OSIPP Discussion Paper: DP-2023-E-003

Piercing the ‘National’ Veil of State-Backed Investors
in ICSID Arbitration: Beyond Broches Test and ARSIWA
24 October, 2023
Kento NISUGI *Osaka School of International Public Policy (OSIPP), Osaka University
Abstract:
Amidst the rising influence of State-owned enterprises and sovereign
wealth funds, the eligibility of State-backed investors to claim standing as a claimant
before an ICSID tribunal emerges as a significant point of contention. The established‘Broches test’ suggests that State-ownership per se does not disqualify an entity frombeing a ‘national’ under Article 25 of the ICSID Convention. However, the ambiguities
inherent in its content and legal authority have yielded varied interpretations. A
newer perspective suggests relying on attribution standards reflected in the Articles
on Responsibility of States for Internationally Wrongful Act (ARSIWA) for guidance.
This article examines critically these prevalent approaches and obstacles to thetransplantation of ARSIWA’s attribution rules to this specific context. Instead, it
proposes a method for piercing the ‘national’ veil of State-backed investors inaccordance with the general principle of law of abuse of legal personality and process.
This proposed framework strikes a proper balance between safeguarding the
integrity of the ICSID system and ensuring State-backed investors’ access to ICSID.
Moreover, this article paves the way for future tribunals by drawing inspiration fromthe parallel practice of the European Court of Human Rights.
Keywords:
International investment law; Investor-State arbitration; ICSID;
State-backed investors; Broches test; ARSIWA; Attribution; Piercing the veil
* Email: nisugi@osipp.osaka-u.ac.jp; nisugi.kento.osipp@osaka-u.ac.jp

Piercing the ‘National’ Veil of State-Backed Investors in ICSID Arbitration:
Beyond Broches Test and ARSIWA
Kento Nisugi *Abstract

Amidst the rising influence of State-owned enterprises and sovereign wealth funds, theeligibility of State-backed investors to claim standing as a claimant before an ICSID

tribunal emerges as a significant point of contention. The established ‘Broches test’suggests that State-ownership per se does not disqualify an entity from being a ‘national’

under Article 25 of the ICSID Convention. However, the ambiguities inherent in its content
and legal authority have yielded varied interpretations. A newer perspective suggests

relying on attribution standards reflected in the Articles on Responsibility of States forInternationally Wrongful Act (ARSIWA) for guidance. This article examines critically theseprevalent approaches and obstacles to the transplantation of ARSIWA’s attribution rules tothis specific context. Instead, it proposes a method for piercing the ‘national’ veil ofState-backed investors in accordance with the general principle of law of abuse of legal

personality and process. This proposed framework strikes a proper balance between
safeguarding the integrity of the ICSID system and ensuring State-backed investors’ accessto ICSID. Moreover, this article paves the way for future tribunals by drawing inspirationfrom the parallel practice of the European Court of Human Rights.

I. Introduction

In an era marked by the growing influence of State-owned enterprises (SOEs) andsovereign wealth funds (SWFs), the eligibility of State-backed investors 1 to claim standing

before an ICSID tribunal has become a contentious issue. Article 25 of the ICSID
Convention restricts the jurisdiction ratione personae of ICSID to investment disputes

between ICSID Member States and a ‘national of another Contracting State’. 2 For corporate* Associate Professor of International Law, Osaka School of International Public Policy (OSIPP),
Osaka
University,
Osaka,
Japan.
Email:
nisugi@osipp.osaka-u.ac.jp
ornisugi.kento.osipp@osaka-u.ac.jp. The author is grateful to valuable comments from Amuro
Wakasa, Keiichiro Niikura, Miharu Hirano, Norihito Samata, Sayoko Tanaka, and Yohei Okada
on the earlier draft. The author wishes to acknowledge the financial support provided by theJapan Society for the Promotion of Science (JSPS) through the JSPS KAKENHI Grant Nos.
20H01425 and 20K13330.
This article uses the term ‘State-backed’ to refer to a variety of connections between an
investor and a State, such as State ownership, control, funding, or other influence. This is a
descriptive concept that does not require a precise definition for the purpose of our discussion.

1

Convention on the Settlement of Investment Disputes between States and Nationals of Other
States (opened for signature 18 March 1965, entered into force 14 October 1966) art 25 (1)2

1 / 27

investors, it defines the term ‘national of another Contracting State’ as ‘any juridical person

which had the nationality of a Contracting State other than the State party to the dispute’on the specified dates. 3 However, it does not expressly address whether and how

State-backing affects the status as a ‘national’, and varying approaches have been
considered.

Traditionally, the so-called ‘Broches test’ has been referenced as a guide on thisissue. From the drafting history, the drafters of the Convention clearly did not intend to

close the door of ICSID to investors simply because of their State-ownership. 4 Based on

this ‘consensus’, Aron Broches, a principal architect of the Convention, 5 famously stated at

the Hague Academy of 1972 that a State-owned investor should not be disqualified as a‘national’ ‘unless it is acting as an agent for the government or is discharging an essentiallygovernmental function’. 6 This test is regarded as the ‘best guidance’ even today. 7 However,
the ambiguity surrounding what constitutes ‘an agent for the government’ or ‘essentiallygovernmental function’, coupled with the informal nature of the ‘test’ as a drafter’s(emphasis added).

Ibid art 25 (2) (b).
4 See Dini Sejko, ‘Sovereign Investors as ICSID Claimants: Lessons from the Drafting
Documents and the Case Law’ (2023) 56 Vand J Transnat’l L 853 860–864 for a recent
historical overview. See, inter alia, Broches’ comment to Article X of the First Preliminary Draft
of 9 August 1963 (‘the term “national” is not restricted to privately owned companies, thus
permitting a wholly or partially government-owned company to be a party to proceedings
brought by or against a foreign State’.) ICSID, History of the ICSID Convention: Documents
Concerning the Origin and the Formulation of the Convention on the Settlement of Investment
Disputes between States and Nationals of Other States, vol II-1 (ICSID 1968) 170. This expansive
understanding was maintained throughout the drafting process. C.F. Amerasinghe, ‘Jurisdiction
Ratione Personae under the Convention on the Settlement of Investment Disputes between
States and Nationals of Other States’ (1977) 47 British Ybk Intl L 227, 242–43.
3

Broches was a former Dutch diplomat who attended the Bretton Woods Conference and wasa member of the International Monetary Fund (IMF) and International Bank for Reconstruction
and Development (IBRD). He joined the IBRD Legal Bureau in 1946; from 1959 to 1971, heserved as General Counsel. On Broches' biography, see, Antonio R. Parra, ‘Remembering Aron
Broches’ (Investment Claims, 14 October 2016) <https://oxia.ouplaw.com/page/546> accessed
21 August 2023; Antonio R. Parra, The History of ICSID (OUP 2012) 25, n 94.
6 Aron Broches ‘The Convention on the Settlement of Investment Disputes between States andNationals of Other States’ (1973) 136 Recueil des Cours de l’Académie de Droit International 331,354-55.
5

Stephan W. Schill (ed) Schreuer’s Commentary on the ICSID Convention (3rd edn, CUP 2022)
291. For other authorities in favour of the test, see, See also, C.F. Amerasinghe ‘Jurisdiction
Ratione Personae Under the Convention on the Settlement of Investment Disputes Between
States and Nationals of Other States’ (1974) 48 BYBIL 227 242-243; P.F. Sutherland ‘The WorldBank Convention on the Settlement of Investment Disputes’ (1979) 28 ICLQ 367 385; Ibrahim
F.I. Shihata and Antonio R. Parra ‘The Experience of the International Centre for Settlement of
Investment Disputes’ (1999)14 ICSID Rev-FILJ 299 316; Julien Fouret and others (ed) TheICSID Convention, Regulations and Rules: A Practical Commentary (Edward Elgar 2019) 144.
7

2 / 27personal opinion expressed retrospectively, have led to varied interpretations. 8

Against this backdrop, an alternative perspective has been suggested. The

supporters rely on the standards of attribution of conduct as reflected in the International

Law Commission’s Articles on Responsibility of States for Internationally Wrongful Act(ARSIWA) 9 to determine whether a State-investor qualifies as a ‘national’. They argue that
this approach can offer clarity and consistency in determining the ‘national’ status and thepotential to better address modern concerns about State-policy-driven foreign investment.

However, whether the reliance on the State attribution rules in a different legal

environment is legally justified and provides the desired guidance has been hardly

examined.

The tightening restrictions on State-led investment and the corresponding risks

of investment disputes also makes the question of State-backed investors’ eligibility crucial.

In the United States (US), certain investments to the US conducted by a foreign
government or an entity controlled by a foreign government are subject to mandatory

review by the Committee on Foreign Investment in the United States. 10 Similar

requirements are increasing in other countries. Japan amended its foreign direct
investment (FDI) screening instrument in 2019, mandating SOEs to file advancedeclarations for investment in critical sectors with no exemptions. 11 The FDI screening

regulation of the European Union (EU) adopted in 2019 also expressly stipulates that the

EU member States and Commission may consider foreign governmental control indetermining whether an FDI poses security risks. 12 The potential risks of State-backed

investment dispute has been proved to be real in November 2022, when the Canadiangovernment ordered three Chinese companies, albeit not State-owned, to sell their
For a study on the test, see Reza Mohtashami and Farouk El-Hosseny ‘State-Owned
Enterprises as Claimants before ICSID: Is the Broches Test on the Ebb?’ in Nassib Ziadé (ed)BDCR International Arbitration Review, Volume 3, Issue 2 (Kluwer Law International 2016)
371.

8

ILC, ‘Draft Articles on the Responsibility of States for Internationally Wrongful Acts with
Commentaries’ UN GAOR 56th Session Supp 10, ch 4, UN Doc A/56/10 (2001) 81, para. 4(ARSIWA with Commentaries).
950 U.S.C. s 4565 (b) (2) (B) (II).
Article 27 bis (1) of Foreign Exchange and Foreign Trade Act (Act No. 228 of 1949, amended
29 November 2019) provides exemptions from the advance declaration requirements, except
for a ‘foreign investor specified by Cabinet Order as one highly requiring the examination’. In
this regard, Cabinet Order on Inward Direct Investment (Cabinet Order No. 261 of 11 October
1980, amended 30 April 2020) specified that investment by entities substantially controlled bya foreign State government as falling under this category.
10
11

European Parliament and Council Regulation (EU) 2019/452 establishing a framework forthe screening of foreign direct investments into the Union [2019] OJ L 79I/1 art 4 (2) (a).

12

3 / 27

holdings in Canadian mineral companies, 13 which the Chinese government denounced asgoing ‘against the principle of market economy and international economic and trading

rules’. 14

This issue also entails a policy repercussion regarding how best balance thesystemic interest of ICSID to maintain its ‘depoliticised’ nature and the claimant’s

legitimate interest in the ICSID arbitration. This article critically analyses the existing

approaches to this question and evaluates the theoretical soundness and practical utility ofsuch approaches. Moreover, this article explores whether there are alternative solutions

that are more convincing. It contributes to the ongoing debate by providing answers tothese questions and proposing a novel analytical framework for piercing the ‘national’ veilof State-backed investors on a solid legal basis.

Section II reviews arbitral practice and identifies how tribunals haveapproached the present legal question. Consequently, we will identify two branches of caselaw: The Broches test approach and the ARSIWA approach. Section III critically examines

how each approach can be theoretically grounded. It shows that existing approaches havea weak legal-theoretical ground and do not provide practical guidance. Meanwhile, Section
IV proposes an alternative framework for piercing the ‘national’ veil based on the doctrineof abuse of legal personality and abuse of process in accordance with general principles oflaw. This permits tribunals to conduct a comprehensive analysis that takes into accountthe totality of the circumstances while striking a balance between the competing interests.
In order to substantiate our claim, the practice of the European Court of Human Rights(ECtHR) on an analogous issue is introduced as a source of inspiration. Finally, Section V

summarises the arguments.

II. Existing Practice: Two Approaches to One Problem
It is not uncommon for investors backed by a State to appear as claimants before

ICSID tribunals. In 1999, Ibrahim Shihata and Antonio Parra reported that the three cases
initiated in 1997 and 1998 involved ‘enterprises substantially owned, directly or indirectly,

Government of Canada Press Release, ‘Government of Canada orders the divestiture ofinvestments by foreign companies in Canadian critical minerals companies’ (2 November2022)
https://www.canada.ca/en/innovation-science-economic-development/news/2022/10/gover
nment-of-canada-orders-the-divestiture-of-investments-by-foreign-companies-in-canadian-cri
tical-mineral-companies.html accessed 21 August 2023.

13

Ministry of Foreign Affairs of the People’s Republic of China Press Release, ‘Foreign Ministry
Spokesperson Zhao Lijian’s Regular Press Conference on November 3, 2022’ (3 November2022)
https://www.fmprc.gov.cn/mfa_eng/xwfw_665399/s2510_665401/202211/t20221103_1080
0030.html accessed 21 August 2023.

14

4 / 27

by their home States’. 15 In 2023, based on online databases, newspapers, and company

websites, Sejko identified at least 27 cases involving sovereign investors, the earliest

dating back to 1977. 16 However, in the majority of the time, the issue of State-backed

status is not substantially addressed by tribunals, either due to the fact that respondent
did not raise the issue, the jurisdiction was denied on a different ground, 17 or tribunals

dealt with the question only succinctly. 18 Currently, five published cases specificallyaddress the present question, which will be reviewed in this section.
A. Broches Test Approach

The first case in which our issue was discussed was Cekoslovenska obchodni

banka, a.s. (CSOB) v The Slovak Republic (1999). The Claimant was a Czech bankundergoing privatisation, and the Slovak Republic argued that the bank was a ‘state agencyof the Czech Republic’ and lacked standing. 19 After finding from the travaux préparatoiresthat the term ‘national’ in Article 25 could encompass SOEs, the Tribunal noted that theBroches test was an ‘accepted test’, which was also recognised by the parties as‘determinative’. 20

The Tribunal considered both the control and operation of the bank. Regarding

the control, CSOB was a ‘public sector’ entity owned by the Czech Republic (65%) and the

Slovak Republic (24%). However, for the Tribunal, this level of control alone was not
sufficient to deny the bank’s standing. 21 On the operation of the bank, on the other, theRespondent argued that CSOB was a ‘government agency’ that was ‘discharging essentiallygovernmental functions’ both in general and specifically in the present dispute. 22 The

Tribunal acknowledged that ‘for much of its existence,’ the bank ‘acted on behalf of the

15
16

Shihata and Parra (n 7) 316.
Sejko (n 4) 867–68.

Telenor Mobile Communications a.s. v Hungary, ICSID Case No. ARB/04/15, Award (13September 2006); Hrvatska v the Slovak Republic, ICSID Case No. ARB/05/24, Decision on theTreaty Interpretation Issue (12 June 2009) para 1; PNG Sustainable Development Program Ltd v
Papua New Guinea, ICSID Case No. ARB/13/33, Award (5 May 2015) paras 74- 82; State
General Reserve Fund of Oman v Bulgaria, ICSID Case No. ARB/15/43, Award (13 August 2019)para 55. Additionally, there are unpublished decisions. For example, ČEZ, a.s. v Bulgaria, ICSID
Case No. ARB/16/24, Decision on Jurisdiction (2 March 2021).

17

CDC Group Plc v Seychelles, ICSID Case No. ARB/02/14, Award (17 December 2003) paras 1
and 6, cf para. 17 and Decision on the Application for Annulment (29 June 2005) para 2.

18

Ceskoslovenska Obchodni Banka, A.S. v The Slovak Republic, ICSID Case No. ARB/97/4,
Decision of the Tribunal on Objections to Jurisdiction (24 May 1999) para 15.

19
20
21
22

Ibid paras 16-17.
Ibid para 18.
Ibid para 19.

5 / 27

State’ in promoting the policies of the State in its international financial activities. 23

However, the relevant test was the ‘nature’ of the activities and not the ‘purpose,’ and the

CSOB’s transaction activities were deemed ‘essentially commercial’ in nature. 24 The
Tribunal also rejected the Respondent’s argument that the bank was performing State

functions by taking advantage of its privatisation policies. 25 The fact that theConsolidation and Loan Agreements were executed by State entities for a governmental
purpose did not alter the conclusion either. 26 As a result, the Tribunal held that CSOB was

not ‘acting as an agent of the State or discharging essentially governmental activities as far
as this dispute [was] concerned’. 27

The Broches test was also key in Flughafen Zürich A.G. and Gestiòn e Ingenería v

Venezuela (2014). 28 Flughafen Zürich is a Swiss limited company that constructs andoperates transportation infrastructure. 29 Venezuela challenged the company’s standing

due to its partial State-ownership, with the Canton of Zürich holding one-third of theshares plus one and the City of Zürich holding 5%, and the Canton’s appointment of up tohalf of the directors. 30

The Tribunal found that the Claimant was prima facie a ‘national’ under Article

25 and then applied the Broches test, 31 on whose application both parties were inagreement. 32 Regarding the ‘agent’ limb, the Tribunal concluded that the Claimant ‘[did]not act on behalf of and for the benefit of the Swiss State’ but ‘its objective [was] to create

value for its shareholders, not to defend the public interest of the Swiss State’. The majorityof the company’s shares were privately held and its stock was listed on the Swiss stock
exchange. 33 As to its functions, the Tribunal observed that airport management was ‘notessentially governmental’, as it could be outsourced to the private and did not constitute‘the core of the nondelegable public activities’. 34 Accordingly, The objection was dismissed.
Ibid para 20.
24 Ibid paras 20 and 24.
23

Ibid para 23.
26 Ibid paras 24-26.
25

Ibid para 27.
28 Flughafen Zürich A.G. and Gestión e Ingenería IDC S.A. v Bolivarian Republic of Venezuela,
ICSID Case No. ARB/10/19, Laudo (18 November 2014).
27

Ibid para 264.
30 Ibid para 263.
29

Ibid paras 280 and 282.
32 Ibid para 274.
31
33
34

Ibid para 284.
Ibid para 286.

6 / 27

Although Venezuela requested annulment of the Award, the ad hoc Committee found that

the Tribunal’s conclusion on the Claimant’s status ‘did not exceed the boundaries ofplausibility’. 35

Both Tribunals determined the Claimant’s standing on the basis of the Broches

test in conjunction with Article 25. However, its concrete application showed interesting
differences. First, the CSOB Tribunal did not draw a clear line between the two componentsof the test, 36 whereas the Flughafen Zürich Tribunal assessed each element distinctly.

Second, the emphasis placed by each Tribunal varied. The critical factor for the CSOB

Tribunal was the nature of the business activities, not their purposes or State-ownership.

In this sense, its approach to the Broches test was ‘objective’ and ‘formalistic’. 37 In contrast,
in rejecting the State agent requirement, the Flughafen Zürich Tribunal also considered theownership structure and the overall business objective. In this regard, the Flughafen Zürich
Tribunal was more holistic than the CSOB Tribunal.
B. ARSIWA Approach

In contrast, the subsequent three Tribunals invoked the ARSIWA attribution

standards. 38 A departure begins with Beijing Urban Constructing Group Co. Ltd. (BUCG) v

Yemen (2017). 39 The Claimant was a wholly Chinese SOE 40 that was involved in aninternational airport construction project in Sana’a, Yemen, where the Yemeni militaryraided. Due to the State-ownership, the parties disputed the Claimant’s standing under the

Broches test. 41 Unlike the previous cases, however, the Respondent invoked Article 5 ofFlughafen Zürich A.G. and Gestión e Ingenería IDC S.A. v Bolivarian Republic of Venezuela,
ICSID Case No. ARB/10/19, Decisión de annulación (15 April 2019) para 186.

35

Paul Blyschak, ‘State-Owned Enterprises and International Investment Treaties: When are
State-Owned Entities and their Investments Protected?’ (2011) 6 J Int’l L & Rel 1, 34-35; Bianca
Nalbandian, ‘State Capitalists as Claimants in International Investor-State Arbitration’ (2021)
81 QIL, Zoom-out 5, 17.

36

Blyschak (n 36) 33; Ji Li, ‘State-Owned Enterprises in the Current Regime of Investor-State
Arbitration’ in Shaheeza Lalani and Rodrigo Polanco (eds), The Role of the State in
Investor-State Arbitration (Brill 2014) 380, 400. See also, Sonia Yeashou Chen, ‘Positioning
Sovereign Wealth Funds as Claimants in Investor-State Arbitration’ (2013) 6 Contemp Asia Arb
J 299, 316
37

Cf State Development Corporation Veb.RF v Ukraine, SCC Case No. 2019/113 and V2019/088,
Partial Award on Preliminary Objections (Case No. V2019/088) (31 January 2021) para 148(relying on Benvenisti’s expert report to the effect that all cases where ARSIWA was applied
were related to the issue of attribution for State responsibility purposes).
38

Beijing Urban Construction Group Co. Ltd. v Republic of Yemen, ICSID Case No. ARB/14/30,
Decision on Jurisdiction (31 May 2017) (BUCG).

39
40
41

Ibid para 32.

Ibid paras 29-30.

7 / 27ARSIWA, which the Claimant seemed to have accepted as relevant. 42

The Tribunal characterised the Broches test as ‘the mirror image of theattribution rules in Articles 5 and 8’ of ARSIWA, which serves as ‘markers for the

non-attribution of State status’. 43 In response to the Respondent’s contention that the

CSOB Tribunal had ‘misapplied’ the Broches test, 44 the BUCG Tribunal bypassed this issue
by stating that the focus of the CSOB case was on a ‘context-specific analysis of thecommercial function of the investment’. 45 Namely, the question for the present Tribunal
was ‘not the corporate framework’ of the company, but ‘whether it function[ed] as an agentof the State in the fact-specific context’ of building an airport terminal in Yemen.46 The

Tribunal, referring to the text of Article 5, 47 noted that the evaluation of the ‘essentiallygovernmental function’ must also consider the function ‘in the particular instance’, in thiscase, the international airport project. 48

The Tribunal analysed the two components of the Broches test in turn.

Regarding the ‘agent’ limb, it examined the BUCG’s Articles of Association, which stipulated

the company’s independent status. The Tribunal then analysed the precise nature of thecompany’s participation in the construction of the terminal building. The Tribunal
determined that BUCG was engaged in the project as an ordinary contractor chosen on thebasis of its commercial merits. Furthermore, the Respondent itself acknowledged that the

dispute was of commercial nature rather than a treaty case, since the Yemeni agency
terminated the contract in question due to the alleged poor commercial performance. 49

Based on these considerations, the Tribunal concluded that BUCG was not acting as anagent of China ‘on the airport site’. 50

Concerning the ‘essentially governmental function’ element, the Tribunal heldthat the Respondent’s contention that the Chinese Government was the ‘ultimate decision

maker’ for BUCG was ‘too remote’ from the project at the site, where BUCG was not

performing governmental functions on behalf of China. Additionally, the target of Yemen’s

Ibid para 31. The Claimant argued that the emphasis should be placed on the phrase ‘in theparticular instance’ in Article 5 but does not appear to have challenged the applicability of the
instrument as a whole.

42
43
44

Ibid para 34.
Ibid para 35.

Ibid.
46 Ibid para 39.
45

Ibid para 31.
48 Ibid para 42.
47
49
50

Ibid para 40.
Ibid para 41.
8 / 27‘military aggression’ was BUCG as a commercial contractor rather than China as a State, 51

so the Tribunal dismissed the Respondent’s objection.

In this case, the parties agreed on the use of the Broches test and ARSIWA, which

the Tribunal adhered to. However, the Tribunal did not apply the conditions stipulated in
Articles 5 and 8 of ARSIWA as such. Instead, it maintained the Broches test as a relevant

gauge, 52 to which an element of Article 5, that is, the exercise of governmental authority‘in that particular instance’, was incorporated. This emphasised that the focus should be on

activities related to the specific investment project rather than the broader status as an
SOE or its ultimate control by the government. As a result, the Tribunal’s interpretation of

the Broches test was circumscribed in scope.

A more broad application was made in Masdar v Spain (2018), 53 which involved

a claim brought by a Dutch private company 54 whose majority ownership was held by Abu

Dhabi Future Energy Company (ADFEC), a wholly-owned subsidiary of the Abu Dhabi SWF,

Mubadala Development Company, which is ultimately controlled by the Government of

Abu Dhabi. 55 To deny the Claimant’s standing, the Respondent argued that the actions of

Masdar could be attributed to the UAE under Article 8 of ARSIWA because the company is
an SOE. 56 The Claimant contested the applicable standard and argued that the CSOB test,

not the control test, should be applied, and that even if the control test were applied, therequired level of governmental control had not been demonstrated. 57

The Tribunal rejected the objection with ‘little hesitation’. In contrast to previous

tribunals, however, the Tribunal relied solely on ARSIWA and did not mention the Broches

test. It held that ARSIWA reflected customary international law on ‘the question of

attribution for purposes of asserting the responsibility of a State towards another State,
which is applicable by analogy to the responsibility of States towards private parties’. 58 To

that end, the Tribunal determined that attribution requires the establishment of a ‘close

link to the State’, including those outlined in Articles 4, 5, or 8. 59 Then, it held that:

Ibid para 43.
52 Jorge E. Viñuales, ‘Attribution of Conduct to States in Investment Arbitration’ (2022) 20
ICSID Rep 13, 31, para 41.
51

Masdar Solar & Wind Cooperatief U.A. v Kingdom of Spain, ICSID Case No. ARB/14/1, Award(16 May 2018).

53

Ibid para 2.
55 Ibid paras 82-83.
54

Ibid paras 145-53.
57 Ibid paras 157-63.
56
58
59

Ibid para 167 (emphasis added).
Ibid para 168.

9 / 27

The question is therefore to examine whether the acts of Claimant, as aseparate entity, can be attributed to the State of Abu Dhabi, either

because it exercises governmental authority (“prérogatives de puissancepublique“) or because it is under the effective control of the State in its
investment activities. 60

The Tribunal seems to have applied each test in turn. First, it relied on the CSOB

decision that quoted the Broches test and declared that Masdar was ‘plainly’ notdisqualified under the test. 61 Second, in relation to the element of ‘effective control’, it
found no evidence of ‘general control’ over Masdar or ‘control of its investment decisions’,
reinforcing the conclusion that Masdar was a commercial company. 62

Although the parties disagreed on what the applicable standard should be, theTribunal opted for ARSIWA. However, it did not apply the instrument verbatim. Although

the Tribunal referred to Articles 4, 5, and 8 of ARSIWA, it ultimately reduced them to a dual

test comprising the exercise of ‘governmental authority’ and ‘effective control’, blurring thedistinction between Articles 4 and 5. In addition, it failed to mention the conditions

contained in Article 5, such as the delegation of governmental authority and the exercise ofthat authority ‘in the particular instance’. These are in contrast to the BUCG Tribunal,

which viewed the Broches test as a ‘mirror image’ of Articles 5 and 8 and incorporated thestrict conditions of Article 5 to the Broches test.
ARSIWAwasalsochosen

as

the

sole

yardstickinLandesbank

Baden-Württemberg (LBW) v Spain (2019). 63 The Claimant was a commercial bankestablished as Anstalt des öffentlichen Rechts (AöR) by German Länder. 64 The Respondent
posited that the bank, being owned by Länder, was ‘equated to Germany’, thustransforming the dispute into one between States. 65 The Tribunal briefly dismissed thisargument, finding that the conduct of the Claimant had not been shown to be attributable

to Germany in accordance with the principles of international law as reflected in
ARSIWA. 66 It also noted that Germany itself had not asserted that the Claimant was a State
60
61

Ibid para 169.
Ibid para 170.

Ibid paras 171 and 173.
63 Landesbank Baden-Württemberg and others v Kingdom of Spain, ICSID Case No. ARB/15/45,
Decision on the Intra-EU Jurisdictional Objection (25 February 2019).
62

64
65
66

Ibid para 1.

Ibid para 97.

Ibid para 112.
10 / 27

equivalent. 67 Here again, there was no mention of the Broches test. However, thereasoning provided by the Tribunal was brief and lacked clarity, making it difficult todetermine the approach taken by the Tribunal.

III. Theoretical Grounds for the Two Approaches
The preceding section highlighted the diverse approaches adopted by tribunals.

Our comparative analysis reveals two primary camps: Tribunals that exclusively apply the

Broches test (CSOB and Flughafen Zürich) and those that exclusively apply ARSIWA(Masdar and LWB). One tribunal straddled the boundary, applying both tests (BUCG). We

also observed the nuanced positions of each tribunal; different tribunals, even whenostensibly in the same camp, emphasised different factors in their analyses, as shown in
Table 1. In this context, a crucial question arises: Is either the Broches test or the ARSIWA
approach based on a robust legal-theoretical framework? This section explores the two
approaches’ theoretical justifications critically.
Case

Applicablestandard

CSOB (1999) *Broches test

FZ (2014) *Broches test

BUCG (2017) *Masdar (2018)
LBW (2019)

Broches test;

Factors taken into accountShareholdings; Nature of general business activities;
Nature of specific transactions

Shareholdings; Designation of directors; Generalbusiness activities; Non-delegable nature of theactivities

Articles of Association; Way of participation in the

ARSIWA arts 5 andproject; Nature of on-site activities; Control over the

ARSIWA arts 4, 5,

Exercise of governmental authority; Effective control

ARSIWA

N/A

8

and 8

on-site activities

over investment decisions

Note: Cases marked with an asterisk (*) indicate the agreement of the parties on theapplication of the Broches test

Table 1. Comparison of ICSID Cases – Standards Applied and Factors Considered

67

Ibid para 98.
11 / 27

A. Status of the Broches Test: ‘Best guidance’ with little practical value
All of the three tribunals invoking the Broches test provided little explanation of

why it is justified. Instead, they seem to have accepted the test because both disputing

parties invoked it. 68 It was the agreement of the parties, together with consideration ofarbitral economy, that prompted these Tribunals to uphold the application of the Broches

test without much justification. 69 In contrast, in Masdar, where the parties disputed theapplicable standard, the Tribunal looked to ARSIWA instead of the Broches test. 70

In fact, jumping to the Broches test in applying Article 25 of the ICSID Convention

is not straightforward as a matter of treaty interpretation. As Christopher Beus correctly
cautions, the ‘Test’ lacks ‘any binding effect on the ICSID itself’. 71 First of all, it goes

without saying that the test, which was expressed as a personal view of Broches and not
ratified by the Contracting States, does not constitute any of the authentic means ofinterpretation enumerated in Article 31 of the Vienna Convention on the Law of Treaties(VCLT). Neither does the test fall under travaux préparatoires, as it emerged after theConvention was adopted. In fact, there is nothing comparable to the Broches test in thenegotiating history; aside from the ‘consensus’ that the term ‘national’ was not limited towholly private parties, no other specific ‘test’ was discussed. 72 At best, the Broches test
can only be viewed as a supplementary means of interpretation not explicitly prescribed in
Article 32 of the VCLT 73 or ‘teachings of the most highly qualified publicists of the various

nations’, which constitute ‘subsidiary means for the determination of rules of law’ within

the meaning of Article 38 (1) (d) of the ICJ Statute. 74 Either way, being ‘supplementary’ or‘subsidiary’, it cannot replace the primary process of treaty interpretation.

Nonetheless, one would not challenge the general idea as such that an entity

equated with a State agency or otherwise discharging an essentially governmental

CSOB (n 19) para 17 (‘Both parties to this dispute accept this [Broches’] test as
determinative); Flughafen Zürich (n 28) para 274(‘ambas partes han invocado como criterio deautoridad la opinión manifestada por Broches en 1972’); BUCG (n 39) para 33 (‘Both Parties
accept as applicable the functional test formulated in 1972 by Aron Broches’).
68

See, Flughafen Zürich (annulment) (n 35) para 183 (‘el Tribunal se fundamenta en un criterioque, según el propio Tribunal, fue invocado por ambas Partes’).
69

Masdar (n 53) paras 146 and 158.
Christopher Beus, ‘Sovereign Wealth Funds in the ICSID: A New Approach to Standing’(2014) 1 Indon J Int’l & Comp L 543, 568.

70
71

An exception could be a note by Broches dated 19 January 1962, where he stated that an
SOE would be eligible ‘if it elected to assimilate itself to a private enterprise rather than agovernment agency’. History, 11, para 29. This, however, is considerably more ambiguous andtherefore cannot be considered an early manifestation of the Broches Test.

72

73
74

Richard Gardiner, Treaty Interpretation (2nd edn, OUP 2015) 401.
Sejko (n 4) 863.

12 / 27

function should not be considered as a ‘national’. To this extent, the Broches test can beseen as correctly reflecting the ‘broad objective’ of the ICSID Convention ‘to encourage alarger flow of private international investment’. 75 Beyond that, however, one cannot derive

any more specific criteria from it. 76 In fact, CSOB and Flughafen Zürich, while relying on
the Broches test, put emphasis on different factual parameters.

B. Analogy from ARSIWA: Putting a square peg in a round hole
The formalistic reading of the Broches test in CSOB has also been criticised on apolicy ground. Although the CSOB approach is sometimes described as ‘objective’ and‘practical’, 77 critics argue that the political motivations of SOEs should also be taken into

account. 78 To support their claim, they suggest borrowing from other fields of generalinternational law, specifically the standard of attribution of conduct in the law of State

responsibility. 79 For them, ARSIWA could ‘offer[] a more developed and flexible

International Bank for Reconstruction and Development, Report of the Executive Directors on
the Convention on the Settlement of Investment Disputes between States and Nationals of Other
States para 13 (18 March 1965).

75

Cf Bin Gu and Chengjin Xu, ‘Treatment Standards of State-Owned Enterprises as Public
entities: A Clash or Convergence across International Economic Law?’ (2020) 50 Hong Kong LJ
1025, 1035; Shixue Hu, ‘State Enterprises in International Investment Disputes: Focus on Actor
or Action?’ (2020) 51 Geo J Int’l L 323 347.

76

Ji Li, ‘State-Owned Enterprises in the Current Regime of Investor-State Arbitration’ in
Shaheeza Lalani and Rodrigo Polanco (eds), The Role of the State in Investor-State Arbitration(Brill 2014) 380, 400. For a similarly positive evaluation, see, Sonia Yeashou Chen, ‘Positioning
Sovereign Wealth Funds as Claimants in Investor-State Arbitration’ (2013) 6 Contemp Asia Arb
J 299, 316. Cf Walid Ben Hamida, ‘Sovereign FDI and International Investment Agreements:
Questions Relating to the Qualification of Sovereign Entities and the Admission of their
Investments under Investment Agreements’ (2010) 9 LPICT 17, 29 (critiquing that CSOB ‘did
not identify a clear methodology that permits to determine if the entity is public or private’.).
77

Blyschak (n 36) 30-31; Mark Feldman, ‘The Standing of State-Controlled Entities under the
ICSID Convention: Two Key Considerations’ (2012) 65 Columbia FDI Perspectives 2-3 <https://academiccommons.columbia.edu/doi/10.7916/D8VH5WZ5> accessed 21 August
2023.

78

Another possible candidate is the law of State immunities, according to which, in certain
circumstances, the purpose of the transaction may be considered when differentiating acta jureimperii from acta jure gestionis. United Nations Convention on State Immunities (adopted 2
December 2004) art 2 (2). Blyschak asserts that this analysis is ‘in many respects analogous to
the Broches test and its “essentially governmental function” limb’. Blyschak (n 36) 30. Similarly,
see Hamida (n 77) 30. According to the Swiss Federal Department of Foreign Affairs, the only
exceptional circumstance in which public investment is treated differently than private
investment is when the investment is ‘carried out by a State and stemming from an act ofpublic authority (jure imperii), as in this case the State enjoys from immunity’. Département
féderal des affairs étrangères, « Accords de promotion et protection des investissements.
Qualité d’investisseur octroyée à un État et traitement à donner à ses investissements – Avis dedroit du 20 novembre 2007 » (2008) Jurisprudence des autorités administratives de laConfédération (JAAC) 183, 185 (author's translation). Although this article does not delve into

79

13 / 27

framework for finding a public action; a framework that could take into account theunderlying purpose of a particular activity rather than focusing narrowly on its immediatefunction in isolation’. 80

However, how do they justify the ARSIWA analogy legally? It is common groundthat attribution rules under ARSIWA were designed specifically for establishing State

responsibility and ‘not for other purposes for which it may be necessary to define the Stateor its government’. 81 For example, the ICJ famously acknowledged that the attribution

standard used for the classification of armed conflict may differ from the State

responsibility standard. 82 In the recent Certain Iranian Assets case, the Court also heldthat attribution for the purpose of State responsibility is a ‘different question’ fromwhether the Iranian central bank qualified as a ‘company’ under a commercial treaty andhas ‘little relevance’. 83 In the investment law area, it has been convincingly argued that
ARSIWA is not applicable to the question of whether the host State is obligated under theso-called umbrella clause to respect obligations entered into a distinct State-related entity.
84

This shows that it is far from self-evident that ARSIWA can provide a suitable source ofanalogy for the current legal issue. 85

this issue, we believe that the argument on the distinct conceptions of attribution developed
here also applies to the determination of acta jure imperii/gestionis, which is primarily
concerned with a behaviour ('acta') rather than the status as a sovereign.

Beus (n 71) 563. Similarly, Mark Feldman, ‘State-Owned Enterprises as Claimants inInternational Investment Arbitration’ (2016) 31 ICSID Rev-FILJ 24, 34 (‘One particularly
noteworthy aspect of customary international law attribution rules is the ability to consider
not only the nature, but also the purpose, of an entity’s activities’); Sejko (n 4) 902 (‘ARSIWA
can serve as a tool to supplement the Broches test in an attempt to prevent access to ICSID
tribunals by actors that intertwine economic and geopolitical objectives under thedemonstrable influence of the state.’).

80

ARSIWA with Commentaries (n 9) 81, para. 4.
Application of the Convention on the Prevention and Punishment of the Crime of Genocide(Bosnia and Herzegovina v Serbia and Montenegro) [2007] ICJ Rep 43, 210, para 404.

81
82

Certain Iranian Assets (Islamic Republic of Iran v United States of America), Judgment of ICJ,
30 March 2023 < https://www.icj-cij.org/case/164/judgments> para 53. At the same time, theCourt also distinguished the present case from CSOB on the ground that the tribunal was
asking ‘whether a commercial bank should be considered as a national of the State by which itis owned or merely as an agency of that State, for the purposes of the applicable convention’.
Ibid. This judgment’s relevance to the ICSID arbitration will be discussed elsewhere.

83

Yves Nouvel, ‘Les entités paraétatiques dans la jurisprudence du CIRDI’ in Charles Leben(ed), Le contentieux arbitral transnational relatif à l’investissement (Anthemis-LGDJ 2006) 25,
51; Shotaro Hamamoto, ‘Parties to the “Obligations” in the Obligations Observance (‘Umbrella’)
Clause’ (2015) 30 ICSID Rev-FILJ 449, 462-463.

84

Claudia Annacker, ‘Protection and Admission of Sovereign Investment under Investment
Treaties’ (2011) 10 Chinese JIL 531, 564; Mohtashami and El-Hosseny (n 8) 377 ; Arrêt du 29
novembre 2016, Cour d’Appel de Paris, Pôle 1 - Chambre 1 (France) 14/17964, para 1885

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There are two claimed justifications for analogically invoking the ARSIWA

framework. First, the authors assert that the attribution standard is similar to the Broches

test. 86 They claim that the two factors in the Broches test – the ‘agent’ limb and‘governmental function’ limb – ‘closely resemble’ 87 or ‘effectively mirror’ 88 Articles 4 and
8 of ARSIWA. The second is an analogy from Maffezini v Spain, 89 in which ARSIWA wasapplied to an inverse scenario in which whether Spain could be held as a proper

respondent for the conduct of an SOE. This analysis, as suggested, ‘can be easily transposed’

to the opposite situation where arbitrators are ‘substantially conducting the same inquiry,
and applying the same method for the same purpose’. 90 In addition, it is claimed that atest is required, 91 but the need for a criterion does not directly justify the use of ARSIWA,

and the first and second arguments will be examined in turn.
1. ‘Closely resemble’ and ‘effectively mirror’?

As previously noted, international law, or law in general, is ‘full of rules of

attribution’, the rules of State responsibility being merely one of them. 92 Whether aperson’s statement is attributed to and binds a State under international law is governedby the law of treaties or unilateral acts, 93and whether an action of an agent is attributable

to a State in international adjudication is a matter regulated by the applicable procedural

rules. 94 This perspective has recently been highlighted by the ‘Fragmentation of

Attribution in International Law’ of Gabor Kajtar, 95 who distinguishes attribution in a
86
87
88

Eg Hamida (n 77) 29.
Feldman (n 80) 33.

Csaba Kovàcs, Attribution in International Investment Law (Wolters Kluwer 2018) 270.

Emilio Agustín Maffezini v The Kingdom of Spain, ICSID Case No. ARB/97/7, Decisión del
Tribunal sobre Excepciones a la Juridicción (25 January 2000).

89

Giulio Alvaro Cortesi, ‘ICSID Jurisdiction with Regard to State-Owned Enterprises – Moving
Toward an Approach Based on General International Law’ (2017) 16 LPICT 108113. See also
Hu (n 76) 374-75 (the ‘action-focused methodology’ deriving from Maffezini should be
favoured over the ‘actor-based methodology’ originating from CSOB).

90

Alvaro Cortesi (n 90) 113-14.
Christina Binder and Stephan Wittich, ‘A Comparison of the Rules of Attribution in the Lawof State Responsibility, State Immunity, and Custom’ in Gabor Kajtàr and others (eds),
Secondary Rules of Primary Importance – Attribution, Causality, Standard of Review and
Evidentiary Rules in International Law (OUP 2022) 242, 242.

91
92

ARSIWA with Commentaries (n 9) 82, para 5.
Simon Olleson, ‘Attribution in Investment Treaty Arbitration’ (2016) 31 ICSID Rev-FILJ 457,
458-59.

93
94

Gabor Kajtàr, ‘Fragmentation of Attribution in International Law’ in Gabor Kajtàr and others(eds), Secondary Rules of Primary Importance – Attribution, Causality, Standard of Review and
Evidentiary Rules in International Law (OUP 2022) 283.

95

15 / 27‘narrow sense’ reflected in ARSIWA and in a ‘broad sense’ for a ‘variety of legal purposes’. 96

In a similar vein, Marko Milanovic assigns the term ‘ascription’ to the latter concept. 97

There are at least two fundamental differences between attribution under the lawof State responsibility and attribution of the status of a ‘national’. First, attribution under

the law of State responsibility pertains to internationally wrongful acts, whereas

attribution of the status of a ‘national’ does not. It is true that attribution ‘does not involve

ex se any analysis of the legality of the act’ but rather ‘focuses only on the links existing

between the enterprise and the State’. 98 Indeed, it is not uncommon for conduct

attributable to a State not to bring about the State’s responsibility because it was legal.
However, this should not obscure the point that attribution stricto sensu is still a legal

operation for establishing State responsibility. It is a legal operation determining who mustbear the consequences of an act, and specific standards of attribution are designed in linewith relevant principles on risk allocation among social actors. 99 Determining if aState-investor is a ‘national’ lies outside of such a specific context, and a different rational
governs the evaluation.

Second, and relatedly, the concept of attribution has two distinct dimensions in

the current context. On the one hand, attribution under the law of State responsibility

focuses on attributing particular acts or omissions of an individual to the State. 100 This is

the attribution of conduct, which by no means affects the status of the person in question:
Attribution does not grant her the status of a sovereign State entitled, for example, torecognise a State, conclude a treaty, waive sovereign immunity, or consent to foreign
military intervention. On the other hand, whether an SOE qualifies as a ‘national’ for the

purpose of Article 25 of the ICSID Convention depends on its status rather than its actions.

The issue is whether the claimant can be equated with the State. Due to the distinction
96

Ibid.

Marko Milanovic, ‘Special Rules of Attribution in International Law’ (2020) 96 Int’l L StudSer US Naval War Col 295, 303-304.

97

Alvaro Cortesi (n 90) 114.
See Olleson (n 94) 483 on the inherent connection between attribution rules and the
purpose underlying the law of State responsibility (‘the rules of State responsibility exist for aparticular purpose and are based on a specific rationale which derives from and is intrinsicallylinked to that purpose’) and Bosnian Genocide Bosnian Genocide (n 82) para 406 (refusing theoverall control test, which had ‘the major drawback of broadening the scope of State
responsibility well beyond the fundamental principle governing the law of international
responsibility’.).

98
99

ARSIWA with Commentaries (n 9) 38, para 1; James Crawford, State Responsibility: The
General Part (CUP 2013) 113; Luigi Condorelli and Claus Kress, ‘The Rules on Attribution:
General Considerations,’ in James Crawford and others (eds), The Law of International
Responsibility (OUP 2010) 221, 221.

100

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between these two attribution dimensions – conduct versus status – the ARSIWA

attribution standards are irrelevant to Article 25 of the ICSID Convention.

In practice, this conceptual difference complicates the analogous application of

ARSIWA to the different question. Since the attribution in ARSIWA is based on conduct, wemust first identify the State-investor's conduct before assessing its attributability. This

analysis is quite specific, as it must be shown that the investor is subject to the State’s
effective control over specific conduct, ‘not generally in respect of the overall actions,’101or exercises a ‘specifically authorize[d]’ 102 governmental function ‘in the particularinstance.’103 However, the law of State responsibility, being secondary in nature, does nothave any standard of selection of such conduct. It is only through the lens of a specificprimary rule, such as the one on expropriation, use of force, or genocide, that we candiscern which conduct is relevant to attribution for constituting an internationallywrongful act. Such a filter is absent in the case of a ‘national’ status assessment, where

ARSIWA is forced to operate in a legal void.

In fact, those authors who support the ARSIWA analogy target investors’ various

conducts for attribution. Some focus on the submission of claims to arbitration. 104 However,this question can be rephrased to ask whether the investor is submitting the claim on
behalf of or representing the State, which can be analysed more pertinently under the rule
governing the power to represent a State in international adjudication 105 rather than thelaw of State responsibility. 106 Others, including the Tribunals we reviewed above, pay
attention to investment activities. However, since an FDI project is a long and complex

enterprise, it must be clarified specifically which activities are relevant in which phase of

the project in which country. This problem was insightfully highlighted by Blyschak, which
deserves a quote. 107

Should the test be applied to the circumstances of the SOE's initial

101
102

investment decision and entry and/or establishment? Should the test

Bosnian Genocide (n 82) para 400.
ARSIWA with Commentaries (n 9) 43, para 7 (art 5).

Ibid 42 (art 5).
Kovács (n 88) 267-68 (asking whether the act of ‘bringing the claims would be considered
as acts of a State’); Feldman (n 80) 27-28 (asking whether ‘such a claim’ is regarded as a State
claim or not.).
103
104

Eg ICSID Arbitration Rules (June 2022) r 2.
Sébastien Manciaux, ‘The Representation of States before ICSID Tribunals’ (2011) 2 J Int
Dispute Settlement 87, 87 (cautioning against ‘the confusion between two distinct issues: State
representation and State responsibility’).

105
106
107

Blyschak (n 36) 39.

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be applied to the entirety of the SOE investment’s lifecycle in a moregeneral manner? Or, should the test be more selectively applied tocertain periods of the SOE's investment or certain important decisions

taken by the SOE in relation thereto? The answers are not immediately
apparent. It is likely that whichever direction a tribunal takes on thesedecisions will be at least moderately context-dependent. However, it isalso clear that questions such as these do not immediately arise in thecontext of state attribution, which generally involves sovereign liability
for more discrete conduct.

The secondary rules of ARSIWA do not provide an answer to these questions and‘without further guidance they can be more than difficult to follow in practice’. 108 In fact,some confusion has already been manifested in arbitral practice. Although the BUCG

Tribunal questioned whether China had specific control over the activities at theconstruction site, 109 the Masdar Tribunal examined whether the UAE exercised ‘generalcontrol over the claimant’ and ‘control over investment decisions’ rather than on-site

activities. 110

To illustrate the significance of the theoretical distinction between conduct-based

and status-based attributions, it is instructive to examine the practice of the Appellate
Body (AB) of the World Trade Organization with respect to the Agreement on Subsidies

and Countervailing Measures (SCM Agreement), which defines the regulated Statesubsidies as a ‘financial contribution by a government or any public body within the
territory of a Member (referred to in this Agreement as “government”)’. 111 A debatedquestion is the relevance of ARSIWA to the interpretation of the term ‘public body’. In the

US-Definitive Anti-dumping and Countervailing Duties on Certain Products from China(US-AD/CVD (China)) (2011), China claimed that the term should be interpreted in linewith ARSIWA as meaning ‘an entity that exercises authority vested in it by a government
for the purpose of performing functions of a governmental character’. 112 While the ABinterpreted the term as ‘an entity that possesses, exercises or is vested with governmental

Lauge N. Skovgaard Poulsen, ‘States as Foreign Investors: Diplomatic Disputes and Legal
Fictions’ (2016) 31 ICSID Rev-FILJ 12, 18 n 27.
108
109

BUCG (n 39) para 43.

Masdar (n 53) para 171.
Marrakesh Agreement Establishing the World Trade Organization (opened for signature 15
April 1994, entered into force 1 January 1995) Annex 1A (Agreement on Subsidies andCountervailing Measures) (‘SCM Agreement’) art 1.1 (a) (1).

110
111

WTO, US-Definitive Anti-dumping and Countervailing Duties on Certain Products from China– Report of the Appellate Body (11 March 2011) WT/DS379/AB/R, para 305.

112

18 / 27authority’, 113 it declined to determine the customary status of Article 5 of ARSIWA, which
the US disputed, 114 on the ground that its interpretation did not turn on ARSIWA. 115

In addition to criticisms on the merit of this interpretation, 116 which this article

does not discuss, some suggest that the AB, in fact, ‘[drew] heavily on [ARSIWA] in spite of
the AB’s disclaimers to the contrary. 117 Indeed, the AB acknowledges that Article 5 of

ARSIWA ‘lends further support’ to its own conclusion. 118 However, the analysis of the AB

overlaps with that provision only in the ‘essence’ or ‘core principles and function’. 119

Importantly, the AB held that ‘[t]the connecting factor for attribution pursuant to ARSIWA
is the particular conduct, whereas, the connecting factors in Article 1.1(a)(1) of the SCM
Agreement are both the particular conduct and the type of entity’. 120 This distinction was

further articulated in the 2014 AB Report in the US-Countervailing Duty Measures on

Certain Products from China. Here, China argued that the purpose of the inquiry was todetermine whether the specific conduct covered by Article 1.1(a)(1) is that of a publicbody. 121 The AB disagreed, emphasising that the question is whether ‘the entity itself
possesses the core characteristics and functions that would qualify it as a public body’,
with the conduct being merely one of the relevant evidence. 122 In this sense, the ‘public

body’ enquiry is ‘entity-based’123 and conceptually distinct from the attribution under

ARSIWA.

2. Analogy from Maffezini?
Another justification in favour of relying on ARSIWA is that Maffezini did so in an

inverse similar situation, so why not here? To recall the context, Maffezini v Spain involved

the conduct of a Spanish State entity, Sociedad para el Desarrollo Industrial de Galicia(SODIGA), and it was disputed whether the dispute could be recognised as arising vis-à-vis
113

Ibid para 317.

Ibid para 306.
115 Ibid para 310.
116 Eg Joost Pauwelyn, ‘Treaty Interpretation or Activism? Comment on the AB Report on
United States – Ads and CVDs on Certain Products from China’ (2013) 12 WTR 235, 235-237.
114

117 Michel Cartland and others, ‘Is Something Going Wrong in the WTO Dispute Settlement?’(2012) 46 JWT 979, 996.
118

US-AD/CVD (China) (n 112) para 311.

122

Ibid para 5.101.

Ibid para 310.
120 Ibid para 309.
121 WTO, US-Countervailing Duty Measures on Certain Products from China – Report of theAppellate Body (16 July 2019) WT/DS437/AB/RW para 5.99.
119

123

Gu and Xu (n 76) 1044.

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the ‘Contracting State’, that is, Spain, or SODIGA. 124

The Tribunal posed two questions: first, whether SODIGA is a State entity forjurisdictional purposes, and second, whether its conduct can be attributed to Spain. It then‘look[ed] to the applicable rules of international law in deciding whether a particular
entity is a state body’, as applied in the context of State responsibility. 125 Whileacknowledging that different approaches might be required in the interpretation of theterms ‘national’ and ‘Contracting State’ in Article 25, it saw ’sufficient similarities’ to draw

on the Broches test and CSOB and established the well-known ‘structural test’ and‘functional test’. 126 Subsequent tribunals have invariably turned to ARSIWA for the same
purpose. 127

However, at a closer look, the two legal questions – whether a State-investor is a‘national’ and whether a dispute is arising with a ‘Contracting State’ – are different and do

not form the same coin. While, on the claimant side, it is examined if the State-backed

investor qualifies as a ‘national’, on the respondent side, the question is not whether the

respondent, like Spain in Maffezini, is a ‘Contracting State’ but rather whether the

respondent is deemed a party to the dispute arising from it. Thus, the two situations
involve the conceptually distinct kinds of attribution discussed above.

It follows that, in cases similar to Maffezini, in which the relationship between the

conduct of State entities and the State is at issue, there is no impediment to invoking

ARSIWA, as it is precisely the attribution for the purpose of State responsibility that is at

issue. 128 While attribution is strictly a matter of merits, it is frequently analysed using the
prima facie case standard during the jurisdictional phase. 129 For example, Saipem v

Maffezini (n 89).
125 Ibid paras 75-76.
126 Ibid paras 79-80. Several additional tribunals appear to view the two issues as two sides ofthe same coin. Eg Teinver S.A., Transportes de Cercanías S.A. and Autobuses Urbanos del Sur S.A. v
The Argentine Republic, ICSID Case No. ARB/09/1, Decision on Jurisdiction (21 December2012) para 272.
124

Eg Salini Construttori S.p.A. and Italstrade S.p.A. v Kingdom of Morocco, ICSID Case No.
ARB/00/4, Decision on Jurisdiction (23 July 2001) para 31.
127

Olleson (n 94) 467-68 (‘the Tribunal [in Maffezini] failed adequately to disentangle anddistinguish between the character of the various claim put forward by the Claimant. Further, itappears to a large extent substantially to have predetermined the question of attribution of the
conduct of SODIGA to the State’.)128

Maffezini (n 89) para 89 (‘the Tribunal concludes that the Claimant has made out a prima
facie case that SODIGA is a State entity acting on behalf of the Kingdom of Spain’); Jan de Nul
N.V. and Dredging International N.V. v Arab Republic of Egypt, ICSID Case No. ARB/04/13,
Decision on Jurisdiction (28 June 2006) para 85 ('it is not for the Tribunal at the jurisdictional
stage to examine whether the case is in effect brought against the State and involves the latter’s
responsibility. An exception is made in the event that it is manifest that the entity involved has
129

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Bangladesh involved an alleged expropriation through the combination of acts ofPetrobangla, a Bangladeshi SOE, and the Bangladeshi court. 130 The Tribunal, applying the

prima facie case test to determine jurisdiction, questioned whether Petrobanla manifestly‘had no link whatsoever with the State’ 131 and examined the entity’s status under ARSIWA

without mentioning the Broches test or CSOB. 132 Similarly, in Helnan International Hotel v
Egypt, the Respondent challenged that the dispute arose between the Claimant and anentity, EGOTH, failing to meet jurisdictional conditions. 133 The Tribunal, noting that
EGOTH’s action was the exercise of the element of governmental authority and thus

attributable, found that the dispute prima facie arose in relation to Egypt, 134 which issquarely within the scope of ARSIWA and fundamentally different from the situation
where the ‘national’ status is being questioned. Consequently, the inverse analogy from

Maffezini also does not ground the invocation of ARSIWA in a distinct legal context.

IV. Alternative Framework: Piercing the ‘National’ Veil

The preceding section highlighted the limitations of the two existing approaches.

On the one hand, although the Broches test accurately reflects the fundamental ethos of
the ICSID system, it plays a limited role in the process of treaty interpretation, boththeoretically and practically. On the other hand, it has been demonstrated that attribution
under ARSIWA is conceptually distinct from the determination of ‘national’ status underthe ICSID Convention and has no bearing on the interpretation of the latter concept. This

theoretical distinction complicates the practical application of ARSIWA, frequently
compelling tribunals to adopt a subjective and case-by-case analysis under the guise ofobjectivity and consistency. Furthermore, neither of these frameworks, even if based onsolid theoretical foundations, is capable of accounting for the varied approaches adopted

by the tribunals in a coherent manner.

How then should we tackle the issue? We submit that these challenges can be

no link whatsoever with the State.’). See, Olleson (n 94) 469–70; Carlo de Stefano, ‘Attributionof Conduct to a State’ (2022) 37 ICSID Rev-FILJ 20, 29–30. Regarding the prima facie case test
in investment arbitration, see Audley Sheppard, ‘The Jurisdictional Threshold of a Prima-Facie
Case’ in Peter T Muchlinski and others (eds), The Oxford Handbook of International Investment
Law (OUP 2008) 932.

130 Saipem S.p.A. v The People’s Republic of Bangladesh, ICSID Case No. ARB/05/07, Decision on
Jurisdiction and recommendation on Provisional Measures (21 March 2007) para 143
131

Ibid para 146

134

Ibid para 94.

Ibid para 148.
133 Helnan International Hotels A/S v The Arab republic of Egypt, ICSID Case No. ARB/05/19,
Decision of the Tribunal on Objection to Jurisdiction (17 October 2006) para 93.
132

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more effectively addressed using the doctrine of abuse of legal personality and abuse ofprocess (A). The pertinence of this approach is further underscored when examining thepractice of another international forum facing an analogous question, which provides aninspiring source of guidance (B).

A. Doctrinal Basis: Abuse of Legal Personality and Process

The spirit of the ‘national’ requirement in Article 25 is to prevent the submissionof inter-State disputes to the ICSID, which is designed as a depoliticised forum; 135 its

primary objective is to prevent investors from using their ‘national’ status granted by theConvention to submit an inter-State dispute. This is couched in terms of the abuse of legal

personality, which is derived from the well-established general principle of law of goodfaith. As the ICJ held in Barcelona Traction, the doctrine of piercing the corporate veil is‘equally admissible to play a similar role in international law’ to ‘prevent the misuse of theprivileges of legal personality’. 136 Accordingly, when an investor misuses its legal

personality as a ‘national’, it should be ‘pierced’ of the legal protection attached to thatstatus.
137

ICSID tribunals have applied the doctrine of abuse of process in various contexts.

Emmanuel Gaillard groups abuse of process into three: Manipulation of jurisdiction

under IIAs, multiplying proceedings to maximise success, and gaining a benefit
inconsistent with the purpose of international arbitration; 138 in the third category,tribunals have rejected claims contradicting the purpose of the ICSID Convention. For

instance, Phoenix Action v The Czech Republic (2009) ruled that claims based on an
investment made in violation of the laws of the host State or obtained throughmisrepresentations, concealments, or corruption constitute ‘an abuse of the international

ICSID arbitration system’ because ‘the purpose of international protection is to protect
legal and bona fide investments’. 139 For the same reason, insofar as the purpose of ICSID is

Broches (n 6) 369; Ibrahim Shihata, ‘Towards a Greater Depoliticization of Investment
Disputes: The Roles of ICSID and MIGA’ (1986) ICSID Rev–FILJ 1, 4.
135

Barcelona Traction, Light and Power Company, Limited [1970] ICJ Rep 3, 38–39 paras 56
and 58.
136

On the abuse of process in investment arbitration, see, Utku Topkan, ‘Abuse of the Right toAccess ICSID Arbitration’ 29 ICSID Rev–FILJ 627; Emanuell Gaillard, ‘Abuse of Process inInternational Arbitration’ (2017) ICSID Rev–FILJ 47; Yuka Fukunaga, ‘Abuse of Process underInternational and Investment Arbitration’ 33 ICSID Rev–FILJ 181; Duncan Watson and Tom
Brebner, ‘Nationality Planning and Abuse of Process: A Coherent Framework’ (2017) 33 ICSID
Rev–FILJ 302; Menalco J Solis, ‘Good-Faith Rule against Abusing Process by Multiplying Action’
36 ICSID Rev–FILJ 70.
137

Gaillard (n 137) 19–27.
139 Phoenix Action, Ltd. V The Czech Republic, ICSID Case No. ARB/06/5, Award (15 April 2009)138

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not to settle inter-State disputes, tribunals should not exercise jurisdiction when facedwith a dispute essentially between States.

It should be clarified here if this plea constitutes an objection against jurisdiction

or admissibility, which is often unclear in practice. 140 Yuka Fukunaga considers abuse ofrights to be a question of admissibility since ‘the principle does not negate the court’s

jurisdiction as such’. 141 This would be the case if a tribunal applies the principle proposed

here as such, that is, independently of other jurisdictional requirements. In such a case, theinvestor remains a ‘national’ but cannot enjoy legal protection at the ICSID any more due tothe inadmissibility of its claims. 142 Meanwhile, if the principle is ‘taken into account’ in theinterpretation of the term ‘national’, then the prohibition of abuse would constitute a partof the definition of that term, comprising an implicit jurisdictional requirement. 143 Such a

construction, however, would mean that the tribunal would ‘add other requirements which
the [Contracting States] could themselves have added but which they omitted to add’, 144
which would be tantamount to an amendment. 145 Consequently, it is more in line with theduties of tribunals to deal with the issue of the standing of State-backed investors at theadmissibility level rather than as a jurisdictional question.

By what standard should tribunals identify such abuse of personality andprocess? The forms of abuse of rights are variable, and the case law holds that clear
evidence of abuse must be demonstrated in each case, taking into account all thecircumstances. 146 In accordance with this general direction, it is submitted that tribunals

para 100.
140 Pac Rim Cayman v El Salvador, ICSID Case No. ARB/09/12, Decision on the Respondent’s
Jurisdictional Objections (1 June 2012) para 2.10.

Fukunaga (n 137) 184.
142 See, Jean d’Aspremont, ‘Abuse of the Legal Personality of International Organizations andthe Responsibility of Member States’ (2007) Int’l Org L Rev 91, 105 (‘[Internationalorganizations] remain international legal persons despite any important dent in theirautonomy. If the autonomy turns out to be a sham, it must however be considered that thepersonality of the organization no longer suffices to shield member states from theconsequences of the wrongful act of the organization’).
141

See eg Phoenix Action (n 139).
Saluka Investments BV v The Czech Republic, PCA Case No. 2001–04, Partial Award (17March 2006) para 241.
143
144

Recall that ‘[n]o attempt was made […] to reduce this common understanding [on theeligibility of mixed companies] to a legal definition, which would have been a difficult task. Nor
was it necessary to do so because of the consensual character of the Convention as a whole’.
Broches (n 6) 355.
145

Mobil Corporation, Venezuela Holdings, B.V. and others v Venezuela, ICSID Case No
ARB/07/27, Decision on Jurisdiction (10 June 2010) para 177; Tidewater Inc. and others v
Venezuela, ICSID Case No. ARB/10/5, Decision on Jurisdiction (8 February 2013) para 147;
Transglobal Green Energy, LLC and Transglobal Green Panama, SA v Republic of Panama, ICSID

146

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should take a case-by-case approach, taking into account the totality of the situations of

the case, to determine whether a State-backed investor is abusing its status as a ‘national’
to bring an inter-State dispute to ICSID. Therefore, we agree with Mosche Hirsch, whostated as early as 1993 that ‘[o]nly a conclusion which takes into account all the relevant

factors may reliably classify the character of the corporation as private or public’. 147

This framework has theoretical, practical, and descriptive advantages. First, it

provides a theoretical basis for tribunals to evaluate the totality of circumstances

surrounding the investor rather than focussing myopically on the nature of specificactivities. It also entails the policy implication of safeguarding the integrity of ICSID

without inadvertently diminishing the access of State-backed investors to ICSID bydemanding clear and convincing evidence to find abuse. 148 Moreover, our claim isconsistent with the observed practice of tribunals. As we have seen, tribunals have alreadyresorted to case-by-case investigations that focus on various factual aspects. The fact thatno ICSID tribunal has ever found that State-investors are ineligible, despite their frequentappearances before ICSID and frequent findings attributing SOE conduct to the respondent

State, further supports our claim. Abuse occurs only in an ‘extreme case’, 149 as predicted

by Broches.

B. List of Relevant Elements: Lessons from the ECtHR

Holistic analysis has the risk of being excessively subjective, and some list of

potentially relevant circumstances may be useful. However, by its very nature, it is

impossible to show such an exhaustive list in the abstract. Hirsch names the structure ofcapital, corporation, share ownership and control and supervision by governmental bodies
over the activities, but emphasises that ‘all the existing links’ should be investigated. 150

Nevertheless, it is convenient to turn our attention to the practice of ECtHR, anotherinternational forum that settles disputes between a private person and the State, which
offers practical guidance on the evaluation of the issue.

Like ICSID, the jurisdiction ratione personae of the ECtHR in individual

Case No ARB/13/28, Award (2 June 2016), para 103.
147 Moshe Hirsch, The Arbitration Mechanism of the International Centre for the Settlement of
Investment Disputes (Springer 1993) 65. See also, Blyschak (n 36) 33 (concluding that ‘thetotality of an SOE’s operation’ should be considered.).

Clorox España S.L. v Venezuela, PCA Case No. 2015–30, Laudo (17 June 2021) para 416. For
the jurisprudence of the ICJ, see Alleged violations of the 1955 Treaty of Amity, Economic
Relations, and Consular Rights [2021] ICJ Rep 9, 36 para 93.

148

149 Broches (n 6) 355. See also Barcelona Traction (n 136) para 58 (holding that lifting the veil
is ‘exceptional’).
150

Hirsch (n 147) 65.

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communication is limited to claims from ‘any person, nongovernmental organisation orgroup of individuals claiming to be the victim of a violation’. 151 Accordingly, when aclaimant is a State-backed entity, the Court must be satisfied that the claimant is‘nongovernmental’ before affirming jurisdiction. Traditionally, the Court explained that theunderlying idea of this requirement is ‘to prevent a Contracting Party acting as both anapplicant and a respondent party before the Court’ 152 However, since this condition also
applies to foreign State-entities, 153 it is better to consider that ‘governmental’organisations are excluded because only private persons listed in Article 34 can enjoy
substantive Convention rights. 154 Accordingly, the rationale is similar to the ‘national’

requirement in ICSID, which is to exclude inter-State disputes.

The ECtHR has interpreted that a ‘governmental organisation’ includes ‘legal

entities which participate in the exercise of governmental powers or run a public service

under government control’. 155 Various factors are taken into account to determine

whether an entity falls under this category, such as ‘its legal status and, where appropriate,

the rights that status gives it, the nature of the activity it carries out and the context inwhich it is carried out, and the degree of its independence from the political authorities’. 156

Additionally, when considering a company, the Court has considered whether ‘it isgoverned essentially by company law, does not enjoy any governmental or other powers[…] and is subject to the jurisdiction of the ordinary rather than the administrative courts,’
or whether it ‘carr[ies] out commercial activities and ha[s] neither a public-service role
nor a monopoly in a competitive sector’. 157 It is worth noting that the ECtHR has

developed these elements of consideration without mentioning the State responsibility
rules on attribution. 158

Based on these considerations, the ECtHR has delineated the scope of entities

Convention for the Protection of Human Rights and Fundamental Freedoms (signed 4
November 1950, entered into force 3 September 1953) art 34.
151

Islamic Republic of Iran Shipping Lines v Turkey ECHR 2007-V 327, para 81.
Matthew Happold, ‘Who Benefits From Human Rights Treaties?’ in Isabelle Riassetto, Luc
Heuschling and Georges Ravarani (eds), Liber Amicorum Rusen Ergeç (Pasicrisie
Luxembourgeoise 2017) 124; Milanovic (n 97) 376–77.
152
153
154

Slovenia v Croatia App no 54155/16 (ECtHR, 16 December 2020) para 66.

156

Radio France (n 155) para 26.

Radio France and Others v France ECHR 2003-X, para 26. On the relevant cases, see, ECtHR,‘Practical
GuideonAdmissibility
Criteria’(2021)
10,
paras
13–14
<
https://www.echr.coe.int/pages/home.aspx?p=caselaw/analysis/admi_guide> accessed 21
August 2023.
155

157
158

TRANSPETROL, a.s. v Slovakia App No 28502/08 (ECtHR, 15 November 2011) paras 61–62.
Milanovic (n 97) 368 and 371.

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that have standing to appear before it. For illustration, the Court granted standing to RadioFrance, which was a wholly State owned and funded but independent publicbroadcaster. 159 Meanwhile, standing was denied to a Slovakian oil company
TRANSPETROL, which had both governmental and non-governmental aspects, because in‘the overall procedural and substantive context of the application and [] its underlying
facts,’ there was ‘the unity of interest of the applicant company, if any, and of theGovernment’. 160

Indeed, the ECtHR’s jurisprudence is not in perfect consistency and coherence.

Rather, as Milanovic points out, the Strasbourg Court jurisprudence in this matter is ‘highly
contextual, and frequently unreasoned’. 161 It is also admitted that the Court’s

jurisprudence has developed around the specific notion of ‘nongovernmentalorganisations’ in the particular convention rather than the general principle of abuse ofrights. Still, the underlying idea of excluding inter-State disputes is the same in the two

adjudicatory bodies, and the Court’s practice indicates that some contextuality is inherent
and inevitable in the proposed holistic approach. The Court’s approach of consideringvarious governmental links, as well as a wide range of points of should provide a newsource of inspiration for ICSID tribunals.

V. Conclusion

The question of whether and when a claimant investor is entitled to claim

standing before an ICSID tribunal despite its State-backed status is expected to gainincreasing practical significance. The existing approaches to this issue, namely, the Broches

test approach and the ARSIWA approach, do not provide beneficial guidance to tribunals.

The Broches test, while reflecting the fundamental ethos of ICSID’s depoliticised nature, isinherently vague and only plays a secondary or subsidiary role in the process ofinterpretation of the treaty. In spite of the hope that ARSIWA approach brings moreobjective and flexible yardsticks, conceptual distinctions between the attribution of

conduct and the attribution of status diminish the relevance and practical utility of the
ARSIWA rules.

This article presents an alternative analytical framework that effectively

addresses these challenges. In particular, it argues that the claimant standing ofState-backed investors should be evaluated under the general principle of abuse of legal

personality and process. In accordance with this doctrine, an investor, even if it formally
159
160
161

Radio France (n 155) para 26.

TRANSPETROL, a.s. v Slovakia (n 157) paras 67 and 73.
Milanovic (n 97) 379.

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satisfies the requirements for qualifying as a ‘national’, is deprived of the legal protection

attached to that status if it is misusing that status to bring an inter-State dispute to ICSID incontravention of the purpose of the ICSID Convention. The finding of abuse requires acomprehensive examination of each case’s circumstances and clear and convincing

evidence to disqualify an investor on this basis.

This architecture offers three benefits. First, it provides a normative foundation

for a comprehensive analysis of the entity’s characteristics. Second, it has the policy

implication of safeguarding the ICSID system’s integrity while protecting the legitimate
interests of State-backed investors. Third, it provides a coherent description of the existing

practices, where tribunals have in fact conducted a case-by-case analysis and rarely, if ever,

admitted disqualification of investors due to State-ownership.

‘Taking into account all the circumstances’ may not seem like a fancy solution, butthat is what lawyers often do. Ultimately, it is up to each tribunal to determine the scope of
its jurisdiction, subject to a limited review. 162 We have already seen ICSID tribunals

develop a unique jurisprudence on the construction of the notion of ‘investment’ in Article
25 of the ICSID Convention. 163 Nothing prevents them from doing the same in relation to

the requirement of ‘national’, and this article paves the way forward.

162
163

ICSID Convention (n 2) arts 41 (1) and 52 (1) (b).
Salini v Morocco (n 127) paras 51–52.

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