Abstract
This paper examines a specific approval and registration requirement that is incorporated in some investment treaties as a technique to restrict the scope of application of treaties. It discusses the policy rationale behind this requirement and analyzes some treaty practice regarding the specific approval requirement as well as the arbitral decisions which deal with the issue. Though such requirement is only prevalent in investment treaties of certain countries, especially ASEAN countries, it represents one of the several legitimate policy tools employed by contracting States to investment treaties to impose a qualitative control on the types of investments to be protected thereunder. Nevertheless, such requirement may pose some challenges for both States and investors. Besides ensuring compliance with relevant admission laws and regulations, investors may bear additional burden to comply with another specific procedure in order to be entitled to treaty protection. Furthermore, such specific approval requirement may provide States with another defense tool in raising a jurisdictional objection to an investor’s claim. For States, implementation of this requirement entails administrative burden and costs, the failure of which will deprive States of the ability to choose the types of investments to be protected. The ambiguity in treaty provision regarding the specific approval requirement as well as the lack of a transparent and clearly defined mechanism for implementing such requirement may strip the provision of its intended legal effect.
The views expressed here are the author’s personal views and do not represent the view of the Ministry or the Government of the Kingdom of Thailand.
The author would like to thank Ms. Sukanya Wisedsri for her research assistance.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Similar content being viewed by others
Notes
- 1.
Bernasconi-Osterwalder N, Malik M (2012) Registration and approval requirements in investment treaties. The International Institute for Sustainable Development
- 2.
Ranjan P, Anand P (2017) The 2016 model Indian bilateral investment treaty: a critical deconstruction. Northwest J Int Law Bus 38
- 3.
Knahr C (2007) ‘Investments “in accordance with host state law”’. 5 TDM; Kriebaum U (2010) ‘Illegal investments’. Aust YBIL 307; Chaisse J (2015) The shifting tectonics of international investment law – structure and dynamics of rules and arbitration on foreign investment in the Asia-Pacific Region. George Washington Int Law Rev. 47(3):563–638
- 4.
For instance, taxation measures are partially excluded from the scope of ASEAN investment treaties. Sector exclusion can also be found, for instance, in Article VI (3) of the 1998 Canadian-Thailand BIT excluding investments in cultural industries as defined in the treaty.
- 5.
The administrative practice confirmed that a certificate of promotion granted by the Board of Promotion of Industrial Investment under the Promotion of Industrial Investment Act will be deemed as “a certificate of admission” within the meaning of paragraph b of the Protocol to Article 1 of the treaty. For overview of the policy in Thailand, see Nottage L, Thanitcul S (2016) The past, present and future of international investment arbitration in Thailand. Sydney Law School research paper no. 16/31, and Nottage L, Thanitcul S (2017) International investment arbitration in Thailand: limiting contract-based claims while maintaining treaty-based ISDS. JWIT 18(5–6):793–835.
- 6.
Reed L, Wong K (2016) Evolution of the formal requirements for investment treaty protection of “investments” in Malaysia. Conventus Law
- 7.
This treaty is now terminated. It is nevertheless useful for our discussion.
- 8.
Most BITs concluded by Singapore contain the specific approval requirement stipulated in the scope of application provision.
- 9.
Germany–Malaysia BIT (in force on 6 July 1963)
- 10.
BLEU (Belgium-Luxembourg Economic Union)–Malaysia (in force on 8 February 1982)
- 11.
Article 1(b) of the UK–Malaysia BIT (in force on 21 October 1988)
- 12.
Denmark-Malaysia BIT (in force on 18 September 1992) contains similar wording
- 13.
Article 12 of Syria–Malaysia (in force on 3 May 2009): “This Agreement shall apply to all investments made by investors of either Party in the territory of the other Party in accordance with its laws, regulations or national policies, whether made before or after the entry into force of this Agreement, but shall not apply to any dispute concerning an investment that arose or any claims that was settled before its entry into force.” Article 11 of UAE–Malaysia (in force on 22 May 1992) only requires compliance with relevant laws and regulations.
- 14.
More examples include the following: Article X of the Indonesia–Mongolia BIT (in force on 13 April 1999) also makes reference to the Law No. 1 of 1967 for Indonesia. Article X of the Indonesia–Lao BIT (in force on 14 October 1995) refers to the Law No. I of 1967 concerning Foreign Investment and any law amending or replacing it for Indonesia and the Law No. 01 of 14 March 1994 on the Promotion and Management of Foreign Investment in the Lao People’s Democratic Republic and other relevant regulations.
- 15.
This treaty is terminated and replaced with the new treaty in force on 15 October 2009, which does not contain the reference to a specific piece of legislation.
- 16.
Such requirement is not contained in Denmark–Indonesia BIT 2009.
- 17.
Article II of the 1987 ASEAN Investment Guarantee Agreement https://asean.org/?static_post=the-1987-asean-agreement-for-the-promotion-and-protection-of-investments
- 18.
Ibid
- 19.
Article 4 (a) “covered investment” means, with respect to a Member State, an investment in its territory of an investor of any other Member State in existence as of the date of entry into force of this Agreement or established, acquired, or expanded thereafter and has been admitted according to its laws, regulations, and national policies and, where applicable, specifically approved in writing by the competent authority of a Member State. For the purpose of protection, the procedures relating to specific approval in writing shall be as specified in Annex 1 (Approval in Writing). For a commentary, see Chaisse J, Jusoh S (2016) In: Bjorklund AK, Reinisch A (eds) The ASEAN comprehensive investment agreement – the regionalization of laws and policy on foreign investment, International investment law series. Edward Elgar, London, p 265.
- 20.
For the purpose of protection, the procedures relating to specific approval in writing shall be in Annex 1 (Approval in Writing).
- 21.
ASEAN–Hong Kong, China SAR Investment Agreement (2017)
- 22.
The name and contact details of the competent authorities responsible for granting such approval shall be informed to the other Parties through the ASEAN Secretariat.
- 23.
ASEAN-India Investment Agreement (signed on 12 November 2014)
- 24.
Article 2 of Hungary-Thailand BIT (in force 18 October 1991) only refers to approval in writing: “the benefits of this Agreement shall apply only in cases where the investment by nationals or companies of one Contracting Party in the territory of the other Contracting Party has been admitted or otherwise approved in writing, if necessary, by the competent authority, in accordance with the law and regulations of that Contracting Party….”
- 25.
Protocol 1(b) (emphasis added). It is unclear whether the certificate of admission referred in the Protocol is distinct from an admission of investment certificate/document pursuant to relevant laws and regulations. This is the issue in the jurisdictional phase of Walter Bau v Thailand, discussed in 2.4.
- 26.
Article 1(2) – the said term [investment] shall refer to all direct investments made in accordance with the laws and regulations in the territory of the Party where the investments are made….
Article II (1) “the benefits of this Agreement shall apply only in cases where the investment by investor of one Party in the territory of the other Party has been specifically approved in writing by the competent authority, if so required, by the laws and regulations of that Party.”
- 27.
Japan-Thailand Economic Partnership Agreement (in force on 1 November 2018) Article 91 (c) stipulates that “direct investment enterprise” means: (i) an enterprise in the Area of a Party in which an investor of the other Party directly owns at least 10% of the total equity interest in the enterprise or (ii) an enterprise in the Area of a Party in which an investor of the other Party, whether directly and indirectly, or indirectly, owns equity interest such that at least 10% of the total equity interest in that enterprise is attributable to such investor.
- 28.
Source from Department of International Economic Affairs, Ministry of Foreign Affairs, Thailand
- 29.
The Cabinet of Ministers’ decision on 9 June 1991
- 30.
The current status of the Announcement is questionable because the Committee was abolished by the Cabinet of Ministers in 2011 [Cabinet Decision on 13 September 2011]. It also remains uncertain how the term “specifically approved in writing” should be interpreted in light of the practice that the Announcement is no longer valid and the Committee is no longer in function. However, the analysis will proceed on the assumption that the Announcement is still valid.
- 31.
In 1 July 2003 and 19 August 2003
- 32.
Yaung Chi Oo Trading Pte. Ltd. V Government of the Union of Myanmar, Award (ASEAN ID Case No. ARB/01/1), 31 March 2003
- 33.
Under Article II(l) of the 1987 ASEAN Agreement, the investment must be “specifically approved in writing and registered by the host country and upon such conditions as it deems fit for the purposes of this Agreement.”
- 34.
Paras 58–59: “No doubt a Party to the 1987 ASEAN Agreement could establish a separate register of protected investments for the purposes of that Agreement, in addition to or in lieu of approval under its internal law.”
- 35.
Para 58
- 36.
Para 59
- 37.
Philippe Gruslin v. Malaysia, ICSID Case No. ARB/99/3, 27 November 2000
- 38.
Para 25.5
- 39.
Para 23.1
- 40.
Desert Line Projects LLC v. The Republic of Yemen, ICSID Case No. ARB/05/17, 6 February 2008
- 41.
Article 1(1) of the Oman-Yemen BIT
- 42.
Para 102
- 43.
Para 103 (emphasis added)
- 44.
Para 108
- 45.
Para 109 (emphasis added)
- 46.
Para 119
- 47.
Ibid
- 48.
Walter Bau AG (In Liquidation) v the Kingdom of Thailand (Partial Award on Jurisdiction) (5 October 2007) (available on https://www.italaw.com/cases/123)
- 49.
Article 8 of the 2002 Treaty: “This Treaty shall also apply to approved investments made prior to its entry into force by investors of either Contracting Party in the territory of the other Contracting Party consistent with the latter’s laws and regulations.”
- 50.
Paras 4.20–4.26
- 51.
Para 4.43
- 52.
Para 4.16 (emphasis added)
- 53.
Para 5.14
- 54.
Rafat Ali Rizvi v. Republic of Indonesia, ICSID Case No. ARB/11/13, 16 July 2013
- 55.
BIT Article 2(1) provides as follows: “Scope of the Agreement (1) This Agreement shall only apply to investments by nationals or companies of the United Kingdom in the territory of the Republic of Indonesia which have been granted admission in accordance with the Foreign Capital Investment Law No. 1 of 1967 or any law amending or replacing it.”
- 56.
Para 66: “It follows that to pass the threshold of being “granted admission in accordance with” the FCIL it is not enough that an investment made in Indonesia is generally lawful or that it was established without contradicting the FCIL. The investment is required to be “granted admission in accordance with” a particular piece of legislation, namely the FCIL.”
- 57.
Para 139
- 58.
Para 196: “Claimant has not established that Bank Indonesia took these three steps in awareness of Claimant’s shareholding in the investment. That is an important deficiency in his contention that Bank Indonesia’s approvals, which apply equally to foreign and local investors, amount to a grant of admission of his stated investment.” Para 197: “…Claimant relies on three regulatory actions undertaken in awareness of his shareholding in the banks, an awareness that has not been supported by evidence, in order to establish a de facto grant of admission.”
- 59.
H&H Enterprises Investments, Inc. v. Arab Republic of Egypt, ICSID Case No. ARB 09/15, 5 June 2012
- 60.
Article II (2)(b) of the BIT
- 61.
Para 53
- 62.
Para 54
- 63.
Bernhard von Pezold and Others v. Republic of Zimbabwe, ICSID Case No. ARB/10/15, 28 July 2015
- 64.
Para 350 – it is noted that the Respondent did not identify at this stage what form of approval was required or by whom. The Respondent also did not argue at this stage whether any subsequent approval might satisfy the requirements of Article 9(b) of the German BIT.
- 65.
Para 409: “The Tribunal therefore considers it reasonable to infer that the parties intended the Protocol to modify or add to the provisions of the BIT. Ad Article 2(a) would be rendered redundant if its effect was not to modify Article 9 of the German BIT.”
- 66.
Para 411: “Apart from the many informal statements of approval given by the Respondent and its organs (see para. 354 above), it is unclear on the evidence what the process would have been to obtain further approval… if this [specific approval] were truly the required procedure under the BIT (as submitted by the Respondent), surely some evidence would exist to corroborate this submission. The Respondent has not produced any such evidence.”
- 67.
These acts include encouragement from senior Government officials, informally and in formal correspondence, approval of the conversion of leasehold title to freehold title on four of the ten properties on one of the estates, and approval of the loans by the Reserve Bank, which were granted of all of the necessary licenses to operate the sawmills and factories and were granted an Export Processing Zone Licence, etc.
- 68.
The specific approval requirement refers to both situations. First, it is a distinct/an additional condition to be fulfilled besides a normal admission procedure. Second, it can also refer to an admission mechanism in accordance with a specific piece of legislation that may require that an investor seeks approval from a specific body and fulfill particular conditions.
- 69.
Desert Lines v Yemen, para 109
- 70.
“Overwhelming evidence of lengthy dealings between the parties at the highest level” which demonstrated that the authorities were fully aware of claimant’s investment and therefore approved it.
- 71.
Australia–Indonesia CEPA 2019 defines the term “investment” to mean “every asset that an investor owns or controls, that has the characteristics of an investment, including such characteristics as the commitment of capital or other resources, the expectation of gain or profit or assumption of risk” (Chapter 14 Investment Section A, Article 14.1) (emphasis added).
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2021 Springer Nature Singapore Pte Ltd.
About this entry
Cite this entry
Wongkaew, T. (2021). Specific Approval Requirement in Investment Treaties: A Pursuit of Legitimate Policy Objectives. In: Chaisse, J., Choukroune, L., Jusoh, S. (eds) Handbook of International Investment Law and Policy. Springer, Singapore. https://doi.org/10.1007/978-981-13-3615-7_50
Download citation
DOI: https://doi.org/10.1007/978-981-13-3615-7_50
Published:
Publisher Name: Springer, Singapore
Print ISBN: 978-981-13-3614-0
Online ISBN: 978-981-13-3615-7
eBook Packages: Law and CriminologyReference Module Humanities and Social SciencesReference Module Business, Economics and Social Sciences