Agreements on promotion and protection of investments, national laws, “clean hands” doctrine and other things

The article discusses the consequences of investor’s non-compliance with the host state’s laws for the applicability of the bilateral investment treaties as well as for the admissibility of the investor’s claims. The analysis begins by questioning whether an investment exists at all if the national law in the host state invalidates the underlying rights (contractual or not). The article suggests that the clause “in accordance with the law” sets out a criterion of a protected investment. Among all possible interpretations of this clause (ranging from requiring compliance with only the most fundamental provisions of the national law of the host state, or with the law specifically setting out regime for foreign investments, to compliance with every provision of national law, except the most insignificant ones), the latter proves to be the most appropriate. In any case, the criterion extends only to violations of national law that occur at the time of making an investment: subsequent violations do not deprive the investment of the protected status. Violation of the most fundamental and generally recognized rules of national law, such as corruption or involvement in other criminal activities, may make the claim inadmissible. Practice of investment treaty tribunals after the YUKOS case demonstrates that arbitrators recognize applicability of the ‘clean hands’ doctrine.

About the author: Sergey Usoskin – Ph.D. Candidate, International Law Department at the Lomonosov Moscow State University Faculty of Laws; Attorney, Double Bridge Law.

Citation: Usoskin S. (2016) Soglasheniya o pooshchrenii i zashchite investitsiy i natsional'noe zakonodatelstvo: o chistykh rukakh i ne tol'ko [Agreements on promotion and protection of investments, national laws, “clean hands” doctrine and other things]. Mezhdunarodnoe pravosudie, no.1, pp.104–112. (In Russian).