International Investment Law Symposium Online Publications

Recognizing an Investment: An Argument for Access to the Investor-State Dispute Settlement Mechanisms for Non-Governmental Organizations

Introduction

Why are Non-Governmental Organizations (“NGOs”) treated differently than traditional commercial investments, and should they be able access the protections from illegal State interference provided by bilateral investment treaties? This paper examines the space for NGOs in the international investment system and argues that they should be covered as foreign investments in bilateral investment treaties. Part I of this paper addresses the need for international and impartial protections for NGOs by examining some of the challenges faced by civil society groups in Ethiopia, Russia, and Egypt. Part II explores the potential benefits of the international investor-State dispute settlement mechanism for international NGOs facing discrimination. Part III examines the inclusion of non-commercial entities in the definition of “investment” by looking at the language in certain bilateral investment treaties and by analyzing case law pertaining to the characteristics of an investment under Article 25 of ICSID Convention. Part IV concludes the paper’s analysis and strongly advocates for the inclusion of non-profit entities into the investor-State dispute settlement system.

Part I: The Need Exists

Non-governmental Organizations are entities that are neither part of a government, nor a traditional for-profit business. They can have many different purposes and missions, and can vary in size and resources. They range from small, local grassroots organizations to large multinational entities with deep pockets. Two examples of international NGOs that invest substantial resources in countries around the world are Médecins Sans Frontières (Doctors Without Borders) and the International Red Cross. In 2014 Médecins Sans Frontières, a medical NGO, had a budget of 1.066 billion Euros01Converted into U.S. dollars at the average exchange rate for 2014 (1.329), this figure would be $1,416,889,890. and operated in over 63 countries.02Financial Report 2014 : Key Figures, Médecins Sans Frontières, http://cdn.msf.org/sites/msf.org/files/msf_finance_summary_2014.pdf. In the same year, the International Committee of the Red Cross, a humanitarian NGO, spent 1.333 billion Swiss Francs03Converted into U.S. dollars at the average exchange rate in 2014 (1.094), this figure would be $1,130,216,663. and operated in over 80 countries worldwide.04Annual Report 2014, International Committee of the Red Cross, https://www.icrc.org/en/document/ICRC-annual-report-2014. Both invest a substantial amount in creating medical and humanitarian infrastructure in developing countries.

Many NGOs work in countries with unstable or restrictive governments. Some find themselves at odds with the local authorities, which leaves them particularly vulnerable to retaliatory measures taken by the State. If a government decides to take such measures, the physical and monetary assets of the NGO are exposed and often there is not a clear legal remedy.

A. Ethiopia

In 2009, the Ethiopian government drastically changed its policy towards NGOs. In an effort to restrict their operations in the country, the Ethiopian Government issued a proclamation05See Proclamation No. 621/2009, Proclamation to Provide for the Registration and Regulation of Charities and Societies, Federal Negarit Gazeta of the Federal Democratic Republic of Ethiopia (2009), http://www.molsa.gov.et/English/Resources/Documents/Charities%20and%20Societies%20Proclamation.pdf. that divided NGOs into categories based on the citizenship of the entity and its employees and the origins of funding.06Id. at 2(2-4). Any NGO that receives more than ten percent of all funds from a foreign source is considered “foreign” and is therefore severely restricted in its operations.07Id.; Yalemzewd Bekele Mulat et al., Center for International Human Rights at Northwestern University School of Law Sounding the Horn: Ethiopia’s Civil Society Law Threatens Human Rights Defenders 5 (2009), https://www.law.northwestern.edu/legalclinic/humanrights/documents/EthiopiaCSOPaper-Nov2009.pdf.

“Foreign” NGOs cannot work on issues including human rights, gender equality, rights of children and the disabled, and conflict resolution.08Proclamation, supra note 5 at arts. 2(3-4), 14(5). Practically speaking, Ethiopia is a country of limited resources, and private donations from within Ethiopia are insufficient to support the entire NGO industry. Essentially, through this proclamation, the Ethiopian government decided to legislate many NGOs out of business. By some estimates, this law resulted in a 45% decrease in the number of NGOs operating in the country in only two years. 09Kendra Dupuy, et al., Who Survived? Ethiopia’s Regulatory Crackdown on Foreign-Funded NGOs, 22 Rev. Int’l Pol. Econ. 419, 433 (2014). That is a seismic shift for the entire human rights field and has large implications for not only the benefactors of these organizations, but for Ethiopian society as well. Forcing almost half the non-profit organizations to close, stop operations, and leave the country reduces the services available to an extremely vulnerable population, and wastes both the investments of human capital and physical infrastructure that these NGOs have made in the country.

B. Russia

Ethiopia is by no means an outlier; Russia is another example of a State that fundamentally altered the regulatory framework for NGOs through discriminatory restrictions. In 2012, Russia passed a law that prohibits NGOs from receiving funding from certain specified States, such as the United States.10Douglas Rutzen, Aid Barriers and the Rise of Philanthropic Protections, 17 Int’l J. of Not-for-Profit L. 5, 18 (2015). The Russian government also required that NGOs have “political” operations in the country register with the Ministry of Justice as “Foreign Agents.”11Id. at 14. If the organization fails to do so, the government has the power to unilaterally brand them as “Foreign Agents,” a term that is used to denote those involved in international espionage. 12Id. The State can arbitrarily deny registration to organizations that it views as undermining its sovereignty and public values.13The Ministry of Justice refused to register Rainbow House, an NGO that works for the protection of rights for the LGBT community, because the organization undermined public values and the security of the Russian State. See Matthew Schaaf et al., Human Rights Watch, An Uncivil Approach to Civil Society: Continuing State Curbs on Independent NGOs and Activists in Russia 31 (2009) https://www.hrw.org/sites/default/files/reports/russia0609webwcover.pdf. The State has the authority to dissolve active NGOs for minor legal infractions.14Id. at 42.

Russia has also restructured some of the tax regulations for these organizations. The government will not tax the receipt of international grant funding if the donor is on the official list of government-approved contributors and the money is being used for the public benefit, but if the grant funding comes from an unapproved source, the government will tax the amount at a rate of 24%.15Aid Barriers, supra note10, at 19. For some groups, a tax disparity of this magnitude will preclude them from operating successfully in the country. The Russian government has revoked approval for several contributors, and can continue to limit the list without notice or warning.16Id. This means that NGOs that are registered to operate in Russia may be subject to drastically different taxation rates depending on who the international donor is and how the Russian government classifies that benefactor in that particular year.

C. Egypt

Egypt has also taken a very aggressive stance against civil society groups. In the Law on Non-governmental Organizations 84/2002,17Law No. 84 of 2002 (Law on Non-Governmental Organizaations), Al-Jaridah Al-Rasmiyya, 3 June 2002 (Egypt). the Egyptian government stipulated that every organization operating in the country must register as an “association” with the proper authorities.18Egypt’s NGOs ‘robbed of independence’, Al Jazeera, (September 22, 2014), http://www.aljazeera.com/news/middleeast/2014/09/egypt-ngo-law-crackdown-2014913121624569527.html. The government has the power to reject registration on vague grounds and has criminalized participation in other international associations without government approval.19Law 84 of 2002, supra note 17, at art. 16. The law also requires that the associations report annually to the government, disclosing their finances and very detailed accounts of their activities.20Id. at art. 23. The government has the power to order the association to stop any activity, and can levy charges if it fails to comply.21Egypt: Draft Law Threatens Independent Organizations, Human Rights Watch (July 14, 2014, 8:04 AM) https://www.hrw.org/news/2014/07/14/egypt-draft-law-threatens-independent-organizations.

Associations are forbidden from accepting unapproved foreign funds, and can lose their registration if the government determines that they have done so. 22Law 84 of 2002, supra note 17, at art.18. International NGOs may not receive any funds from a foreign government, and can be sanctioned and disbanded by the government if it is determined that their activities “infringe on national sovereignty” or endorse a political ideology.23Egypt Draft Law Threatens Independent Organizations, supra note 21. Egypt has created heightened criminal sanctions for the individuals and organizations that are found to have breached this law. In 2013, the Egyptian government arrested and convicted forty-three foreign NGO workers and accused several groups, including Freedom House, an American NGO founded by Eleanor Roosevelt, of accepting over $50 million in illegal funds.24Alastair Beach, US anger as 43 NGO workers are jailed in Egyptian crackdown, Independent (June 4, 2013). http://www.independent.co.uk/news/world/africa/us-anger-as-43-ngo-workers-are-jailed-in-egyptian-crackdown-8644660.html.

Part II: How Can the International Investment Dispute Settlement Mechanism Help?

A. NGOs Would Have Similar Claims for the Breach of Traditional BITs

Ethiopia drastically changed its regulations regarding “foreign” NGOs, subjecting them to arduous and arbitrary registration requirements, and even precluding them from working in a large portion of the civil society sector.25See Proclamation, supra note 5. Russia blatantly discriminates against organizations based on the State of origin of the funding, arbitrarily labels foreign organizations as channels for espionage which compromises their legitimacy and credibility in the country, and capriciously interferes with foreign NGOs’ ability to register and operate in the country. Egypt created a new regulatory regime for NGOs that gives the government the power to force any non-profit association to change its activities or terminate operations. If these discriminatory measures were levied against a commercial industry, and not against civil society groups, these States would be held accountable for breaches of multiple substantive provisions in their bilateral investment treaties, including the prohibition against illegal expropriation, requirement of fair and equitable treatment, and the most-favored nation provision.

i. The Governments in Ethiopia, Russia, and Egypt have engaged in illegal expropriation of portions of their NGO sector.

Many BITs contain a prohibition on the illegal expropriation of private investments. Illegal expropriation has evolved over the years to contain three main components: (i) the act is attributable to the State; (ii) the act involved either a transfer of property rights or rendered use of the property valueless; and (iii) the original owner does not receive proper compensation.26Barry Appleton, Regulatory Takings: The International Law Perspective, 11 NYU Envt’l L.J. 46 (2002).

There are two types of illegal expropriation—direct and indirect. A direct expropriation is an outright physical seizure of the property in question. In Funnekotter v. Zimbabwe, the tribunal found that the government had expropriated the claimant’s investment, commercial farms, by instituting a land acquisition program and taking control of the property.27Bernardus Henricus Funnekotter and Others v. Republic of Zimbabwe, ICSID Case No. ARB/05/6, Award, ¶ 107 (April 22, 2009). The countries in the three case studies mentioned above have not yet resorted to direct expropriation, but a good argument can be made for a case of indirect expropriation.

Indirect illegal expropriation involves government action that results in the “total loss of value of the property such as when the property affected is rendered worthless by measure.”28Total S.A. v. The Argentine Republic, ICSID Case No. ARB/04/01, Decision on Liability, ¶ 195 (Dec. 27, 2010). Many times the investor retains ownership, but the asset has significantly less or little value. In Total v. Argentina, the tribunal termed this “effective deprivation.”29Id. When the Ethiopian government prohibited the participation of foreign funded civil society groups in certain sectors of the field and forced almost half of the entities to close, it rendered the investments in their infrastructure worthless. These groups have been regulated out of the market and are unable to use and manage their assets in Ethiopia, even though they have not yet lost ownership of the physical property.

In Pope & Talbot v. Canada, the tribunal identified the characteristics of substantial deprivation. To meet this threshold, the investor had to prove that the State essentially took control over the investment, managed the day-to-day operations of the entity, arrested and detained the officials or employees, or interfered in administration.30Pope & Talbot Inc. v. The Government of Canada, UNCITRAL, Interim Award, ¶ 100 (June 26, 2000). The new regulations in Egypt allow the government to monitor, veto, and essentially control the activities of registered NGOs. The State intensified the criminal sanctions for NGO employees who fail to conform to the regulations, resulting in the detention and arrest of prominent members of the community.

The tribunal in Burlington Resources v. Czech Republic discussed a further layer to the meaning of indirect expropriation: expropriatory taxation. “Case law and doctrinal writings suggest that a tax measure may be tantamount to expropriation if (i) it produces the effects required for any indirect expropriation and (ii) in addition, it is discriminatory, arbitrary, involves a denial of due process or an abuse of rights.”31Burlington v. Ecuador, ICSID Case No. ARB/08/5, Decision on Liability, ¶ 375 (Dec. 14, 2012). The tribunal found both taxation rates in question as expropriatory because they had a “devastating impact on Burlington’s investment.”32Id. at ¶ 109. Russia’s law pertaining to foreign funding of NGOs meets many of these criteria. The law distinguishes between approved and unapproved sources of funding, discriminating based on the country of origin. It imposes a tax of 24% on funds that had not been previously taxed and remain tax free for many firms.33Aid Barriers, supra note10, at 19. The process for determining the status of the source of funding is opaque, and the regulatory agency has wide discretionary power.34An Uncivil Approach, supra note 13, at 22. There are due process concerns because the agency is not required to give notice regarding the change of status. If the NGOs could prove that this discriminatory tax regime contributed to the loss of control and devaluation of their investment, they would have a potential claim for indirect expropriation.

Many of these regulatory changes individually may not have a disastrous effect on the NGOs; however when instituted together, the collective effect can constitute creeping expropriation. Creeping expropriation is the amalgamation of State actions, including legal and insignificant acts, which eventually have the effect of expropriation.35Siemens A.G. v. The Argentine Republic, ICSID Case No. ARB/02/8, Award, ¶ 263 (Jan. 17, 2007). Tribunals are more concerned with the effect of the policies than the State’s intent in enacting it, or the significance of any one act individually.36See CME Czech Republic B.V. v. Czech Republic, UNCITRAL, Partial Award, (Sept. 13, 2001). The NGOs would only need to prove that the measures in question have the effect of expropriation; they would not have to speculate as to the discriminatory intent of the government.

ii. The Governments of Ethiopia, Russia, and Egypt Have Treated NGOs Unfairly and Inequitably

Most BITs also include a provision that obligates the State to give the foreign investor fair and equitable treatment. There is no hard line rule for what constitutes fair and equitable treatment, but the tribunal in Tecmed v. Mexico approached the analysis by first looking to the proper interpretation of the term under Article 31 of the Vienna Convention on the Law of Treaties, and then applying that in the context of international law and the good faith principle.37Técnicas Medioambientales Tecmed, S,A,v. The United Mexican States, Award, ICSID Case No. ARB (AF)/00/2, Award, ¶ 155 (May 29, 2003). Under this framework, the tribunal determined that fair and equitable treatment obligates States to “provide to international investments treatment that does not affect the basic expectations that were taken into account by the foreign investor [when making the investment].”38Id. at ¶ 154. It further requires a State to “act in a consistent manner, free from ambiguity and totally transparently in its relations with the foreign investor.”39Id.

States should act consistently towards their investors and should not fundamentally, arbitrarily, and opaquely alter important regulations or laws. However, many NGOs face these kinds of capricious and discriminatory policies around the world. In Ethiopia, the government re-categorized NGOs as “foreign” after many had been operating in the country for years, and severely restricted their activities. This change in policy was inconsistent and resulted in a complete restructuring of the investment landscape for NGOs. Many of these organizations could not survive in the new framework and were forced to close.

Tecmed also involved an investor’s reasonable expectation that the State would honor a permit that it had issued to the investor, on which the investor had planned its investment. The tribunal found that the fair and equitable treatment standard should preclude a State from revoking a license on which the investor relies, in an arbitrary manner that deprives the investors of the opportunity to contest the action or participate in the procedure.40Id. at ¶ 173. In its NGO regulations, Russia has given its administrative body the right to revoke registration of any civil society group for vague reasons such as “national security.” There is no requirement to provide the groups with notice, and there is no guarantee that the NGOs will have an opportunity to be heard.41Aid Barriers, supra note 10, at 14. The government can also label any group as a “foreign agent,” similarly without notice.42Id. The Egyptian procedure also grants the government the ability to unilaterally and without notice terminate a group’s registration and sanction them. These countries are failing to provide the foreign NGO sector with fair and equitable treatment by discriminating against individual entities, terminating their licenses arbitrarily and without notice, and depriving the affected groups of a chance to respond or contest their new categorization.

Some tribunals have found that illegitimate discrimination against foreign firms can also constitute a breach of fair and equitable treatment. In Eastern Sugar v. Czech Republic, the tribunal found that the government breached this obligation when it denied subsidies to foreign companies but continued to grant them for domestic entities.43Eastern Sugar B.V. v. The Czech Republic, UNCITRAL SCC No. 088/2004, ¶ 337 (March 27, 2007). Ethiopia, Egypt, and Russia have all instituted policies that punish foreign firms, or those who receive a certain amount of foreign funds. Ethiopia has forced foreign firms out of business through their regulation; Russia takes 24% of foreign grants from unapproved donors, while not taxing money from approved donors at all. Strong comparisons can be made to the Czech Republic’s discriminatory subsidy program.

iii. NGOS are Subject to Discriminatory Measures Based on their Foreign Status

Improper discrimination based on an investor’s country of origin can also be viewed as a breach of the Most-Favored Nation (“MFN”) clause. MFN guarantees covered investors equal access to the competitive environment. It is a concept that was imported into the investment context from international trade, and lacks a perfectly consistent meaning or application. However, at its core, a breach of MFN can be shown if the State party has given more favorable treatment to one of its nationals or another foreign investor in comparable circumstances.44Nigel Blackaby, et al., Redfern and Hunter On International Arbitration 8.124-8 (6th ed. 2015). Strong arguments can be made by foreign NGOs in Ethiopia, Russia, and Egypt that they receive less favorable treatment than national NGOs or those that receive funding from approved sources. Tribunals will generally make exceptions to this principle for legitimate policy reasons, so the non-profit groups would have to prove that none are present in their cases.45Id.

B. Access to the Investor-State Dispute Settlement System Would Give Many NGOs an Impartial Forum to Address Their Claims and Would Allow Them to Better Collect on Judgments.

Many of the justifications for the creation of the investor-State dispute settlement system apply to NGOs in the same way they apply to commercial entities, including the need for neutrality and proper enforcement.46Id. at 28-19. Some countries like Ethiopia essentially make the work of the NGO illegal; others like Russia disguise the discrimination in a tax regulation or a registration requirement. Depending on the manner in which the assets are taken or devalued, NGOs may be limited in their ability to bring a case in the local courts. Even so, there are serious concerns about the impartiality and independence of the national judiciary in all three of the aforementioned countries, and many others in which these organizations work. The dispute becomes even more challenging for an NGO to bring when it involves a direct conflict between domestic and international law, as the local courts may not be in a good position to engage in treaty interpretation.

International NGOs sometimes try to bring claims of government discrimination and harassment under international human rights law. However, international human rights tribunals are not an option for many organizations because they are limited in their geographic scope.47Nick Gallus and Luke Eric Peterson, International Investment Treaty Protection of NGOs, 2(4) Arb. Int’l 527, 531-32 (2006). They also provide more limited forms of relief than the international investment system.

In addition to having a neutral venue for dispute resolution, access to the International Centre for the Settlement of Investment Disputes (ICSID) in particular would be beneficial because it would mean that the subsequent award would be enforceable under the ICSID Convention. Each contracting State to the ICSID Convention agreed to recognize each valid ICSID award as if it were a final judgment in its own domestic courts, and is obligated to enforce it as such.48Convention on the Settlement of Investment Disputes Between States and Nationals of Other States, art. 54, Oct. 14, 1966. Along with being enforceable in over 150 countries, ICSID awards are only subject to very limited review; they are essentially immune from domestic interference. Annulment and revision can only occur through the ICSID system.49Id. at art. 53(1). This separation from the oversight of the domestic courts would give NGOs an added layer of protection from a potentially biased or substandard judiciary.

Part III: Including NGOs in the International Investment Framework

To access the investor-State dispute settlement mechanism, a proper tribunal needs to establish jurisdiction over the claim. Often this finding of jurisdiction hinges on how the State consented to the international arbitration proceeding. The vast majority of investor-State disputes are decided through the ICSID system. For an ICSID tribunal to establish jurisdiction over a claim, it must arise directly out of an “investment” made by a national with the proper citizenship.50Id. at art. 25. Before a non-profit organization can present its substantive claims against a State, it must convince the tribunal that it has made an investment under the BIT and Article 25 of the ICSID Convention as well.

A. Some Countries Give Explicit Instruction in their BITs

Some countries express a clear and explicit intention to include non-profit entities in the definition of investment. In the Norwegian Model BIT, “investment means: Every kind of asset owned or controlled, directly or indirectly, by an investor of a Party, including … any entity established in accordance with, and recognised as a legal person by the law of the Party, whether or not their activities are directed at profit.”51Norway Model BIT, Draft version 191207, Article 2(i), http://investmentpolicyhub.unctad.org/Download/TreatyFile/2873. The draft comments justified this broad definition, “because one wishes in principle to motivate investment in all areas.”52Comments on the Model for Future Investment Agreements, English Translation, (December 19, 2007) http://www.uio.no/studier/emner/jus/jus/JUR5850/tekster/norway_draft_model_bit_comments.pdf. The comments reiterate that “it is not required that one intends to earn money on the investment.”53Id. Norway has yet to integrate this language into a ratified bilateral investment treaty, but this language in the draft model could mark a shift for future treaties. Norway has a substantial international NGO sector, and the Ministry of Foreign Affairs alone provides around 30 billion krone a year in grants to NGOs around the world.54Grants, Government.no (July 27, 2013) https://www.regjeringen.no/en/dep/ud/grants/id620650/. With large amounts of capital leaving the country to be invested in different international NGO infrastructures, the country may be exploring a new way to protect those assets. If the government of Norway decides to negotiate non-profits directly into the definition of investment, this could give the covered NGOs neutral legal recourse.

In the BIT between United States and Kazakhstan, the concept of a covered “investment” includes “any kind of corporation, company, association, enterprise, partnership, or other organization legally constituted under the laws and regulations of a Party or a political subdivision thereof whether or not organized for pecuniary gain.”55Treaty Between the United States of America and the Republic of Kazakhstan Concerning the Encouragement and Reciprocal Protection of Investment, art. 1(b) (January 12, 1994). See also Treaty Between the United States and the Republic of Kyrgyzstan Concerning the Encouragement and Reciprocal Protection of Investment, art. 1(b) (January 12, 1994). This BIT uses the exact language cited above from the BIT with Kazakhstan

Explicit inclusion in the definition of “investment” in a BIT would certainly provide the strongest grounds for a NGO to bring a case under one such treaty; however, the vast majority of BITs do not directly provide for non-profit inclusion. Some countries go so far as to explicitly require that an investment under the BIT be a for-profit entity. The Swiss-Egyptian BIT states that “[t]he term ‘investment’ shall include every kind of asset that has the characteristics of an investment, such as the commitment of capital or other resources, the expectation of gain or profit, or the assumption of risk.”56Agreement between the Swiss Confederation and the Arab Republic of Egypt on the Promotion and Reciprocal Protection of Investments (June 7, 2010).

B. ICSID Case Law Inconsistently Requires Mandatory External Criteria Investments under Article 25

Many BITs are silent on the inclusion or exclusion of non-profit entities in the definition of “investment.” NGOs may still be able to access the international investment dispute settlement mechanism if the tribunal decides to interpret the jurisdictional definition of “investment” broadly.

When the bilateral investment treaty is silent on whether or not a specific asset is included in the definition of the investments, some tribunals have determined that there are external criteria inherent in the essence of an investment that must be met before establishing jurisdiction. In Fedax v. Republic of Venezuela, the ICSID tribunal stated that “the basic features of an investment have been described as involving a certain duration, a certain regularity of profit and return, assumption of risk, a substantial commitment and a significance for the host State’s development.”57Fedax v. Republic of Venezuela, ICSID Case No. ARB/96/3, Decision of the Tribunal on Objections to Jurisdiction, ¶ 43 (July 11, 1997). These criteria, taken from scholar Christoph Schreuer, were subsequently applied in the landmark proceeding of Salini v. Kingdom of Morocco and became known as the “Salini test.” The Salini tribunal held that the dispute had to arise out of an investment under both the pertinent BIT and Article 25 of the ICSID Convention. Regardless of the wording of the BIT, the tribunal held that the outlined criteria were inherent in an investment under Article 25 of the ICSID Convention, and therefore jurisdiction could not be established if the purported investment did not have these characteristics.58Salini Costruttori SpA and Italstrade SpA v Kingdom of Morocco), ICSID Case No. 00/4, Decision on Jurisdiction, ¶ ¶ 51-58 (July 23, 2001). These cases paved the way for tribunals to look past simply analyzing whether or not the asset qualified under the language of the BIT, but to require an additional objective definition of “investment” completely separate from the agreement of the parties.59W. Michael Reisman and Anna Vinnik, What Constitutes an Investment and Who Decides? in Contemprary Issues in International Arbitration and Mediation The Fordham Papers 50 (Arthur Rovine and Martinus Nijhoff eds., 2010).

Some tribunals have interpreted each criterion as individually required for jurisdiction.60See also Joy Mining Machinery Limited v. The Arab Republic of Egypt, ICSID Case No. ARB/03/11, Award on Jurisdiction (August 6, 2004). The tribunal refused jurisdiction because one Salini criterion, a substantial risk, was not established. In Malaysian Historical Salvors v. Malaysia, the tribunal refused to grant jurisdiction because the arbitrator felt that one of the Salini criterion was not met.61Malaysian Historical Salvors SDN, BHD v. The Government of Malaysia, ICSID Case No. ARB/05/10, Award on Jurisdiction, ¶ 146 (May 17, 2007). More specifically, he held that the salvage diving operation did not contribute significantly to Malaysia’s economic development.62Id. at ¶ 143.

The claimant sought an annulment on the jurisdictional decision, and the annulment committee acquiesced, finding that the elevation of these objective Salini factors to mandatory jurisdictional criteria was an abuse of discretion.63Malaysian Historical Salvors SDN, BHD v. The Government of Malaysia, ICSID Case No. ARB/05/10, Decision on the Application of Annulment, ¶ 74 (April 16, 2009). Most tribunals are now wary of denying jurisdiction solely because of the absence of one Salini criterion, stressing that the Salini factors should be viewed in totality and applied to the circumstances of the case.64Guillermo Aguilar Alvarez & W. Michael Reisman, How Well Are Investment Awards Reasoned? in The Reasons Requirement in International Investment Arbitration: Critical Case Studies 1-32 (2008). Conversely, the first tribunal in Patrick Mitchell v. Democratic Republic of Congo found that a law office constituted an investment and held in favor of claimant, and on appeal the tribunal annulled the award for claimant because the law office did not contribute to the economic development of the State, and therefore missed one of the crucial Salini criteria.65See Patrick Mitchell v. Democratic Republic of Congo, ICSID Case No. ARB/99/7, Decision in Annulment, ¶¶ 39-41 (Nov. 1, 2006).

Some tribunals have used these Salini criteria in their expansion of the definition of investment,66See Saipem v. Bangladesh, ICSID Case No. ARB/05/7, Decision on Jurisdiction and Recommendation on Provisional Measures, ¶¶ 99-100, (March 21, 2007). The tribunal used the Salini criteria to evaluate whether or not the cause of the commercial arbitration case was an investment, and then held that the award resulting from that arbitral claim also constituted an award. while others have rejected the imposition of these additional external criteria altogether. One tribunal stated “even if the Republic could demonstrate that any or all, of the Salini criteria are not satisfied in this case, this would not necessarily be sufficient in and of itself to deny jurisdiction.”67Biwater Gauff (tanz.), Ltd. v. United Republic of Tanzania, ICSID Case No. ARB/05/22, Award, ¶ 318 (July 24, 2008). In Inmaris v. Ukraine, the tribunal wrote

various tribunals have adopted some or all of the typical characteristics of an investment identified by the tribunal in Salini v. Morocco, and have applied them as a compulsory, limiting definition of investment under the ICSID Convention. However this Tribunal is not persuaded that it is appropriate to impose such a mandatory definition through case law where the Contracting States … chose not to specify one.68Inmaris Perestroika Sailing Maritime Services GMBH and Others v. Ukraine, ICSID Case No. ARB/08/8, Decision on Jurisdiction, ¶ 129 (Mar. 8, 2010).

Some scholars have been highly critical of some tribunals’ choice to add multiple mandatory requirements to ICSID jurisdiction under Article 25.69See generally D. Krishan, “A Notion of ICSID Investment” in Investment Treaty Arbitration: A Debate and Discussion (T. Weiler ed., 2008), https://www.transnational-dispute-management.com/journal-browse-issues-toc.asp?key=26. They find these additional characteristics to be completely antithetical to the intention of the drafters of the ICSID Convention. Through extensive analysis of the travaux preparatoires of the ICSID Convention, Julian Mortenson found that the choice to include a vague and encompassing definition of “investment” was intentional, and was the result of a compromise.70See generally Julian Mortenson, The Meaning of “Investment”: ICSID’s Travaux and the Domain of International Investment Law, 51 Harv. Int’l L.J. 257. (2010). The drafters meant to keep the jurisdiction open; they did not mean to allow tribunals to limit jurisdiction further on a case-by-case basis.71Id.

For tribunals who agree that ICSID jurisdiction is not limited by Article 25, but rather by the Contracting State’s intent, the language in the BIT becomes extremely important. In Inmaris, the tribunal gave great deference to definition of “investment” in the BIT, explaining “State parties to a BIT agree to protect certain kinds of economic activity, and … that means that they believe that that activity constitutes an ‘investment’ within the meaning of the ICSID Convention as well.”72Inmaris, supra note 70, at ¶ 130. In M.C.I Power Group L.C. v. Ecuador, the tribunal stated “[f]rom a simple reading of Article 25(1), the Tribunal recognizes that the ICSID Convention does not define the term “investments”… [T]he BIT complements Article 25 of the ICSID Convention, for purposes of defining the Competence of the Tribunal with respect to any legal dispute arising directly out of an investment.”73M.C.I. Power Group L.C. and New Turbine, Inc. v. Republic of Ecuador, ICSID Case No. ARB/03/6, Award, ¶¶ 159-60 (July 31, 2007). Tribunals that subscribe to this philosophy, and believe that the BIT is the gatekeeper to ICSID jurisdiction, must determine what the language of the BIT means. If the State is a party to the Vienna Convention on the Law of Treaties, the tribunal will often engage in an Article 31 interpretation. This involves interpreting the definition of “investment” “in good faith in accordance with the ordinary meaning… in light of its object and purpose.”74Vienna Convention on the Law of Treaties, art.31(1). Where the BIT does not explicitly deny jurisdiction to disputes arising out of non-profit entities, the tribunals may find that the language is more permissive than limiting, and grant jurisdiction.

Part IV: Non-Governmental Organizations Are Similarly Situated to Foreign Commercial Entities and Should be Able to Access the Investor-State Dispute Settlement Mechanism

As demonstrated through the brief analysis of new State policies towards the NGO communities in Ethiopia, Russia, and Egypt, non-profit organizations are sometimes subjected to harsh and discriminatory regulations and policies that can hinder their ability to operate effectively. Many times those organizations have inadequate legal remedies, including bringing a case in the local jurisdiction that may not be sufficiently independent from the offending government. The international business community faced similar problems, and as a result, the international investor-State dispute settlement system was born. The same guidelines and principles that apply to States’ obligations to commercial operations and other traditional investments should be, and can easily be, applied to international non-profit organizations. States should explicitly include non-profit entities in the definition of a covered “investment” in their BITs. In the absence of such language, and when there is no explicitly contradictory language, tribunals should allow NGOs to establish jurisdiction through a broad definition of “investment” that is more aligned with the intentions of the original drafters. Allowing these groups to access the international investor-State mechanism would institute a much-needed system of accountability for governments that try to infringe upon, control, and terminate these civil society groups.

References   [ + ]

01. Converted into U.S. dollars at the average exchange rate for 2014 (1.329), this figure would be $1,416,889,890.
02. Financial Report 2014 : Key Figures, Médecins Sans Frontières, http://cdn.msf.org/sites/msf.org/files/msf_finance_summary_2014.pdf.
03. Converted into U.S. dollars at the average exchange rate in 2014 (1.094), this figure would be $1,130,216,663.
04. Annual Report 2014, International Committee of the Red Cross, https://www.icrc.org/en/document/ICRC-annual-report-2014.
05. See Proclamation No. 621/2009, Proclamation to Provide for the Registration and Regulation of Charities and Societies, Federal Negarit Gazeta of the Federal Democratic Republic of Ethiopia (2009), http://www.molsa.gov.et/English/Resources/Documents/Charities%20and%20Societies%20Proclamation.pdf.
06. Id. at 2(2-4).
07. Id.; Yalemzewd Bekele Mulat et al., Center for International Human Rights at Northwestern University School of Law Sounding the Horn: Ethiopia’s Civil Society Law Threatens Human Rights Defenders 5 (2009), https://www.law.northwestern.edu/legalclinic/humanrights/documents/EthiopiaCSOPaper-Nov2009.pdf.
08. Proclamation, supra note 5 at arts. 2(3-4), 14(5).
09. Kendra Dupuy, et al., Who Survived? Ethiopia’s Regulatory Crackdown on Foreign-Funded NGOs, 22 Rev. Int’l Pol. Econ. 419, 433 (2014).
10. Douglas Rutzen, Aid Barriers and the Rise of Philanthropic Protections, 17 Int’l J. of Not-for-Profit L. 5, 18 (2015).
11. Id. at 14.
12. Id.
13. The Ministry of Justice refused to register Rainbow House, an NGO that works for the protection of rights for the LGBT community, because the organization undermined public values and the security of the Russian State. See Matthew Schaaf et al., Human Rights Watch, An Uncivil Approach to Civil Society: Continuing State Curbs on Independent NGOs and Activists in Russia 31 (2009) https://www.hrw.org/sites/default/files/reports/russia0609webwcover.pdf.
14. Id. at 42.
15. Aid Barriers, supra note10, at 19.
16. Id.
17. Law No. 84 of 2002 (Law on Non-Governmental Organizaations), Al-Jaridah Al-Rasmiyya, 3 June 2002 (Egypt).
18. Egypt’s NGOs ‘robbed of independence’, Al Jazeera, (September 22, 2014), http://www.aljazeera.com/news/middleeast/2014/09/egypt-ngo-law-crackdown-2014913121624569527.html.
19. Law 84 of 2002, supra note 17, at art. 16.
20. Id. at art. 23.
21. Egypt: Draft Law Threatens Independent Organizations, Human Rights Watch (July 14, 2014, 8:04 AM) https://www.hrw.org/news/2014/07/14/egypt-draft-law-threatens-independent-organizations.
22. Law 84 of 2002, supra note 17, at art.18.
23. Egypt Draft Law Threatens Independent Organizations, supra note 21.
24. Alastair Beach, US anger as 43 NGO workers are jailed in Egyptian crackdown, Independent (June 4, 2013). http://www.independent.co.uk/news/world/africa/us-anger-as-43-ngo-workers-are-jailed-in-egyptian-crackdown-8644660.html.
25. See Proclamation, supra note 5.
26. Barry Appleton, Regulatory Takings: The International Law Perspective, 11 NYU Envt’l L.J. 46 (2002).
27. Bernardus Henricus Funnekotter and Others v. Republic of Zimbabwe, ICSID Case No. ARB/05/6, Award, ¶ 107 (April 22, 2009).
28. Total S.A. v. The Argentine Republic, ICSID Case No. ARB/04/01, Decision on Liability, ¶ 195 (Dec. 27, 2010).
29. Id.
30. Pope & Talbot Inc. v. The Government of Canada, UNCITRAL, Interim Award, ¶ 100 (June 26, 2000).
31. Burlington v. Ecuador, ICSID Case No. ARB/08/5, Decision on Liability, ¶ 375 (Dec. 14, 2012).
32. Id. at ¶ 109.
33. Aid Barriers, supra note10, at 19.
34. An Uncivil Approach, supra note 13, at 22.
35. Siemens A.G. v. The Argentine Republic, ICSID Case No. ARB/02/8, Award, ¶ 263 (Jan. 17, 2007).
36. See CME Czech Republic B.V. v. Czech Republic, UNCITRAL, Partial Award, (Sept. 13, 2001).
37. Técnicas Medioambientales Tecmed, S,A,v. The United Mexican States, Award, ICSID Case No. ARB (AF)/00/2, Award, ¶ 155 (May 29, 2003).
38. Id. at ¶ 154.
39. Id.
40. Id. at ¶ 173.
41. Aid Barriers, supra note 10, at 14.
42. Id.
43. Eastern Sugar B.V. v. The Czech Republic, UNCITRAL SCC No. 088/2004, ¶ 337 (March 27, 2007).
44. Nigel Blackaby, et al., Redfern and Hunter On International Arbitration 8.124-8 (6th ed. 2015).
45. Id.
46. Id. at 28-19.
47. Nick Gallus and Luke Eric Peterson, International Investment Treaty Protection of NGOs, 2(4) Arb. Int’l 527, 531-32 (2006).
48. Convention on the Settlement of Investment Disputes Between States and Nationals of Other States, art. 54, Oct. 14, 1966.
49. Id. at art. 53(1).
50. Id. at art. 25.
51. Norway Model BIT, Draft version 191207, Article 2(i), http://investmentpolicyhub.unctad.org/Download/TreatyFile/2873.
52. Comments on the Model for Future Investment Agreements, English Translation, (December 19, 2007) http://www.uio.no/studier/emner/jus/jus/JUR5850/tekster/norway_draft_model_bit_comments.pdf.
53. Id.
54. Grants, Government.no (July 27, 2013) https://www.regjeringen.no/en/dep/ud/grants/id620650/.
55. Treaty Between the United States of America and the Republic of Kazakhstan Concerning the Encouragement and Reciprocal Protection of Investment, art. 1(b) (January 12, 1994). See also Treaty Between the United States and the Republic of Kyrgyzstan Concerning the Encouragement and Reciprocal Protection of Investment, art. 1(b) (January 12, 1994). This BIT uses the exact language cited above from the BIT with Kazakhstan
56. Agreement between the Swiss Confederation and the Arab Republic of Egypt on the Promotion and Reciprocal Protection of Investments (June 7, 2010).
57. Fedax v. Republic of Venezuela, ICSID Case No. ARB/96/3, Decision of the Tribunal on Objections to Jurisdiction, ¶ 43 (July 11, 1997).
58. Salini Costruttori SpA and Italstrade SpA v Kingdom of Morocco), ICSID Case No. 00/4, Decision on Jurisdiction, ¶ ¶ 51-58 (July 23, 2001).
59. W. Michael Reisman and Anna Vinnik, What Constitutes an Investment and Who Decides? in Contemprary Issues in International Arbitration and Mediation The Fordham Papers 50 (Arthur Rovine and Martinus Nijhoff eds., 2010).
60. See also Joy Mining Machinery Limited v. The Arab Republic of Egypt, ICSID Case No. ARB/03/11, Award on Jurisdiction (August 6, 2004). The tribunal refused jurisdiction because one Salini criterion, a substantial risk, was not established.
61. Malaysian Historical Salvors SDN, BHD v. The Government of Malaysia, ICSID Case No. ARB/05/10, Award on Jurisdiction, ¶ 146 (May 17, 2007).
62. Id. at ¶ 143.
63. Malaysian Historical Salvors SDN, BHD v. The Government of Malaysia, ICSID Case No. ARB/05/10, Decision on the Application of Annulment, ¶ 74 (April 16, 2009).
64. Guillermo Aguilar Alvarez & W. Michael Reisman, How Well Are Investment Awards Reasoned? in The Reasons Requirement in International Investment Arbitration: Critical Case Studies 1-32 (2008).
65. See Patrick Mitchell v. Democratic Republic of Congo, ICSID Case No. ARB/99/7, Decision in Annulment, ¶¶ 39-41 (Nov. 1, 2006).
66. See Saipem v. Bangladesh, ICSID Case No. ARB/05/7, Decision on Jurisdiction and Recommendation on Provisional Measures, ¶¶ 99-100, (March 21, 2007). The tribunal used the Salini criteria to evaluate whether or not the cause of the commercial arbitration case was an investment, and then held that the award resulting from that arbitral claim also constituted an award.
67. Biwater Gauff (tanz.), Ltd. v. United Republic of Tanzania, ICSID Case No. ARB/05/22, Award, ¶ 318 (July 24, 2008).
68. Inmaris Perestroika Sailing Maritime Services GMBH and Others v. Ukraine, ICSID Case No. ARB/08/8, Decision on Jurisdiction, ¶ 129 (Mar. 8, 2010).
69. See generally D. Krishan, “A Notion of ICSID Investment” in Investment Treaty Arbitration: A Debate and Discussion (T. Weiler ed., 2008), https://www.transnational-dispute-management.com/journal-browse-issues-toc.asp?key=26.
70. See generally Julian Mortenson, The Meaning of “Investment”: ICSID’s Travaux and the Domain of International Investment Law, 51 Harv. Int’l L.J. 257. (2010).
71. Id.
72. Inmaris, supra note 70, at ¶ 130.
73. M.C.I. Power Group L.C. and New Turbine, Inc. v. Republic of Ecuador, ICSID Case No. ARB/03/6, Award, ¶¶ 159-60 (July 31, 2007).
74. Vienna Convention on the Law of Treaties, art.31(1).

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