Investment treaty practice

Model BIT

Does the state have a model BIT?

Austria does have a Model BIT adopted in 2008 (Model BIT). It is, however, crucial to recall that the prevailing number of BITs signed and ratified by Austria predate the newest version of the Model BIT. An assessment of the impact the latest model BIT may have in the future is likewise challenging to make.

A comparable analysis of BITs signed after the Austrian Model BIT had been introduced shows a lack of uniformity. On the one hand, investment treaties with Tajikistan and Kosovo were strictly drafted along the lines of the Model BIT. Contrariwise, agreements of the same nature with Kyrgyzstan and Kazakhstan introduced amendments to the Model BIT in some important respects.

Furthermore, investment protection provisions are commonly becoming a part of EU trade agreements with third countries, thus limiting the purpose envisaged for the Model BIT.

As far as the content of the Model BIT is concerned, Austria certainly presented a concise, functional and advanced platform for successful protection of foreign investments. The key provisions ensure:

  • equal treatment of foreign investors in comparison to national investors or investors from third countries;
  • obligation of a fair treatment according to the standards of international law (closely regulated expropriation, payments made in the context of an investment must be effected without restrictions, etc); and
  • effective dispute resolution in front of:
    • national courts;
    • the International Centre for Settlement of Investment Disputes (ICSID);
    • a sole arbitrator or an ad hoc arbitration tribunal established under the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL); and
    • a sole arbitrator or an ad hoc tribunal under the Rules of Arbitration of the International Chamber of Commerce (ICC).

Further peculiarities of the Model BIT include a characteristic defining of the terms ‘investor’ and ‘investment’, as well as a rather wide-reaching umbrella clause. A commentary addressing important aspects of the Model BIT in greater detail is conveniently accessible online: www.iisd.org/pdf/2012/austrian_model_treaty.pdf

Preparatory materials

Does the state have a central repository of treaty preparatory materials? Are such materials publicly available?

All available supporting materials to any international treaty ratified by the Parliament of the Republic of Austria are officially accessible in an electronic form under www.parlament.gv.at/PAKT/. While the Federal Ministry of Digital and Economic Affairs makes German versions of the ratified BITs with accompanying instruments available on its website for review and public scrutiny (www.bmdw.gv.at/Themen/International/Handels-und-Investitionspolitik/Investitionspolitik/BilateraleInvestitionsschutzabkommen-Laender.html), English versions, as well as translations in other languages when applicable, may be found under http://investmentpolicyhub.unctad.org/IIA/CountryBits/12.

Scope and coverage

What is the typical scope of coverage of investment treaties?

Investor qualifications

Investment treaties entered into by Austria (see question 5) stipulate, somewhat not as uniformly, a number of legal qualifications that a foreign investor ought to meet to be awarded with substantive protections. While both natural persons, as well as legal entities (ie, enterprises) may generally be regarded ‘investors’, additional requirements include:

  • Principle place of incorporation/business: article 1(3) Model BIT defines enterprise inter alia as ‘constituted or organized under the applicable law of a contracting party’. The seat requirement is explicitly stipulated in multiple concluded BIT (see eg, article 1(2) Austria-Belarus BIT; article 1(2)(b) Austria-Argentina BIT; etc). The principle place of incorporation requirement may, in some instances, be substituted through establishing (pre)dominant influence over the investor established by an entity of one of the contracting parties (see, eg, article 1(2)(c), Austria-Egypt BIT; article I(2), Austria-Kuwait BIT; etc).
  • Performing substantive business activities: article 1(3) Model BIT further states that the enterprise should be ‘carrying out substantive business [in the host state]’. In line with the foregoing, a number of BITs invoke an obligation of genuine business activities (see, eg, article 1(2)(b), Austria-Chile BIT).
  • Inconsistent qualifications depending on the contracting party: a noticeable number of BITs define requirements attached to defining ‘investor’ independently for each contracting party (see, eg, article I(2), Austria-Kuwait BIT).
  • Denial of benefits: in line with the Model BIT, a number of concluded BITs explicitly deny protection in the cases where the above-stated requirements are not met. The prime example of such a provision is found in article 10, Austria-Uzbekistan BIT, which states: ‘[a] Contracting Party may deny the benefits of this Agreement to an investor of the other Contracting Party and to its investments, if investors of a Non-Contracting Party own or control the first mentioned investor and that investor has no substantial business activity in the territory of the Contracting Party under whose law it is constituted or organized’.
Defining ‘investment’

Protected ‘investment’ under the Model BIT includes any asset ‘owned or controlled, directly or indirectly’ by the protected investor. This admittedly board definition is somewhat limited by additional considerations imposed by the applicable BITs:

  • Distinction between direct and indirect investments: while the prevailing number of investment treaties entered into by Austria (see question 5 above) approve of protection in both instances, some do not reach as far as to confer protection to indirect or not-for-profit investments (see, eg, article 1(1), Austria-Iran BIT).
  • Territorial requirement and legality: investments are generally protected if made within the territory of a contracting party and in accordance with that party’s laws and regulations (see, eg, article 1(3), Austria-Malaysia BIT).
  • Questions of retroactive coverage: a significant majority of investment treaties entered into by Austria either accord protection to investments made as of a particularly stipulated date (see, eg, article 9, Austria Russia BIT), or make no distinction in awarding protection to investments made prior and subsequent to the treaty’s date of entry into force (see, eg, article 24, Austria-Cuba BIT).
Protections

What substantive protections are typically available?

Investment treaties entered into by Austria generally stipulate the following protections subject only exceptionally to a very view restrictions:

  • fair and equitable treatment (FET);
  • expropriation (direct and indirect) protection;
  • most-favoured-nation (MFN) protection;
  • non-discrimination/national treatment protection;
  • full protection and security; and
  • umbrella clause.
Dispute resolution

What are the most commonly used dispute resolution options for investment disputes between foreign investors and your state?

Austrian BITs most commonly provide for an ICSID institutional arbitration or UNCITRAL ad hoc proceedings as the forum to be selected for resolution of any disputes arising out of the respective BIT. In contrast to the former, some BITs further provide for an additional option of arbitrating under the Stockholm Chamber of Commerce (SCC) rules (see, eg, article 7, Austria-Russia BIT), or the International Chamber of Commerce (ICC) rules (see, eg, article 11, Austria-Cuba BIT).

Confidentiality

Does the state have an established practice of requiring confidentiality in investment arbitration?

Not applicable (see question 24).

Insurance

Does the state have an investment insurance agency or programme?

Austrian investors may request insurance for investing into developing countries under the Convention establishing the Multilateral Investment Guarantee Agency. Austria became in 1997 one of the 25 industrialised countries to be members to this act.

Austrian investors may furthermore apply for coverage of foreign investments against political risk. The ‘G4 guarantee’ provided by the Osterreichische Kontrollbank AG (OeKB) is generally intended for non-EU and non-OECD markets. A convenient overview of the services is available under: www.oekb.at/en/export-services/covering-and-financing-investments-and-participation/political-coverage-of-foreign-investments.html