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Jan 01, 2016

The Long March towards a Jurisprudence Constante on the Notion of Investment: Salini v. Morocco

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Partners Emmanuel Gaillard and Yas Banifatemi (both Paris-International Arbitration) authored a publication titled “The Long March Towards a Jurisprudence Constante on the Notion of Investment: Salini v. Morocco, ICSID Case No. ARB/00/41,” that was published in Building International Investment Law: The First 50 Years of ICSID, 2015.

Rarely has an arbitral award been as celebrated or criticized as Salini v. Morocco, not only in the history of the International Centre for Settlement of Investment Disputes ("ICSID"), but more generally in the context of investment law and public international law. In a system that is not based on precedent, this has been a remarkable example of a case that is almost systematically referred to by every arbitral tribunal called upon to define the notion of "investment," either to follow or to depart from what has come to be known as the "Salini test." That Salini's reach has gone beyond the ICSID system, and that - for good or bad reason - its definition of an investment has been relied on in arbitrations unrelated to the ICSID Convention is telling of the significance and impact of the Decision. 

There may be two systemic reasons for this success. First, the existence of an investment is the very premise of the entire investor-State arbitration system and the protection which investors can find in their contracts, relevant investment laws or treaties, and the ICSID Convention itself. Being the first to truly define "investment" within the meaning of Article 25(1) of the ICSID Convention, Salini v. Morocco set the record for future cases. Second, the ICSID Convention, which establishes the jurisdiction of ICSID tribunals, has intentionally left the notion of investment undefined, instead leaving it to the parties to determine what they consider to be an investment. This absence of definition, which was noted by every tribunal before it but which was addressed differently by the Salini Tribunal, has made this case a key point of reference for arbitral tribunals having to assess their ratione materiae jurisdiction.

One should not overlook, in addition, the audacity of the Salini Tribunal as it chose to tackle the meaning and substance of the requirement of an investment under Article 25(1) of the ICSID Convention, while recognizing - as all tribunals had done before it - that the drafters of the Convention bad chosen to not provide a definition. The Tribunal thus ruled with respect to two critical threshold issues: first, that the requirement of an investment under Article 25(1) is an objective one which has to be met regardless of any specific definition of an investment under the applicable investment treaty; second, that an investment within the meaning of Article 25(1) of the ICSID Convention can be defined, in all cases, by certain specific "conditions," "elements" or "criteria". The Salini Tribunal found those criteria in the economic definition of an investment proposed in scholarly writings, namely a contribution, a certain duration, and a participation in the risk of the transaction; to this economic definition - which could be said to be the ordinary meaning of the word "investment" - the Tribunal adjoined the contribution to the economic development of the host State as a criterion which it found in the Preamble of the ICSID Convention. These are the criteria that have been at the heart of almost every discussion on the existence of an investment and every debate on the notion of investment in the ICSID case law following Salini v. Morocco.

View the full publication, “The Long March Towards a Jurisprudence Constante on the Notion of Investment: Salini v. Morocco, ICSID Case No. ARB/00/41,” in Building International Investment Law: The First 50 Years of ICSID, 97-125 (Meg Kinnear et al., Eds., 2015).

 

Authors and Contributors

Emmanuel Gaillard

Partner

International Arbitration

+33 1 53 89 70 00

+33 1 53 89 70 00

Paris

Yas Banifatemi

Partner

International Arbitration

+33 1 53 89 70 00

+33 1 53 89 70 00

Paris

Regional Experience