CYIL vol. 10 (2019)

MARTINA POHANKOVÁ CYIL 10 ȍ2019Ȏ nationals of a third country with which the denying Party does not maintain normal economic relations.” 6 The content of such clauses may be generally broken down into the following elements: 1.1 The right to deny element The clauses operate on the basis of active invocation by the respondent state. This is different to requirements of the definition of the investor, which are examined ex officio , although they ultimately might have a similar effect – the investor in question will not be protected by the treaty. The mere inclusion of the clause is not enough for the tribunal to examine whether its conditions are fulfilled. It must be the state who awakens the clause from plain existence to activity. 1.2 The carve-out element The clauses are drafted as carve-out provisions that, as their name suggests, once revoked, deprive the investor of the protection of its rights. Here, the question arises as to what rights are no longer available to the investor. In most cases, the denial of benefits clauses will affect the whole treaty, but especially in free trade agreements (“ FTAs ”) they may only affect the investment chapter and the substantive investment protection provisions, having therefore The clauses commonly define their personal scope of application by two requirements, (i) lack of substantiality of business activities in the home state and (ii) control over the investor by a third party. 1.4 The invocation element This last element, that would greatly simplify tribunal’s analysis of the clause application, is usually missing. The clauses are frequently silent on the matter of timeliness and their application and do not provide guidance on the occasions in which they may be invoked. There are some exceptions containing further references in the clause or at least in the soft- law “mutual understandings” of the contracting parties or in explanations to the text, but they are unfortunately in the minority. 2.1 Contents of the requirements – substantiality and control The tribunal in the AMTO case examining the denial of benefits clause contained in the Energy Charter Treaty (“ ECT ”) is an often-quoted decision which dealt with the question of substantiality of the business activities of the claimant in the home state. In this case, the tribunal concluded that a small number of permanent staff (namely two) 7 and the conduct of the investor’s business activities from small premises located in the home state were sufficient 2. Application problems no effect on dispute resolution provisions. 1.3 The character of the investor element

6 Czech Republic–US BIT, Article 1. II. 7 Amto v. Ukraine , Final Award para. 68.

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