The Level of Substantive Protection Is More Limited
The “most-favored-nation” clause no longer allows investors to claim a breach of this provision due to more favorable treatment accorded to investors in other treaties, absent measures adopted or maintained pursuant to those obligations. Under the fair and equitable treatment provision, legitimate expectations cover only investments that were induced by specific representations by the contracting party. Therefore, general changes in regulatory regime may no longer be covered. The concept of “indirect expropriation” is confined to deprivation of “fundamental attributes of property.” Whether this is the situation requires a case-by-case, fact-based inquiry, using factors such as economic impact of the measures(s), their duration, character, object, and context.
Investor-State Dispute Settlement
With respect to investor-state dispute settlement (“ISDS”), investors may choose to resolve disputes under the International Centre for Settlement of Investment Disputes (“ICSID”) Convention or on the basis of the ICSID Additional Facility Rules and the United Nations Commission on International Trade Law Arbitration Rules. The appointment of arbitrators, however, will be reserved for the Secretary-General of ICSID or for the Secretary-General of the Permanent Court of Arbitration, depending upon which rules apply.
Compensation in the Case of Non-compliance
Arbitrators may limit or deny compensation in the case of an investor’s noncompliance with corporate social responsibility policies. In particular, this applies to the Organization for Economic Cooperation and Development Guidelines for Multinational Enterprises and the United Nations Guiding Principles on Business and Human Rights.
Investors should be aware of prescription periods for the filing of a request or consultations. Claims must be commenced two years after local remedies were exhausted or ceased, or within five years of the date on which the investor first acquired or should have acquired knowledge of the infringement and resulting loss.
Sunset Clauses in Existing BITs May No Longer Apply
If a BIT is replaced by a new BIT based on the 2019 Model, such clauses may not be applicable. On one occasion, the Dutch government has already stated a preference for using a replacement, since termination of the existing BIT would trigger a sunset clause entitling investors to a 15-year protection extension.
Three Key Takeaways
- Pure holding companies may no longer qualify for investment protection unless their owners have substantial business activities in the Netherlands.
- Sunset clauses may no longer apply if existing BITs are replaced by new BITs.
- Investors should carefully monitor pending negotiations and evaluate whether current investments need restructuring, with a view to maintaining optimal investment protection and access to ISDS.