Passive Investments

Abstract

Passive investments are a phenomenon in investment treaty arbitration. Arbitral jurisprudence is divided over the eligibility of investments represented by claimants who played little or no part in their establishment or nurturing for treaty protection. This note attributes the emergence of passive investments as a category of protected investments to a jurisdictional loophole present in the vast majority of investment treaties. It then considers the extent to which this loophole can be addressed by 'denial of benefits' clauses in applicable treaties, by reading an 'action of investing' jurisdictional condition into applicable treaties, and by the award of nominal damages when a claim arising from a passive investment prevails on the merits. This note concludes that so long as investment treaties continue to hold sway as regulatory tools, passive investments, for better or for worse, are protected investments.