HSE University Journal of International Law

The present article analyses whether investment tribunals are competent to determine which representatives are entitled to act on behalf of respondent states with competing governments. The examination of existing case law and theoretical background suggests that investment tribunals have incidental jurisdiction to decide on the representation issue. In this case, the representation issue is resolved for the sole purpose of proceeding to consideration of claims, which are properly within the tribunals’ jurisdiction ratione materiae and the decision on this issue is not included in the dispositif of the awards and lacks res judicata effect. The most plausible approach to decide the representation issue is to conduct a substantive analysis of the government’s entitlement to act on behalf of the state. The alternative avoidance techniques to resolve the representation issue are questionable from the perspectives of their logical coherence, practical convenience and safeguarding the parties’ procedural rights. This analysis should be conducted in accordance with the criteria of customary international law. The legitimacy of a government’s origin is just one of these criteria and has a limited role in the overall test for identifying the government which is entitled to act on behalf of the state. Finally, this analysis should also take into account the considerations of procedural fairness, which depends on the factual circumstances of each specific case.

The paper addresses jurisdictional issues on the case of NSD initiating investment arbitration against Belgium/Luxembourg. Under the Russia-Belgium/Luxembourg BIT, the states undertake to prevent expropriation of investments and, if it does happen, to pay timely and fair compensation. Such “expropriation” may also occur due to sanctions. Being a Russian intermediate custodian for a number of foreign securities, the NSD has accounts with the centralized European securities Euroclear/Clearstream depositories. Since the inclusion of the NSD in the list of entities provided for in Annex I of EU Regulation no. 269/2014 in June 2022, transactions with the securities were suspended, NSD’s account with Euroclear/Clearstream was blocked. Because the NSD accounts with foreign securities depositories were blocked, it became impossible to transfer non-Russian securities from a securities account opened with the NSD to another Russian or foreign securities depository. One of the ways to challenge the consequences of Euroclear/Clearstream actions is to file a claim with the investment tribunal against Belgium/Luxembourg. The case has two potential solutions: mass claim from the end-investors or one single claim by the NSD as a “nominee holder” of the end-investors’ securities. The first option might seem time- and resource-costly, which is why a claim by the NSD might seem more attractive. Hence, using the interpretation instruments of public international law, the paper aims at assessing the perspectives of initiating investment arbitration proceedings by the NSD, thereby focusing on interpretation of the two central terms in the Russia-Belgium/Luxembourg BIT — “investor” and “investment”. The paper concludes that prima facie the investment tribunal would have jurisdiction over the case rationae personae nonetheless the “nominee holder” status of the NSD, as well as jurisdiction ratione materiae, where the blocked securities could constitute an “investment” in the sense of the BIT. Consequently, the paper defines the legal capacity of nominee holders to initiate arbitration. Since the issue has never been raised before, the paper draws an analogy with the case law on shell companies.