Definition of Foreign Investors and Protected Investments: A Comparative Analysis

This chapter first identifies problems arising out of definitions of “foreign investor” and “foreign investment” in domestic legislation. The chapter then analyses bilateral and multilateral investment treaties, awards of investment tribunals, and recommendations of international organizations and experts concerning the definition of “foreign investor” and “protected investments”. It shows that the criteria defining “investment”, “investor”, “investment activity” and “investment dispute” differ in domestic laws and international investment agreements. In the absence of detailed definitions, investor-State tribunals have wide discretion when interpreting these terms. The chapter then focuses on controversial issues arising out of definitions of foreign investments and investors or the lack of such definitions. More specifically, it discusses the relationship between a state’s sovereign right to regulate the activity of foreign investors, on the one hand, and the protection of their legitimate expectations, on the other. Many international treaties lack specific provisions to clarify the limits of a state’s ability to regulate in this context, including in the area of taxation and other areas of public law. The chapter also examines how international law and international tribunals approach corporate features of individual companies and corporate groups, as well as approaches to defining the concept of “investor” based on location, incorporation and control. Before concluding, the final section presents an overview of recent reforms in various jurisdictions, as well as specific policy options related to the definition of “investment”, “investor”, and related terms.