INVESTMENT TREATY DISPUTES: SECTOR ANALYSIS
This article considers investment treaty disputes in the construction, energy and mining and natural resource sectors.
Investment treaty disputes in the construction sector
Cross-border activity in the construction sector has seen exponential growth over the past decade, with an increasing number of complex construction projects being awarded, particularly in developing economies. The increased use of public-private partnership (PPP) investment vehicles and joint ventures with state-owned entities has given rise to further investment-related disputes caused by states’ postponement, frustration or cancellation of different construction projects. The United Nations Conference on Trade and Development (UNCTAD) reports 106 United Nations Commission on International Trade Law (UNCITRAL) and International Centre for Settlement of Investment Disputes (ICSID) investment cases, 43 of which are pending. Furthermore, 15 percent of all cases registered and administered by ICSID in 2019 were construction-related disputes.
A foreign investor seeking treaty protection must first comply with a nationality requirement that the investor be a national of the state party to the investment treaty that is not the host state. Second, foreign investors must have made a qualifying investment in the host state.
Examples of qualifying investments found in the construction sector include the acquisition of shares in a local construction consortium (Hochtief Aktiengesellschaft v. Argentine Republic), the grant of a long-term concession by a host state (Malicorp Limited v. Arab Republic of Egypt), a contractor’s supply of services and materials and the mobilisation of its resources for the performance of a construction contract (Pantechniki S.A. Contractors & Engineers v. Republic of Albania), an operator’s two-year commitment to provide vessels and services for a dredging contract (Jan de Nul N.V. and Dredging International N.V. v. Arab Republic of Egypt) and a project company’s claim to a share of profits or returns flowing from the right to operate a project following its construction (Alpha Projektholding GmbH v. Ukraine).
Oct-Dec 2020 issue
Reed Smith