Consistently Inconsistent: What Is a Qualifying Investment Under Article 25 of the ICSID Convention and Why the Debate Must End
By Jeremy Marc Exelbert
International investment has helped to pave the way for an increasingly globalized world community. Consequently, the International Centre for Settlement of Investor Disputes (ICSID)—existing under the mandate of the World Bank and with the stated purpose of increasing economic development abroad—has become the leading international arbitration mechanism currently available for settling disputes arising out of such investments. It is unsettling, therefore, that the interpretation of “investment” within article 25 of the ICSID Convention (the provision that determines whether an ICSID tribunal may exercise jurisdiction over a dispute) has given rise to a unique interpretive controversy because the ICSID Convention fails to define “investment.”
Accordingly, ICSID tribunals (bound neither by precedent nor a definition of “investment” contained within the ICSID Convention) have interpreted the term inconsistently, providing a source of unpredictability for investors and host countries alike, as they are unable to adequately ascertain whether an investment in their eyes is an investment that qualifies for ICSID protection. Given the associated risks with international investment generally, such unpredictability unnecessarily increases the costs of foreign investment, impeding efficient economic growth abroad. An unfortunate consequence of this controversy is that many ICSID tribunals have taken an investor-centric view, going so far as to exercise jurisdiction over activities that directly contravene the ICSID Convention’s stated purpose.