The Application of the Prohibition of Abuse of Process Principle in the Context of Corporate Restructurings Aimed at Obtaining Protection under Investment Treaties: A Critical Review

Arbitral tribunals have long emphasized that it is in principle legitimate for investors to structure their investments with a view to maximizing protection under international investment agreements (IIAs). At the same time, a jurisprudence has developed denying investors the right to invoke the arbitration mechanism in an IIA following a restructuring carried out when a specific dispute was already foreseeable. In such circumstances arbitral tribunals tend to find that the investor’s behaviour constitutes an abuse of process and that they either lack jurisdiction or that the claims are inadmissible as a consequence. The present contribution reviews the historical development of this jurisprudence in search of a rationale for using the foreseeability of a specific dispute as the criterion distinguishing legitimate from abusive investor behaviour. It shows that such a rationale has never been clearly articulated and that several arguments actually speak against making this type of distinction. Under the circumstances, the submission suggests that it will typically be appropriate for arbitral tribunals to exercise restraint when applying the prohibition of abuse of process in the context of corporate restructurings, in accordance with the purpose of the relevant treaties and the subsidiary nature of the principle.