CYIL 2011

TOMÁŠ FECÁK CYIL 2 ȍ2011Ȏ contracting party. The definition is accompanied by a non-exhaustive list of examples including movable and immovable property, shares, stocks and debentures, claims to money, intellectual property rights and any right conferred by laws or under any licenses and permits pursuant to laws. The structure of the definition provides for protection of both direct and portfolio investments (the definition does not operate with the criterion of investor’s control over investment, while it expressly enumerates shares and stocks as kinds of investment). On the other hand, the definition used excludes protection of investments indirectly controlled by nationals or companies of a contracting party through an investor of a third state. The BITs with the USA and with Canada, as well as those with some “old” EU Member States, form an important exception in this regard. • Definition of investor, including both natural and legal persons. As far as legal persons are concerned, the incorporation model is used, recognizing entities incorporated or constituted under the laws of a contracting party as its investors. Some agreements also require legal persons to have their registered or real seat in the country of incorporation. No requirements for control (linked to the nationality of shareholders or excluding publicly controlled entities) are usually prescribed. • Commitment to encourage favourable conditions for investors to invest in the host country and to admit such investments in accordance with domestic laws and regulations. The wording of the provision indicates that the pre-establishment stage is regulated merely in the form of soft law. The agreement with the USA regulating also market access is an isolated exception. • Standards of fair and equitable treatment and full protection of security, accorded to both investors and their investments. • Most favoured nation and national treatment clauses concerning both investors and investment. These are complemented by regional integration organizations (REIO) exceptions for customs, economic or monetary union, a common market or a free trade area. The latest BITs contain extended REIO exceptions (see below). Another exception concerns treatment accorded by virtue of an international agreement relating to taxation. • Commitment to compensate losses owing to exceptional situations (such as war, armed conflict, state of emergency etc.) in a manner no less favourable than compensation accorded to domestic investors. However, the obligation to compensate is absolute (amounting to just and adequate compensation) if the losses result from requisitioning of property by forces or authorities of the contracting party or by their acts in excess. • Commitment not to expropriate investors and investment, except for a public purpose (public purpose is not defined by BIT). In that case, the expropriation shall be carried out under due process of law, on a non-discriminatory basis and the host state shall pay to the investor prompt, adequate and effective compensation, amounting to the value of the investment. Indirect expropriation, in terms of measures having effect equivalent to expropriation, is also covered.

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