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Sovereign Investors as ICSID Claimants: Lessons from the Drafting Documents and the Case Law


By: Dini Sejko


The prominence of state-controlled entities (SCEs) in foreign direct investment (FDI) flows has created multilayer regulatory challenges. The nature of SCEs and geo-economic considerations related to their investments have exacerbated investment-related concerns and, since the global financial crisis and during the global pandemic, triggered

legal reforms. Concurrently, SCEs have increasingly relied on international investment arbitration to solve their disputes.

This Article examines the role of the International Centre for Settlement of Investment Disputes (ICSID) in resolving cases brought by an increasing number of sovereign investors. The Article begins with a linguistic analysis of the ICSID Convention’s relevant provisions, which lack a definitive regulatory position, and then reviews historical

and drafting documents showing the position of some states that participated in the negotiations. Part III uncovers new cases and further examines understudied ones, and introduces a holistic and systematic analytical study of the case law, drawing lessons from

consistencies in the awards. In Part IV, the awards are grouped, focusing on salient issues deriving from the diverse factual and legal elements of the cases. Initially, Part IV focuses on the first ICSID case in which a state-owned enterprise acts as a claimant. The analysis continues with the first application of the Broches test, an examination

of awards in which investors were operating for little or no profit, and a review of awards in which sovereign investors were treated as any other privately owned investor. Last, the Part reviews the particularities of Chinese SCEs in FDI flows and ends with an assessment of the role of sovereign wealth funds and related awards.

A comprehensive evaluation of the case law reveals that European SCEs have massively relied on the ICSID system, in contrast with Chinese SCEs that have made marginal use of it. Part V explains the relevance of the consistent approaches and argues that ICSID tribunals have established a jurisprudence constante in dealing with SCEs that confirms their access as claimants in investor-state disputes. Conversely, Part VI provides innovative approaches and instruments to assess the owner’s role in sovereign investors’ transactions and prevent distortions of the Centre’s jurisdiction. The last Part summarizes the research findings.

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