An Analysis of Abuse of Process through Corporate Restructuring in International Investment Disputes under the ICSID Convention

Document Type : Research Paper

Authors

1 . Assistant Prof., Department of Law, Kho.C., Islamic Azad University, Khomeinishahr, Iran

2 . PhD Student Of Private Law, Najafabad Branch, Islamic Azad University, Najafabad, Iran

Abstract

Introduction
Bilateral investment treaties are designed to foster mutual economic cooperation and protect foreign investments. However, these treaties are sometimes exploited by investors—whether individuals or corporations—who are not originally entitled to their protections. One prominent method of such exploitation is corporate restructuring, undertaken specifically to gain access to treaty benefits. The ICSID Arbitration Tribunal has encountered multiple cases involving such tactics and has, in several decisions, emphasized its unwillingness to entertain jurisdiction where it finds an abuse of process. Such practices undermine the core objectives of the ICSID Convention, particularly the promotion of genuine international investment and sustainable development in host countries. This paper seeks to provide a detailed legal analysis of process abuse, especially through corporate restructuring. It evaluates the criteria used by ICSID tribunals to identify and respond to such abuse and aims to shed light on how international legal mechanisms can preserve the integrity of investment arbitration. 




An Analysis of Abuse of Process through Corporate Restructuring …




Methods
This study employs both doctrinal (library-based) research and qualitative analysis using questionnaires. First, the legal concept of abuse of process is explained and distinguished from the closely related concept of abuse of rights. The paper then examines how abuse of process can be realized through corporate restructuring and reviews legal responses to this issue. Finally, the role of good faith and other key legal principles in preventing abuse is assessed, providing insight into how tribunals evaluate such cases and maintain fairness in international investment arbitration.
 
Findings
Through detailed analysis, the paper finds that corporate restructuring carried out with the sole purpose of accessing treaty protection constitutes a violation of the international principle of good faith. Such actions are often viewed as circumventing the legitimate objectives of BITs, which include encouraging foreign investment, ensuring fair treatment of investors, and contributing to the economic development of host states. ICSID tribunals, aligning with scholarly views and arbitral precedents, have consistently refused to recognize jurisdiction in cases where claimants restructure merely to benefit from treaty protections they were not originally entitled to. These tribunals have identified specific jurisdictional criteria—personal jurisdiction, temporal jurisdiction, subject matter jurisdiction, and consent—which must all be satisfied for a claim to proceed. When claimants fail to meet even one of these criteria, particularly in situations involving strategic restructuring close to the emergence of a dispute, their claims are typically dismissed. This has led to a growing body of case law supporting host states' objections based on abuse of process.
 
Conclusion
In light of the absence of a clear definition of "investment" under Article 25 of the ICSID Convention, tribunals have relied on rigorous analysis of jurisdictional requirements and the overarching principle of good faith to safeguard the legitimacy of the arbitration process. The consistent application of these standards serves to deter opportunistic behavior by investors and to prevent the manipulation of BIT provisions through bad-faith restructuring. The findings of this study underscore the importance of upholding procedural integrity and ensuring that ICSID proceedings are not misused. By doing so, the system can better serve its original purpose—protecting legitimate investors while supporting fair and sustainable international investment practices.

Keywords

Main Subjects

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