Investment disputes are not a rare occurrence in today’s world. With globalization and the growth of international trade, it is becoming increasingly common for investors to invest in foreign countries. However, such investments are often subject to disputes that require resolution through international arbitration. In this context, two international organizations, namely, the International Centre for Settlement of Investment Disputes (ICSID) and the United Nations Commission on International Trade Law (UNCITRAL), have established arbitration mechanisms to resolve such disputes. One of the primary issues in investment disputes is the question of dual nationality. This article will explore and compare the dual nationality issues between ICSID and UNCITRAL.
DUAL NATIONALITY UNDER ICSID
ICSID is an organization established under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States. It is a specialized organization that provides arbitration services to investors and states. One of the significant benefits of ICSID arbitration is that it allows investors to sue a foreign state directly, thereby avoiding the need to rely on the host country’s courts. This is particularly advantageous for investors who may need more confidence in the host country’s legal system.
One of the critical issues that arise in ICSID arbitration is the question of dual nationality. Article 25 of the ICSID Convention provides that an investor must have the nationality of a contracting state to bring a claim against another contracting state. This means that if an investor has dual nationality, they can only bring a claim if they have the nationality of a contracting state other than the host state. The rationale behind this is that if an investor has the nationality of the host state, they may be considered to have a sufficient connection to that state such that they do not require the protection of their home state. However, there is less scrutiny for a State government to enforce an arbitral award that follows the ICSID rules and procedures. See Dual Nationality Problem In International Investment Arbitration – International Courts & Tribunals – Turkey (mondaq.com)
DUAL NATIONALITY UNDER UNCITRAL
UNCITRAL, on the other hand, is a United Nations organization that provides a framework for international trade and investment. It has developed a set of rules known as the UNCITRAL Arbitration Rules, which are widely used in international arbitration. Unlike ICSID, UNCITRAL does not have a specific treaty or convention governing investment disputes. However, it has established guidelines known as the UNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration. These guidelines provide a framework for transparency in investment arbitration, including the question of dual nationality. See
Under the UNCITRAL Rules on Transparency, dual nationality is not a disqualifying factor for investors bringing claims against states. However, the rules do require investors to disclose any dual nationality they may have, along with any other relevant facts that could give rise to doubts about their independence and impartiality. The rationale behind this is that transparency is essential in investment arbitration, and investors must be seen to be independent and impartial. See Dual nationality – Global Arbitration Review
However, there is more scrutiny for a State government to enforce an award that follows the UNCITRAL procedure.
In conclusion, while ICSID and UNCITRAL provide arbitration mechanisms for investment disputes, they approach the question of dual nationality differently. ICSID requires investors to have the nationality of a contracting state other than the host state to bring a claim. At the same time, UNCITRAL allows investors with dual nationality to bring claims but requires transparency and disclosure. Ultimately, the choice between the two mechanisms will depend on each case’s specific circumstances and the parties’ preferences. Please visit our practice on Investor-State Dispute Settlement for more information International Arbitration Attorney – Transnational Matters