In the middle of 20th Century Investment arbitration was originated, and at that time in developing countries large multinational companies were conferred concessions for extraction of natural resources. Traditionally, if a dispute arises between the state and the foreign investor or generally a national of a different state and in which investment was involved, so in such case the state will be called as the host state and only the domestic court of the host state has the power to address the dispute because a foreign state will not receive the justice in another state’s court as the states have protection from foreign jurisdiction. If in case the domestic court of a host state cannot present a remedy to the dispute due to any reason then foreign investor can file a claim in diplomatic protection against the host state through the help of his state.
Under international investment agreements the definition of investment and investor are among the important elements stating the scope of application of rights and obligations. Two types of investors are there: natural person and legal person. For natural persons, who invests, investment agreements are generally based on the nationality exclusively on the law of the state of claimed nationality. Some of the agreements also initiate alternative criteria, such as a requirement of residency or domicile. Issues are more complicated when it comes to Legal person in case of Nationality. Just because of the companies it has become difficult to determine the Nationality as they operate in such manner. While determining the nationality of a legal person, Tribunals have adopted the test of incorporation or seat rather than control, unless in the agreement the test of control is provided. Accordingly, it is the general practice in investment agreements to specifically define the objective criteria which make a legal person a national, or investor, of a Party, for purposes of the agreement. When the objective criteria used may include investors to whom a Party would not wish to extend the treaty protection, some treaties include “denial of benefits” clauses allowing exclusion of investors in certain categories.
(ICSID) International center for the settlement of the investment dispute Convention is the main instrument for settling the investor-state disputes. It limits jurisdiction of its Centre to disputes that are in between one Contracting State and a national of another Contracting State. It also got the specific rules on the nationality of claims. In case of natural persons, ICSID requires nationality to be recognized on two vital dates: the date of registration and the date of consent to arbitration, and it does not cover dual nationals when one of the nationalities is the one of the other Contracting State party to one dispute. A connected issue is that the extent to which shareholders can bring claims for injury sustained by the corporation. Recent jurisprudence has decided in favor of the right of shareholders, to be accepted as claimants with respect to the portion of shares they own or control. Investment is usually defined by the International investment agreements in broad terms. They refer to “every kind of asset” followed by an illustrative but usually non-exhaustive list of assets, recognizing that investment forms are constantly evolving. The term Investment is not being defined by ICSID Convention.