The Problem of Shareholder Claims under ICSID Bi-Lateral Investment Treaties

Abstract

This paper examines the rights of shareholders under ICSID bilateral investment treaties. It considers first the respective responses of both customary international law and ICSID jurisprudence and concludes that both are undesirable. The former applies a strict form of corporate personality which would bar the claim of the shareholder altogether. The latter permits the shareholder to claim but provides no principled basis upon which issues commonly associated with shareholder claims (i.e. double recovery, prejudice to the corporation’s creditors etc.) might be avoided. This paper proposes an alternative solution that generally permits shareholders to bring their BIT claim but only permits them to recover to the extent that their loss is not, or will not be, recoverable by the suit of the corporation. It does so by prioritizing the recovery of the corporation, over that of the shareholder. This means that the shareholder’s recovery shall be discounted by any compensation already awarded to the corporation. This is to be contrasted with barring the claim of the shareholder altogether. The paper also addresses difficulties in relation to quantum that flow from this approach. In concert with this general principle, the paper also proposes a number exceptions to when the shareholder’s recovery is unaffected by any recovery awarded to the corporation. These are drawn from municipal law and seek to identify situations where the shareholder’s claim raises no problems commonly associated with shareholder claims and should thus be permitted to proceed unhindered by any corporate recovery. Taken as a whole, these proposals offer a detailed and principled solution to the seemingly intractable problem of ICSID shareholder claims