Browsing by Author "Puukka, Johanna"

This study systematically examines the practice of treaty shopping in international investment law and related arbitral awards. In this context the term "treaty shopping" connotes a strategic change of the investor's nationality for the purpose of accessing more favourable investment treaty provisions and dispute settlement mechanisms. The focus is solely on corporate investors, as the overwhelming majority of international investments are made by legal entities. In addition, the nationality of legal entities is generally much easier to manipulate as they can be relatively freely established, modified and dissolved. In recent years, international investment law has witnessed a rapidly growing number of treaty shopping cases, which has also raised certain concerns regarding the practice. At present, these concerns are strikingly unsettled as investment tribunals have adopted diverging attitudes towards treaty shopping, thus rendering decisions inconsistent with regard to the permissibility of it. Corporate nationality planning or treaty shopping is not illegal or unethical in principle, although many states perceive it as undesirable and have increasingly taken measures against such practices. What separates legitimate nationality planning from treaty abuse? The uncertainty about the limits of treaty shopping is unsatisfactory for both states and investors, not to mention the functionality of the investment protection system in general. This is the principal problem this study attempts to resolve. The study approaches the topic through three separate research questions. The first question seeks to place investment treaty shopping in the wider context. In this regard, the study will endeavour to establish a working definition of treaty shopping. In addition, the study will analyse the reasons for the occurrence of treaty shopping and introduce the most common ways to carry it out. Most importantly, the study explores in detail the benefits of treaty shopping and the main objections against it. Following the examination, the study concludes that despite extensive criticism, treaty shopping may actually enhance the underlying objectives of the investment regime: fair treatment of investors regardless their origin and helping states attract foreign capital to further stimulate financial growth. The second research question encompasses the legal limits to treaty shopping via corporate restructuring. The main purpose is to clarify the dividing line between legitimate nationality planning and abusive treaty shopping. To answer this question, the study analyses the most influential case law related to treaty shopping and discusses the different ways investment tribunals have reviewed the distinction between objectionable and acceptable treaty shopping. Further, the study attempts to systematise the main elements of the arbitral decisions with the goal of formulating general rules for assessing the permissibility of treaty shopping. These rules are useful guidelines for maintaining stability and predictability in investment treaty arbitration, which benefits both investors and states wishing to attract foreign capital. In this respect, the study suggests that the decisive factor is the timing of the investment vis-à-vis the timing of the dispute. The timing element, however, raises its own questions, each of which are further explained in the study. The third and final research question addresses the practical aspects of treaty shopping. While the previous research questions relate to defining the boundaries of treaty shopping, this part of the study focuses solely on the pragmatic and political implications. To this end, the study will introduce certain state reactions to treaty shopping. Further, the study will explore solutions and make recommendations de lege ferenda on how states can safeguard themselves against abusive treaty shopping. It also highlights that the power to curb the practice lies mostly with states who conclude investment treaties. The study suggests that the most effective methods are including narrower definitions and denial of benefits clauses to the treaties. From the foreign investor's perspective, the study will propose a "shopping list" that contains points to consider before undertaking any restructuring measures. This study is not meant as a comprehensive empirical review of treaty shopping, nor does it claim to supply any definitive answers to the questions it raises. Rather, the goal is to elaborate the legal issues arising from the ambiguous boundaries of treaty shopping and to make proposals as to how to assess these issues. For the time being, treaty shopping will remain not only possible, but also a highly attractive option for a prudent investor wishing to improve investment protection.