Who qualifies as a 'covered investor' under an international investment agreement? Whether an investor is covered by the state's offer to arbitrate certain claims is a critical question that often lies at the heart of jurisdictional disputes. If a state has not consented to arbitration with an investor, an arbitral tribunal has no jurisdiction to hear that investor's claim.

As a general matter, covered investors are (1) persons (either natural or juridical) (2) with the requisite nationality who (3) have control over an investment that is entitled to protection under a given agreement. This chapter addresses common issues concerning such investors; it does not take a position on the proper way to approach or resolve these questions for any particular dispute. Whether an investor is covered in a specific case depends on the specific agreement at issue and the facts underlying the dispute.


i Nationality

Under most international investment agreements (IIAs), to qualify for protection, an investor must be a national of a contracting state other than the host state in which they are investing.2 To claim protection, an investor must typically have the relevant nationality at the time of the events giving rise to the claim.3 Although the investor may be able to preemptively structure its investment to gain an IIA's protection, tribunals may look unfavourably on an investor's attempt to manufacture the requisite nationality after an alleged breach solely to bring a claim.4 Indeed, tribunals have largely rejected such post hoc attempts as 'forum shopping'.5

Tribunals have also confronted the question of how long an investor must retain the requisite nationality. That is, while the investor must be an appropriate national at the date giving rise to the claim, must they also have that nationality later in the proceedings? Must it be continuous?6 Under the traditional rules of diplomatic protection, whereby a state could bring a claim against another state based on an injury to one of its nationals, nationality must indeed be continuous.7 In the context of diplomatic protection, the continuous nationality requirement 'ensures that the State seeking to protect a person has a proper interest in such protection'.8 The International Law Commission's Draft Articles on Diplomatic Protection reflect this approach, requiring continuous nationality from the date of the events giving rise to the claim until the date of claim submission.9 Whether a continuous nationality requirement exists in the context of an IIA, however, will depend on that agreement's language.10

Article 25(2) of the ICSID Convention requires that a juridical person have the requisite nationality on the date of consent to arbitration; a natural person must have the requisite nationality on the date of consent and on the date the claim is registered by ICSID.11 One tribunal interpreted this language to mean that there is no requirement under the ICSID Convention that nationality be continuous from the time the claim arises.12

ii Control

To bring a dispute to arbitration, the investor typically must own or have control of the investment.13 Many IIAs, however, do not define what 'control' means.14 One ICSID decision defined it as legal control, rather than 'actual day-to-day' control.15 It found that, generally, 'legal capacity is to be ascertained with reference to the percentage of shares held', though minority shareholders could also demonstrate legal control 'by reason of the percentage of shares held, legal rights conveyed in instruments or agreements such as articles of incorporation or shareholders' agreements, or a combination of these'.16

A number of treaties contain language protecting investors that exercise 'direct or indirect' control over an investment. The new United States-Mexico-Canada Agreement (USMCA) and the 2012 US Model BIT, for instance, both refer to assets 'that an investor owns or controls, directly or indirectly'.17 Similarly, the BIT between Canada and China protects investments 'owned or controlled directly or indirectly by an investor' of the contracting state.18 In such cases, it has been argued that nationals of a contracting state who hold their investments through intermediaries can nevertheless bring claims – even if those intermediaries do not have the same nationality.19

Though it is possible that an investor might be required to continuously retain the requisite nationality, 'there is no rule of continuous ownership of the investment'.20 As one tribunal said, 'the issues addressed by [ICSID and BIT] instruments are precisely those of confiscation, expropriation and nationalisation of foreign investments. Once the taking has occurred, there is nothing left except the possibility of using the ICSID/BIT mechanism. That purpose would be defeated if continuous ownership were required.'21 Instead, the investor is generally required to control the investment only at the time of the events giving rise to the claim – not before or afterwards.22


Generally, a natural person is considered a national under an IIA if he or she is considered a national under the state party's own law.23 Tribunals have found, however, that although nationality may be defined by the state party's own law, 'where . . . the jurisdiction of an international tribunal turns on an issue of nationality, the international tribunal is empowered, indeed bound, to decide that issue'.24 Accordingly, in certain circumstances a tribunal may be empowered to determine whether an investor qualifies as a national even in contradiction of that nation's own findings of fact.25

Depending on the IIA, an investor may bring a claim if he or she has dual nationality with both a contracting state and a non-contracting state. Some have opined that there is no issue under the Energy Charter Treaty, for instance, given the ordinary meaning of the treaty's language: Article 26(1) refers to '[d]isputes between a Contracting Party and an Investor of another Contracting Party'.26 Likewise, several commentators and tribunals have found that dual nationality does not present a problem under the ICSID Convention.27 Tribunals have rejected arguments that a claimant's nationality must be 'effective'28 – that is, that the claimant must show a genuine link with the contracting state through which he or she brings his or her claim.29 One tribunal said, '[A]s regards dual nationals who do not hold the nationality of the host State . . . the ICSID drafters did not subject their access to ICSID jurisdiction to the effective nationality test'.30

Typically, however, a dual national cannot bring a claim if one of his or her nationalities is that of the host state.31 Article 25(2)(a) of the ICSID Convention specifically excludes 'any person who [on the relevant dates] also had the nationality of the Contracting State party to the dispute'. One ICSID tribunal found that such dual nationals are excluded even when his or her nationality with the host state is no longer effective.32

It is recommended to always consult the relevant IIA, however, because there is not necessarily a common approach to these questions. The USMCA, for instance, states that 'a natural person who is a dual citizen is deemed to be exclusively a national of the State of his or her dominant and effective citizenship.'33 Some understand such language to permit a dual national to bring a claim against the host state even if the claimant were also a national of that state, so long as it was not their 'dominant and effective' nationality.


Unincorporated entities will generally not enjoy legal protection unless specified by the IIA.34 Article 25(2)(b) of the ICSID Convention, which defines the nationality of juridical persons, requires legal personality – 'a mere association of individuals or of juridical persons would not qualify.'35 As a related point, entities that lack the capacity to sue under the law under which they were formed will not generally be able to sue under an IIA.36

i The nationality of juridical persons

Determining the nationality of a corporation can sometimes be more complicated than defining the nationality of a natural person.37 '[T]he ICSID Convention does not impose any particular test for the nationality of juridical persons not having the nationality of the host State,'38 and there are several methods to determine corporate nationality. Sometimes the same IIA may incorporate multiple tests or adopt separate definitions of corporate nationality for each party.39

One of the more common tests to determine a company's nationality is to look at the law under which the company was incorporated.40 The US Model BIT of 2012, for instance, describes an 'enterprise of a Party' as 'an enterprise constituted or organized under the law of a Party'; the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) does the same.41 Some respondents have objected to this test, arguing that businesses must also show a bona fide connection to the state under which they claim nationality. ICSID tribunals have generally rejected such arguments, finding that contracting state parties 'should be given the widest possible latitude to agree on the meaning of “nationality”',42 and that 'it is not open to the Tribunal to add other requirements which the parties themselves could have added but which they omitted to add.'43

Other treaties' definitions of nationality may include the corporate seat, or 'siège social'. The particular meaning of siège social within a given agreement, however, may be the subject of contention: tribunals have found the phrase is not a '“legal term of art,” with only one meaning'.44 Instead, it can be 'susceptible of either a formal or substantive meaning'45 – it 'can either be statutaire, referring to the seat appearing in the company's bylaws or statutes, or réel, referring to the effective seat where the company is actually managed'.46 Recent tribunals have diverged when interpreting the term in the context of Belgium–Luxembourg Economic Union (BLEU) BITs.47

Some IIAs require a bond of economic substance between the corporate investor and the state of its purported nationality. This bond might consist of 'effective control' over the corporation by nationals or the company having 'genuine economic activity' within the state.48 Such a requirement can be designed to prevent 'treaty shopping', where investors with no real connection to a country structure their holdings so that they can claim protection under a favourable BIT.

ii Denial of benefits

Some IIAs contain 'denial of benefits' clauses to preclude certain investors – typically, those with no meaningful connection to a contracting state – from taking advantage of an IIA's protections. Under such a clause, states reserve the right to deny a company of another party the benefits of the IIA in certain circumstances, such as if the company has no substantial business activities within the state party of its incorporation. For instance, Article 9.15 of the CPTPP reads, in part:

A Party may deny the benefits of this Chapter to an investor of another Party that is an enterprise of that other Party and to investments of that investor if the enterprise:
  1. is owned or controlled by a person of a non-Party or of the denying Party; and
  2. has no substantial business activities in the territory of any Party other than the denying Party.

The Comprehensive Economic and Trade Agreement between the European Union and Canada has a denial of benefits clause allowing contracting states to deny benefits to a corporate investor if the investor's owners are nationals of a third-party state that is subject to sanctions. Article 8.16 states:

A Party may deny the benefits of this Chapter to an investor of the other Party that is an enterprise of that Party and to investments of that investor if:
  1. an investor of a third country owns or controls the enterprise; and
  2. the denying Party adopts or maintains a measure with respect to the third country that:
    1. relates to the maintenance of international peace and security; and
    2. prohibits transactions with the enterprise or would be violated or circumvented if the benefits of this Chapter were accorded to the enterprise or to its investments.

Tribunals have differed as to whether a denial of benefits clause needs to be invoked before arbitration has been sought.49 Though a denial of benefits clause may be substantively similar to a restricted definition of 'investor' based on bonds of economic substance, the burden of proof can be different – while a claimant generally has the jurisdictional burden of proving that it falls within the definition of 'investor', tribunals diverge on who bears the burden of proof once a state invokes a denial of benefit clause.50

iii Foreign control of local companies

'Host states often require that investments are made through locally incorporated companies.'51 While such local companies might not otherwise qualify as foreign investors, the ICSID Convention makes special allowance for them should a state agree to it. Under Article 25(2)(b) of the ICSID convention, a 'National of another Contracting State' includes:

Any juridical person which had the nationality of the Contracting State party to the dispute on that date and which, because of foreign control, the parties have agreed should be treated as a national of another Contracting State for the purposes of this Convention.

In other words, some IIAs will treat a local company as a foreign investor – namely, as eligible to bring an international arbitration claim – if they are foreign-controlled and the state consents to it. States may consent in either a direct contract with the investor or by a blanket offer of consent via the IIA. In the latter case, the IIA will usually state more broadly that local companies controlled by nationals of the other state will be treated as nationals of that state.52

Tribunals have noted that the ICSID Article 25(2)(b) 'separately establishes a subjective test and an objective test'. Even where the parties agree 'to treat the company as a national of another Contracting State for the purposes of this Convention', ICSID jurisdiction is not satisfied unless the company is actually subject to foreign control – the 'objective test is not satisfied by mere agreement by the Parties'.53

The CPTPP too provides a path to arbitration for local companies controlled by a foreign investor, albeit via a different mechanism. Article 9.19(1)(b) permits claimants to bring a claim 'on behalf of an enterprise of the respondent that is a juridical person that the claimant owns or controls directly or indirectly'.

Notably, both the ICSID Convention and the CPTPP may require control, and thus the status of minority shareholders remains an open question that needs careful review under the specific facts.54 One tribunal confronted whether, through a shareholders' agreement, a foreign investor might aggregate its ownership share of a local company with other investors to achieve the requisite degree of 'foreign control' under Article 25(2)(b) of the ICSID Convention. It found such aggregation permissible in some circumstances but not in others.55

IIAs may also offer independent standing to shareholders – the shareholding itself becomes the investment. 'Put differently, even if the local company is not endowed with investor status, the investor's participation therein is seen as the investment.'56 Under this approach, the shareholder, as investor, bring claims in its own name 'for adverse action by the host state against the company that affects its value and profitability'.57

iv State-owned enterprises

Some IIAs explicitly protect entities owned or controlled by a state.58 Even where IIAs do not, however, state-owned enterprises may in certain circumstances receive investor protection. In ICSID arbitrations, tribunals must decide whether a state enterprise is 'a national of another Contracting State' under Article 25. Several tribunals have applied the 'Broches test', named after the first ICSID Secretary-General Aron Broches, under which 'a mixed economy company or government-owned corporation should not be disqualified . . . unless it is acting as an agent for the government or is discharging an essentially governmental function.'59


It is axiomatic that if an investor is not covered by an IIA, that IIA generally does not provide the investor with substantive protections. An investor's status, therefore, is often central to the resolution of the dispute itself. Determining this status requires careful analysis – it will turn both on the particular language of the applicable IIA and on the facts at hand, which can often involve complex corporate structures or searching inquiries into how a person has lived. Should a dispute arise between an investor and a state, both parties should develop a view on the issues early in the proceedings.