Abstract:
This paper examines admission provisions in international investment agreements (IIA) with specific emphasis on “in accordance with host State law” admission provisions (conformity clauses). The examination of admission provisions is important as it determines if the foreign investment is covered by the protections of the relevant IIA. Admission provisions also form part of the jurisdictional inquiry that arbitral tribunals must make to determine if they are competent to hear a dispute arising out of the relevant IIA.
This paper finds that in interpreting conformity clauses, their overall meaning is that foreign investment needs to be valid with reference to host State law rather than meet the definition of investment in host State law. The reasoning is that investment is defined in IIAs and thus a consideration of definition in host State law would undermine the agreement between the contracting State parties to the IIA. Further, the paper finds that the “ordinary meaning” of the different formulations of conformity clauses in IIAs can confuse the jurisdictional inquiry and the merits inquiry of arbitral tribunals and defeat the purpose of having a conformity clause. Thus, it is recommended that conformity clauses be interpreted as referring to the action of the host State in screening foreign investment or the foreign investment conforming to the relevant admission legislation of the host State.
Due to the problems of taking an “ordinary meaning” approach to the interpretation of conformity clauses it is recommended that the dominant interpretive approach should be with reference to the object and purpose of the relevant IIA. In terms of IIAs with conformity clauses, it is posited that the object and purpose is the promotion and protection of foreign investment but also the protection of host State sovereignty. The protection of host State sovereignty is reflected in the relevant host State law. Therefore, it is recommended that an interpretation of the relevant host State law inform the interpretation of the conformity clause rather than the interpretation of the clause itself. The paper finally concludes with recommendations on the interpretation of host state law to determine arbitral tribunal jurisdiction.
