CYIL vol. 10 (2019)

CYIL 10 ȍ2019Ȏ IN SEARCH OF THE PERFECT DENIAL OF BENEFITS CLAUSE This gap unfortunately has severe consequences. I presume that not many tribunals would be ready to reach outside the wording of the clause and conclude, for example with reference to the maxim a minori ad maius , that if the clause applies to investors controlled by third- state parties, the applicability of the denial should extend to the control of host state entities. 3.1.5 Definitions of substantiality and control Some treaties go as far as including the definition of substantiality and control, for example ome of agreements concluded by Japan define the criterions in the following manner: “an enterprise is: ‘owned’ by an investor if more than 50 per cent of the equity interest in it is beneficially owned by the investor, ‘controlled’ by an investor if the investor has the power to name a majority of its directors or otherwise to legally direct its actions.” 47 Taking into account the complications that those criteria caused while they very examined by the tribunals, this can only be perceived as a positive step. 3.1.6 The personal scope of the denial The Azerbaijan model BIT touches upon the scope of the denial and states that “once exercised, [the] denial may apply to all or only specified investors or investment of investors, and whether existing or future investors or investments” 48 The denial may thus be invoked against an individual investor in connection to the dispute or against abstractly defined investors that fall within a certain category. 3.1.7 Criterions A clear majority of the treaties make the denial possible only if both lack of substantiality and foreign or host state control criterions are fulfilled in the case of the claimant. I traced two exceptions from this trend, but it is questionable to what extent they are the result of deliberate omission. As already mentioned, the Azerbaijan–San Marino BIT contains both criterions, but links them with the word “or” instead of “and”. Precisely the “and” was an important reason for the tribunals to conclude that the fulfilment of only one of the criterions is not enough for the clause to be successfully invoked. A contrario this would mean that under the Azerbaijan–San Marino BIT either lack of substantiality or lack of control could potentially deprive the investor of its rights. In the second case – the EU–Canada Comprehensive Economic and Trade Agreement (CETA), the substantiality criterion is missing entirely. 49 On the other hand, application of the denial is conditioned by fulfilling an additional set of criterions (mostly of political character). 3.2 Recommendations Besides the above-mentioned examples, many clauses do not reflect the interpretation problems at all and remain plainly drafted, resembling the insufficient example given at the beginning of this paper.

47 Japan–Ukraine BIT, Article 26. 48 Azerbaijan–San Marino BIT, Article 11, Azerbaijan model BIT, Article 11. 49 CETA, Article 8.16.

419