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INTERNATIONAL
ACADEMY OF COMPARATIVE LAW
XVIII International Congress of Comparative Law Washington 2010 Section IV. A: The Protection of Foreign Investment
UNITED
KINGDOM
NATIONAL
REPORT
Rapporteur:
Dr.
James
Harrison
(University
of
Edinburgh)*
1. Framework
and
hierarchy
of
foreign
investment
laws
and
treaties
The
general
legal
framework
governing
foreign
investment
in
the
United
Kingdom
The
United
Kingdom
has
no
single,
specific
legal
framework
in
domestic
law
for
the
regulation
of
foreign
investment.
Rather,
the
relevant
rules
and
regulations
are
found
in
a
variety
of
statutes
and
statutory
instruments.
Despite
the
recent
trend
towards
devolution
in
the
United
Kingdom,
most
domestic
laws
directly
pertaining
to
foreign
investors
continue
to
be
found
in
legislation
adopted
by
the
United
Kingdom
Parliament.
The
regulation
of
financial
services,
financial
markets,
business
associations,
insolvency,
competition,
and
intellectual
property
tend
to
be
reserved
matters
under
the
devolution
legislation.1
United
Kingdom
investment
treaties
The
United
Kingdom
is
a
party
to
almost
one
hundred
bilateral
investment
treaties
(BITs)
with
countries
around
the
world.2
The
United
Kingdom
started
its
BIT
programme
a
little
later
than
other
European
countries;3
one
of
the
first
BITs
concluded
by
the
United
Kingdom
was
with
Egypt
in
June
1975.4
A
small
number
of
BITs
with
other
developing
countries
were
concluded
in
the
latter
half
of
1970s.5
Thereafter,
a
gradual
expansion
in
the
number
of
BITs
concluded
by
the
United
Kingdom
has
taken
place.
There
was
a
rapid
growth
in
the
mid-1990s,
partly
inspired
by
the
break-up
of
the
former
Soviet
Union
and
the
opportunities
presented
by
the
new
markets
in
Central
and
Eastern
Europe.6
Many
of
its
investment
agreements
are
based
upon
the
1991
Model
Agreement
between
the
Government
of
the
United
Kingdom
of
Great
Britain
and
Northern
Ireland
and
the
Government
of
*
Email:
james.harrison@ed.ac.uk.
Thanks
to
Matt
Soper
for
research
assistance
on
this
project.
Thanks
also
to
David
Cabrelli
for
comments
and
assistance
on
certain
parts
of
this
text.
Any
mistakes
remain
the
responsibility
of
the
author.
1
Scotland
Act
1998,
ss
29-30,
Sch
5;
Government
of
Wales
Act
2006,
s
94,
Sch
5;
Northern
Ireland
Act
1998,
s
8,
Sch
3.
2
A
full
list
of
those
bilateral
investment
treaties
which
are
currently
in
force
for
the
United
Kingdom
can
be
found
on
the
website
of
the
Foreign
and
Commonwealth
Office
<http://www.fco.gov.uk/en/about-the-fco/publications/treaties/treaty-texts/ippas-investment- promotion>
accessed
12
August
2009.
3
On
the
development
of
the
UK
BIT
programme
and
comparisons
with
other
European
countries,
see
FA
Mann
British
Treaties
for
the
Promotion
and
Protection
of
Investments
[1981]
BYIL
241.
4
Agreement
between
the
Government
of
the
United
Kingdom
of
Great
Britain
and
Northern
Ireland
and
the
Government
of
Egypt
for
the
Promotion
and
Protection
of
Investments
(UK
Egypt
BIT)
(adopted
11
June
1975)
1032
UNTS
32.
5
Namely
Singapore,
Indonesia,
Thailand,
and
Jordan.
6
See
generally
UNCTAD
International
Investment
Rule-Making:
Stocktaking,
Challenges
and
the
Way
Forward
(October
2008)
UNCTAD/ITE/IIT/2007/3,
14-15.
X
for
the
Promotion
and
Protection
of
Investments.7
The
analysis
of
the
investment
protections
in
the
following
sections
will
be
primarily
based
upon
the
provisions
of
the
UK
Model
BIT,
whilst
highlighting
any
significant
deviations
in
BITs
which
have
been
concluded
by
the
United
Kingdom
with
individual
countries.
Whilst
these
investment
treaties
provide
important
protections
for
investors,
they
have
limited
effect
within
the
legal
systems
of
the
United
Kingdom.
Generally
speaking,
the
United
Kingdom
adopts
a
dualist
approach
to
the
incorporation
of
its
international
treaty
obligations
into
national
law.8
It
follows
that
there
are
limited
opportunities
for
investors
to
rely
directly
on
an
investment
treaty
in
the
domestic
courts
of
the
United
Kingdom
unless
the
treaty
has
been
implemented
by
statute
or
statutory
instrument.
Investment
protection
and
membership
of
the
European
Community
The
regulation
of
foreign
investment
in
the
United
Kingdom
is
further
complicated
by
its
membership
of
the
European
Community.
This
has
implications
for
both
the
protection
of
investors
and
investments
originating
from
other
Member
States,
as
well
as
the
way
in
which
obligations
are
undertaken
towards
investors
from
third
states.
The
European
Community
is
founded
upon
the
idea
of
a
common
market
and
an
economic
and
monetary
union9,
which
includes
certain
aspects
of
investment
protection.
Perhaps
most
importantly,
the
EC
Treaty
guarantees
a
right
of
establishment
for
nationals
of
one
Member
State
in
the
territory
of
another
Member
State10,
as
well
as
free
movement
of
capital
between
Member
States.11
These
treaty
provisions
are
directly
applicable
in
national
courts
of
Member
States12
and
they
take
priority
over
national
laws.13
In
some
cases,
the
investment
protection
provisions
found
in
EC
law
will
overlap
with
investment
treaties
concluded
with
states
before
their
accession
to
the
7
Model
Agreement
between
the
Government
of
the
United
Kingdom
of
Great
Britain
and
Northern
Ireland
and
the
Government
of
X
for
the
Promotion
and
Protection
of
Investments
(UK
Model
BIT)
<http://www.unctad.org/sections/dite/iia/docs/Compendium//en/69%20volume%203.pdf>
(accessed
11
August
2009).
8
See
generally
R
Higgins
United
Kingdom,
in
F
Jacobs
and
S
Roberts
(eds)
The
Effects
of
Treaties
in
Domestic
Law
(Sweet
&
Maxwell,
London
1987)
9
EC
Treaty
(Treaty
of
Rome,
as
amended)
art
2.
10
EC
Treaty
(n
9)
art
43.
11
EC
Treaty
(n
9)
art
56.
12
The
European
Communities
Act
1972
s
2(1)
provides:
All
such
rights,
powers,
liabilities,
obligations
and
restrictions
from
time
to
time
created
or
arising
by
or
under
the
Treaties,
and
all
such
remedies
and
procedures
from
time
to
time
provided
for
by
or
under
the
Treaties,
as
in
accordance
with
the
Treaties
are
without
further
enactment
to
be
given
legal
effect
or
used
in
the
United
Kingdom
shall
be
recognised
and
available
in
law,
and
be
enforced,
allowed
and
followed
accordingly;
and
the
expression
enforceable
Community
right
and
similar
expressions
shall
be
read
as
referring
to
one
to
which
this
subsection
applies.
13
See
R
v
Secretary
of
State
for
Transport,
ex
p
Factortame
Ltd
(No
2)
[1991]
1
AC
603.
European
Community.
For
its
part,
the
United
Kingdom
concluded
BITs
with
Malta14,
Hungary15,
Poland16,
Lithuania17,
Latvia18,
Estonia19,
Bulgaria20,
and
Slovenia21
before
they
joined
the
European
Community.22
In
practical
terms,
it
may
be
the
case
that
these
agreements
are
superfluous
as
most
of
their
content
is
superseded
by
EC
law.
This
is
the
view
taken
by
the
European
Commission
which
has
urged
Member
States
to
formally
rescind
intra-EC
investment
agreements.23
Nevertheless,
as
held
by
the
arbitral
tribunal
in
Eastern
Sugar
BV
v
The
Czech
Republic,
in
the
absence
of
any
express
agreement
on
termination
of
the
treaty,
the
legal
status
of
BITs
between
Member
States
remains
unchanged
by
the
accession
of
a
state
to
the
European
Community.24
In
particular,
the
arbitral
tribunal
appeared
to
reject
the
argument
that
the
BIT
between
the
Netherlands
and
the
Czech
Republic
had
been
implicitly
terminated
by
the
accession
of
the
Czech
Republic
to
the
EC
Treaty.25
It
follows
that
14
Agreement
between
the
Government
of
the
Republic
of
Malta
and
the
Government
of
the
United
Kingdom
of
Great
Britain
and
Northern
Ireland
for
the
Promotion
and
Protection
of
Investments
(UK
Malta
BIT)
(adopted
4
October
1986)
1667
UNTS
132.
15
Agreement
between
the
Government
of
the
United
Kingdom
of
Great
Britain
and
Northern
Ireland
and
the
Government
of
the
Hungarian
Peoples
Republic
for
the
Promotion
and
Protection
of
Investments
(UK-
Hungary
BIT)
(adopted
9
March
1987)
1694
UNTS
446.
16
Agreement
between
the
Government
of
the
United
Kingdom
of
Great
Britain
and
Northern
Ireland
and
the
Government
of
the
Polish
Peoples
Republic
for
the
Promotion
and
Protection
of
Investments
(UK
Poland
BIT)
(adopted
8
December
1987)
1556
UNTS
204.
17
Agreement
between
the
Government
of
the
United
Kingdom
of
Great
Britain
and
Northern
Ireland
and
the
Government
of
the
Republic
of
Lithuania
for
the
Promotion
and
Protection
of
Investments
(UK
Lithuania
BIT)
(adopted
17
May
1993)
1792
UNTS
122.
18
Agreement
between
the
Government
of
the
United
Kingdom
of
Great
Britain
and
Northern
Ireland
and
the
Government
of
the
Republic
of
Latvia
for
the
Promotion
and
Protection
of
Investments
(UK
Latvia
BIT)
(adopted
24
January
1994)
1913
UNTS
84.
19
Agreement
between
the
Government
of
the
United
Kingdom
of
Great
Britain
and
Northern
Ireland
and
the
Government
of
the
Republic
of
Estonia
for
the
Promotion
and
Protection
of
Investments
(UK
Estonia
BIT)
(adopted
12
May
1994)
1892
UNTS
310.
20
Agreement
between
the
Government
of
the
United
Kingdom
of
Great
Britain
and
Northern
Ireland
and
the
Government
of
the
Republic
of
Bulgaria
for
the
Promotion
and
Protection
of
Investments
(UK
Bulgaria
BIT)
(adopted
11
December
1995)
1995
UNTS
258.
21
Agreement
between
the
Government
of
the
United
Kingdom
of
Great
Britain
and
Northern
Ireland
and
the
Government
of
the
Republic
of
Slovenia
for
the
Promotion
and
Protection
of
Investments
(UK
Slovenia
BIT)
(adopted
3
July
1996)
2076
UNTS
176.
22
The
United
Kingdom
also
concluded
a
BIT
with
the
Czech
and
Slovak
Republic;
Agreement
between
the
Government
of
the
United
Kingdom
of
Great
Britain
and
Northern
Ireland
and
the
Government
of
the
Czech
and
Slovak
Federal
Republic
for
the
Promotion
and
Protection
of
Investments
(UK
Czech
and
Slovak
BIT)
(adopted
10
July
1990)
1765
UNTS
4.
23
See
Note
from
the
European
Commission
to
the
Economic
and
Financial
Committee,
November
2006,
reproduced
in
Eastern
Sugar
BV
v
Czech
Republic,
Arbitration
Institute
of
the
Stockholm
Chamber
of
Commerce
(Partial
Award
of
27
March
2007)
para
126.
Some
intra-EC
BITs
have
since
been
terminated;
see
UNCTAD
Recent
Developments
in
International
Investment
Agreements
2008- June
2009
(June
2009)
UNCTAD/WEB/DIAE/IA/2009/8,
5.
24
Eastern
Sugar
BV
v
Czech
Republic
(n23)
para
160.
25
This
argument
was
based
upon
Article
59(1)
of
the
Vienna
Convention
on
the
Law
of
Treaties
which
provides
that:
A
treaty
shall
be
considered
as
terminated
if
all
the
parties
to
it
conclude
a
later
treaty
relating
to
the
same
subject-matter
and:
(a) It
appears
from
the
later
treaty
or
is
otherwise
established
that
the
parties
intended
that
the
matter
should
be
governed
by
that
treaty;
or
(b) The
provisions
of
the
later
treaty
are
so
far
incompatible
with
those
of
the
earlier
one
investors
in
those
Member
States
with
which
the
United
Kingdom
has
concluded
a
BIT
prior
to
their
joining
the
EC
will
have
a
choice
of
law
under
which
to
pursue
any
investment
claims,
until
such
a
time
as
the
treaties
are
formally
terminated.
Nevertheless,
membership
of
the
European
Community
may
still
have
implications
for
the
interpretation
and
application
of
BITs
between
Member
States.
Article
31(3)(c)
of
the
Vienna
Convention
on
the
Law
of
Treaties
requires
that
a
treaty
interpreter
takes
into
account
relevant
rules
of
international
law
applicable
in
the
relations
between
the
parties.
On
the
basis
of
this
rules
of
treaty
interpretation,
it
is
arguable
that
arbitral
tribunals
may
have
to
take
into
account
potentially
competing
standards
such
as
those
of
the
[EC
Treaty]
when
interpreting
an
intra-EU
BIT.26
Membership
of
the
European
Community
may
also
have
consequences
for
BITs
with
third
states.
Treaties
entered
into
by
a
state
prior
to
their
membership
of
the
EC
are
not
affected
by
the
provisions
of
the
EC
Treaty,
although
Member
States
are
under
an
obligation
to
take
all
appropriate
steps
to
eliminate
the
incompatibilities
established.27
In
addition,
Article
10
of
the
EC
Treaty
requires
that
Member
States
shall
abstain
from
any
measure
which
could
jeopardise
the
attainment
of
the
objectives
of
this
Treaty.
Thus,
any
treaty
entered
into
by
a
state
after
it
has
joined
the
European
Community
must
be
compatible
with
the
EC
Treaty.
The
European
Commission
has
brought
infringement
proceedings
against
several
Member
States
which
the
Commission
believed
had
failed
to
take
sufficient
steps
to
bring
their
bilateral
investment
treaties
with
third
states
into
line
with
EC
law.
In
two
recent
judgments,
the
European
Court
of
Justice
(ECJ)
found
that
Austria
and
Sweden
had
failed
to
take
all
the
appropriate
steps,
as
required
under
Article
307
of
the
EC
Treaty,
to
eliminate
any
incompatibilities
between
BITs
entered
into
before
their
entry
into
the
European
Community.28
It
was
noted
by
the
ECJ
in
these
cases
that
the
possibility
of
relying
on
other
mechanisms
offered
by
international
law,
such
as
suspension
of
the
agreement,
or
even
denunciation
of
the
agreements
at
issue
or
of
some
of
their
provisions,
is
too
uncertain
in
its
effects
to
guarantee
that
the
measures
adopted
by
the
Council
could
be
applied
properly.29
The
same
reasoning
arguably
also
applies
to
the
duty
found
in
Article
10
of
the
EC
Treaty.
Although
the
European
Community
does
not
yet
have
explicit
competence
over
investment
law,
it
is
nevertheless
the
case
that
it
exercises
external
competence
in
several
related
areas.
Indeed,
some
authors
argue
that
the
European
Community
possesses
an
implicit
competence
in
the
field
of
international
investment,
shared
with
the
Member
States.30
Certainly,
several
powers
which
have
the
potential
to
that
the
two
treaties
are
not
capable
of
being
applied
at
the
same
time.
26
H
Wehland
Intra-EU
Investment
Agreements
and
Arbitration:
Is
European
Community
Law
an
Obstacle?
(2009)
58
ICLQ
297,
307.
27
EC
Treaty
(n
9)
art
307.
28
Case
C-249/06
Commission
v
Sweden
(ECJ
3
March
2009);
Case
C-205/06
Commission
v
Austria
(ECJ
3
March
2009).
29
Commission
v
Austria
(n
28)
para
40.
30
See
T
Eilmansberger
Bilateral
Investment
Treaties
and
EU
Law
(2009)
CML
Rev
383,
391-392.
He
argues
that
the
competence
is
shared
not
only
in
the
sense
that
there
is
an
overlapping
competence
but
that
the
EC
depends
on
complementary
competence
of
Member
States
if
it
wishes
to
conclude
an
agreement
in
this
area.
impact
upon
foreign
investments
are
exercised
at
the
European
level.31
Indeed,
the
European
Community
has
been
the
driving
force
behind
the
negotiation
of
several
new
international
agreements
which
include
important
provisions
on
investment
protection.
One
example
is
the
Energy
Charter
Treaty
to
which
both
the
European
Community
and
the
United
Kingdom
are
parties
and
which
is
one
of
the
few
multilateral
instruments
to
contain
substantive
standards
on
investment
protection.32
Part
III
of
the
treaty
covers
the
promotion
and
protection
of
investments
in
the
energy
sector
which
is
defined
to
include
the
exploration,
extraction,
refining,
production,
storage,
land,
transport,
transmission,
distribution,
trade,
marketing,
or
sale
of
Energy
Materials
and
Products.33
Another
prominent
example
is
the
Cotonou
Agreement
which
was
concluded
on
23
June
2000
between
the
European
Community
and
its
Member
States
on
the
one
hand,
and
those
countries
which
constitute
the
Group
of
African,
Caribbean
and
Pacific
(ACP)
States
on
the
other
hand.34
Article
78(1)
of
the
Cotonou
Agreement
explicitly
provides
that:
The
ACP
States
and
the
Community
and
its
Member
States,
within
the
scope
of
their
respective
competencies,
affirm
the
need
to
promote
and
protect
either
Partys
investments
on
their
respective
territories,
and
in
this
context
affirm
the
importance
of
concluding,
in
their
mutual
interest,
investment
promotion
and
protection
agreements
which
could
also
provide
the
basis
for
insurance
and
guarantee
schemes.
The
treaty
further
calls
for
the
inclusion
of
general
principles
on
the
protection
and
promotion
of
investments
in
the
Economic
Partnership
Agreements
that
are
planned
to
be
negotiated
between
the
European
Community,
its
Member
States
and
the
various
ACP
regional
groupings.35
As
there
are
79
states
which
are
members
of
the
ACP
Group,
the
negotiation
of
Economic
Partnership
Agreements
could
have
important
implications
for
the
protection
of
foreign
investment.
31
Eg
EC
Treaty
(n
9)
arts
57,
59,
60.
32
Energy
Charter
Treaty
(adopted
17
December
1994)
2080
UNTS
100.
The
Energy
Charter
Treaty
entered
into
force
for
the
United
Kingdom
on
16
April
1998,
the
same
day
as
it
entered
into
force
for
the
European
Communities.
The
treaty
was
implemented
in
the
United
Kingdom
through
the
European
Communities
(Definition
of
Treaties)
(Energy
Charter
Treaty)
Order
1996,
SI
1996/1639.
33
Energy
Charter
Treaty,
art
1(5).
34
Partnership
Agreement
between
the
Members
of
the
African,
Caribbean
and
Pacific
Group
of
States
of
the
one
Part,
and
the
European
Community
and
its
Member
States
of
the
other
Part
(Cotonou
Agreement)
(adopted
23
June
2000)
UKTS
No
24
(2003).
This
treaty
was
implemented
in
the
UK
through
the
European
Communities
(Definition
of
Treaties)
(Partnership
Agreement
between
the
Members
of
the
African,
Caribbean
and
Pacific
Group
of
States
and
the
European
Community
and
its
Member
States
(The
Cotonou
Agreement))
Order
2001,
SI
2001/3935.
35
Cotonou
Agreement
(n
34)
art
78(3).
One
of
the
first
such
Economic
Partnership
Agreements
is
the
EU-CARICOM
Economic
Partnership
Agreement.
It
contains
basic
investment
provisions
in
Part
II,
Title
II.
The
text
of
the
Agreement
is
available
on
the
European
Commission
website
<http://trade.ec.europa.eu/doclib/docs/2008/february/tradoc_137971.pdf>
accessed
1
July
2009.
All
of
these
treaties
containing
investment
provisions
have
been
concluded
under
the
current
division
of
competence
between
the
European
Community
and
its
Member
States.
If
the
Lisbon
Treaty36
finally
enters
into
force,
it
will
further
consolidate
the
role
of
the
European
Community
in
the
protection
of
foreign
investment
with
third
states.
Article
207(1)
of
the
treaty
provides
that:
The
common
commercial
policy
shall
be
based
on
uniform
principles,
particularly
with
regard
to
changes
in
tariff
rates,
the
conclusion
of
tariff
and
trade
agreements
relating
to
trade
in
goods
and
services,
and
the
commercial
aspects
of
intellectual
property,
foreign
direct
investment,
the
achievement
of
uniformity
in
measures
of
liberalisation,
export
policy
and
measures
to
protect
trade
such
as
those
to
be
taken
in
the
event
of
dumping
or
subsidies.
(emphasis
added)
However,
the
precise
scope
of
this
mandate
is
unclear
and
it
is
arguable
that
it
does
not
cover
all
foreign
investment
matters.
On
this
basis,
Eilmansberger
argues
that
while
it
is
possible
that
this
new
competence
will
be
used
by
the
EU
to
negotiate
and
conclude
pure
investment
treaties
for
the
first
time,
it
is
highly
improbable
that
it
will
conclude
such
agreements
on
its
own.37
On
this
basis,
it
follows
that
there
will
probably
still
be
a
role
for
Member
States
in
the
conclusion
of
treaties
for
the
protection
and
promotion
of
investment.
2. General
standards
of
treatment
of
foreign
investment/investors
Introduction
BITs
concluded
by
the
United
Kingdom
follow
most
other
nations
BITs
in
providing
for
general
standards
of
treatment
for
investors
and
investments.
Such
standards
of
treatment
can
generally
be
divided
into
two
categories:
non-discrimination
standards
and
minimum
standards
of
treatment.
Non-discrimination
standards
The
majority
of
BITs
concluded
by
the
United
Kingdom
follow
the
UK
Model
BIT
in
providing
for
both
most-favoured
nation
(MFN)
treatment
and
national
treatment
within
the
territory
of
the
contracting
parties.38
In
this
regard,
Article
3
of
the
UK
Model
BIT
provides:39
(1)
Neither
Contracting
Party
shall
in
its
territory
subject
investments
or
returns
36
The
Treaty
of
Lisbon
amending
the
Treaty
Establishing
the
European
Union
and
the
Treaty
Establishing
the
European
Community
(Lisbon
Treaty)
(adopted
13
December
2007)
Command
Paper
Cm
7294.
37
See
T
Eilmansberger
Bilateral
Investment
Treaties
and
EU
Law
(n
30)
395.
38
One
exception
is
the
UK-USSR
BIT
which
provides
for
MFN
treatment
for
investments
and
investors
but
which
only
requires
the
contracting
parties
to
accord
national
treatment
to
the
extent
possible
and
in
accordance
with
its
laws
and
regulations;
Agreement
between
the
Government
of
the
United
Kingdom
of
Great
Britain
and
Northern
Ireland
and
the
Government
of
the
Union
of
Soviet
Socialist
Republics
for
the
Promotion
and
Protection
of
Investments
(UK
USSR
BIT)
(adopted
8
April
1989)
1670
UNTS
28,
art
2.
39
UK
Model
BIT
(n
7)
art
3.
In
theory,
these
standards
are
intended
to
create
a
level
playing
field
for
investors
of
all
nations,
under
the
protection
of
a
BIT.
What
both
paragraphs
of
this
provision
have
in
common
is
that
they
are
restricted
to
the
post-establishment
phase
of
an
investment
and
they
cannot
be
relied
on
to
claim
a
right
to
entry
or
establishment.40
In
this
regards,
the
United
Kingdom
follows
other
European
nations
in
not
extending
protection
to
the
pre-establishment
phase
of
an
investment;
they
can
be
contrasted
to
United
States,
Canadian,
or
Japanese
BITs,
which
specifically
cover
market
access
or
pre-establishment
rights.41
The
MFN
provision
nevertheless
is
broad
enough
to
cover
both
substantive
and
procedural
protections
in
the
post-establishment
phase.
This
was
confirmed
in
RosInvest
Co
Ltd
v
Russian
Federation
where
the
arbitral
tribunal
held
that
the
MFN
clause
in
Article
3
of
the
UK-USSR
BIT
covered
arbitration
provisions,
as
well
as
substantive
standards
of
treatment.42
The
dispute
centred
around
certain
actions
taken
by
the
Russian
authorities
which
RosInvest
Co
Ltd
claimed
had
completely
devalued
its
shares
held
in
the
Yukos
Oil
Corporation,
resulting
in
its
expropriation.
A
problem
for
the
investor
was
that
Article
8
of
the
UK-USSR
BIT
unambiguously
excludes
expropriatory
issues
from
the
jurisdiction
of
an
arbitral
tribunal
established
under
the
treaty.
Yet,
Article
3
of
the
UK
USSR
BIT
provides:
(1)
Neither
Contracting
Party
shall
in
its
territory
subject
investments
or
returns
of
nationals
or
companies
of
the
other
Contracting
Party
to
treatment
less
favourable
than
that
which
it
accords
to
investments
or
returns
of
any
third
State.
(2)
Neither
Contracting
Party
shall
in
its
territory
subject
investors
of
the
other
Contracting
Party,
as
regards
their
management,
maintenance,
use,
enjoyment
or
disposal
of
their
investments,
to
treatment
less
favourable
than
that
which
it
accords
to
investors
of
any
third
State.
Rosinvest
Co
Ltd
thus
invoked
this
provision
to
import
the
wording
of
the
arbitration
40
See
generally
J
Kurtz
The
Delicate
Extension
of
the
Most-Favoured-Nation
Treatment
to
Foreign
Investors:
Maffezini
v
Kingdom
of
Spain,
in
T
Weiler
(ed),
International
Investment
Law
and
Arbitration:
Leading
Cases
from
the
ICSID,
NAFTA,
Bilateral
Treaties
and
Customary
International
Law
(Cameron
May,
London
2004).
41
Generally
see
R
Dolzer
and
C
Schreuer
Principles
of
International
Investment
Law
(Oxford
University
Press,
Oxford
2008)
80-82.
42
RosInvest
Co
UK
Ltd
v
Russian
Federation
(Award
on
Jurisdiction
October
2007)
Arbitration
Institute
of
the
Stockholm
Chamber
of
Commerce
Case
No
Arbitration
V
079/2005,
para
132.
of nationals or companies of the other Contracting Party to treatment less favourable than that which it accords to investments or returns of its own nationals or companies or any third State. (2) Neither Contracting Party shall in its territory subject nationals or companies of the other Contracting Party, as regards their management, maintenance, use, enjoyment or disposal of their investments, to treatment less favourable than that which it accords to its own nationals or companies of any third State.
clause
in
a
Denmark-Russia
BIT
in
order
to
allow
it
to
submit
the
issues
arising
from
the
expropriation
to
arbitration.
The
arbitral
tribunal
first
rejected
the
argument
that
treatment
within
the
meaning
of
Article
3(1)
of
the
UK-USSR
BIT
included
protection
by
an
arbitration
clause.
It
reasoned
that
while
protection
of
an
arbitration
clause
covering
expropriation
is
indeed
a
highly
relevant
aspect
of
[expropriatory
treatment]
it
does
not
directly
affect
the
investment,
but
rather
the
procedural
rights
of
the
investor.43
However,
the
tribunal
went
on
to
find
that
protection
by
an
arbitration
clause
could
fall
within
the
meaning
of
Article
3(2)
of
the
UK-USSR
BIT:
it
is
difficult
to
doubt
that
an
expropriation
interferes
with
the
investors
use
and
enjoyment
of
the
investment,
and
that
the
submission
to
arbitration
forms
a
highly
relevant
part
of
the
corresponding
protection
for
the
investor
by
granting
him,
in
case
of
interference
with
his
use
or
enjoyment,
procedural
options
of
obvious
and
great
significance
compared
to
the
sole
option
of
challenging
such
interference
before
the
domestic
courts
of
the
host
state.44
This
interpretation
of
the
BIT
leads
to
the
extraordinary
result
that
the
express
exclusion
of
certain
issues
from
arbitration
in
Article
8
of
the
UK-USSR
BIT
can
be
circumvented
by
relying
on
the
MFN
clause.
The
tribunal
makes
clear
that
its
decision
is
principally
based
on
the
particular
wording
of
the
UK-USSR
BIT.45
Nevertheless,
given
the
similarities
between
this
treaty
and
other
BITs
concluded
by
the
United
Kingdom,
this
case
could
potentially
set
the
benchmark
for
how
the
MFN
standard
is
interpreted
in
the
future.
There
are
some
general
exceptions
to
the
MFN
standard
and
national
treatment
contained
in
most
United
Kingdom
BITs.
Article
7
of
the
UK
Model
BIT
provides:
The
provisions
of
this
Agreement
relative
to
the
grant
of
treatment
not
less
favourable
than
that
accorded
to
the
nationals
or
companies
of
either
Contracting
Party
or
of
any
third
State
shall
not
be
construed
so
as
to
oblige
one
Contracting
Party
to
extend
to
the
nationals
or
companies
of
the
other
the
benefit
of
any
treatment,
preference
or
privilege
resulting
from
(a) any
existing
or
future
customs
union
or
similar
international
agreement
to
which
either
or
the
Contracting
Parties
is
or
may
become
a
party,
or
(b) any
international
agreement
or
arrangement
relating
wholly
or
mainly
to
taxation
or
any
domestic
legislation
relating
wholly
or
mainly
to
taxation.
The
first
of
these
exceptions
allows
the
United
Kingdom
to
continue
giving
preferential
treatment
to
investors
of
other
Member
States
as
a
matter
of
EC
law.
The
second
of
these
exceptions
is
largely
designed
to
cover
double
taxation
treaties.
Similar
provisions
are
found
in
most
United
Kingdom
BITs.
In
addition,
some
specific
43
RosInvest
Co
UK
Ltd
v
Russian
Federation
(n
42)
para
128.
44
RosInvest
Co
UK
Ltd
v
Russian
Federation
(n
42)
para
130.
45
RosInvest
Co
UK
Ltd
v
Russian
Federation
(n
42)
para
137.
BITs
concluded
by
the
United
Kingdom
contain
more
unusual
exceptions.
Under
the
UK-Swaziland
BIT,
the
national
treatment
and
MFN
provision
are
not
applicable
to
the
ownership
of
land
under.46
The
UK-Papua
New
Guinea
BIT
is
one
of
several
United
Kingdom
BITs
which
has
a
clause
under
the
MFN
provision
saying
that
special
incentives
granted
by
one
contracting
Party
only
to
its
nationals
in
order
to
stimulate
the
creation
of
local
industries
are
considered
compatible
with
this
Article
provided
they
do
not
substantially
impair
the
investments
and
activities
of
nationals
and
companies
of
the
other
Contracting
Party
in
connection
with
an
investment.47
This
provision
obviously
raises
questions
about
what
is
meant
by
substantially
impair.
How
this
term
is
interpreted
in
practice
will
determine
the
scope
of
the
exception.
The
UK-Antigua
and
Barbuda
BIT
also
deviates
significantly
from
the
UK
Model
BIT
and
the
trend
of
general
standards
of
treatment
by
providing
that
...in
exceptional
circumstances
either
Contracting
Party
is
entitled
in
specific
cases
and
on
special
grounds
to
give
different
treatment
to
the
nationals
or
companies
of
a
third
State
where
there
is
good
reason
to
justify
this.48
Again,
this
provision
raises
serious
questions
of
interpretation,
in
particular
what
is
meant
by
the
terms
special
grounds
and
good
reason.
It
is
arguable
that
this
exception
should
be
interpreted
narrowly
otherwise
it
could
undermine
the
object
and
purpose
of
the
MFN
clause.
As
well
as
MFN
treatment
and
national
treatment
standards,
Article
2(2)
of
the
UK
Model
BIT
also
includes
a
prohibition
on
other
discriminatory
measures.
This
provision
is
not
limited
to
discrimination
on
the
grounds
of
nationality
and
it
may
cover
discrimination
on
other
grounds.49
Following
previous
arbitral
awards
in
SD
Myers
v
Canada50
and
Occidental
Exploration
and
Production
Company
v
Ecuador51,
the
arbitral
tribunal
in
National
Grid
PLC
v
Argentina
accepted
that
the
prohibition
on
non-discrimination
permitted
comparisons
to
be
made
between
sectors
of
the
economy,
whilst
warning
that
the
elements
that
may
justify
reasonable
and
objective
differentiation
are
bound
to
be
more
numerous
in
cross-sector
comparisons
and,
hence,
the
discrimination
more
difficult
to
establish.52
46
Agreement
between
the
Government
of
the
United
Kingdom
of
Great
Britain
and
Northern
Ireland
and
the
Government
of
the
Kingdom
of
Swaziland
for
the
Promotion
and
Protection
of
Investments
(UK-Swaziland
BIT)
(adopted
5
May
1995)
1914
UNTS
18,
art
3(3).
47
Agreement
between
the
Government
of
the
United
Kingdom
of
Great
Britain
and
Northern
Ireland
and
the
Government
of
Papua
New
Guinea
for
the
Promotion
and
Protection
of
Investments
(UK
Papua
New
Guinea
BIT)
(adopted
14
May
1981)
1285
UNTS
158
art
3(3).
BITs
concluded
with
Jamaica,
Guyana,
Nigeria,
and
Tanzania
contain
analogous
language.
48
Agreement
between
the
Government
of
the
United
Kingdom
of
Great
Britain
and
Northern
Ireland
and
the
Government
of
Antigua
and
Barbuda
for
the
Promotion
and
Protection
of
Investments
(UK
Antigua
and
Barbuda
BIT)
(adopted
12
June
1987)
1656
UNTS
96,
art
3(3).
49
National
Grid
PLC
v
Argentina
(Award
of
3
November
2008)
UNCITRAL
Arbitration,
para
198.
50
SD
Myers
Inc
v
Canada
(Partial
Award
of
13
November
2000)
UNCITRAL
Arbitration.
51
Occidental
Exploration
and
Production
Company
v
Republic
of
Ecuador
(Award
of
1
July
2004)
London
Court
of
International
Arbitration
Case
No
UN3467.
52
National
Grid
PLC
v
Argentina
(n
49)
para
200.
Minimum
standards
of
protection
All
BITs
concluded
by
United
Kingdom
include
minimum
standards
of
protection
for
investments
which
generally
follow
Article
2(2)
of
the
UK
Model
BIT:53
investments
of
nationals
or
companies
of
each
Contracting
Party
shall
at
all
times
be
accorded
fair
and
equitable
treatment
and
shall
enjoy
full
protection
and
security....
Neither
Contracting
Party
shall
in
any
way
impair
by
unreasonable
or
discriminatory
measures
the
management,
maintenance,
use,
enjoyment
or
disposal
of
investments...
It
should
be
noted
from
the
outset
that
this
provision
only
applies
to
investments
once
they
have
been
made
and
it
does
not
create
pre-establishment
rights.
As
a
result,
the
host
state
could
potentially
treat
an
investor
in
a
way
which
violated
these
standards
during
the
admission
and
establishment
phase
of
an
investment,
providing
the
right
to
do
so
was
legal
exercised
under
the
host
states
domestic
laws.
However,
once
an
investment
has
been
made,
it
is
the
duty
of
the
contracting
parties
to
treat
investors
and
companies
of
the
other
contracting
party
in
accordance
with
the
standards
set
out
in
this
article.
Article
2(2)
of
the
UK
Model
contains
a
number
of
distinct,
albeit
related,
standards
which
will
be
analysed
separately
below.
Fair
and
equitable
treatment
The
first
standard
to
be
mentioned
in
this
provision
is
that
of
fair
and
equitable
treatment.
In
recent
years,
a
number
of
tribunals
have
considered
the
interpretation
of
the
fair
and
equitable
treatment
standard
found
in
United
Kingdom
BITs.
One
of
the
leading
cases
in
this
regard
is
Biwater
Gauff
(Tanzania)
Ltd
v
Tanzania.
In
this
case,
the
arbitral
tribunal
addressed
the
question
of
whether
or
not
Article
2(2)
of
the
UK-Tanzania
BIT
created
a
standard
which
was
distinct
from
the
international
minimum
standard
found
in
customary
international
law.
The
tribunal
took
the
view
that
the
contracting
parties
to
the
BIT
had
intended
to
create
an
autonomous
treaty
standard.54
In
doing
so,
the
tribunal
relied
upon
the
argument
advanced
by
Professor
Schreuer
that
[i]f
the
parties
to
a
treaty
want
to
refer
to
customary
international
law,
it
must
be
presumed
that
they
will
refer
to
it
as
such
rather
than
using
a
different
expression.55
The
tribunal
went
on
to
distil
the
fair
and
equitable
treatment
standard
into
three
separate
components:
protection
of
legitimate
expectations,
good
faith,
and
transparency,
consistency,
and
non-discrimination.56
To
support
this
view,
the
53
UK
Model
BIT
(n
7)
art
2(2).
54
Biwater
Gauff
(Tanzania)
Ltd
v
Tanzania
(Award
of
24
July
2008)
ICSID
Case
No
ARB/05/22,
para
591.
55
C
Schreuer
Fair
and
Equitable
Treatment
in
Arbitral
Practice
(2005)
6
Journal
of
World
Investment
and
Trade
360.
See
also
FA
Mann
British
Treaties
for
the
Promotion
and
Protection
of
Investments
[1981]
BYIL
241,
244.
56
Biwater
Gauff
(Tanzania)
Ltd
v
Tanzania
(n
54)
para
602.
tribunal
cited
a
number
of
arbitral
awards
in
other
investment
disputes,
including
Waste
Management
v
Mexico
(No.
2)57,
Middle
East
Cement
v
Egypt58,
Saluka
v
Czech
Republic59,
Maffezini
v
Spain60,
and
CME
v
Czech
Republic61.
One
effect
of
relying
on
the
decisions
of
tribunals
in
these
other
cases
is
to
harmonize
the
interpretation
of
the
fair
and
equitable
treatment
standard
under
the
United
Kingdom
BIT
with
the
interpretation
of
BITS
concluded
by
other
countries.
A
similar
approach
to
the
fair
and
equitable
treatment
standard
was
taken
by
the
arbitral
tribunal
in
the
UNCITRAL
arbitration
in
the
case
of
National
Grid
PLC
v
Argentina.
The
tribunal
in
this
case
observed
that
the
UK-Argentina
BIT
made
no
reference
to
the
minimum
standard
of
treatment
under
international
law
and
decided
to
interpret
the
terms
fair
and
equitable
in
accordance
with
their
ordinary
meaning,
as
prescribed
by
Article
31(1)
of
the
Vienna
Convention
on
the
Law
of
Treaties.62
It
is
likely
that
future
tribunals
examining
UK
BITs
will
follow
these
awards
and
interpret
the
fair
and
equitable
standard
based
on
the
ordinary
meaning
of
the
terms.
However,
the
inherent
ambiguity
of
the
wording
means
that
the
substance
of
the
fair
and
equitable
treatment
standard
may
evolve
over
time.63
Indeed,
this
approach
confers
a
broad
degree
of
discretion
on
tribunals
to
develop
the
fair
and
equitable
treatment
standard.
In
this
regard,
it
is
important
to
note
that
one
of
the
latest
BITs
to
be
concluded
by
the
United
Kingdom
deviates
significantly
from
the
UK
Model
BIT
on
the
issue
of
fair
and
equitable
treatment.
In
this
regard,
Article
3(1)
of
the
UK-Mexico
BIT
provides
that:64
Investments
of
investors
of
each
Contracting
Party
shall
at
all
times
be
accorded
treatment
in
accordance
with
customary
international
law,
including
fair
and
equitable
treatment
in
the
territory
of
the
other
contracting
party.
It
is
clear
from
the
text
of
this
provision
that
it
is
not
intended
to
create
an
autonomous
treaty
standard.
To
avoid
any
doubt
on
this
point,
Article
3(2)
confirms
that
the
Contracting
Parties
do
not
intend
the
obligations
in
paragraph
1
above
in
respect
of
fair
and
equitable
treatment
to
require
treatment
in
addition
to
or
57
Waste
Management
v
Mexico
(No
2)
(Award
of
30
April
2004)
ICSID
Arbitration
Case
No
ARB(AF)/00/3.
58
Middle
East
Cement
v
Egypt
(Award
of
12
April
2002)
ICSID
Arbitration
Case
No
ARB/99/6.
59
Saluka
v
Czech
Republic
(Partial
Award
of
17
March
2006)
UNCITRAL
Arbitration.
60
Maffezini
v
Spain
(Award
of
13
November
2000)
ICSID
Arbitration
Case
No
ARB/97/7.
61
CME
Czech
Republic
BV
v
Czech
Republic
(Final
Award
of
14
March
2003)
UNCITRAL
Arbitration.
62 National
Grid
PLC
v
Argentina
(n
49)
para
167.
63
This
point
was
made
by
the
arbitral
tribunal
in
National
Grid
PLC
v
Argentina
(n
56)
para
172:
the
standards
of
treatment
have
gradually
evolved
over
the
centuries
and
that
this
evolution
is
for
the
most
part
the
outcome
of
a
case
by
case
determination
by
courts
and
tribunals.
[Quoting
the
tribunal
in
Enron
v
Argentina
(Award
of
22
May
2007)
ICSID
Case
No.
ARB/01/3]
64
Agreement
between
the
Government
of
the
United
Kingdom
of
Great
Britain
and
Northern
Ireland
and
the
Government
of
the
United
Mexican
States
for
the
Promotion
and
Protection
of
Investments
(UK
Mexico
BIT)
(adopted
12
May
2006)
UKTS
No
22
(2007)
art
3(1).
beyond
that
which
is
required
by
the
customary
international
law
minimum
standard
of
treatment
of
aliens.
Moreover,
it
continues
to
say
that
a
determination
that
there
has
been
a
breach
of
this
Agreement
or
of
a
separate
international
agreement,
does
not,
in
and
of
itself,
establish
that
there
has
been
a
breach
of
the
provisions
of
this
Article.
The
inclusion
of
an
explicit
reference
to
the
international
minimum
standard
in
the
fair
and
equitable
treatment
provision
of
the
UK-Mexico
BIT
follows
attempts
by
other
states
to
ensure
that
this
latter
standard
is
not
interpreted
too
broadly
by
arbitral
tribunals.65
However,
in
light
of
the
dicta
of
the
arbitral
tribunal
in
Biwater
Gauff
(Tanzania)
Ltd
v
Tanzania
that
the
actual
content
of
the
treaty
standard
of
fair
and
equitable
treatment
is
not
materially
different
from
the
content
of
the
minimum
standard
of
treatment
in
customary
international
law66,
it
must
be
wondered
whether
this
development
in
the
UK
Mexico
BIT
will
make
a
significant
difference
to
the
scope
of
the
protection
offered.
Unreasonableness
Article
2(2)
of
the
UK
Model
BIT
also
contains
a
prohibition
on
the
use
of
unreasonable
measures
which
may
impair
the
management,
maintenance,
use,
enjoyment
or
disposal
of
investments.
Although
this
standard
is
included
in
a
separate
sentence,
it
largely
overlaps
with
the
protection
offered
by
the
fair
and
equitable
treatment
standard
and
the
two
can
in
most
cases
be
treated
as
synonymous.67
Full
protection
and
security
Distinct
from
fair
and
equitable
treatment
is
the
obligation
to
provide
full
protection
and
security.
Whilst
there
is
an
overlap
between
the
two
standards,
the
latter
is
usually
analysed
separately
by
arbitral
tribunals
and
it
is
possible
to
imagine
conduct
which
is
both
fair
and
equitable
but
which
nevertheless
fails
to
promote
the
full
protection
and
security
of
an
investment.
The
full
protection
and
security
standard
has
been
held
to
imply
a
duty
of
due
diligence
which
requires
contracting
parties
to
take
precautionary
measures
to
protect
investments
in
its
territory.68
Whilst
traditionally
this
standard
has
been
invoked
in
situations
involving
physical
threats
to
the
security
of
investors,
it
is
not
necessarily
so
limited.69
As
explained
by
the
arbitral
tribunal
in
Biwater
Gauff
v
Tanzania:70
When
the
terms
protection
and
security
are
qualified
by
full,
the
content
of
the
standard
may
extend
to
matters
other
than
physical
security.
It
implies
a
65
See
UNCTAD
Bilateral
Investment
Treaties
1995-2006:
Trends
in
Investment
Rulemaking
(February
2007)
UNCTAD/ITE/IIT/2006/5,
32-33.
66
Biwater
Gauff
(Tanzania)
Ltd
v
Tanzania
(n
54)
para
592.
A
similar
conclusion
was
reached
by
the
arbitral
tribunal
in
Pope
and
Talbot
v
Canada
(Award
in
respect
of
Damages
of
31
May
2002)
UNCITRAL
Arbitration,
paras
55-66.
67
See
comments
of
the
arbitral
tribunal
in
Biwater
Gauff
(Tanzania)
Ltd
v
Tanzania
(n
54)
para
692
[Adopting
an
interpretation
put
forward
by
the
tribunal
in
Saluka
v
Czech
Republic
(n
59)]
68
Biwater
Gauff
(Tanzania)
Ltd
v
Tanzania
(n
54)
paras
724-725.
69
National
Grid
PLC
v
Argentina
(n
49)
para
187.
70
Biwater
Gauff
(Tanzania)
Ltd
v
Tanzania
(n
54)
para
729.
A
similarly
broad
interpretation
was
adopted
by
the
arbitral
tribunal
in
National
Grid
v
Argentina
even
though
Article
2(2)
of
the
UK-Argentina
BIT
only
made
reference
to
protection
and
constant
security
and
not
full
protection
and
security.71
This
linguistic
difference
did
not
affect
the
scope
of
the
protection
offered
by
the
BIT.
In
that
case,
the
decision
of
the
Argentine
government
to
change
the
regulatory
framework
applicable
to
the
investment
of
National
Grid
was
held
to
be
contrary
to
the
obligation
to
promote
the
protection
and
constant
security
of
the
investment
in
accordance
with
the
BIT.72
Umbrella
Clause
The
UK
Model
BIT
also
includes
a
so-called
umbrella
clause
in
the
last
sentence
of
Article
2(2):
Each
Contracting
Party
shall
observe
any
obligation
it
may
have
entered
into
with
regard
to
investments
of
national
or
companies
of
the
other
Contracting
Party.
This
provision
is
broadly
worded
so
that
it
could
potentially
cover
all
types
of
obligations,
both
contractual
and
otherwise.73
However,
the
umbrella
clause
in
United
Kingdom
BITs
has
not
yet
been
the
subject
of
a
decision
by
an
arbitral
tribunal
and
it
remains
to
be
seen
how
widely
it
will
interpreted.74
This
is
another
issue
on
which
there
has
been
a
change
in
the
practice
of
the
United
Kingdom
when
concluding
more
recent
BITs.
In
UK
Mexico
BIT,
it
is
notable
that
there
is
no
umbrella
clause
at
all.75
3. Admission/entry
requirements
As
noted
above,
it
is
the
general
practice
of
the
United
Kingdom
in
negotiating
BITs
to
limit
the
protections
offered
to
investors
to
the
post-establishment
phase
of
the
71
National
Grid
PLC
v
Argentina
(n
49)
para
189.
72
National
Grid
PLC
v
Argentina
(n
49)
para
189.
73
See
eg
Socit
Gnrale
de
Surveillance
SA
v
Pakistan
(Decision
of
the
Tribunal
on
Objections
to
Jurisdiction
of
6
August
2003)
ICSID
Arbitration
Case
No
ARB/01/13,
para
166:
The
commitments
the
observance
of
which
a
Contracting
Party
must
constantly
guarantee
are
not
limited
to
contractual
commitments.
The
commitments
referred
to
may
be
embedded
in,
e.g.
the
municipal
legislative
or
administrative
or
other
unilateral
measures
of
a
Contracting
Party.
Cf
OECD
Interpretation
of
the
Umbrella
Clause
in
Investment
Agreements
(October
2006)
Working
Papers
on
International
Investment
Number
2006/3,
10-11.
74
The
arbitral
tribunal
in
National
Grid
PLC
v
Argentina
found
that
the
claim
under
the
umbrella
clause
was
inadmissible;
National
Grid
PLC
v
Argentina
(n
49)
para
204.
75
UK
Mexico
BIT
(n
64).
States guarantee of stability in a secure environment, both physical, commercial and legal. It would in the Arbitral Tribunals view be unduly artificial to confine the notion of full security only to one aspect of security, particularly in light of the use of this term in a BIT, directed at the protection of commercial and financial investments.
investment.
One
of
the
few
treaty
obligations
to
apply
to
the
pre-establishment
phase
of
an
investment
is
Article
2(1)
of
the
UK
Model
BIT
which
provides
that
each
Contracting
Party
shall
encourage
and
create
favourable
conditions
for
nationals
or
companies
of
nationals
to
invest
capital
in
its
territory,
and,
subject
to
its
right
to
exercise
powers
conferred
by
its
laws,
shall
admit
such
capital.
However,
the
language
of
this
obligation
is
only
aspirational
in
nature
and
it
falls
far
short
of
establishing
an
enforceable
right
of
entry
for
foreign
investors.
A
novel
approach
to
the
admission
of
investments
is
taken
in
the
most
recent
BIT
to
be
concluded
by
the
United
Kingdom.
Article
2(1)
of
the
UK-Mexico
BIT
provides
that
each
Contracting
Party
shall
admit
investments
in
accordance
with
its
laws
and
regulations.
Although
this
provision
is
drafted
as
an
obligation,
it
still
does
not
create
any
independent
right
of
entry
or
establishment
other
than
those
which
otherwise
exist
in
the
national
law
of
the
contracting
parties.
The
UK-Mexico
BIT
also
seeks
to
promote
investment
by
requiring
the
two
contracting
parties
to
exchange
certain
information
on
investment
opportunities,
laws
and
regulations
affecting
investments,
and
investment
statistics.76
Despite
its
hesitant
approach
to
the
admission
of
investments
in
its
BITs,
the
United
Kingdom
has
a
fairly
liberal
approach
to
the
admission
of
foreign
investments
which
is
largely
based
upon
a
system
of
registration
rather
than
authorisation.
There
is
nothing
to
prevent
a
foreign
national
from
setting
up
a
company
in
the
United
Kingdom
provided
that
the
relevant
statutory
requirements
are
complied
with.77
Alternatively,
a
foreign
company
may
carry
on
business
in
the
United
Kingdom
as
an
establishment
by
either
opening
a
place
of
business
or
a
branch.
Part
34
of
the
Companies
Act
2006
allows
the
Secretary
of
State
to
make
various
regulations
relating
to
the
operation
of
overseas
companies
in
the
United
Kingdom.78
Under
the
regulations
produced
by
the
Secretary
of
State,
an
overseas
company
that
opens
a
UK
establishment
must
deliver
a
return
to
the
registry
which
contains
particulars
of
the
company,
such
as
name,
legal
form,
as
well
as
particulars
of
its
establishment
in
the
United
Kingdom.79
In
addition,
the
return
must
include
a
copy
of
the
companys
constitution
and
copies
of
accounting
documents.80
Failure
to
comply
with
these
requirements
is
a
criminal
offence.81
Whereas
there
is
no
general
system
of
authorisation
for
the
making
of
foreign
76
Agreement
between
the
Government
of
the
United
Kingdom
of
Great
Britain
and
Northern
Ireland
and
the
Government
of
the
United
Mexican
States
for
the
Promotion
and
Protection
of
Investments
(UK
Mexico
BIT)
(adopted
12
May
2006)
UKTS
No
22
(2007)
art
2(2).
77
See
the
Companies
Act
2006.
78
See
in
particular,
the
Overseas
Companies
Regulations
2009
SI
2009/1801;
the
Overseas
Companies
(Execution
of
Documents
and
Registration
of
Charges)
regulations
2009
SI
2009/1917;
the
Registrar
of
Companies
(Fees)
(Companies,
Overseas
Companies
and
Limited
Liability
Partnerships)
Regulations
2009
SI
2009/2102.
All
in
force
from
1
October
2009.
79
The
Overseas
Companies
Regulations
2009
SI
2009/1801
regs
4-7.
See
also
the
Registrar
of
Companies
(Fees)
(Companies,
Overseas
Companies
and
Limited
Liability
Partnerships)
Regulations
2009
SI
2009/2101.
80
The
Overseas
Companies
Regulations
2009
(n
79)
regs
8-9.
81
The
Overseas
Companies
Regulations
2009
(n
79)
reg
11.
investments,
the
United
Kingdom
government
does
possess
some
statutory
powers
to
block
acquisitions
of
companies
by
foreign
investors
in
certain
circumstances.
Under
the
Industry
Act
1975,
the
Secretary
of
State
has
a
power
to
prohibit
the
change
of
control
of
an
important
manufacturing
undertaking
or
any
act
which
may
lead
to
such
a
change
in
control,
where
it
appears
to
the
Secretary
of
State
that
the
change
of
control
would
be
contrary
to
the
interests
of
the
United
Kingdom
or
contrary
to
the
interests
of
any
substantial
part
of
the
United
Kingdom.82
Change
of
control
is
defined
to
include
the
situation
where
a
person
not
resident
in
the
United
Kingdom
acquires
the
whole
or
part
of
the
relevant
undertaking,
where
a
person
not
resident
in
the
United
Kingdom
becomes
able
to
exercise
or
control
the
exercise
of
at
least
30
per
cent
of
votes
in
a
body
corporate
carrying
out
the
undertaking,
or
where
a
body
corporate
resident
in
the
United
Kingdom
but
controlled
by
a
person
not
so
resident
acquires
the
whole
or
part
of
the
undertaking.83
A
prohibition
order
takes
immediate
effect
but
it
must
be
laid
before
Parliament
after
being
made
and
it
shall
cease
having
effect
after
28
days
unless
it
is
approved
by
a
resolution
of
each
House
of
Parliament.84
Failure
to
comply
with
a
prohibition
order
does
not
amount
to
a
criminal
offence
but
civil
proceedings
may
be
brought
in
order
to
enforce
compliance
with
such
an
order.85
Where
the
Secretary
of
State
is
satisfied
that
a
change
of
control,
whether
or
not
it
is
subject
to
a
prohibition
order,
is
contrary
to
the
interests
of
the
United
Kingdom,
the
Secretary
of
State
may,
with
the
approval
of
the
Treasury,
make
a
vesting
order.86
This
type
of
order
allows
a
percentage
of
the
share
capital
and
loan
capital
and
any
assets
which
are
employed
in
the
undertaking
to
be
vested
in
the
Secretary
of
State
or
in
a
nominee.
A
vesting
order
is
a
measure
of
last
resort
and
this
step
should
only
be
taken
where
the
national
interest
cannot
be
protected
in
any
other
way.87
Generally,
a
vesting
order
must
be
approved
by
a
resolution
of
each
House
of
Parliament
before
it
is
made,
but
a
number
of
exceptions
to
this
rule
exist.88
Compensation
must
also
be
paid
for
the
acquisition
of
the
capital
or
assets
or
the
extinguishment
or
transfer
of
any
rights,
liabilities
or
encumbrances.89
Once
made,
a
vesting
order
must
be
notified
to
all
other
holders
of
share
capital
in
that
undertaking
who
have
a
right
to
insist
that
their
holdings
are
also
vested
in
the
Secretary
of
State
or
the
nominee.90
Despite
the
availability
of
this
broad
power
to
protect
certain
manufacturing
industries
which
are
considered
vital
to
the
United
Kingdom,
it
has
never
been
used.91
82
Industry
Act
1975
s
13.
83
Industry
Act
1975
s
12(2).
84
Industry
Act
1975
s
15(1).
85
Industry
Act
1975
s
17.
86
Industry
Act
1975
s
13(2).
87
Industry
Act
1975
s
13(3).
88
Industry
Act
1975
s
15(3)-(6).
89
Industry
Act
1975
s
19.
90
Industry
Act
1975
s
14.
91
See
United
States
Government
Accountability
Office
Laws
and
Policies
Regulating
Foreign
Investment
in
10
Countries
(February
2008)
Report
to
the
Honorable
Richard
Shelby,
Ranking
Member,
Committee
on
Banking,
Housing,
and
Urban
Affairs,
US
Senate
100.
Another
power
to
control
the
acquisition
of
companies
by
foreign
investors
is
found
in
the
Enterprise
Act
2002.
This
legislation
largely
concerns
the
regulation
of
mergers
to
prevent
lessening
of
competition
within
any
market
or
markets
for
goods
or
services
in
the
United
Kingdom.
However,
the
2002
Act
also
allows
the
Secretary
of
State
to
refer
a
merger
to
the
Office
of
Fair
Trading
on
the
grounds
that
the
merger
raises
issues
of
public
interest,
including
national
security
and
the
stability
of
the
financial
system.92
Following
investigations
by
the
Office
of
Fair
Trading
and
by
the
Competition
Commission,
the
Secretary
of
State
may
decide
whether
or
not
to
make
an
adverse
public
interest
finding.
If
this
is
the
case,
the
Secretary
of
State
may
take
such
measures
as
are
specified
under
the
Act.93
This
includes
the
ability
to
make
such
provision
as
the
Secretary
of
State
considers
appropriate
in
the
interests
of
national
security.94
Finally,
the
United
Kingdom
has
sought
to
regulate
the
control
of
certain
companies
which
have
been
privatized
through
the
insertion
of
particular
clauses
in
a
companys
articles
of
association.
One
common
clause
is
a
limit
on
the
ability
of
any
individual
or
corporation
to
control
a
certain
percentage
of
shares.95
Another
common
technique
is
the
creation
of
so-called
golden
shares.
This
mechanism
is
designed
to
allow
the
government,
through
a
person
designated
as
a
special
shareholder,
to
continue
to
control
key
aspects
relating
to
the
operation
of
the
company
which
will
require
the
consent
in
writing
of
the
special
shareholder.
However,
the
use
of
these
arrangements
has
been
affected
by
the
judgment
of
the
European
Court
of
Justice
(ECJ)
in
European
Commission
v
United
Kingdom
in
which
the
Court
held
that
the
governmental
controls
found
in
the
articles
of
association
of
the
British
Airports
Authority
constituted
a
restriction
on
the
movement
of
capital
in
violation
of
Article
56
of
the
European
Communities
Treaty.96
It
follows
that
such
arrangements
will
only
be
lawful
under
EC
law
where
they
are
justified
by
overriding
requirements
relating
to
the
general
interest.
Despite
the
ECJ
judgment,
the
United
Kingdom
government
continues
to
use
golden
shares
on
grounds
of
national
security,
for
instance
in
relation
to
BAE
Systems,
Rolls-Royce,
and
other
defence
related
companies.97
4. Investment
contracts
92
Enterprise
Act
2002
s
42.
93
Enterprise
Act
2002
ss
54-55.
94
Enterprise
Act
2002
Sch
8,
para
20.
95
For
example,
Article
40(1)
of
the
British
Airport
Authoritys
Articles
of
Association
used
to
provide
that
the
purpose
of
this
article
is
to
prevent
any
person
(other
than
a
Permitted
Person)
being,
or
being
deemed
or
appearing
to
the
directors
to
be,
interested
in
the
shares
of
the
Company,
which
carry
(or
may
in
accordance
with
their
terms
in
certain
circumstances
carry)
the
right
to
more
than
15%
of
the
votes
which
could
be
cast
on
any
resolution
at
any
general
meeting
of
the
Company
(whether
or
not
the
votes
could
be
cast
in
relation
to
all
resolutions
at
all
general
meetings).
This
was
one
of
the
provisions
challenged
in
Case
C-98/01
European
Commission
v
United
Kingdom
[2003]
ECR
I-4641;
see
below.
96
European
Commission
v
United
Kingdom
(n
95)
para
49.
97
See
United
States
Government
Accountability
Office
Laws
and
Policies
Regulating
Foreign
Investment
in
10
Countries
(n
91)
101-102.
There
are
no
requirements
over
the
form
of
contracts
entered
into
by
foreign
investors
in
the
United
Kingdom.
5. Performance
requirements
(such
as
local
contents
requirement,
local
employment
requirement,
trade
balancing
requirement,
technology
transfer
requirement)
As
the
United
Kingdom
BITs
do
not
tend
to
confer
pre-establishment
rights
on
investors,
they
do
not
contain
provisions
on
performance
requirements.
Nevertheless,
as
a
Member
of
the
World
Trade
Organization,
the
United
Kingdom
is
prohibited
from
imposing
certain
trade-related
performance
requirements
on
investors.98
6. Tax
regime
and
incentives
Generally
speaking,
a
company
is
liable
to
corporation
tax
on
its
profits
if
it
is
resident
in
the
United
Kingdom
or
it
is
trading
in
the
United
Kingdom
through
a
branch
or
agency.99
In
order
to
avoid
double
taxation,
the
United
Kingdom
utilises
a
system
of
tax
credits100
whereby
the
parent
company
is
permitted
to
set
off
the
taxes
paid
by
its
subsidiary
in
the
host
state
against
its
tax
liability
to
the
home
state
on
its
remitted
worldwide
profits.101
Such
credits
are
mostly
conferred
following
the
conclusion
of
a
double
taxation
agreement.
The
United
Kingdom
has
one
of
the
largest
network
of
double
taxation
agreements,
having
concluded
more
than
150
treaties
on
this
topic,102
although
not
all
of
these
are
yet
in
force.
These
treaties
have
been
concluded
with
a
wide
range
of
countries,
including
both
developed
and
developing
countries.103
Before
they
are
given
effect
in
domestic
law,
double
taxation
treaties
must
be
approved
by
a
resolution
of
the
United
Kingdom
Parliament.104
In
addition
to
double
taxation
treaties,
the
UK
also
provides
unilateral
tax
credit
relief
under
certain
circumstances.105
7. Property
rights,
expropriation
and
compensation
Expropriation
is
a
right
of
a
sovereign
state,
permitted
under
international
98
See
WTO
Agreement
on
Trade
Related
Investment
Measures,
in
WTO
The
Legal
Texts:
The
Results
of
the
Uruguay
Round
of
Multilateral
Trade
Negotiations
(Cambridge
University
Press,
Cambridge
1999)
143-146.
99 th
There
are
many
specialized
works
on
UK
tax
law;
see
eg
J
Tiley
Revenue
Law
(6
edn
Hart
Publishing,
Oxford
2008).
100
See
in
particular
Income
and
Corporation
Taxes
Act
1988
s
793.
101 nd
P
Muchlinski
Multinational
Enterprises
and
the
Law
(2
edn
Oxford
University
Press,
Oxford
2007)
265.
102
UNCTAD
International
Investment
Rule-Making:
Stocktaking,
Challenges
and
the
Way
Forward
(n
6)
25.
103
For
a
full
list
of
double
taxation
agreements
entered
into
by
the
United
Kingdom,
see
HM
Revenue
and
Customs
website
<http://www.hmrc.gov.uk/international/treaties1.htm>
accessed
3
August
2009.
104
Income
and
Corporation
Taxes
Act
1988
s
788(10),
as
inserted
by
the
Finance
Act
2006,
s.
176.
105
Income
and
Corporation
Taxes
Act
1988
s
790.
investment
law.106
It
is
therefore
not
surprising
that
BITs
concluded
by
the
United
Kingdom
generally
allow
for
expropriation
or
nationalization,
as
long
as
the
taking
is
for
a
public
purpose,
is
non-discriminatory,
and
is
accompanied
by
prompt,
adequate
and
effective
compensation.107
The
UK-Mexico
BIT,
which
is
the
most
recent
United
Kingdom
BIT
to
come
into
force,
adds
a
requirement
for
due
process
of
law
to
the
traditional
criteria
mentioned
above.108
The
requirement
of
prompt,
adequate
and
effective
compensation
follows
the
traditional
Hull
formula
advocated
for
a
number
of
years
by
many
capital-exporting
countries.109
The
UK
Model
BIT
specifies
that
such
compensation
shall
amount
to
the
genuine
value
of
the
investment
expropriated
immediately
before
the
expropriation
or
before
the
impending
expropriation
became
public
knowledge,
whichever
is
earlier
and
it
shall
include
interest
at
a
normal
commercial
rate.110
Compensation
for
expropriation
may
also
include
consequential
losses,
such
as
loss
of
profits.111
However,
the
mere
fact
that
an
expropriation
has
taken
place
does
not
mean
that
compensation
will
always
be
necessary.
In
other
words,
an
expropriation
may
take
place
by
reason
of
a
substantial
interference
with
rights,
even
if
no
economic
loss
is
caused
thereby,
or
can
be
quantified.112
Thus,
in
Biwater
Gauff
(Tanzania)
Ltd
v
Tanzania,
the
tribunal
concluded
that
the
loss
suffered
by
the
company
had
occurred
prior
to
the
expropriation
and
the
fair
market
value
of
the
investment
at
the
date
of
the
expropriation
was
already
zero.113
As
a
consequence,
no
compensation
was
payable.
The
protection
of
property
is
also
governed
by
international
human
rights
law.
The
United
Kingdom
is
a
party
to
the
European
Convention
on
Human
Rights
which
contains
certain
protections
for
the
property
of
individuals
from
undue
interference
by
the
state.114
According
to
Article
1
of
Protocol
1
to
the
Convention:
Every
natural
legal
person
is
entitled
to
the
peaceful
enjoyment
of
his
possessions.
No
one
shall
be
deprived
of
his
possessions
except
in
the
public
interest
and
subject
to
the
conditions
provided
for
by
law
and
by
the
general
principles
of
international
law.
The
preceding
provisions
shall
not,
however,
in
any
way
impair
the
right
of
a
State
to
enforce
such
laws
as
it
deems
necessary
to
control
the
use
of
property
in
accordance
with
the
general
interest
or
to
secure
payment
of
taxes
or
other
contributions
or
penalties.
This
provision
applies
both
to
United
Kingdom
nationals
as
well
as
foreign
nationals
106
Libyan
American
Oil
Company
(LIAMCO)
v
Libyan
Arab
Republic
(1981)
20
ILM
1,
121-122.
107
UK
Model
BIT
(n
7)
art
5.
108
UK
Mexico
BIT
(n
64)
art
7(1).
109 nd
See
eg
M
Sornarajah
The
International
Law
on
Foreign
Investment
(2
edn
Cambridge
University
Press,
Cambridge
2004)
437.
110
UK
Model
BIT,
(n
7)
art
5(1).
111
Biwater
Gauff
(Tanzania)
Ltd
v
Tanzania
(n
54)
para
775.
112
Biwater
Gauff
(Tanzania)
Ltd
v
Tanzania
(n
54)
para
781.
113
Biwater
Gauff
(Tanzania)
Ltd
v
Tanzania
(n
54)
para
797.
114
European
Convention
for
the
Protection
of
Human
Rights
and
Fundamental
Freedoms
(European
Convention
on
Human
Rights)
(adopted
4
November
1950)
213
UNTS
221.
and
companies
with
property
in
the
United
Kingdom.
It
has
been
broadly
interpreted
by
both
national
courts
and
by
the
European
Court
of
Human
Rights.115
Unlike
many
BITs116,
this
treaty
can
be
invoked
in
the
United
Kingdom
courts,
although
it
cannot
be
used
to
overturn
Acts
of
the
United
Kingdom
Parliament.117
However,
one
key
difference
between
the
protection
of
property
under
the
European
Convention
on
Human
Rights
and
the
protection
offered
by
BITs
relates
to
the
standards
of
compensation
that
are
available.
The
European
Court
of
Human
Rights
has
held
that
Article
1
does
not
guarantee
a
right
to
full
compensation
in
all
circumstances,
since
legitimate
objectives
of
public
interest
may
call
for
less
than
reimbursement
of
the
full
market
value.118
Indeed,
the
Court
has
held
that
the
national
authorities
will
have
a
wide
margin
of
appreciation
in
deciding
what
is
appropriate
compensation.119
8. Monetary
Transfer
Most
investors
would
expect
to
be
able
to
transfer
any
profits
made
from
their
investment
back
to
their
home
state.
The
UK
Model
BIT
prescribes
that
the
contracting
parties
shall
guarantee
the
unrestricted
transfer
of
any
investment
which
falls
within
the
treaty
regime
and
any
returns
on
such
investments.120
A
similar
provision
is
found
in
all
BITs
concluded
by
the
United
Kingdom.121
Returns
is
defined
in
the
UK
Model
BIT
as
the
amounts
yielded
by
an
investment
and
in
particular,
though
not
exclusively,
includes
profit,
interest,
capital
gains,
dividends,
royalties
and
fees.122
This
is
an
open-ended
definition
which
is
capable
of
evolution.
Nevertheless,
in
one
of
the
most
recent
BITs
concluded
by
the
United
Kingdom,
a
much
more
detailed
list
of
transfers
covered
by
the
provision
is
set
out:123
(a) Profits,
dividends,
interests,
capital
gains,
royalty
payments,
management
fees,
technical
assistance
and
other
fees
and
amounts
derived
from
the
investment;
(b) Proceeds
from
the
sale
of
all
or
any
part
of
the
investment,
or
from
the
partial
or
complete
liquidation
of
the
investment;
(c) Payments
arising
from
the
compensation
from
expropriation;
(d) Payments
pursuant
to
the
application
of
provisions
relating
to
the
settlement
of
disputes;
(e) Payments
arising
from
the
compensation
and
losses
under
Article
6
of
this
Agreement.
115
See
generally
C
Ovey
and
R
White
Jacobs
&
White
on
the
European
Convention
on
Human
Rights
th (4
edn
Oxford
University
Press,
Oxford
2006)
ch
15.
116
See
above.
117
Human
Rights
Act
1998
ss
3,
4,
6.
118
Holy
Monasteries
v
Greece
(Judgment
of
9
December
1994)
(1995)
20
EHRR
1,
para
71.
119
Lithgow
v
United
Kingdom
(Judgment
of
8
July
1986)
(1986)
8
EHRR
329,
para.
122.
120
UK
Model
BIT
(n
7)
art
6.
121
One
oddity
is
the
UK
Egypt
BIT
which
only
provides
for
the
free
transfer
of
returns
from
investments,
but
not
the
investment
itself;
UK
Egypt
BIT
(n
4)
art
6.
122
UK
Model
BIT
(n
7)
art
1(b).
123
UK
Mexico
BIT
(n
64)
art
8(2).
The
UK
Model
BIT
also
stipulates
that
transfers
must
be
made
without
delay.
There
is
no
definition
of
delay
in
the
Model
BIT
but
several
instruments
concluded
by
the
United
Kingdom
do
specify
a
maximum
time
limit
within
which
a
transfer
must
be
made.
This
varies
from
60
days124
to
three
months.125
According
to
the
UK
Model
BIT,
there
is
also
a
right
to
have
the
transfer
made
in
the
currency
in
which
the
capital
was
originally
invested.126
It
also
says
that,
unless
otherwise
agreed
by
the
investor,
transfers
must
be
made
at
the
rate
of
exchange
on
the
date
of
the
transfer
subject
to
any
exchange
regulations
in
force.127
Whilst
most
of
the
BITs
concluded
by
the
United
Kingdom
apply
to
investments
made
before
or
after
the
entry
into
force
of
the
treaty,
there
are
some
exceptions
to
the
application
of
the
prohibition
on
the
unrestricted
transfer
of
investments
and
returns.
In
some
cases,
a
transitional
period
is
permitted.128
In
other
cases,
the
agreement
expressly
excludes
the
application
of
the
transfer
provisions
to
investments
made
prior
to
a
certain
date.
Thus,
the
BIT
between
the
United
Kingdom
and
Zimbabwe
concluded
on
1
March
1995
says
that
investments
made
in
Zimbabwe
prior
to
1
May
1993
shall
be
subject
to
any
restrictions
on
transfers
of
capital
which
existed
at
the
time
of
admission
of
the
investment.129
At
the
same
time,
the
agreement
places
an
obligation
on
Zimbabwe
to
use
its
best
endeavours
to
reduce
and
eliminate
such
restrictions,
although
the
wording
of
this
provision
falls
short
of
creating
a
strong
obligation
to
do
so.
There
are
no
general
exceptions
found
in
the
UK
Model
BIT
which
allow
the
United
Kingdom
or
other
contracting
parties
to
impose
any
restrictions
on
the
transfer
of
investments
or
returns.
Whilst
many
of
the
BITs
concluded
by
the
United
Kingdom
follow
this
approach,
some
of
the
earlier
agreements
do
provide
exceptions
to
the
unrestricted
transfer
of
investments
and
returns.
For
instance
the
BIT
concluded
between
the
UK
and
Singapore
in
1975
provides
for
the
free
transfer
of
the
returns
from
investments
but
it
is
subject
to
the
right
of
each
Contracting
Party
in
exceptional
financial
or
economic
circumstances
to
exercise
equitably
and
good
faith
powers
conferred
by
its
laws.130
A
narrower
exception
is
found
in
the
BIT
concluded
between
the
UK
and
the
Philippines
which
states
that
the
contracting
parties
shall
allow
the
free
transfer
of
capital
and
the
earnings
of
its
albeit
subject
to
a
right
to
124
Agreement
between
the
Government
of
the
United
Kingdom
of
Great
Britain
and
Northern
Ireland
and
the
Government
of
the
Republic
of
Honduras
for
the
Promotion
and
Protection
of
Investments
(UK
Honduras
BIT)
(adopted
7
December
1993)
art
6.
125
UK
Latvia
BIT
(n
18)
art
6.
126
UK
Model
BIT
(n
7)
art
6.
127
UK
Model
BIT
(n
7)
art
6.
128
UK
Lithuania
BIT
(n
17)
art
6.
129
Agreement
between
the
Government
of
the
United
Kingdom
of
Great
Britain
and
Northern
Ireland
and
the
Government
of
Zimbabwe
for
the
Promotion
and
Protection
of
Investments
(UK
Zimbabwe
BIT)
(adopted
1
March
1995)
art
6(2).
130
Agreement
between
the
Government
of
the
United
Kingdom
of
Great
Britain
and
Northern
Ireland
and
the
Government
of
the
Republic
of
Singapore
for
the
Promotion
and
Protection
of
Investments
(UK
Singapore
BIT)
(adopted
22
July
1975)
1018
UNTS
175,
art
6.
impose
equitably
and
in
good
faith
such
measures
as
may
be
necessary
to
safeguard
the
integrity
and
independence
of
its
currency;
its
external
financial
position
and
balance
of
payments,
consistent
with
its
rights
and
obligations
as
a
member
of
the
International
Monetary
Fund.131
Other
BITs
also
limit
the
exceptions
on
free
transfer
of
investments
and
returns
to
situations
of
exceptional
balance
of
payments
difficulties.132
Many
of
the
BITs
which
do
contain
a
balance
of
payments
exception
to
the
unrestricted
transfer
of
investments
and
returns
impose
certain
conditions
to
the
exercise
of
the
exception.
For
instance,
the
BIT
between
the
United
Kingdom
and
Mauritius
concluded
in
1986
provides
that
such
powers
must
not
be
used
to
impede
any
transfer
and
it
further
specifies
that,
even
in
cases
where
there
is
an
exceptional
balance
of
payments
difficulty,
the
transfer
of
at
least
20%
of
any
investment
or
return
shall
be
guaranteed
each
year.133
Slight
variations
on
the
conditions
are
found
in
other
early
BITs.
The
BIT
between
the
United
Kingdom
and
Tunisia
states
that
a
transfer
must
take
place
as
soon
as
possible
and
at
least
shall
be
spread
out
equitably
over
a
period
of
not
more
than
five
years.134
Another
example
of
time
limits
on
transfer
restrictions
is
found
in
the
BIT
between
the
UK
and
Argentina
which
provides
that
any
limitation
must
not
exceed
eighteen
months
in
respect
of
each
application
to
transfer
and
shall
allow
the
transfer
to
be
made
in
instalments
within
that
period
so
that
at
least
fifty
per
cent
of
the
capital
and
the
returns
shall
be
permitted
by
the
end
of
the
first
year.135
One
of
the
latest
BITs
concluded
by
the
United
Kingdom
with
Mexico
does
include
an
explicit
balance
of
payments
exception
to
the
unrestricted
transfer
of
investments
and
returns.
Article
8(4)
of
the
treaty
provides
that
in
case
of
serious
balance
of
payments
difficulty
or
of
a
threat
thereof,
a
Contracting
Party
may
temporarily
restrict
transfers
provided
that
such
a
Contracting
Party
implements
measures
or
a
programme
in
accordance
with
international
standards.
These
restrictions
should
be
131
Agreement
between
the
Government
of
the
United
Kingdom
of
Great
Britain
and
Northern
Ireland
and
the
Government
of
the
Republic
of
the
Philippines
for
the
Promotion
and
Protection
of
Investments
(UK
Philippines
BIT)
(adopted
3
December
1980)
1218
UNTS
62,
art
VII.
132
See
eg
Agreement
between
the
Government
of
the
United
Kingdom
of
Great
Britain
and
Northern
Ireland
and
the
Government
of
Belize
for
the
Promotion
and
Protection
of
Investments
(UK
Belize
BIT)
(adopted
30
April
1982)
1294
UNTS
200,
art
6;
Agreement
between
the
Government
of
the
United
Kingdom
of
Great
Britain
and
Northern
Ireland
and
China
for
the
Promotion
and
Protection
of
Investments
(UK
China
BIT)
(adopted
15
May
1985)
1462
UNTS
256,
art
6.
133
Agreement
between
the
Government
of
the
United
Kingdom
of
Great
Britain
and
Northern
Ireland
and
the
Government
of
Mauritius
for
the
Promotion
and
Protection
of
Investments
(UK
Mauritius
BIT)
(adopted
20
May
1986)
1505
UNTS
64,
art
6;
see
also
UK
China
BIT
(n
158)
art
6(2);
UK
Hungary
BIT
(n
15)
art
7(1).
134
Agreement
between
the
Government
of
the
United
Kingdom
of
Great
Britain
and
Northern
Ireland
and
the
Government
of
the
Tunisian
Republic
for
the
Promotion
and
Protection
of
Investments
(UK
Tunisia
BIT)
(adopted
14
March
1989)
1584
UNTS
164,
art
6.
The
UK
Turkey
BIT
makes
a
similar
provision
subject
to
a
time
limit
of
three
years;
Agreement
between
the
Government
of
the
United
Kingdom
of
Great
Britain
and
Northern
Ireland
and
the
Government
of
the
Republic
of
Turkey
for
the
Promotion
and
Protection
of
Investments
(UK
Turkey
BIT)
(adopted
15
March
1991)
1972
UNTS
26,
art
6.
135
Agreement
between
the
Government
of
the
United
Kingdom
of
Great
Britain
and
Northern
Ireland
and
the
Government
of
the
Republic
of
Argentina
for
the
Promotion
and
Protection
of
Investments
(UK
Argentina
BIT)
(adopted
11
December
1990)
1765
UNTS
34,
art
6(3).
Article
6(4)
further
provides
that
the
transfer
of
dividends
shall
not
be
restricted
at
all.
imposed
on
an
equitable,
non-discriminatory
and
in
good
faith
basis.
The
provision
falls
short
of
imposing
any
time-limits
on
the
use
of
restrictions,
in
contrast
to
some
of
the
other
treaties
discussed
above.
In
addition,
the
UK
Mexico
BIT
also
contains
a
broader
list
of
exceptions
which
allow
a
Contracting
Party
to
prevent
a
transfer
in
cases
of:136
(a) bankruptcy,
insolvency,
or
the
protection
of
rights
of
creditors;
(b) issuing,
trading
or
dealing
in
securities;
(c) criminal
or
administrative
violations;
(d) reports
of
transfers
of
currency
or
other
monetary
instruments;
(e) ensuring
the
satisfaction
of
judgments
in
adjudicatory
proceedings.
In
practice,
the
variety
of
treaty
language
relating
to
monetary
transfer
may
be
irrelevant
given
that
the
treatment
of
the
returns
of
investors
falls
within
the
scope
of
the
MFN
treatment
standard.137
This
means
that
investors
may
be
able
to
claim
better
standards
of
treatment
than
those
actually
set
out
in
the
BIT
that
is
directly
applicable
to
their
investment.
9. Dispute
settlement
Investor-state
disputes
The
UK
Model
BIT
provides
for
investor-state
dispute
settlement
in
Article
8.
International
arbitration
is
available
if
the
dispute
has
not
been
settled
within
three
months
from
the
written
notification
of
the
claim.
The
investor
and
the
contracting
party
concerned
may
agree
to
subject
the
dispute
to
one
of
three
possible
options:
(a) The
International
Centre
for
the
Settlement
of
Disputes138;
(b) The
Court
of
Arbitration
of
the
International
Chamber
of
Commerce;
(c) An
international
arbitrator
or
ad
hoc
arbitration
tribunal
to
be
appointed
by
a
special
agreement
or
establishment
under
the
Arbitration
Rules
of
the
United
Nations
Commission
on
International
Trade
Law
(UNCITRAL).
If
the
disputing
parties
cannot
agree
on
one
of
these
options,
the
dispute
shall
be
submitted
by
the
investor
to
UNCITRAL
arbitration.139
Investor-state
dispute
settlement
is
one
issue
on
which
the
practice
of
the
United
Kingdom
has
varied
considerably.
Most
UK
BITs
concluded
before
February
1982
contained
a
dispute
settlement
clause
which
only
allowed
an
investor
to
submit
a
dispute
to
ICSID
conciliation
or
arbitration.140
Since
April
1982,
practice
on
this
136
UK
Mexico
(n
64)
art
8(3).
137
See
above.
138
The
ICSID
Convention
entered
into
force
for
the
United
Kingdom
on
18
January
1967.
Article
8
of
the
UK
Model
BIT
makes
clear
that
the
contracting
parties
consent
to
submit
any
dispute
concerning
an
investment
to
the
Centre.
139
UK
Model
BIT
(n
7)
art
8.
140
This
is
true
of
BITs
concluded
with
Egypt,
Singapore,
Indonesia,
Jordan,
Sri
Lanka,
Senegal,
Bangladesh,
Philippines,
Malaysia,
Papua
New
Guinea,
Paraguay,
and
Yemen.
matter
has
varied.
Some
BITs
continued
to
offer
ICSID
as
an
exclusive
forum
for
the
settlement
of
investment
disputes141,
whereas
others
substituted
ICSID
for
another
exclusive
forum
for
the
settlement
of
disputes.
For
instance,
the
UK
Panama
BIT,
concluded
in
October
1983,
provides
that
any
disputes
between
a
national
or
company
and
one
of
the
contracting
parties
shall
be
submitted
to
such
procedures
that
can
be
agreed,
or
otherwise
to
arbitration
under
UNCITRAL
rules.142
Other
BITs
allow
more
of
a
choice.
For
instance,
the
UK
Haiti
BIT,
concluded
in
March
1985,
permitted
investors
to
choose
between
arbitration
through
the
Court
of
Arbitration
of
the
International
Chamber
of
Commerce
or
UNCITRAL
arbitration.143
Even
after
the
Model
BIT
was
promulgated
in
June
1991,
there
continued
to
be
variety
in
the
way
in
which
investor-state
dispute
settlement
was
dealt
with
under
the
UK
BITs.
The
limitation
of
dispute
settlement
options
can
have
important
consequences
for
the
investors
concerned.
There
are,
of
course,
procedural
differences
between
the
various
arbitral
mechanisms.
In
addition,
there
can
also
be
differences
in
the
scope
of
jurisdiction
conferred
upon
the
arbitral
institution.
This
is
particularly
true
where
the
only
option
is
ICSID
arbitration,
as
is
the
case
in
several
BITs
concluded
by
the
United
Kingdom.
As
noted
by
the
ICSID
Ad
Hoc
Committee
in
the
recent
case
of
Malaysian
Historical
Salvors
v
Malaysia:144
Under
Article
7
of
the
[UK
Malaysia
BIT],
the
sole
recourse
in
the
event
that
a
legal
dispute
between
the
investor
and
the
host
State
should
arise
which
is
not
settled
by
agreement
between
them
through
the
pursuit
of
local
remedies
or
otherwise
is
reference
to
the
International
Centre
for
the
Settlement
of
Investment
Disputes.
Unlike
some
other
BITs,
no
third
party
dispute
settlement
options
are
provided
in
the
alternative
to
ICSID.
It
follows
that,
if
jurisdiction
is
found
to
be
absent
under
the
ICSID
Convention,
the
investor
is
left
without
international
recourse
altogether.
This
raises
the
question
of
how
wide
the
jurisdiction
of
an
ICSID
arbitral
tribunal
is.
This
is
a
controversial
issue
and
the
jurisprudence
has
been
described
by
one
commentator
as
sheer
chaos.145
This
is
demonstrated
if
one
considers
how
the
question
was
addressed
in
the
case
of
Malaysian
Historical
Salvors
v
Malaysia
decided
under
the
UK
Malaysia
BIT.
At
dispute
was
the
question
whether
or
not
the
ICSID
Convention
imposed
an
additional
hurdle
for
investors
to
meet
before
they
141
See
eg
BITs
concluded
with
Mauritius,
Jamaica,
Hungary,
Benin,
and
Tunisia.
142
Agreement
between
the
Government
of
the
United
Kingdom
of
Great
Britain
and
Northern
Ireland
and
the
Government
of
the
Republic
of
Panama
for
the
Promotion
and
Protection
of
Investments
(UK
Panama
BIT)
(adopted
7
October
1983)
1461
UNTS
142,
art
7.
The
UNCITRAL
arbitration
rules
had
been
adopted
in
April
1976
by
UNCITRAL
and
they
were
noted
and
recommended
later
that
year
by
the
UN
General
Assembly;
see
Arbitration
Rules
of
the
United
Nations
Commission
on
International
Trade
Law
(15
December
1976)
UNGA
Resolution
31/98.
143
Agreement
between
the
Government
of
the
United
Kingdom
of
Great
Britain
and
Northern
Ireland
and
the
Government
of
the
Republic
of
Haiti
for
the
Promotion
and
Protection
of
Investments
(UK
Haiti
BIT)
1913
UNTS
3,
art
8;
see
also
UK
USSR
BIT
(n
38)
art
8.
144
Malaysian
Historical
Salvors
v
Malaysia
(Decision
on
the
Application
for
Annulment
of
16
April
2009)
ICSID
Case
ARB/05/10,
para
62.
145
S
Manciaux
The
Notion
of
Investment:
New
Controversies
(2009)
10
Journal
of
World
Trade
and
Investment
443,
444.
could
commence
arbitral
proceedings.
The
sole
arbitrator
who
originally
decided
the
dispute
had
taken
the
view
that,
as
well
as
showing
that
there
was
an
investment
within
the
definition
of
the
BIT,
it
was
also
necessary
to
show
that
the
objective
criterion
of
an
investment
within
the
meaning
of
Article
25(1)
of
the
ICSID
Convention
had
been
met.146
The
arbitrator
found
that
one
of
these
criteria
the
need
to
demonstrate
a
substantial
contribution
to
the
economic
development
of
the
host
state
had
not
been
met
on
the
facts
of
the
case
and
he
therefore
held
that
he
did
not
have
jurisdiction.147
In
doing
so,
he
cited
a
number
of
other
cases
which
had
taken
this
approach,
including
Joy
Mining
Machinery
Ltd
v
Egypt
which
was
decided
under
the
1975
UK
Egypt
BIT.148
The
consequence
of
this
approach
is
that
a
dispute
over
something
which
would
qualify
as
an
investment
under
the
broad
definition
of
that
term
generally
adopted
in
United
Kingdom
BITs
may
nevertheless
be
excluded
from
the
jurisdiction
of
an
ICSID
tribunal,
thus
preventing
the
submission
of
the
dispute
to
arbitration.
It
is
partly
for
this
reason
that
the
award
in
Malaysian
Historical
Salvors
v
Malaysia
was
annulled
by
the
ICSID
Ad
Hoc
Committee.149
According
to
the
majority
of
the
Ad
Hoc
Committee,
the
drafting
history
of
Article
25(1)
of
the
ICSID
Convention
did
not
support
the
creation
of
an
independent
definition
of
investment.150
In
support
of
this
conclusion,
they
cited,
inter
alia,
the
award
of
the
arbitral
tribunal
in
Biwater
Gauff
v
Tanzania,
a
decision
rendered
under
the
1994
UK
Tanzania
BIT.151
Rather
than
relying
on
an
independent
concept
of
investment
crafted
by
arbitrators,
the
majority
took
the
view
that
it
is
[the]
bilateral
and
multilateral
treaties
[on
investment]
which
today
are
the
engine
of
ICSIDs
effective
jurisdiction.
To
ignore
or
depreciate
the
importance
of
the
jurisdiction
they
bestow
upon
ICSID,
and
rather
to
embroider
upon
questionable
interpretations
of
the
term
investment
as
found
in
Article
25(1)
of
the
Convention,
risks
crippling
the
institution.152
In
the
context
of
the
particular
BIT
which
was
applicable
to
the
case
before
it,
the
majority
of
the
Ad
Hoc
Committee
said
that:
It
cannot
be
accepted
that
the
Governments
of
Malaysia
and
the
United
Kingdom
concluded
a
treaty
providing
for
arbitration
of
disputes
arising
under
it
in
respect
of
investments
so
comprehensively
described,
with
the
intention
that
the
only
arbitral
recourse
provided
between
a
Contracting
State
and
a
national
of
another
Contracting
State,
that
of
ICSID,
could
be
rendered
nugatory
by
a
restrictive
definition
of
a
deliberately
undefined
term
of
the
ICSID
Convention,
namely,
investment,
as
it
is
found
in
the
provision
of
Article
25(1).153
146
Malaysian
Historical
Salvors
v
Malaysia
(Award
on
Jurisdiction
of
17
May
2007)
ICSID
Case
No
ARB/05/10,
para
55.
See
also,
prominently,
Salini
Construtti
v
Morocco
(Decision
on
Jurisdiction
of
23
July
2001)
ICSID
Case
No
ARB/00/4,
para
44:
jurisdiction
depends
upon
the
existence
of
an
investment
under
the
meaning
of
the
Bilateral
Investment
Treaty
as
well
as
that
of
the
[ICSID]
Convention
[Emphasis
added]
147
Malaysian
Historical
Salvors
v
Malaysia
(n
146)
para
143.
148
Joy
Mining
Machinery
Ltd
v
Egypt
(Award
on
Jurisdiction
of
6
August
2004)
ICSID
Case
No
ARB/03/11.
149
Malaysian
Historical
Salvors
v
Malaysia
(n
144).
150
Malaysian
Historical
Salvors
v
Malaysia
(n
144)
paras
69-72.
151
Biwater
Gauff
Ltd
v
Tanzania
(n
54).
152
Malaysian
Historical
Salvors
v
Malaysia
(n
144)
para
73.
153
Malaysian
Historical
Salvors
v
Malaysia
(n
144)
para
62.
If
the
approach
adopted
by
the
majority
of
the
Ad
Hoc
Committee
in
this
case
prevails,
the
difference
between
ICSID
arbitration
and
other
arbitral
institutions
is
lessened.
However,
the
existence
of
a
strong
dissenting
opinion
by
Judge
Mohamed
Shahabuddeen,
means
that
this
issue
may
be
re-visited
again
by
future
tribunals.154
The
latest
BIT
to
be
concluded
by
the
United
Kingdom
with
Mexico
deviates
significantly
from
previous
practice
in
the
sense
that
investor-state
dispute
settlement
is
not
dealt
with
in
a
single
article.
Rather,
a
whole
chapter
of
the
treaty
is
dedicated
to
the
subject.
It
provides
a
much
more
detailed
account
of
the
process
which
applies
to
proceedings
against
a
host
state.
There
are
a
number
of
features
of
the
dispute
settlement
provisions
in
this
BIT
which
are
worthy
of
note.
First,
the
UK
Mexico
BIT
includes
provisions
on
what
steps
have
to
be
taken
prior
to
the
initiation
of
proceedings,
i.e.
notice
of
intent
and
consultation.155
Failure
to
take
these
steps
will
prevent
a
dispute
being
submitted
to
arbitration.156
In
addition,
the
treaty
sets
a
limitation
period
of
three
years
from
the
date
that
the
investor
first
acquired,
or
should
have
first
acquired,
knowledge
of
the
alleged
breach
and
knowledge
that
the
investor
had
incurred
loss
or
damage.157
Second,
under
the
UK
Mexico
BIT,
the
investor
may
choose
between
ICSID
arbitration,
ICSID
Additional
Facility
arbitration,
or
arbitration
through
the
Permanent
Court
of
Arbitration
Optional
Rules
for
Arbitrating
between
two
Parties
of
which
only
one
is
a
State.158
The
contracting
parties
are
taken
to
have
consented
to
all
of
these
options.159
Thus,
this
is
one
of
the
few
BITs
concluded
by
the
United
Kingdom
which
confer
a
choice
of
forum
on
the
foreign
investor.
Third,
the
UK
Mexico
BIT
contains
provisions
on
the
arbitral
procedure
that
should
be
applied.
This
follows
a
recent
trend
in
certain
BITs
towards
leaving
less
scope
for
arbitral
tribunals
to
decide
their
own
procedure.160
Thus,
it
specifies
that,
unless
the
parties
agree
otherwise,
the
arbitral
tribunal
shall
be
composed
of
three
arbitrators.161
It
also
specifies
the
applicable
law.162
A
tribunal
seized
of
a
dispute
under
the
treaty
has
the
power
to
order
provisional
measures
pending
the
final
settlement
of
the
dispute.163
State-to-state
disputes
154
Malaysian
Historical
Salvors
v
Malaysia
(n
144)
Dissenting
Opinion
of
Judge
Mohamed
Shahabuddeen.
155
UK
Mexico
BIT
(n
64)
art
10.
156
UK
Mexico
BIT
(n
64)
art
11(9).
157
UK
Mexico
BIT
(n
64)
art
11(9).
158
UK
Mexico
BIT
(n
64)
art
11(4).
159
UK
Mexico
BIT
(n
64)
art
12.
160
See
UNCTAD
International
Investment
Rule-Making:
Stocktaking,
Challenges
and
the
Way
Forward
(n
6)
64.
161
UK
Mexico
BIT
(n
64)
art
13.
162
UK
Mexico
BIT
(n
64)
art
17.
163
UK
Mexico
BIT
(n
64)
art
19.
All
BITs
concluded
by
the
United
Kingdom
also
contain
a
provision
on
state-to-state
dispute
settlement.
To
this
end,
the
UK
Model
BIT
says
that
disputes
between
the
contracting
parties
concerning
the
interpretation
or
application
of
the
treaty
should,
if
possible,
be
settled
through
diplomacy.164
If
this
is
not
possible,
a
dispute
may
be
submitted
to
arbitration
upon
the
request
of
either
contracting
party.165
There
is
almost
no
deviation
on
this
issue
in
BITS
concluded
by
the
United
Kingdom.
Overview
of
national
control
mechanisms
The
legal
framework
which
governs
the
control
of
arbitration
proceedings
and
awards
varies
depending
on
where
in
the
United
Kingdom
the
arbitration
took
place.
In
England
and
Wales,
there
is
a
long
history
of
legislation
purporting
to
place
limits
on
the
exercise
of
arbitration
within
the
jurisdiction.
Today,
it
is
principally
the
Arbitration
Act
1996
which
applies
to
arbitrations
having
their
seat
in
England,
Wales
or
Northern
Ireland,
including
any
such
arbitration
which
may
take
place
under
a
BIT
or
under
an
investment
contract.
As
explained
by
one
judge,
the
object
of
modern
arbitration
legislation,
starting
from
at
least
the
1979
[Arbitration]
Act,
has
been
to
offer
the
international
community
an
attractive
framework
within
which
to
arbitrate
in
England.166
Thus,
according
to
the
general
principles
of
the
Arbitration
Act
1996,
the
parties
should
be
free
to
agree
how
their
disputes
are
resolved,
subject
only
to
such
safeguards
as
are
necessary
in
the
public
interest.167
In
Scotland,
in
contrast,
there
is
currently
no
general
legislative
framework
governing
the
arbitration
process.168
However,
Scots
law
does
provide
that
the
decisions
of
arbiters
may
be
subject
to
challenge
under
the
general
principles
of
judicial
review.169
Control
of
validity
of
United
Kingdom
arbitral
awards
In
England,
Wales
and
Northern
Ireland,
it
is
the
Arbitration
Act
1996
which
sets
out
the
circumstances
in
which
an
arbitral
award
made
in
the
United
Kingdom
may
be
subject
to
the
control
of
the
courts.
In
general,
an
arbitral
award
will
be
enforceable,
by
leave
of
a
court,
in
the
same
manner
as
a
judgment
or
order
of
a
court.170
However,
there
are
several
grounds
on
which
an
arbitral
award
may
be
challenged.
First,
an
arbitral
award
may
be
challenged
on
the
ground
that
the
tribunal
did
not
164
UK
Model
BIT
(n
7)
art
9(1).
165
UK
Model
BIT
(n
7)
art
9(2).
166
Department
of
Economics,
Policy
and
Development
of
the
City
of
Moscow
and
another
v
Bankers
Trust
Company
and
another
[2005]
QB
207,
para
30.
167
Arbitration
Act
1996
s
1(b).
168
See
the
limited
provisions
of
the
Arbitration
(Scotland)
Act
1894.
See
also
the
Arbitration
(Scotland)
Bill
introduced
to
the
Scottish
Parliament
on
29
January
2009;
available
on
the
Scottish
Parliament
website
<http://www.scottish.parliament.uk/s3/bills/19-Arbitration/index.htm>
accessed
30
June
2009.
169
See
eg
Forbes
v
Underwood
(1886)
13
R
465.
170
Arbitration
Act
1996
s
66(1).
have
substantive
jurisdiction.171
In
this
case,
a
party
to
arbitral
proceedings
may
apply
to
a
court
for
an
order
declaring
the
award
on
the
merits
made
by
the
tribunal
to
be
of
no
effect.172
The
court
has
the
power
to
confirm,
vary
or
set
aside
the
award,
in
whole
or
in
part.173
In
deciding
whether
or
not
an
arbitral
tribunal
has
exceeded
its
jurisdiction
for
the
purposes
of
section
67
of
the
1996
Act,
the
courts
will
proceed
by
way
of
re-hearing
the
matters
before
the
arbitrators.174
Secondly,
an
arbitral
award
may
be
challenged
on
the
basis
of
serious
irregularity
affecting
the
tribunal,
the
proceedings,
or
the
award.175
Situations
which
are
deemed
to
have
caused
serious
irregularity
are
listed
in
section
68(2)
of
the
Act
and
they
include:
failure
by
the
tribunal
to
conduct
the
proceedings
in
accordance
with
the
procedure
agreed
by
the
parties;
failure
by
the
tribunal
to
deal
with
all
the
issues
that
were
put
to
it;
uncertainty
or
ambiguity
as
to
the
effect
of
the
award;
the
award
being
obtained
by
fraud
or
the
award
or
the
way
in
which
it
was
procured
being
contrary
to
public
policy;
failure
to
comply
with
the
requirements
as
to
the
form
of
the
award.
Serious
irregularity
alone,
however,
is
not
enough.
It
is
also
necessary
to
show
that
the
serious
irregularity
has
caused
or
will
cause
a
substantial
injustice
to
the
applicant.176
If
this
is
the
case,
the
courts
have
the
power
to
remit
the
award
to
the
arbitral
tribunal
for
reconsideration.177
Where
that
is
inappropriate,
the
court
may
set
aside
the
award
in
whole
or
in
part
or
declare
the
award
to
be
of
no
effect
in
whole
or
in
part.178
These
two
grounds
of
challenge
are
mandatory
provisions
which
cannot
be
circumvented
by
the
agreement
of
the
parties.179
One
exception
is
that
they
do
not
apply
to
ICSID
arbitrations
which
have
their
seat
in
the
United
Kingdom.180
There
are
several
procedural
aspects
relating
to
an
application
under
the
1996
Act
which
are
worth
mentioning.
Any
applications
under
the
previously
described
provisions
must
be
made
within
28
days
of
the
award.181
In
both
cases,
the
decision
of
the
court
may
only
be
appealed
with
the
leave
of
the
court.182
More
importantly
171
Arbitration
Act
1996
s
67.
172
Arbitration
Act
1996
s
67(1)(b).
173
Arbitration
Act
1996
s
67(3).
174
Czech
Republic
v
European
Media
Ventures
[2007]
EWHC
2851,
para
13.
175
Arbitration
Act
1996
s
68.
176
Arbitration
Act
1996
s
68(2).
177
Arbitration
Act
1996
s
68(3)(a).
178
Arbitration
Act
1996
ss
68(3)(b),
(c).
179
Arbitration
Act
1996
s
4(1),
Sch
1.
180
Arbitration
(International
Investment
Disputes)
Act
1966
s
3(2).
The
only
provision
of
the
1966
Act
which
does
apply
to
ICSID
arbitrations
is
section
9
which
allows
a
party
to
apply
to
a
court
for
an
order
to
suspend
proceedings
when
an
arbitration
is
underway.
See
The
Mayor
and
Commonalty
&
Citizens
of
the
City
of
London
v
Ashok
Sancheti
[2008]
EWCA
Civ
1283.
181
Arbitration
Act
1996
s
70(3).
182
Arbitration
Act
1996
ss
67(4),
68(4).
for
the
parties
to
the
arbitral
award,
proceedings
under
these
provisions
of
the
1996
Act
may
take
place
in
private.183
Yet,
as
noted
by
Mance
LJ
in
Department
of
Economics,
Policy
and
Development
of
the
City
of
Moscow
and
another
v
Bankers
Trust
Company
and
another,
even
though
the
hearing
may
have
been
in
private,
the
court
should,
when
preparing
and
giving
judgment
bear
in
mind
that
any
judgment
should
be
given
in
public,
where
this
can
be
done
without
disclosing
significant
confidential
information.184
This
is
a
matter
that
must
be
decided
by
the
judge
taking
into
account
all
the
relevant
circumstances.
Recognition
and
enforcement
of
foreign
arbitral
awards
The
1996
Act
also
makes
provision
for
the
mutual
recognition
and
enforcement
of
arbitral
awards
made
in
the
territory
of
a
party
to
the
1958
New
York
Convention
on
the
Recognition
and
Enforcement
of
Foreign
Arbitral
Awards.185
Such
awards
may
be
enforced
by
leave
of
a
court.186
Recognition
of
New
York
awards,
however,
may
be
refused
for
the
following
reasons:187
(a)
that
a
party
to
the
arbitration
agreement
was
(under
the
law
applicable
to
him)
under
some
incapacity;
(b)
that
the
arbitration
agreement
was
not
valid
under
the
law
to
which
the
parties
subjected
it
or,
failing
any
indication
thereon,
under
the
law
of
the
country
where
the
award
was
made;
(c)
that
he
was
not
given
proper
notice
of
the
appointment
of
the
arbitrator
or
of
the
arbitration
proceedings
or
was
otherwise
unable
to
present
his
case;
(d)
that
the
award
deals
with
a
difference
not
contemplated
by
or
not
falling
within
the
terms
of
the
submission
to
arbitration
or
contains
decisions
on
matters
beyond
the
scope
of
the
submission
to
arbitration
;
(e)
that
the
composition
of
the
arbitral
tribunal
or
the
arbitral
procedure
was
not
in
accordance
with
the
agreement
of
the
parties
or,
failing
such
agreement,
with
the
law
of
the
country
in
which
the
arbitration
took
place.
In
addition,
recognition
or
enforcement
of
a
New
York
award
may
be
refused
if
the
award
is
in
respect
of
a
matter
which
is
not
capable
of
settlement
by
arbitration,
or
if
it
would
be
contrary
to
public
policy
to
recognise
or
enforce
the
award.188
Separate
provisions
apply
to
the
recognition
and
enforcement
of
ICSID
awards.189
ICSID
awards
must
be
registered
under
rules
and
procedures
prescribed
by
the
courts.190
The
effect
of
registration
is
to
give
the
same
force
to
an
ICSID
award
as
a
183
CPR
62.10.
184
Department
of
Economics,
Policy
and
Development
of
the
City
of
Moscow
and
another
v
Bankers
Trust
Company
and
another
[2005]
QB
207,
para
39.
185
Arbitration
Act
1996
s
101.
See
also
Arbitration
Act
1950,
Pt
2.
186
Arbitration
Act
1996
s
101(2).
187
Arbitration
Act
1996
s
103(2).
188
Arbitration
Act
1996
s
103(3).
See
E
Brown
Illegality
and
public
policy
enforcement
of
arbitral
awards
in
England:
Hillmarton
Limited
v
Omnium
de
Traitement
de
de
Valorisation
SA
(2000)
International
Arbitration
Law
Review
31.
189
Arbitration
(International
Investment
Disputes)
Act
1966
s
1.
190
CPR
62.21.
judgment
of
the
High
Court.191
However,
the
execution
of
an
award
may
be
stayed
if
an
application
to
stay
the
enforcement
of
the
award
has
been
made
under
the
ICSID
Convention.192
No
separate
challenge
to
the
award
can
be
made
in
the
courts
of
the
United
Kingdom.
State
immunity
and
arbitration
proceedings
Section
9(1)
of
the
State
Immunity
Act
1978
makes
clear
that
where
a
state
has
agreed
to
arbitration,
it
is
not
able
to
invoke
the
doctrine
of
state
immunity
in
connection
with
any
proceedings
in
the
courts
of
the
United
Kingdom
which
relate
to
the
arbitration.
This
section
covers
both
proceedings
to
challenge
the
validity
of
an
arbitral
award,
as
well
as
proceedings
relating
to
the
execution
of
an
arbitral
award.193
It
also
applies
to
both
awards
rendered
in
the
United
Kingdom
as
well
as
foreign
arbitral
awards.194
Nor
can
the
doctrine
of
non-justiciability
be
invoked
to
prevent
an
arbitral
award
which
had
been
made
under
a
bilateral
investment
treaty
from
being
challenged
in
the
courts.195
Although
arbitration
awards
against
foreign
states
are
in
theory
enforceable
in
the
United
Kingdom196,
in
practice,
many
assets
held
by
a
state
will
be
subject
to
sovereign
immunity.
Section
13(2)(b)
of
the
State
Immunity
Act
1978
provides
that
the
property
of
a
State
shall
not
be
subject
to
any
process
for
the
enforcement
of
a
judgment
or
arbitration
award
or,
in
an
action
in
rem,
for
its
arrest,
detention
or
sale.
There
is
an
exception
for
property
which
is
for
the
time
being
in
use
or
intended
for
use
for
commercial
purposes.197
The
precise
scope
of
this
exception
is
open
to
interpretation.
In
AIG
Capital
Partners
Inc
and
another
v
Kazakhstan,
it
was
held
that,
in
accordance
with
section
14(4)
of
the
1978
Act,
all
property
of
the
central
bank,
whether
or
not
it
was
a
separate
entity
from
the
central
government,
was
immune
from
enforcement
proceedings.198
The
rationale
for
this
exemption
was,
according
to
Aikens
J,
that
it
would
be
difficult,
if
not
impossible,
to
determine
whether
a
particular
asset
of
a
central
bank
or
monetary
authority
was,
at
a
relevant
time,
being
used
or
intended
for
use
for
sovereign
purposes
or
for
commercial
purposes.199
He
dismissed
arguments
that
the
exception
in
section
14(4)
of
the
1978
Act
should
be
construed
narrowly
in
order
to
protect
the
rights
of
the
claimant
under
the
European
Convention
of
Human
Rights.
Although
Aikens
J
accepted
that
Convention
rights
were
affected
by
the
1978
Act,
he
concluded
that
the
interference
was
legitimate
and
proportionate.200
10. FDI
statistics,
policies
and
authorities
191
Arbitration
(International
Investment
Disputes)
Act
1966
s
2.
192
Arbitration
(International
Investment
Disputes)
Act
1966
s
2(1).
193
Svenska
Petroleum
Exploration
v
Lithuania
[2007]
QB
886;
[2006]
EWCA
Civ
1529,
paras
117-119.
194
Svenska
Petroleum
Exploration
v
Lithuania
(n
193)
paras
120-121.
195
Republic
of
Ecuador
v
Occidental
Exploration
and
Production
Company
[2006]
QB
432;
[2006]
EWCA
Civ
1116.
196
Arbitration
Act
1996
ss
66,
101;
Arbitration
(International
Investment
Disputes)
Act
1966
s
2.
197
State
Immunity
Act
1978
s
13(4).
198
AIG
Capital
Partners
Inc
and
another
v
Kazakhstan
[2006]
1
WLR
1420;
[2005]
EWHC
2239
(Comm).
199
AIG
Capital
Partners
Inc
and
another
v
Kazakhstan
(n
198)
para
58.
200
AIG
Capital
Partners
Inc
and
another
v
Kazakhstan
(n
198)
para
79.
According
to
figures
released
in
June
2009,
foreign
direct
investment
in
the
United
Kingdom
rose
in
the
year
2008-2009
with
1,744
investment
projects
locating
and
expanding
in
the
country.201
This
makes
the
United
Kingdom
the
major
beneficiary
of
foreign
direct
investment
in
Europe.202
In
addition,
the
United
Kingdom
ranked
as
the
third
largest
recipient
of
foreign
direct
investment
in
the
World
Investment
Report
2008.203
According
to
this
report,
foreign
direct
investment
stocks
in
the
United
Kingdom
amounted
to
48.6
per
cent
of
its
Gross
Domestic
Product.204
In
total,
inward
investment
to
the
United
Kingdom
amounted
to
$1,347,688
million
in
2007,
up
from
$438,631
million
in
2000.205
The
majority
of
inward
investment
into
the
United
Kingdom
came
from
the
United
States,
followed
by
India,
France,
Germany,
Canada,
Japan,
Australia,
China,
Ireland,
Switzerland,
Italy,
and
Sweden.206
Software
was
the
largest
investment
sector
in
the
United
Kingdom,
followed
by
advanced
engineering,
business
services,
ICT,
life
sciences,
financial
services,
creative
and
media
services,
and
environmental
technology.207
As
well
as
investment
from
foreign
transnational
corporations,
the
United
Kingdom
has
also
attracted
significant
investment
from
sovereign
wealth
funds.208
The
promotion
of
foreign
direct
investment
in
the
United
Kingdom
is
undertaken
principally
by
UK
Trade
and
Investment.209
UK
Trade
and
Investment
operates
under
the
auspices
of
the
Foreign
and
Commonwealth
Office
and
the
Department
for
Business,
Innovation
and
Skills
and
it
offers
advice
and
information
to
companies
and
individuals
wishing
to
invest
in
the
United
Kingdom.
201 UK attracts increased foreign investment in 2008-09 (Press Release) (Wednesday 17 June 2009) <http://www.newsroom.uktradeinvest.gov.uk/content/news/uk-attracts-increased-foreign- investment-in-2008-0.ashx> accessed 10 August 2009. 202 See Ernst & Young European Investment Monitor <http://www.eyeim.com/pdf/EIM%202008%20Report%20final.pdf> accessed 22 June 2009. 203 UNCTAD World Investment Report 2008 (September 2008) UNCTAD/WIR/2008, 215. 204 UNCTAD World Investment Report 2008 (n 203) 262. 205 UNCTAD World Investment Report 2008 (n 203) 257. 206 UK Trade and Investment UK Inward Investment Report 2008/2009 (July 2009) 3. 207 UK Trade and Investment UK Inward Investment Report 2008/2009 (n 206) 6. 208 UNCTAD World Investment Report 2008 (n 203) 23. 209 UK Trade and Investment website < https://www.uktradeinvest.gov.uk/index.html> accessed 10 August 2009.
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