CYIL vol. 10 (2019)

MARTINA POHANKOVÁ CYIL 10 ȍ2019Ȏ In order to improve this state of affairs, the following points should ideally be covered in a proper denial of benefits clause if the states intend it to be applied without difficulties: – protection against investment controlled by host state entities, – if possible, the denial should be made automatic, – if the clause is construed to demand its invocation, then process of application and timing should be described. The ideal simple model denial of benefits clause could then be drafter in the following manner: “The benefits of this agreement are denied to investors that: a) are controlled or owned by a national of a non-party or of the party that is the host state of the investor or b) have no substantial business activities in the territory of the home state, especially investors whose primary purpose is to gain protection of this treaty that would not otherwise be available to them.” The clause aims at automatic application. In such a case, timeliness and invocation do not have to be covered since the clause would operate as another criterion of the qualified investor and the state could raise the objection of the denial until the time limit for objections to jurisdiction according to the rules applied in the case at hand. Conclusion It is evident that the functioning of denial of the benefits clauses poses a number of problems that investment tribunals were inevitably confronted with while examining the possibility of denying the protection on the basis thereof. It is also clear that most of the problems arise due to the clauses’ deficits and could effectively be tackled by more coherent wording. Therefore, it is a rather sad conclusion that the states have learned almost no lessons from the evolvement of denial of benefits clauses’ application. Most concluded treaties lack the clause entirely. As for the ones that do contain it, the traditional ambiguous versions prevail. It is only exceptionally traceable that some of the states decided to reflect some of the arisen problems in their treaties. The conclusions are even more pressing considering the fact that the denial of benefits clauses are truly capable of preventing the treaty shopping practices and that such practices may cause the states unnecessary costs running into millions.

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