Dutch subsidiaries, and inserted them into the projects’ ownership structure.79 From 2005 to 2007, Venezuela took the measures described above in the context of the Mobil Corporation Case, culminating in the nationalisation of the two projects in June 2007.80 The Tribunal discussed a number of the Arbitral Awards set out above (though not, perhaps strangely, Pac Rim). It noted that those decisions entertained jurisdictional challenges on a ‘distinct broader basis’, even where formal requirements under the relevant treaties had been met—namely, where there had been a ‘misuse of power conferred by law’.81 A finding that the ‘good faith … standard’ was breached was rare, it said: the ‘standard is a high one’.82 The Claimants admitted that the ‘only business purpose’ of the restructurings was to gain access to treaty protection and ICSID arbitration.83 However, the Tribunal found that ‘no claim had been made’ and, with minor exceptions, ‘none was in prospect’ at the time the Dutch entities were inserted into the corporate structure.84 ConocoPhillips invested more than US$400 million in the projects after the restructurings, a factor the Tribunal considered to be ‘very weighty’, and which was ‘evidence telling very strongly against any finding of treaty abuse’.85 In Lao Holdings NV v Laos,86 the Respondent disavowed any challenge to jurisdiction on the basis of an abuse of process; but the Tribunal considered the scope of the doctrine in any event, in order to distinguish it from jurisdiction ratione temporis. The case concerned the development of hotels and casinos in Laos. In 2007, Sanum Investments Ltd, a Macao company (Sanum), entered into a joint venture agreement with a Laotian company. Sanum held a 40 percent interest in at least two major projects. In 2009, the Laotian Government granted one of those projects a ‘Flat Tax Agreement’, by which it would pay a capped amount of annual tax for five years. In 2011, the parties entered into negotiations to extend the agreement; but in December 2011, Laos enacted an 80 percent tax on casino revenues (not profit). Negotiations for an extension of the Flat Tax Agreement continued through to March 2012, but were unsuccessful. In the meantime, in July 2011, Sanum began looking into a potential corporate restructuring. On 17 January 2012, an ‘off the rack’ company registered in Aruba acquired all of the share capital in Sanum. The Tribunal considered that it would be ‘clearly an abuse’ if an investor manipulates its corporate structure to obtain treaty protection ‘at a time when [it] is aware that events have occurred that negatively affect its investment and may lead to arbitration’.87 Citing Pac Rim, the Tribunal noted that, while a restructuring which takes place when a dispute is ‘highly probable’ may be an abuse of process, the ‘solution is different’ with respect to jurisdiction ratione temporis: the dispute must have already occurred.88 For the purposes of that analysis, the Tribunal held that the dispute arose in March 2012 (the date it became clear the Flat Tax Agreement would not be extended). This was after the restructuring, and so the Tribunal had jurisdiction. The Tribunal ultimately made no findings in respect of abuse of process because the Respondent did not plead it. Levy and Gremcitel SA v Peru89 illustrates this crucial difference between the two doctrines. It concerned three valuable and historically significant parcels of land near Lima, where the Claimants proposed to develop a tourism and real estate ‘megaproject’.90 In 1995, a company referred to as Gremco acquired the three parcels of land, variously from the local public authority and private sellers. In 2003-04 the second Claimant, Gremcitel SA (a Peruvian company), acquired the land. Both Gremco and Gremcitel were part of the ‘Levy Group’.91 On 9 October 2007, the first Claimant, Ms Renee Levy, acquired a controlling share in Gremcitel.92 Ms Levy, a French national, acquired the shares from her brother.93 From at least 2001, Gremco and Gremcitel had dealings with various State authorities as to the use that could be made of the land, given its historical significance. In February 2005, the National Institute of Culture (INC) formed a Historical Commission to propose the delimitation of the ‘intangible historical area’.94 Its report was issued in July 2005. On 10 October 2007, one day after Ms Levy acquired her direct stake in Gremcitel,95 the INC issued a resolution formally delimiting the historical area. The Claimants argued that the resolution made their proposed property development ‘meaningless’.96 The Tribunal concluded that, because Ms Levy’s investment pre-dated the dispute (even by a few short days), the requirements of jurisdiction ratione temporis were met.97 Turning to the Respondent’s contention that the ‘investment [was] abusive’,98 the Tribunal considered it to be ‘well-established, and rightly so’, that structuring or re-structuring an investment to obtain treaty protection is not, in itself, objectionable.99 On the other hand, it agreed with the Pac Rim Tribunal’s formulation that a restructuring to procure protection for a ‘specific future dispute’ which was ‘foresee[able] … as a very high probability’ may amount to an abuse of process.100 The Tribunal noted that ‘the closer the acquisition of the investment is to the act giving rise to the dispute, the higher the degree of foreseeability will normally be’, and that there was ‘striking proximity’ between Ms Levy’s investment and the relevant events.101 It held that, in light of the parties’ dealings since the Historical Commission was established in 2005, and given that the transfer of shares to Ms Levy was brought about ‘in a great hurry’,102 the Claimants foresaw the passage of the 2007 Resolution ‘as a very high probability’.103 The Claimants could give no other reason for Ms Levy being inserted into the ownership structure of the project, and accordingly the Tribunal concluded that its only purpose was to obtain access to ICSID arbitration where that remedy was otherwise unavailable.104 Finally, the Tribunal considered that the Claimant’s failed attempt to prove that Ms Levy indirectly owned and controlled Gremcitel from 2005, which had relied on backdated documents, ‘evinces a pattern of manipulative conduct that casts a bad light on their actions’.105 It concluded that the restructuring was an ‘abuse of process’, and so the Tribunal was ‘precluded’ from exercising jurisdiction.106 Philip Morris concerned Australian legislation which, among other things, essentially prohibited cigarettes from being sold in branded packages—the ‘plain packaging legislation’. The Claimant was a company registered in Hong Kong, which had been part of the Philip Morris corporate group since it was incorporated in 1994. In September 2010, the group approved a restructuring by which the Claimant would become the (direct and indirect) sole owner of the group’s Australian subsidiaries. The restructuring was consummated on 23 February 2011. Following a long gestation, the plain packaging legislation was passed by the Australian Parliament in November 2011.107 The Framework Convention on Tobacco Control entered into force for Australia in 2005; it obliges State Parties to implement measures including a ‘comprehensive ban on tobacco advertising, promotion and sponsorship’.108 In October 2008, a Government Taskforce published a position paper suggesting mandatory plain packaging; its final report in June 2009 recommended implementing plain packaging legislation.109 In September 2009, Australia’s Health Minister launched the National Preventative Health Strategy and released a paper proposing plain packaging laws. In October 2009 and January 2010, Philip Morris and its advisers warned the Government that such laws might be unconstitutional, and would be ‘tantamount to expropriation’.110 In April 2010, Australia’s Prime Minister and Health Minister jointly announced proposed tobacco control measures, including plain packaging legislation very similar to what was finally enacted. In June 2010, Prime Minister Rudd was replaced by Prime Minister Gillard, and in July 2010 the Government published a timetable for the implementation of plain packaging laws. Also in July 2010, a Federal election was called and Parliament was dissolved. The election was held on 21 August 2010, and on 14 September 2010 Prime Minister Gillard formed a minority government. In October and November 2010, the Health Minister confirmed that the Government intended to introduce plain packaging legislation. The legislation was introduced into the Federal Parliament in April 2011 and was passed by both Houses of Parliament on 21 November 2011. The Claimant filed its Notice of Arbitration the same day. The Respondent objected to the Tribunal’s jurisdiction on a number of grounds. The Tribunal held that, for the purposes of jurisdiction ratione temporis, the ‘critical date’ is the date on which the State adopts the relevant measure; in this case, when the plain packaging legislation was enacted.111 Because the restructuring had taken place before that date, the requirements for jurisdiction ratione temporis were met. The Tribunal then reviewed in some detail the arbitral practice concerning allegations of abuse of process in the context of corporate restructurings.112 It was ‘clear’ to the Tribunal that the ‘threshold for finding an abusive initiation of an investment claim is high’, but does not require a finding of bad faith.113 The Tribunal noted that restructuring to obtain treaty protection is not abusive in and of itself; but may be where the restructuring occurs at a time when a specific dispute exists or is foreseeable.114 It noted that different Tribunals have articulated the test differently, but that they were all ‘broadly analogous’: In the Tribunal’s view, foreseeability rests between the two extremes posited by the tribunal in Pac Rim v. El Salvador—‘a very high probability and not merely a possible controversy’. On this basis, the initiation of a treaty-based investor-State arbitration constitutes an abuse of rights (or an abuse of process, the rights abused being procedural in nature) when an investor has changed its corporate structure to gain the protection of an investment treaty at a point in time when a specific dispute was foreseeable. The Tribunal is of the opinion that a dispute is foreseeable when there is a reasonable prospect, as stated by the Tidewater tribunal, that a measure which may give rise to a treaty claim will materialise.115 On the facts of the case, the Tribunal found that from at least the April 2010 joint announcement by the Prime Minister and Health Minister, ‘there was no uncertainty about the Government’s intention to introduce plain packaging’ and, consequently, ‘there was at least a reasonable prospect that legislation equivalent to the Plain Packaging Measures would eventually be enacted, which would trigger a dispute’.116 The Tribunal dismissed the substantial delay between the announcement and the final passage of the legislation as ‘not a decisive factor in determining whether the legislation is foreseeable’.117 The Tribunal then considered the reasons for the restructuring, noting that ‘it would not normally be an abuse of right to bring a BIT claim in the wake of a corporate restructuring, if the restructuring was justified independently of the possibility of bringing such a claim’.118 It was unpersuaded by the Claimant’s purported reasons for the re-organization (including alleged tax benefits, aligning ownership with management, and optimising cash flow), at least in part because the people most closely involved with the decision to implement the restructuring did not give evidence.119 It concluded that the ‘main and determinative, if not sole’ reason for the restructuring was to bring a claim under the Hong Kong–Australia BIT.120 The Tribunal held that the arbitration amounted to an ‘abuse of rights’, the claims raised were inadmissible and accordingly the Tribunal was precluded from exercising jurisdiction.121 Most recently, in Transglobal Green Energy, LLC v Panama122 jurisdiction was rejected on the basis of a transaction which does not appear to have been an inter-group or inter-family restructuring. It concerned a concession agreement to design, build and operate a hydroelectric plant in Panama. In 2005, the concession was granted to a local company (referred to as La Mina) owned by a Panamanian national, a Mr Lizac. In December 2006, the local authority (referred to as ASEP), terminated the concession agreement, on the basis that construction had not commenced within twelve months as required. In 2008, ASEP granted a new concession agreement for the same project to a different, unrelated, company. In the meantime, La Mina had pursued tortuous litigation in Panama, which culminated on 11 November 2010 with a judgment of the Supreme Court, ruling that the termination of the concession agreement with La Mina was invalid, and the agreement remained on foot. A month later, Mr Lizac signed a Memorandum of Understanding with Transglobal Green Energy, LLC (the first Claimant, Transglobal), an apparently unrelated company incorporated in Texas. By the MOU, Mr Lizac agreed to provide documentation on the project, and Transglobal agreed to perform due diligence.123 In September 2011, Transglobal and Mr Lizac signed a further agreement, the purposes of which were to collaborate to seek mechanisms by which to bring about compliance with the Supreme Court’s judgment (which, to that point, ASEP had failed to effect). They agreed to incorporate a local company, of which Transglobal would own 70 percent, in return for its investment of $50,000. However, the agreement further provided that Mr Lizac would exercise effective control of the local subsidiary and would enjoy 80 percent of its financial return. In 2012, the Cabinet authorised the rescission of the concession agreement and the project was handed back to the alternative concessionaire. The Tribunal held that, in determining whether ‘an abuse of rights has occurred’, all of the circumstances of the case must be considered, including: the timing of the purported investment, the timing of the claim, the substance of the transaction, the true nature of the operation, and the degree of foreseeability of the governmental action at the time of restructuring.124 The Tribunal reviewed the timing and terms of the second agreement between Transglobal and Mr Lizac, and noted that the Claimants had, on a number of occasions, requested that the arbitration be suspended when it appeared that the local courts would enforce the Supreme Court judgment. It held that ‘Mr. Lizac inserted TGGE and TGGE Panama into the process of pursuing the execution of the Third Chamber Judgment at a time when it was clear that there was a problem with its implementation’.125 The arbitration amounted to an abuse of the ‘investment treaty system’ by the Claimants, ‘by attempting to create artificial international jurisdiction over a pre-existing domestic dispute’.126 In the fifteen years since the Autopista Award, international arbitral jurisprudence on abuse of process has developed rapidly, but inconsistently. In the following sections, we draw together the threads of the various decisions to identify and elucidate the core elements of the abuse of process test, and provide suggestions as to how the test can be refined. III. THE TEST FOR WHEN A CORPORATE RESTRUCTURING RENDERS A CLAIM AN ABUSE OF PROCESS A. Abuse of Process is a Broad and Indefinable Doctrine The notion of an abuse of process, or abuse of rights, is a broad one. It is not susceptible of precise definition, and is likely to adapt to unforeseen circumstances in the future as tribunals flex their powers. It is certainly broader than the specific topic of this article. For example, although the Cementownia Award contains some discussion as to when a genuine corporate restructuring may amount to an abuse of process, its ultimate finding had a different basis. Like Europe Cement, it held that the investment had not in fact taken place: the Claimant had attempted a fraud on the Tribunal by relying on fabricated documents, which itself rendered the proceedings abusive. In Ampal-American Israel Corp v Egypt, the Tribunal held that it would be an abuse of process for the same party in interest to pursue claims, on the merits, in respect of the same investment before two different Tribunals.127 A comprehensive survey and analysis of the doctrine of abuse of process in investment arbitration is beyond the scope of this article.128 Our focus is specifically on the operation of the doctrine in the context of investment restructurings. Consequently, we will not consider issues such as whether tribunals have or should exercise the power to dismiss claims over which they otherwise have jurisdiction;129 or whether such an objection relates to jurisdiction or admissibility.130 B. The Underlying Rationale It has been said that the underlying rationale of a tribunal’s power to dismiss arbitration as an abuse of process is as follows: If it were accepted that the Tribunal has jurisdiction to decide Phoenix’s claim, then any pre-existing national dispute could be brought to an ICSID tribunal by a transfer of the national economic interests to a foreign company in an attempt to seek protections under a BIT. Such transfer from the domestic arena to the international scene would ipso facto constitute a ‘protected investment’—and the jurisdiction of BIT and ICSID tribunals would be virtually unlimited. It is the duty of the Tribunal not to protect such an abusive manipulation of the system of international investment protection under the ICSID Convention and the BITs. It is indeed the Tribunal’s view that to accept jurisdiction in this case would go against the basic objectives underlying the ICSID Convention as well as those of bilateral investment treaties. The Tribunal has to ensure that the ICSID mechanism does not protect investments that it was not designed for to protect, because they are in essence domestic investments disguised as international investments for the sole purpose of access to this mechanism. 131 Other tribunals have expressed similar sentiments.132 C. Two Necessary Elements Tribunals have held that there are two elements of this type of abuse of process: that the restructuring was (i) undertaken at a time when a specific dispute existed or was foreseeable;133 and (ii) motivated by a desire to obtain treaty protection for that dispute.134 Subject to the proposal below, it would ordinarily be for the respondent to prove both elements.135 The two elements are necessarily interdependent: the cases are clear that, without more, a restructuring intended to secure treaty protection is unobjectionable.136 A pre-existing or foreseeable dispute must be established. The cases are less clear as to whether the second element is necessary. In Philip Morris, the Respondent accepted that the two elements were ‘key factors’ to be taken into consideration,137 but appeared to contend that the first element alone was sufficient: ‘[t]he abuse … resides in the manipulation of corporate nationality at a time when the dispute is in existence or is foreseeable to a sufficient degree’.138 The better analysis, however, is that the first element alone is not sufficient to establish an abuse of rights. In each of the cases discussed above in which an abuse was found, the Tribunal made a specific determination as to the intention or motivation behind the restructuring.139 That makes sense. Although a finding of ‘bad faith’ or ‘fraud’ is not necessary to establish an abuse of process,140 some quality of ‘abusiveness’ is required. That is in keeping with the stated underlying rationale—to reserve the treaty arbitration mechanism for genuine claims of the sort envisioned by the Contracting States—and the broader doctrine of abuse of rights or abuse of process. If the claimant did not restructure its investment for the proscribed purpose, then there is nothing abusive about its conduct; the dispute remains a genuine one. A mere coincidence of timing—a restructuring which happens to take place when a treaty claim is objectively foreseeable—should not be enough to deprive a claimant of its right to bring an otherwise valid claim, however unlikely such a coincidence may be in practice. For that reason, it is suggested that the Philip Morris Tribunal was not quite right to describe it as an ‘objective test’.141 Likewise, the Tidewater Tribunal’s reference to the ‘objective purpose’142 of the restructuring is apt to mislead. A better analysis is that the test is objective as to the first element, and subjective as to the second. That is, the tribunal must be satisfied that: (i) the restructuring occurred at a time when, objectively, a specific dispute had crystallised or was foreseeable; and (ii) the claimant, subjectively, intended to secure treaty protection for that dispute by means of its restructuring.143 Breaking down the test in that way better reflects the arbitral jurisprudence—in many instances, the claimant itself admitted that it was motivated by the prospect of obtaining treaty protection144—and strikes a better balance between the stated rationale, and allowing valid claims to proceed. If the test were purely objective, then there is a prospect of the extraordinary power to dismiss valid claims as an abuse being wielded against claimants guilty of nothing more than unfortunate timing.145 That would be a step too far. The subjective element of the test has its own difficulties. Some claimants may manage to establish some form of ‘plausible deniability’ as to any improper motivation behind a restructuring. Findings as to subjective intention may still, of course, be made by inference in view of all of the circumstances of the case, including the factors already identified by tribunals. Such factors include the proximity in time between the restructuring, the measures in question, and the threats of arbitration.146 There is some artificiality to this approach. The innocent claimant who benefits from a coincidence of timing is perhaps highly unlikely in practice. However, it is better to trust in the ability of tribunals to draw inferences on the facts, and get at the true motivation behind a restructuring, rather than making the test entirely objective or abandoning the intention element altogether. As discussed above, a subjective proscribed intention provides the necessary quality of abusiveness; and, as discussed below, approaching the second element subjectively allows for a conceptually coherent approach to resolving a number of outstanding questions. However, there may be another way to address these difficulties—and particularly to address the risk that well-advised claimants may be able to make an otherwise abusive restructuring appear entirely innocent. By this approach, tribunals would first determine whether the restructuring occurred147 at a time when a dispute was on foot or reasonably foreseeable. Secondly, if that element is established, a rebuttable presumption would arise that the restructuring was intended to secure treaty protection for that dispute. The onus would then be on the claimant to displace that presumption.148 It is, of course, the claimant who is best able to adduce evidence of its intention; whereas a respondent is unlikely to be in a position to do so. Further, the unlikelihood of a claimant obtaining treaty protection in these circumstances by dumb luck means that the risk of the presumption doing an injustice is low. Indeed, a tribunal is likely to be highly sceptical of a claimant’s plea that, although a dispute was objectively foreseeable at the time it restructured its investment, it did not in fact foresee that dispute. Reversing the burden in this manner may therefore not have significant practice effect: where the first element is proven, a tribunal may readily infer the requisite intention even where the respondent bears the burden of proving it. Having established the core elements of the test applied by Tribunals to date, the following sections discuss aspects of both limbs which remain obscure, and suggest ways of clarifying those ambiguities. IV. ISSUES WHICH REMAIN TO BE CLARIFIED A. The First Element: Foreseeability It is now well-established that a restructuring designed to enable a treaty claim to be brought on the basis of an existing dispute will amount to an abuse of process.149 However, that aspect of the doctrine overlaps completely with the requirements of jurisdiction ratione temporis: if the claimant had not made its investment before the dispute crystallised, its claim will be dismissed in any event.150 The more interesting, and powerful, aspect of the doctrine is that which allows a claim to be dismissed even where the requirements of jurisdiction ratione temporis are met. However, large questions remain as to the boundaries of the foreseeability requirement. Some of these open questions caused the Claimant in Philip Morris to argue that the ‘entire concept of foreseeability as a standard of abuse is ultimately unworkable’.151 There are certainly difficulties with the concept.152 After all, a restructuring intended to procure treaty protection, without more, is unobjectionable. However, a claimant presumably undertakes such a restructuring because it foresees at least some risk that it will need to call upon that protection in the future; that a dispute may arise. The boundary is therefore an exceedingly grey one. It may be that it would be better to do away with the foreseeability element altogether, and only impugn restructurings which took place after a dispute has crystallised. However, in light of the fact that some Tribunals have included this element in their analysis, and that it appears unlikely to be abandoned altogether, the remainder of this section proposes ways to make the boundaries of it clearer. (i) What has to be foreseeable? ‘[I]t is perfectly legitimate … for an investor to seek to protect itself from the general risk of future disputes’:153 therefore, a key question is what specific risks must be foreseeable to satisfy the first element of the test. It is unclear precisely what must be foreseeable. At a high level, it is clear that the subject matter of the subsequent arbitration must have been foreseeable. However, some cases conclude that the dispute must be foreseeable; others, the measures underlying the dispute. The latter should be preferred. However, the weight of the authorities suggests that it is the dispute which must be (existing or) foreseeable.154 That begs the question: What constitutes a ‘dispute’ for these purposes? The definition of ‘dispute’ is relatively settled in other areas of public international law. In the Mavrommatis Palestine Concessions case, the Permanent Court of International Justice held that a ‘dispute is a disagreement on a point of law or fact, a conflict of legal views or of interests between two persons’.155 In Teinver v Argentina, the Tribunal further explained that ‘for a dispute to exist, it must have crystallized into an actual disagreement’.156 In Maffezini v Spain, the Tribunal teased out the difference between the underlying events and the dispute, and described the ‘natural sequence of events’ between them, including the ‘formulation of legal claims’ and the communication of those claims between the parties.157 If it is this conception of ‘dispute’ which must be either pre-existing or foreseeable, then real problems may arise. The danger is seen most acutely in Pac Rim. In that case, the Tribunal appeared to conclude that it was the pleaded case that must have been foreseeable at the time of the restructuring. In the Claimant’s early pleadings, it had ‘focus[ed] primarily on events’ prior to its restructuring, being the failure of the El Salvador authorities to issue mining licences.158 The Tribunal would, apparently, have concluded that the restructuring was an abuse of process on the basis of that version of the claim.159 However, the Claimant subsequently changed tack, emphasising the relevance of the President’s 2008 speech to characterising prior events. The speech post-dated the restructuring but had occurred by the time the Claimant filed its original pleadings. The Tribunal concluded that, on the basis of the ‘claims as finally pleaded’,160 the restructuring was not an abuse of process. This apparent focus on the precise way in which a claimant formulates its legal claims may allow a claimant to craft its pleadings in a way that avoids the abuse of process doctrine, just as the Claimant in Pac Rim was able to do. (The Pac Rim Tribunal itself warned of such a possibility.161) That would arguably not serve the stated underlying purpose of protecting the investment treaty arbitration system from manipulation; it would simply expose it to a different kind of manipulation. A second difficulty with this approach is that it opens the door for arguments as to when a claimant formed the intention to sue, or took an outward position which crystallised the disagreement. For example, in Philip Morris, the Respondent identified two outward acts of the Philip Morris group which were ‘critical to the formation of the dispute’.162 Such an argument allows a claimant to dispute when it formed its intention to sue (as the Claimant in Philip Morris did163). These factors are also open to manipulation. For instance, a claimant could remain entirely silent until after its restructuring was complete, thereby preventing a dispute or disagreement from arising or appearing foreseeable until the right moment.164 A more objective approach is to consider the foreseeability of the measures giving rise to the dispute.165 That appears to have been the approach adopted by the Tidewater Tribunal: despite formulating the enquiry in terms of the ‘dispute’, it asked whether there was ‘a reasonable prospect … such a nationalization [ie, the measures in question] was imminent’.166 Likewise, the Gremcitel Tribunal set out to determine whether the ‘dispute’ was foreseeable, but did so by concluding that the Claimants could foresee the 2007 Resolution which underpinned it.167 The Philip Morris Tribunal held that ‘a dispute is foreseeable when there is a reasonable prospect … that a measure which may give rise to a treaty claim will materialize’.168 And in Transglobal, the Tribunal held that a relevant circumstance was the ‘degree of foreseeability of the governmental action’.169 Applying this test, Pac Rim may have been decided differently. The Tribunal characterised El Salvador’s measures in that case as a ‘continuing act’, which began long before the restructuring.170 Accordingly, the wrongful measures were not only foreseeable at the relevant time171 they had begun—arguably making the claim a classic example of an abuse of process. To some extent, this may in practice be a distinction without a difference: if a claimant takes steps to obtain treaty protection at a time when it is foreseeable that a State may take measures in breach of its investment treaty obligations, then it may be reasonable to infer that the claimant took such steps because it foresaw that it would initiate a dispute with respect to those measures. However, the analysis is clearer if the focus is squarely on the government measures, and not the claimant’s attitude towards them. (ii) How specific? Another difficult issue is just how specific the foreseeable events need to be. Some cases appear to require a high degree of specificity; in others, it appeared to be enough that unlawful measures of some kind or other were foreseeable. At one end of the spectrum lie the cases against Venezuela. In those cases, it might be thought that it was clearly foreseeable at the time of the relevant restructurings that Venezuela’s regulation of its oil resources was on a path inexorably leading to breaches of its treaty obligations.172 There was a ‘ticking clock’, in the sense of the impending deadline for migration to the new style of agreement; the level of extraction tax was quickly being ratcheted up; and the Claimant in Mobil Corporation specifically wrote to the Government in respect of potential expropriation or nationalization measures. The restructurings in Mobil Corporation, Tidewater and ConocoPhillips each occurred after the clock had started to run; but they were held not to be abuses of process. The Tidewater Tribunal considered that the specific ‘acts of expropriation that gave rise to the present dispute’ were not foreseeable (at least ‘imminently’); the ConocoPhillips Tribunal held that ‘no claim … was in prospect’; and the Mobil Corporation Tribunal did not consider foreseeability at all (which may have been, in light of other Awards, an error). A high degree of specificity and timeliness appears to have been required. Transglobal sits towards the middle of the spectrum. In that case, the Tribunal held that the restructuring occurred at a time ‘when it was clear that there was a problem’ in implementing the Supreme Court’s judgment—which appears to have been enough to amount to an abuse of process.173 (There was no suggestion that the Cabinet’s formal authorization of the rescission of the concession agreement was foreseeable at the relevant time.) This appears to set a much lower threshold: it was enough that some ‘problem[s]’ were foreseeable. The Philip Morris Tribunal might be seen to have staked out a position at the far end of the spectrum: a dispute is foreseeable if there is a prospect that ‘a measure which may give rise to a treaty claim will materialise’.174 Arguably, this test simply requires that any unlawful measure be foreseeable: a measure, rather than the measure which eventuates. Read in context, however, that is not what the Tribunal intended: the measure must be referable to the ‘specific dispute’ which forms the basis of the subsequent claim.175 The better test (albeit an imperfect one) lies somewhere in the middle of that spectrum. It should be sufficient that measures of a kind which eventually form the basis of the claim are foreseeable, or reasonably in prospect—though not necessarily their precise form or timing. It need not be foreseeable that the measures are ‘imminent’ (per Tidewater), as that would reward a claimant for restructuring earlier than another, even though the eventual measures were just as foreseeable. There does not appear to be any good justification for such a distinction. A restructuring which occurs when it is foreseeable that an expropriation is three years away may be just as abusive as if the expropriation were likely to take place in the next few months.176 This test is necessarily vague and flexible and its application will be fact-dependent. Applying it, the Venezuelan cases may have been determined differently. (iii) How foreseeable? The Pac Rim Tribunal appeared to require a high degree of foreseeability: the specific dispute must be a ‘very high probability and not merely … a possible controversy’.177 Subsequent tribunals have specifically cited that test, while at the same time retreating from it. The Philip Morris Tribunal did so most explicitly, reasoning that the foreseeability threshold lay ‘between [those] two extremes’—while that description provides little guidance, it makes clear that a ‘very high probability’ is not required.178 Reasonable foreseeability is enough. (iv) When does it have to be foreseeable? Recent cases have drawn out an important, but overlooked, question: At what point in time is foreseeability to be assessed? In particular, is it when the restructuring is set in motion, or when it is consummated?179 The question may be important, as a complex corporate restructuring may take many months to document and complete, by which stage the situation in the host State may have changed considerably. By way of illustration, in Transglobal, the Memorandum of Understanding was signed very soon after the Supreme Court judgment was rendered, at which stage it may not have been foreseeable that the executive would refuse to implement it. The second agreement, however, was signed almost a year later, at which point the measures were foreseeable. If the Tribunal had assessed the position at the first date and not the second, its decision may well have been different. Most cases assess foreseeability at the time the restructuring completed,180 without any substantive discussion as to which is the critical date. However, it is respectfully suggested that foreseeability should be assessed at the time the restructuring is set in motion, not when it is consummated. That is when the decision to restructure is made—it follows that that is the time at which the claimant’s motivation behind the restructuring should be assessed. It is difficult to justify, conceptually, a holding that a restructuring was motivated to gain protection for a foreseeable dispute if that dispute was not foreseeable at the time the decision to restructure was made. This suggestion raises evidential difficulties: it will generally be easier to determine the date on which a restructuring was completed, than the date it was first decided upon. This necessitates a flexible approach to the critical date. One possible solution is to assume that the dates coincide, unless the claimant establishes to the contrary. B. The Second Element: Intention (i) Bad faith? The Claimant in Philip Morris argued that a finding of bad faith was ‘critical’ to dismissing a claim as abuse of process.181 It appeared to argue that, in the absence of bad faith, a restructuring undertaken at a time when a dispute was reasonably foreseeable would not be an abuse of process. It is true that a number of tribunals have referred to concepts of good and bad faith in their analysis.182 However, the Philip Morris Tribunal was right to dismiss it as a necessary element.183 No previous tribunal has considered a finding of bad faith to be essential to the abuse of process doctrine. In Ampal-American, the Tribunal ‘wishe[d] to make it very clear that this resulting abuse of process is in no way tainted by bad faith on the part of the Claimants’.184 To some extent, this is merely a matter of semantics. Some quality of ‘abusiveness’ must be shown. But that is satisfied by the two elements discussed above whether that is labelled ‘bad faith’ or not. (ii) A ‘dominant purpose’ test? The cases are unclear as to whether a restructuring can be saved from being an abuse of process if it was additionally motivated by other, legitimate, reasons. In Phoenix Action, the Tribunal emphasised that the investment treaty arbitration system would not protect transactions ‘undertaken and performed with the sole purpose of taking advantage of the rights in such instruments’.185 The Cementownia Tribunal adopted that reasoning.186 In Mobil Corporation, the Respondent submitted that the ‘sole purpose’ of the restructuring was to gain treaty protection;187 the Tribunal found that that was indeed the ‘main, if not the sole purpose’.188 Subsequent tribunals picked up on the Mobil Corporation Tribunal’s nuancing of the test. In Pac Rim, the Tribunal found that ‘one of the principal purposes’ of the restructuring was to obtain access to CAFTA remedies.189 In Tidewater, the Claimant argued that its restructuring had two purposes: tax advantages and treaty protection. The Tribunal reasoned that: it suffices for the Tribunal to accept for present purposes that one of the two reasons for the reorganization was a desire to protect Tidewater from the risk of expropriation by incorporation of an investment vehicle in a state having investment treaty arrangements with Venezuela.190 In ST-AD, the Tribunal found that the ‘essential purpose’ of the restructuring was creating international jurisdiction;191 although that is better viewed as a finding on the facts, rather than a ruling that an abuse of process will only be found where the only or essential purpose of the restructuring is the proscribed purpose. Likewise, the Claimant’s admission in ConocoPhillips that the ‘only business purpose of the restructuring’ was to access ICSID arbitration,192 and the Gremcitel Tribunal’s finding that the ‘only purpose’ of the transfer was to bring a treaty arbitration.193 In Philip Morris, the Tribunal echoed Mobil Corporation in finding that the ‘main and determinative, if not sole’ reason for the restructuring was to obtain BIT protection.194 Interestingly, it went further and said: it would not normally be an abuse of right to bring a BIT claim in the wake of a corporate restructuring, if the restructuring was justified independently of the possibility of bringing such a claim.195 This seems to support the notion that a restructuring may not render a claim an abuse of process, even if it was brought about partly to obtain treaty protection for an existing or foreseeable claim, if it also had an ‘independent’ justification. That would contradict the reasoning of the Pac Rim and Tidewater Tribunals, which suggested it would be sufficient if the proscribed purpose was only one of a number of motivating reasons for restructuring. In no case was this issue determinative, and so it remains open for future tribunals to reach their own view. However, the tension in the authorities discussed above may be resolved by introducing a dominant purpose test. That is, if the proscribed purpose is the dominant, ‘main’ (per Mobil Corporation) or ‘principal’ (per Pac Rim) purpose of the restructuring, then it will be an abuse. However, if obtaining treaty protection is merely ‘an ancillary consequence’196 of a restructuring with an unrelated dominant purpose, or a subsidiary motivation, then it will not be abusive. Such a test would strike a fairer balance between the stated rationale of protecting the integrity of the investment arbitration system, and the interests of claimants who have not set out to abuse it.197 On the other hand, the Philip Morris Tribunal’s apparent suggestion that any other ‘independent justification’ for the restructuring would save it from being an abuse of process would arguably tip the balance too far in favour of claimants.198 If the burden-shifting suggestion made above is accepted, the onus would be on the claimant to establish that the restructuring was not done for the dominant purpose of obtaining treaty protection for the dispute. In any case, a claimant should be prepared to submit evidence in respect of the purpose of the restructuring, ideally in the form of contemporaneous corporate documents and witness statements from the true decision-makers. (The Philip Morris Tribunal made particular mention of the absence of such evidence in finding that the alternative reasons for the restructuring proffered by the Claimant were unpersuasive.199) C. Other Factors? Finally, some of the cases appear to suggest that the two stage test described above is merely one factor to consider in determining whether a restructuring renders arbitration an abuse of process. In other words, they leave open the possibility that, even if a restructuring meets the test, other factors may save the claim from being an abuse of process. The most obvious such factor is the degree to which the claimant increased its investment after the restructuring. The ConocoPhillips Tribunal considered that the Claimant’s $400+ million post-restructuring investment was a ‘very weighty’ factor ‘telling very strongly against any finding of treaty abuse’.200 The Mobil Corporation Tribunal noted that one of the Claimants re-committed, after the restructuring, to invest more than $1 billion.201 In neither case was the restructuring an abuse of process even though, as discussed above, the dispute in question was arguably reasonably foreseeable at the relevant time. There are at least two ways to conceptualise the relevance of post-restructuring investment. Some tribunals have analysed it in terms of the second element of the test—that is, as evidence supporting a conclusion that the restructuring was not motivated to obtain protection for a foreseeable dispute.202 Alternatively, post-restructuring investment may be considered as a relevant factor that sits entirely outside the two stage test.203 At first blush, this argument is problematic. If the two stage test is satisfied, then arguably no mitigating circumstances should permit a claimant nevertheless to bring a claim; that hard-line position would certainly be easier to police. However, it would not best serve one of the objects and purposes of the investment arbitration mechanism—namely, to attract investment—at least in the case of foreseeable, rather than existing, disputes. A foreseeable unlawful measure is not a certainty: it is a risk. All investments have risks. The investment arbitration mechanism is, in essence, a standing offer by States to provide a remedy if the risk of an unlawful measure crystallises, in order to thereby encourage investment. If a claimant foresees such a measure and is willing to take that risk and continue investing on the condition that it have access to the arbitration mechanism—rather than, say, pulling out of the country altogether—then that purpose is served, not subverted. If it is accepted that post-restructuring investment is an independent consideration, then it will be a matter of fact and judgment as to how much subsequent investment is sufficient. For instance, the $50,000 sum paid by the Claimant in Transglobal was clearly considered not to be sufficient to prevent a finding of abuse of process. Accordingly, the better view is that the two step test is just one factor in the abuse of process analysis, albeit a very weighty one. The relevance of other factors, if any, should be left for future cases in which those factors are raised. V. CONCLUSION There is no doubt that tribunals have the power to dismiss a claim on the basis of an abusive restructuring. In this article, we have explored the developing arbitral jurisprudence in respect of that extraordinary power. We have sought to identify and resolve inconsistencies in the decisions, and bring clarity to a difficult area which is becoming increasingly important to investors, their advisers, and arbitration practitioners. In short, the test may be restated as follows. Subject to the caveat set out in Section IV.C above, a restructuring may render a subsequent claim an abuse of process where the restructuring was: i) set in motion at a time when a specific dispute existed or when measures of a kind which form the basis of the eventual dispute were reasonably foreseeable; and ii) undertaken for the dominant purpose of obtaining treaty protection for that dispute. It is hoped that this paper has assisted to develop a rigorous framework in which to analyse these issues as they come up, whether that be when a restructuring is being considered, or after a claim has been made. Footnotes 3 See eg Christoph Schreuer, ‘Nationality Planning’ in Arthur Rovine (ed), Contemporary Issues in International Arbitration and Mediation: The Fordham Papers (Brill | Nijhoff 2012). 4 Two preliminary comments on terminology need to be made. As will be seen later in this article, rightly or wrongly, parties and tribunals have variously used the phrases ‘abuse of rights’ and ‘abuse of process’ to refer to the doctrine with which we are concerned (in some instances interchangeably). This article will use the former. De Brabandere has argued that ‘abuse of process’ is a particular feature of the broader principle of ‘abuse of rights’, denoting cases where the right in question is procedural in nature: Eric De Brabandere ‘“Good Faith”, “Abuse of Process” and the Initiation of Investment Treaty Claims’ (2012) 3(3) J Intl Disp Settlement 609–36. The difficulties in drawing that distinction—and the relative lack of utility in doing so—may be a good reason to prefer the more general term, ‘abuse of rights’: see Tania Voon, Andrew Mitchell and James Munro, ‘Legal Responses to Corporate Maneuvering in International Investment Arbitration’ (2014) 5 J Intl Disp Settlement 41, 61. In Philip Morris Asia Limited v The Commonwealth of Australia, PCA Case No 2012-12, Award on Jurisdiction and Admissibility (17 December 2015) (Philip Morris), the Tribunal considered the terms to be essentially interchangeable for the purposes of the topic of this article: ‘abuse of rights (or an abuse of process, the rights abused being procedural in nature)’ (para 554). By contrast, John Gaffney has argued that an aggrieved investor’s right of recourse under an investment treaty should not be equated with States’ substantive rights. Gaffney argues that, because the international law doctrine of ‘abuse of rights’ is traditionally associated with the abuse by States of their substantive sovereign rights, it does not underpin the power of tribunals to dismiss abusive claims by investors. Instead, he argues, that power is derived from the inherent power of a tribunal to regulate its own procedure: John Gaffney, ‘“Abuse of Process” in Investment Treaty Arbitration’ (2010) 11(4) J World Inv & Trade 515, 523–24. Without entering into that debate, this article will adopt the ‘abuse of process’ terminology. In addition, the ‘right’ or ‘process’ being ‘abused’ for the purposes of the topic of this article is the right to bring a claim in arbitration. A restructuring may render a claim abusive; but the restructuring itself does not constitute the abuse of rights (cf Renée Rose Levy and Gremcitel SA v Republic of Peru, ICSID Case No ARB/11/17, Award (9 January 2015) para 195, concluding that ‘the corporate restructuring … constitutes an abuse of process’). 5 We note in this regard the contribution to that debate made by Stephen Jagusch and others, ‘Restructuring Investments to Achieve Investment Treaty Protection’ in Meg Kinnear and others (eds), Building International Investment Law: The First 50 Years of ICSID (Kluwer Law International 2015), 175–76; 189–90. In particular, those authors raise the concern that a foreseeability test is difficult for investors to apply in ‘real time’, and that further clarification would be welcome from future tribunals in this regard. 6 For an interesting discussion of the history of the abuse of rights doctrine in domestic and international law, see Michael Byers, ‘Abuse of Rights: An Old Principle, A New Age’ (2002) 47 McGill L J 389, 389–404. Byers observes that the abuse of rights principle appears in the early case law of the Permanent Court of International Justice and the International Court of Justice. For example, in the Case concerning certain German interests in Polish Upper Silesia (The Merits) (1926) PCIJ (Ser A) no 7, 30, it was acknowledged that a misuse of Germany’s right to dispose of property could amount to a breach of the Treaty of Versailles. In the Fisheries Case (United Kingdom v Norway) [1951] ICJ Rep 116, 150–51, Alvarez J observed that states demarcating their territorial seas must do so in a way that does not constitute an abuse of rights. In the Barcelona Traction Case [1970] ICJ Rep (vol 1) 3, 17, Belgium argued that Spain had abused its powers to bring about the transfer of control of certain assets (while Spain in turn argued that the claim for reparation was itself ‘an abuse of the right of diplomatic protection’: 15). In the Nuclear Tests Case (Australia v France) [1974] ICJ Rep 253, 362, Australia argued that if France was determined to have a right to conduct atmospheric nuclear tests, its exercise of that right would have constituted an abuse of rights. See also GDS Taylor, ‘The Content of the Rule Against Abuse of Rights in International Law’ (1972–73) 46 BYBIL 323, 323–52; Martins Paparinskis, ‘Inherent Powers of ICSID Tribunals: Broad and Rightly So’ in Ian A Laird and Todd J Weiler (eds), Investment Treaty Arbitration and International Law, vol 5 (JurisNet 2012). 7 Autopista Concesionada de Venezuela, CA v Bolivarian Republic of Venezuela, ICSID Case No ARB/00/5, Decision on Jurisdiction (27 September 2001) (Autopista). 8 Autopista (n 7) heading before para 47. 9 Autopista (n 7) para 123. 10 Autopista (n 7) paras 17, 123–24. 11 Autopista (n 7) para 126. 12 Aguas del Tunari SA v Republic of Bolivia, ICSID Case No ARB/02/3, Decision on Respondent’s Objections to Jurisdiction (21 October 2005) (Aguas del Tunari). 13 Article 9(6) of the Agreement on Encouragement and Reciprocal Protection of Investments between the Kingdom of the Netherlands and the Republic of Bolivia (signed 10 March 1992, entered into force 1 November 1994) extracted at Aguas del Tunari (n 12) para 79. 14 Aguas del Tunari (n 12) paras 328–33. 15 Aguas del Tunari (n 12) para 330(d). 16 Aguas del Tunari (n 12) para 331. 17 Phoenix Action Ltd v Czech Republic, ICSID Case No ARB/06/5, Award (15 April 2009) (Phoenix Action). 18 It was accepted that the Claimant was incorporated in Israel, and that the Agreement between the Government of the Czech Republic and the Government of the State of Israel for the Reciprocal Promotion and Protection of Investments (signed 23 September 1997, entered into force 16 March 1999) contained the Respondent’s consent to ICSID arbitration in such circumstances: ibid, paras 65–66. 19 Phoenix Action (n 17) para 67. 20 Phoenix Action (n 17) para 114. 21 Phoenix Action (n 17) para 106. The Tribunal relied primarily on two cases concerning the ‘international principle of good faith as applied to the international arbitration mechanism of ICSID’ (para 113): Inceysa Vallisoletana SL v Republic of El Salvador, ICSID Case No ARB/03/26, Award (2 August 2006) (Inceysa), and Plama Consortium Limited v Republic of Bulgaria, ICSID Case No ARB/03/24, Award (27 August 2008) (Plama). Inceysa did not involve a corporate restructuring; rather, the Claimant in that case had relied on false representations to secure the government contract in issue. The Tribunal held that El Salvador’s consent to ICSID’s jurisdiction ‘presuppos[ed] good faith behavior on the part of future investors’ (at para 238), and therefore could not apply to the case before it. In Plama, the Claimant made misrepresentations as to its ultimate ownership in the course of obtaining government approval for its investment; had the truth been known, approval would not have been granted. The Tribunal held that the investment had been procured in a manner ‘contrary to the principle of good faith’ and that, therefore, the substantive provisions of the Energy Charter Treaty did not apply to it: paras 144–46. 22 Phoenix Action (n 17) para 135. 23 Phoenix Action (n 17) paras 136–37. 24 Phoenix Action (n 17) para 138. 25 Phoenix Action (n 17) paras 139–40. 26 Phoenix Action (n 17) para 142. 27 Phoenix Action (n 17) para 144. 28 Phoenix Action (n 17) paras 144–45. 29 Europe Cement Investment and Trade SA v Republic of Turkey, ICSID Case No ARB(AF)/07/2, Award (13 August 2009) (Europe Cement). 30 Cementownia ‘Nowa Huta’ SA v Republic of Turkey, ICSID Case No ARB(AF)/06/2, Award (17 September 2009) (Cementownia). 31 Cementownia (n 30) para 16; Europe Cement (n 29) para 84. 32 Cementownia (n 30) para 149; Europe Cement (n 29) para 145. 33 Cementownia (n 30) para 156. 34 Europe Cement (n 29) para 163. 35 Cementownia (n 30) para 159; Europe Cement (n 29) paras 167, 175. 36 Cementownia (n 30) para 154. 37 Cementownia (n 30) para 156. 38 See eg Charbel A Moarbes, ‘Introductory Note To The International Centre For Settlement Of Investment Disputes: Malaysian Historical Salvors Sbn., Bhd. V. Government Of Malaysia & Phoenix Action Ltd. v. Czech Republic’ (2009) 48(5) ILM 1081, 1085. 39 Mobil Corporation and others v Bolivarian Republic of Venezuela (now known as Venezuela Holdings BV and others v Bolivarian Republic of Venezuela), ICSID Case No ARB/07/27, Decision on Jurisdiction (10 June 2010) (Mobil Corporation). 40 Mobil Corporation (n 39) para 201. 41 Mobil Corporation (n 39) para 204. 42 Mobil Corporation (n 39) para 204. 43 Phoenix Action (n 17) para 205. 44 Mobil Corporation (n 39) paras 203–05. 45 Pac Rim Cayman LLC v Republic of El Salvador, ICSID Case No ARB/09/12, Decision on the Respondent’s Jurisdictional Objections (1 June 2012) (Pac Rim). 46 Pac Rim (n 45) para 2.22. ‘CAFTA’ is the Central America Free Trade Agreement (signed 5 August 2004) (2004) 43 ILM 514. 47 Pac Rim (n 45) para 2.52. 48 Pac Rim (n 45) para 2.81, citing the Notice of Intent. 49 Pac Rim (n 45) para 2.82. 50 Pac Rim (n 45) para 2.55. 51 Pac Rim (n 45) para 2.83. 52 Pac Rim (n 45) para 2.94. 53 Pac Rim (n 45) para 2.99. 54 Pac Rim (n 45) para 2.99. 55 Pac Rim (n 45) para 2.100 (emphasis added). 56 Pac Rim (n 45) para 2.110. 57 Tidewater Investment SRL and Tidewater Caribe, CA v Bolivarian Republic of Venezuela, ICSID Case No ARB/10/5, Decision on Jurisdiction (8 February 2013) (Tidewater). 58 Tidewater (n 57) paras 154, 163. 59 Tidewater (n 57) para 167. 60 Tidewater (n 57) para 173. 61 Tidewater (n 57) para 181. 62 Tidewater (n 57) para 166. 63 Claims were also made under the Venezuelan Investment Law. 64 Tidewater (n 57) para 144. 65 Tidewater (n 57) para 183. 66 Tidewater (n 57) para 183. 67 Tidewater (n 57) paras 146, 184. 68 Tidewater (n 57) para 145. 69 Tidewater (n 57) para 190. 70 Tidewater (n 57) para 197. 71 Tidewater (n 57) para 195. 72 Tidewater (n 57) para 198. 73 ST-AD GmbH v The Republic of Bulgaria, UNCITRAL, PCA Case No 2011-06, Award on Jurisdiction (18 July 2013) (ST-AD). 74 ST-AD (n 73) para 209. 75 ST-AD (n 73) paras 317, 333. 76 ST-AD (n 73) para 415. 77 ST-AD (n 73) paras 421–23. 78 ConocoPhillips Petozuata BV, ConocoPhillips Hamaca BV and ConocoPhillips Gulf of Paria BV v Bolivarian Republic of Venezuela, ICSID Case No ARB/07/30, Decision on Jurisdiction and the Merits (3 September 2013) (ConocoPhillips). 79 ConocoPhillips (n 78) paras 140, 183. 80 ConocoPhillips (n 78) paras 6, 227. 81 ConocoPhillips (n 78) paras 272–73. 82 ConocoPhillips (n 78) para 275. 83 ConocoPhillips (n 78) para 279. 84 ConocoPhillips (n 78) para 279. 85 ConocoPhillips (n 78) para 280. 86 Lao Holdings NV v Lao People’s Democratic Republic, ICSID Case No ARB(AF)/12/6, Decision on Jurisdiction (21 February 2014) (Lao Holdings). 87 Lao Holdings (n 86) para 70. 88 Lao Holdings (n 86) paras 76–78. 89 Renée Rose Levy and Gremcitel SA v Republic of Peru, ICSID Case No ARB/11/17, Award (9 January 2015) (Gremcitel) 90 Gremcitel (n 89) para 18. 91 The precise structure of the group is not made clear in the Award. 92 The Tribunal rejected the Claimants’ contention that Ms Levy had owned an indirect interest in Gremcitel from an earlier date, in part because the documents submitted in support of that contention were ‘so full of inconsistencies that they cannot be relied upon’: Gremcitel (n 89) para 152. 93 Gremcitel (n 89) para 158. Mr Levy’s nationality is unclear from the Award, but it can be inferred that he did not qualify for BIT protection, while his sister did. 94 Gremcitel (n 89) para 35. 95 The resolution was published in Peru’s Official Journal on 18 October 2007. The Claimants contended the dispute arose on that date. 96 Gremcitel (n 89) para 37. 97 The BIT, the Agreement between the Government of the Republic of France and the Government of the Republic of Peru for the Promotion and Reciprocal Protection of Investments dated 6 October 1993, permitted Gremcitel itself also to bring a claim, on the basis that it was under French ‘control’. The Tribunal appears to have equated ‘majority ownership’ with ‘control’, holding that Ms Levy’s ‘ownership of the shares [was] sufficient to establish “foreign control”’: para 71. 98 Gremcitel (n 89) para 174. 99 Gremcitel (n 89) para 184. 100 Gremcitel (n 89) para 185. 101 Gremcitel (n 89) paras 187–88. 102 Gremcitel (n 89) para 190. 103 Gremcitel (n 89) para 191. 104 Gremcitel (n 89) paras 189–91. 105 Gremcitel (n 89) para 194. 106 Gremcitel (n 89) para 195. Ms Levy was the Claimant in another ICSID arbitration against Peru during this period: Renée Rose Levy de Levi v Republic of Peru, ICSID Case No ARB/10/17, Award (26 February 2014). The arbitration concerned an entirely different investment from that considered by the Gremcitel Tribunal, being shares in the Peruvian company, Banco Nuevo Mundo. Ms Levy acquired her shares in that company from her father without charge in 2005; however, the relevant Peruvian regulator had ordered the company to be dissolved and liquidated in 2001, which had been the subject of various legal challenges in the intervening period. A few months after Ms Levy acquired her shares, the Supreme Court of Justice of Peru confirmed the validity of the original dissolution order. Peru contested jurisdiction on the basis that Ms Levy’s acquisition of shares was merely an attempt to manufacture ICSID jurisdiction. The Tribunal rejected that contention for two reasons: firstly, the mere fact that Ms Levy acquired her shares for no consideration did not evidence an abuse, because it was a transfer between family members; and second, because the Claimant did not file proceedings until five years after she acquired her shares: para 154. The Tribunal did not consider whether the dispute pre-existed the acquisition, or was foreseeable at that time: the reasoning was clearly inadequate on this issue, and so this case will not be considered further. It also appears that no objection was made on the basis of lack of ratione temporis jurisdiction. The claim failed on the merits. 107 Philip Morris (n 4) para 176. 108 See WHO Framework Convention on Tobacco Control, art 13. 109 Philip Morris (n 4) paras 105–06. 110 Philip Morris (n 4) para 111. 111 Philip Morris (n 4) para 533. 112 The Tribunal members themselves were steeped in the issue: Prof Böcksteigel sat on the Autopista Tribunal; Prof Kaufmann-Kohler heard Autopista, Mobil Corporation and Gremcitel; and Prof McRae sat on the Europe Cement Tribunal. 113 Philip Morris (n 4) para 539. 114 Philip Morris (n 4) para 536. 115 Philip Morris (n 4) para 554. 116 Philip Morris (n 4) para 566. 117 Philip Morris (n 4) para 567. 118 Philip Morris (n 4) para 570. 119 Philip Morris (n 4) para 582. 120 Philip Morris (n 4) para 584. 121 Philip Morris (n 4) para 588. 122 Transglobal Green Energy, LLC and Transglobal Green Panama, SA v Republic of Panama, ICSID Case No ARB/13/28, Award (2 June 2016) (Transglobal). 123 Transglobal (n 122) para 105. 124 Transglobal (n 122) para 103. 125 Transglobal (n 122) para 116. 126 Transglobal (n 122) para 118. 127 Ampal-American Israel Corporation and others v Arab Republic of Egypt, ICSID Case No ARB/12/11, Decision on Jurisdiction (1 February 2016) para 331 (Ampal-American). The abuse of process did not ‘crystallise’ until both Tribunals determined that they had jurisdiction over the claim. 128 See eg Martins Paparinskis (n 6), ‘Inherent Powers of ICSID Tribunals: Broad and Rightly So’ in Ian A Laird and Todd J Weiler (eds), Investment Treaty Arbitration and International Law, vol 5 (JurisNet 2012); Hervé Ascensio, ‘Abuse of Process in International Investment Arbitration’ (2014) 13 Chinese J Intl Law, 763. 129 The former issue has been resolved in practice, while the latter potentially remains a fruitful avenue for further analysis. The doctrine is an exceedingly powerful one: ‘Marshalled as it is as an objection at this preliminary stage, this is evidently a proposition of a very farreaching character; it would entail an ICSID tribunal, after having determined conclusively (or at least prima facie) that the parties to an investment dispute had conferred on it by agreement jurisdiction to hear their dispute, deciding nevertheless not to entertain the application to hear the dispute’ [The Rompetrol Group NV v Romania, ICSID Case No ARB/06/3, Decision on Respondent’s Preliminary Objections on Jurisdiction and Admissibility (18 April 2008) para 115]. 130 This has been described as a ‘distinction without a difference’: see Pac Rim (n 45) para 2.10, Gremcitel (n 89) para 181. Cf Eric De Brabandere (n 4). 131 Phoenix Action (n 17) para 144. 132 Mobil Corporation (n 39) para 205; Cementownia (n 30) para 154; ST-AD (n 73) para 423; ConocoPhillips (n 78) paras 273–74; Lao Holdings (n 86) paras 69–70; Gremcitel (n 89) para 183; Transglobal (n 122) para 102. 133 As discussed below and elsewhere [see eg Jagusch and others (n 5), 188–90], the foreseeability element has real difficulties that cannot be entirely solved merely by refinement. It may not be possible to determine, with real certainty, whether any proposed restructuring would subsequently be held abusive. The inability to advise ‘in real time’ may be a strong argument in favour of abandoning the foreseeability element altogether. That approach would be a substantial departure from current arbitral practice. Accordingly, this article proceeds to consider ways to improve the foreseeability element assuming that it will not be wholly abandoned by subsequent Tribunals. 134 See eg Phoenix Action (n 17) para 142; Cementownia (n 30) para 154; ST-AD (n 73) para 415; Lao Holdings (n 86) para 70; Gremcitel (n 89) para 185; Philip Morris (n 4) para 539. 135 See eg Philip Morris (n 4) para 495, where the Tribunal observed that ‘… it is for the Claimant to allege and prove facts establishing the conditions for jurisdiction under the Treaty; for the Respondent to allege and prove the facts on which its objections are based; and, to the extent the Respondent has established a prima facie case, for the Claimant to rebut this evidence’. In Pac Rim (n 45) paras 211–14 the Tribunal observed that it is for the Respondent to prove any positive objections to jurisdiction, including abuse of process [and quoted Chevron Corporation (USA) and Texaco Petroleum Company (USA) v The Republic of Ecuador, UNCITRAL, PCA Case No 34877, Interim Award (1 December 2008) paras 138–39]. See also Cervin Investissements SA and Rhone Investissements SA v Republic of Costa Rica, ICSID Case No ARB/13/2, Decision on Jurisdiction (15 December 2014) paras 294–95 (Cervin Investissements). 136 See eg Aguas del Tunari (n 12) para 330(d); Mobil Corporation (n 39) para 204; Tidewater (n 57) paras 146, 184; Gremcitel (n 89) para 184; Philip Morris (n 4) para 540. 137 Philip Morris (n 4) para 402. 138 Philip Morris (n 4) para 420, quoting from the Respondent’s First Post-Hearing Brief. The parties’ Memorials have not been made public, so it is possible that the Respondent did not contend that the second element was, alone, sufficient to amount to an abuse. The Tribunal’s summary of the parties’ arguments deals separately with what are described as the ‘foreseeability’ and ‘motivation’ criteria apparently on the basis that timing alone may be sufficient. 139 Phoenix Action (n 17), para 142; Cementownia (n 30) para 154; ST-AD (n 73) para 415; Gremcitel (n 89) paras 191–92; Philip Morris (n 4) para 587; Transglobal (n 122) para 118. 140 See Philip Morris (n 4) para 539, and discussion below. 141 Philip Morris (n 4) para 539. 142 Tidewater (n 57) para 150, citing Zachary Douglas, The International Law of Investment Claims (CUP 2009) 465. 143 It may be that this is what was intended by the Tidewater (n 57) and Philip Morris (n 4) Tribunals—ie that the claimant’s subjective intention must be determined objectively: that is, by reference to all the evidence rather than merely the claimant’s submissions as to its subjective intention. It is not clear how a party’s intention could otherwise be ‘objective’. Teasing out this distinction should assist to bring clarity to the analysis. Furthermore, it is acknowledged that, if this element is a subjective one, it essentially requires that the dispute not only be ‘foreseeable’ but ‘foreseen’. That is, in practice, how the Philip Morris Tribunal appears to have approached the analysis: see its formulation of the test at para 536 (‘motivated … by a desire to gain access to protection in order to bring a claim in respect of a specific dispute that … exists or is foreseeable’—for a foreseeable dispute to have motivated the restructuring, it must also have been foreseen), and its conclusion at para 584 (‘the Tribunal can only conclude that the main and determinative, if not sole, reason for the restructuring was the intention to bring a claim under the Treaty’). 144 See eg Mobil Corporation (n 39) paras 189–90, 204; Tidewater (n 57) paras 183, 194; ConocoPhillips (n 78) para 279. Even the Philip Morris (n 4) Tribunal made findings as to the Claimant’s (subjective) motivation: para 584. 145 And perhaps naïve luck in obtaining protection for a reasonably foreseeable claim that it had not foreseen. 146 See eg the factors considered in Mobil Corporation (n 39) paras 199–205; Phoenix Action (n 17) paras 136–40; ST-AD (n 73) paras 412–23; ConocoPhillips (n 78) paras 278–80; Gremcitel (n 89) paras 188–94. 147 See below the discussion as to when foreseeability should be assessed. 148 The Philip Morris (n 4) Tribunal may have taken this approach, albeit not explicitly. It noted at para 495 that it is ‘for the Respondent to allege and prove the facts on which its objections are based; and, to the extent that the Respondent has established a prima facie case, for the Claimant to rebut this evidence’. It first considered the ‘key question’ of ‘whether a dispute about plain packaging was reasonably foreseeable before the restructuring’: para 566; and concluded that this requirement was satisfied: paras 566, 569. The Tribunal then considered the Claimant’s ‘alleged other reasons for restructuring’ (see paras 570–83), and concluded at para 584 that ‘the Claimant has not been able to prove that tax or other business reasons were determinative for the restructuring’ (emphasis added). The Tribunal was critical of the Claimant’s failure to present key evidence as to its intention in restructuring (see paras 582–83), which perhaps further supports the view that the Tribunal considered the Claimant bore the burden of establishing its subjective intention. The Tribunal in Gremcitel (n 89) at paras 187–93 appears to discuss foreseeability and motivation together. However, the Tribunal commenced with an analysis of facts going to foreseeability, and then turned to consider (and criticise) the Claimant’s stated rationales for the restructure. By contrast, in Cervin Investissements (n 135) paras 294–95, the Tribunal firmly held that it was not for the Claimant to give a positive explanation of its reasons for the restructuring (though, in that case, the Claimant had provided a number of general motivations apart from obtaining treaty protection): it put the burden squarely on the Respondent to prove the proscribed motivation. 149 See eg Phoenix Action (n 17) paras 139–40; ST-AD (n 73) paras 421–23; Transglobal (n 122) para 118. 150 The Philip Morris (n 4) Tribunal specifically recognised this overlap: para 539. 151 Philip Morris (n 4) para 434. 152 See Jagusch and others (n 5), 188–90. 153 Tidewater (n 57) para 184 (emphasis added). See also Pac Rim (n 45) para 2.99; Philip Morris (n 4) paras 541, 547. 154 See eg Pac Rim (n 45) para 2.99; Tidewater (n 57) para 193; ConocoPhillips (n 78) para 279 (a ‘claim’ rather than a ‘dispute’); Lao Holdings (n 86) para 83; Gremcitel (n 89) para 185; Philip Morris (n 4) para 554. Cf Transglobal (n 122) para 103. 155 Mavrommatis Palestine Concessions, Judgment No 2 (1924) PCIJ Rep Series A No 2, 11. 156 Teinver SA, Transportes de Cercanías SA and Autobuses Urbanos del Sur SA v Argentine Republic, ICSID Case No ARB/09/1, Decision on Jurisdiction (21 December 2012), para 119. 157 Emilio Agustín Maffezini v Kingdom of Spain, ICSID Case No ARB/97/7, Decision of the Tribunal on Objections to Jurisdiction (25 January 2000) paras 94–96. 158 Pac Rim (n 45) paras 2.80–2.81. 159 Pac Rim (n 45) para 2.82. 160 Pac Rim (n 45) para 2.110. 161 Pac Rim (n 45) para 2.100. The Respondent in Philip Morris (n 4) also argued that this was not determinative: para 375. 162 Philip Morris (n 4) para 447. 163 Philip Morris (n 4) para 454. 164 Access to the claimant’s legal advice (or at least logs of its privileged communications), as in the Philip Morris case, may go some way to avoiding this risk—but this material will not always be available. 165 Tania Voon, Andrew Mitchell and James Munro, ‘Legal Responses to Corporate Manoeuvring in International Investment Arbitration’ (2014) 5 J Intl Disp Settlement 41, approach this slightly differently. They propose a distinction between a ‘narrow or broad view of the boundaries of the dispute’, rather than the dispute and its underlying facts. They note that, in Tidewater (n 57) para 149, the Tribunal adopted the test set out in Industria Nacional de Alimentos, SA and Indalsa Perú, SA (formerly Empresas Lucchetti, SA and Lucchetti Perú, SA) v Republic of Peru, ICSID Case No ARB/03/4, Award (7 February 2015) (Lucchetti), being a ‘broad’ notion of what constitutes the ‘dispute’. However, in Lucchetti, the question was whether the Tribunal had jurisdiction ratione temporis, which turned on whether there was ‘one or two separate disputes’: if the arbitration was merely a continuation of an earlier dispute, rather than in respect of a fresh dispute, then the Tribunal had no jurisdiction. For the purposes of that analysis, the Tribunal considered that the key question was whether the two alleged disputes concerned the same underlying subject matter. That is quite different from the analysis with which this article is concerned. The Lucchetti Tribunal did not purport to (re)define what constituted a ‘dispute’ for the purposes of international law more generally; indeed, it specifically noted that the concept of a ‘dispute’ had an ‘accepted meaning’, citing (among other cases) Mavrommatis Palestine Concessions: para 48. Rather, it simply enunciated principles to determine whether two purportedly separate disputes are one and the same for the purposes of jurisdiction ratione temporis. Accordingly, it is both simpler and more in keeping with the arbitral practice on the point to distinguish between the dispute and the measures underlying it (and perhaps accept that tribunals which focused on the existence or foreseeability of the dispute, rather than the measures, slightly missed the mark), rather than to attempt to parse out different definitions of ‘dispute’. 166 Tidewater (n 57) para 194. 167 Gremcitel (n 89) para 189. 168 Philip Morris (n 4) para 554. 169 Transglobal (n 122) para 103. In Aguas del Tunari (n 12) para 329(c), the Tribunal noted that the ‘severity of the particular events that would erupt in the Spring of 2000’ was not foreseeable. This appears to have been a reference to the popular opposition to the project in question, rather than the State measures taken in response to that opposition. As one led to the other, this decision might also be read as considering the foreseeability of the measures, rather than the dispute. 170 Pac Rim (n 45) para 294. 171 It is notable that the restructuring occurred more than three years after the mining licence application had been made—but a mere three months before the President of El Salvador’s speech which became central to the characterisation of the claim. Cf the discussion in Gremcitel (n 89) paras 187–88 as to the relevance of such ‘striking proximity’. 172 The Claimant in Philip Morris (n 4) certainly argued that the measures in question in Mobil Corporation (n 39), Tidewater (n 57), Pac Rim (n 45) and ConocoPhillips (n 78) were all at least reasonably foreseeable at the relevant time: paras 438–39. 173 Transglobal (n 122) para 116. 174 Philip Morris (n 4) para 554. 175 Philip Morris (n 4) para 554. 176 The Philip Morris (n 4) Tribunal made this point in a slightly different way: see para 567, noting that 19 months passed between the announcement of the legislation and its passage. Long democratic processes do ‘not make the outcome any less foreseeable than in the case of a State that does not have the same sort of democratic oversight of the legislative process and might enact legislation almost overnight’. 177 Pac Rim (n 45) para 2.99. 178 Philip Morris (n 4) para 554. 179 In Philip Morris (n 4), the Claimant argued that it was the latter, while the Respondent argued that it was the former: para 429. 180 See Pac Rim (n 45) para 2.45: the Tribunal in that case did not discuss any steps that were taken in preparation for the restructuring that occurred on 13 December 2007. In Mobil Corporation (n 39) the Tribunal focused on the time of the transfer of the shares, not earlier relevant dates such as the incorporation of the new Dutch holding company (see paras 187, 206). Even in the Philip Morris (n 4) case, the focus was on when the restructuring ‘occurred’. The Tribunal held that it was enough that, from 29 April 2010, ‘long before the restructuring’, there was a reasonable prospect that plain packaging measures would be enacted: see paras 566, 568. However, the first approval for the eventual restructuring appears to have occurred earlier in time: para 557. Cf Tidewater (n 57) paras 194–95, where the Tribunal focuses its analysis on the time when the Claimant commenced restructuring, not its consummation some three months later. In Gremcitel (n 89) the Tribunal focused upon the acts that set in motion the investment: see paras 188, 190. 181 Philip Morris (n 4) paras 414–19, 537. 182 See eg Mobil Corporation (n 39) paras 169–70; Phoenix Action (n 17) paras 106–13, 142–43; Pac Rim (n 45) para 2.100; ConocoPhillips (n 78) paras 273–74; Lao Holdings (n 86) para 70. 183 Philip Morris (n 4) para 539. 184 Ampal-American (n 127) para 331. 185 Phoenix Action (n 17) para 93, emphasis in original. The Phoenix Action (n 17) Tribunal reached this conclusion having reviewed the arbitration jurisprudence on purported assignment of claims: Banro American Resources, Inc and Société Aurifère du Kivu et du Maniema, SARL v Democratic Republic of the Congo, ICSID Case No ARB/98/7, Award (1 September 2000); and Mihaly International Corporation v Democratic Socialist Republic of Sri Lanka, ICSID Case No ARB/00/2, Award (15 March 2002). See also Caratube International Oil Company LLP v Republic of Kazakhstan, ICSID Case No ARB/08/12, Award (5 June 2012). In that case, the Tribunal drew on the six elements of a protected investment set out in the Phoenix Action Award. It concluded that, because the shareholder of the Claimant through which BIT protection was claimed had paid a nominal US$6,500 sum for his 92% stake, whereas the claim was for more than US$1 billion, there was insufficient financial contribution or risk taking to constitute an investment. This conclusion survived an annulment application [see Caratube International Oil Company LLP v Republic of Kazakhstan, ICSID Case No ARB/08/12, Decision on the Annulment Application (21 February 2014)]. The Respondent also contended that the investment was not bona fide for the purposes of the sixth element of the Phoenix Action test. However, the Tribunal held that there was ‘not sufficient proof … that the nationality shelter was the exclusive motivation for the transaction’ (para 465, emphasis added). See also Malicorp Limited v Arab Republic of Egypt, ICSID Case No ARB/08/18, Award (7 February 2011) para 116. 186 Cementownia (n 30) para 154. 187 Mobil Corporation (n 39) para 27. 188 Mobil Corporation (n 39) para 190. 189 Pac Rim (n 45) para 2.41. 190 Tidewater (n 57) para 183, emphasis in original. 191 ST-AD (n 73) paras 421, 423. 192 ConocoPhillips (n 78) para 279. 193 Gremcitel (n 89) para 191. 194 Philip Morris (n 4) para 584. 195 Philip Morris (n 4) para 570. 196 Philip Morris (n 4) para 570. 197 As noted above, the requirement to establish a subjective intention should serve to protect claimants who have not foreseen a reasonably foreseeable dispute. Similarly, the ‘dominant purpose’ aspect of this element should protect claimants who bring about restructurings primarily for genuine, unrelated reasons, but do so at a time when a dispute is reasonably foreseeable. 198 Philip Morris (n 4) para 570. 199 Philip Morris (n 4) para 582. 200 ConocoPhillips (n 78) para 280. 201 Mobil Corporation (n 39) para 196. 202 This appears to be at least one way in which the post-restructuring investments were found to be relevant in Tidewater (n 57) para 194 and ConocoPhillips (n 78) para 280. 203 In Mobil Corporation (n 39) the Tribunal observed at paras 190–91 that ‘… the main, if not the sole purpose of the restructuring was to protect Mobil investments from adverse Venezuelan measures in getting access to ICSID arbitration… Such restructuring could be ‘legitimate corporate planning’ as contended by the Claimants or an ‘abuse of right’ as submitted by the Respondents. It depends upon the circumstances in which it happened.’ The Tribunal considered the timing of the Claimant’s investments as one such circumstance. © The Author(s) 2018. Published by Oxford University Press on behalf of ICSID. All rights reserved. For permissions, please email: journals.permissions@oup.com This article is published and distributed under the terms of the Oxford University Press, Standard Journals Publication Model (https://academic.oup.com/journals/pages/about_us/legal/notices)

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ICSID Review: Foreign Investment Law JournalOxford University Press

Published: Jan 19, 2018

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