Investment Treaty Arbitration: Germany

Afghanistan (12 October 2007)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Albania (18 August 1995)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Algeria (30 May 2002)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Angola (1 March 2007)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Antigua and Barbuda (28 February 2001)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Argentina (8 November 1993)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Armenia (8 November 1993)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Azerbaijan (29 July 1998)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Bahrain (27 May 2010)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Bangladesh (14 September 1986)

Yes

Yes

Yes

Yes

Yes

No

No

No

Barbados (11 May 2002)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Benin (18 July 1985)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Bosnia and Herzegovina (11 November 2007)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Botswana (6 August 2007)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Brunei Darussalam (15 June 2004)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Belarus (23 September 1996)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Burkina Faso (21 November 2009)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Burundi (9 December 1987)

Yes

Yes

Yes

Yes

Yes

No

No

No

Cambodia (14 April 2002)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Cameroon (21 November 1963)

Yes

Yes

Yes

Yes

Yes

No

No

No

Cape Verde (15 December 1993)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Central African Republic (21 January 1968)

Yes

Yes

Yes

Yes

Yes

No

No

No

Chad (23 November 1968)

Yes

Yes

Yes

Yes

Yes

No

No

No

Chile (8 May 1999)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

China (11 November 2005)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Congo, Democratic Republic of (22 July 1971)

Yes

Yes

Yes

Yes

Yes

No

No

No

Republic of the Congo (14 October 1967)

Yes

Yes

Yes

Yes

Yes

No

No

No

Costa Rica (24 April 1998)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Cote d’Ivoire (10 June 1968)

Yes

Yes

Yes

Yes

Yes

No

No

No

Cuba (22 November 1998)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Dominica (11 May 1986)

Yes

Yes

Yes

Yes

Yes

No

No

No

Egypt (22 November 2009)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

El Salvador (15 April 2001)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Ethiopia (4 May 2006)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Gabon (4 July 2007)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Georgia (27 September 1998)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Ghana (23 November 1998)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Guatemala (29 October 2006)

No

Yes

Yes

Yes

Yes

No

No

Guinea (14 August 2014)

Yes

Yes

Yes

Yes

Yes

6 month

Yes

Yes

Guyana (6 December 1989 provisionally)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Haiti (1 December 1975)

Yes

Yes

Yes

Yes

Yes

No

No

No

Honduras (27 May 1998)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Hong Kong, China (19 February 1998)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Iran, Islamic Republic (23 June 2005)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Jamaica (29 May 1996)

Yes

Yes

Yes

Yes

Yes

12 months

No

Yes

Jordan (28 August 2010)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Kazakhstan (10 May 1995)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Kyrgyzstan (16 April 2006)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Kenya (7 December 2000)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Korea (15 January 1967)

Yes

Yes

Yes

Yes

Yes

No

No

No

Kuwait (15 November 1997)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Lao People’s Democratic Republic (24 March 1999)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Lebanon (25 March 1999)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Lesotho (17 August 1985)

Yes

Yes

Yes

Yes

Yes

No

No

No

Liberia (22 October 1967)

Yes

Yes

Yes

Yes

Yes

No

No

No

Macedonia (17 September 2000)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Madagascar (17 October 2005)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Malaysia (6 July 1963)

Yes

Yes

Yes

Yes

Yes

No

No

No

Mali (28 June 1977provisionally)

Yes

Yes

Yes

Yes

Yes

No

No

No

Mauritania (26 April 1986)

Yes

Yes

Yes

Yes

Yes

No

No

No

Mauritius (27 August 1973)

Yes

Yes

Yes

Yes

Yes

No

No

No

Mexico (23 February 2001)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Moldova (15 June 2006)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Mongolia (23 June 1996)

Yes

Yes

Yes

Yes

Yes

Yes

No

Yes

Morocco (12 April 2008)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Mozambique (15 September 2007)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Namibia (21 December 1997)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Nepal (7 July 1988)

Yes

Yes

Yes

Yes

Yes

3 months

No

Yes

Nicaragua (19 January 2001)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Niger (10 January 1966)

Yes

Yes

Yes

Yes

Yes

No

No

No

Nigeria (20 September 2007)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Oman (4 April 2010)

Yes

Yes

Yes

Yes

Yes

3 months

Yes

Yes

Pakistan (28 April 1962)

No

Yes

Yes

No

Yes

No

No

No

Panama (10 March 1989)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Papua New Guinea (3 November 1983)

Yes

Yes

Yes

Yes

Yes

No

No

No

Paraguay (3 July 1998)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Peru (1 May 1997)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Philippines (1 February 2000)

Yes

Yes

No

Yes

Yes

6 months

Yes

Yes

Qatar (19 January 1999)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Rwanda (28 February 1969)

Yes

Yes

Yes

Yes

Yes

No

No

No

Saint Lucia (22 July 1987)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Saint Vincent (8 January 1989)

Yes

Yes

Yes

Yes

Yes

No

No

No

Saudi Arabia (9 January 1999)

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Senegal (16 January 1966)

Yes

Yes

Yes

Yes

Yes

No

No

No

Sierra Leone (10 December 1966)

Yes

Yes

Yes

Yes

Yes

No

No

No

Singapore (3 October 1973 provisionally)

Yes

Yes

Yes

Yes

Yes

No

No

No

Somalia (15 February 1985)

Yes

Yes

Yes

Yes

Yes

No

No

No

South Africa (10 April 1998)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Sri Lanka (16 January 2004)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Sudan (24 November 1967)

Yes

Yes

Yes

Yes

Yes

No

No

No

Swaziland (7 August 1995)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Syrian Arab Republic (20 April 1980)

Yes

Yes

Yes

Yes

Yes

No

No

No

Tajikistan (25 May 2006)

Yes

Yes

Yes

Yes

Yes

Yes

No

Yes

Tanzania, United Republic of (12 July 1968)

Yes

Yes

Yes

Yes

Yes

No

No

No

Thailand (20 October 2004)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Togo (21 December 1964)

Yes

Yes

Yes

Yes

Yes

No

No

No

Trinidad and Tobago (17 April 2010)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Tunisia (6 February 1966)

Yes

Yes

Yes

Yes

Yes

No

No

No

Turkey (5 December 1965)

Yes

Yes

Yes

Yes

Yes

No

No

No

Turkmenistan (19 February 2001)

Yes

Yes

Yes

Yes

Yes

Yes

No

Yes

Uganda (19 August 1968)

Yes

Yes

Yes

Yes

Yes

No

No

No

Ukraine (29 June 1996)

Yes

Yes

Yes

Yes

Yes

Yes

No

Yes

United Arab Emirates (2 July 1999)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Uruguay (29 June 1990)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Russian Federation (5 August 1991)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Venezuela (16 October 1998)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Vietnam (19 September 1998)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Yemen (28 March 2008)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Yugoslavia (ie, still applicable to Serbia, Montenegro and Kosovo) (25 October 1990)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Zambia (25 Aug 1972)

Yes

Yes

Yes

Yes

Yes

No

No

No

Zimbabwe (14 Apr 2000)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Energy Charter Treaty

Yes

Yes

Yes

Yes

Yes

3 months

Yes

Yes

Approach to definition of investors

As a matter of treaty drafting techniques used in the majority of German investment treaties (including the 1991, 1998 and 2008 versions of the German Model BIT), the drafters mostly chose to have a split definition of ‘investor’ in the treaties. In particular, most German investment treaties contain two separate definitions of investor: one definition for legal entities and individuals from Germany, and the second definition for legal entities and individuals from the other contracting state (eg, Germany–Bahrain, Germany–Cambodia BITs). The main reason for this split is a particularity arising from EU law pursuant to which EU nationals who, within the context of freedom of establishment under EU law, are established in Germany must be treated like German nationals.

Types of legal entities

German investment treaties generally employ broad definitions of legal entities that qualify as investors using umbrella terms like ‘any juridical person’ or ‘any legal entity’. Most German investment treaties also expressly confer the status of investor on German entities that do not possess legal personality.

In that context, the tribunal in JSW Solar and Wirtgen v Czech Republic found that a German Kommanditgesellschaft qualified as an investor under relevant BIT even though under German law this type of entity did not possess distinct legal personality.

Similarly to the criterion of ‘legal personality’, many German investment treaties expressly provide that a German entity would qualify as an investor even if its activities are not directed at profit, as well as regardless of whether the entity’s founders bear limited or unlimited liability.

Nationality of legal entities

The most common criterion used in German investment treaties to establish German nationality of legal entities is the ‘seat’ in Germany. This approach is reminiscent of the widespread treaty practice of other civil law jurisdictions in Europe that also use the requirement of ‘seat’ (sometimes in conjunction with other criteria) to determine the nationality of a legal entity (eg, France and Spain).

At the same time, most German investment treaties do not list specific criteria that the term ‘seat’ encompasses, nor do they usually contain an express renvoi to German law to determine that term’s meaning. This leaves open a debate on whether the requirement of ‘seat’ requires a closer connection to a jurisdiction rather than mere incorporation in it.

The tribunal in AMF Aircraftleasing v Czech Republic interpreted the term ‘seat’ as referring to an effective place of management and central administration of a company’s business activities. In the tribunal’s view, unless the relevant treaty contained a specific reference to domestic law for the purpose of interpretation of the term ‘seat’, that term had to be interpreted autonomously under international law.

As for the criteria of nationality used for legal entities from the other contracting states German investment treaties employ a plethora of different approaches, ranging from mere incorporation to more substantive tests, such as place of business, place of management, place where the economic activity of the entity is conducted, etc.

For example, the Germany–Bahrain BIT requires legal entities to have their head office in Bahrain to qualify as Bahraini investors; the Germany–Jordan BIT requires legal entities incorporated in Jordan to also conduct ‘effective economic activity’ there; the Germany–Namibia BIT requires Namibian companies to be beneficially controlled by Namibian nationals and have their principal place of business in that country. In turn, the Germany–Singapore BIT excludes from its scope legal entities that, among others, have their ‘seat’ in any third state.

State entities

Notably, some German investment treaties also expressly address the question of whether state or state agencies may qualify as investors.  In particular, the Germany–Qatar BIT lists the government of Qatar as a protected investor under BIT; the Germany–UAE BIT also lists the government of UAE acting directly or indirectly through its financial institutions, development funds, agencies or similar institutions as a type of investor. In turn, the Germany–Panama BIT excludes Panama’s state-owned entities from the scope of protected investors.

Individuals

The majority of German investment treaties determine nationality of individuals – investors from each state with reference to the respective domestic legislation.

A number of German investment treaties require individuals to have actual residence in the relevant state to enjoy protection under the respective treaty. In particular, the Germany–Bosnia and Herzegovina BIT requires Bosnian nationals to also have permanent residence in Bosnia to qualify as investors under the treaty.

Another example is Germany’s investment treaty with the former Yugoslavia, which confers status of a German investor on individuals having domicile (Wohnsitz) in Germany. In turn, the Germany–Russia BIT (ie, the former Germany–USSR BIT) requires individuals from either state to hold permanent residence (ständiger Wohnsitz) in the respective state.

In general, German investment treaties do not address dual nationality or the situations where a national of one contracting state also holds permanent residence in the other contracting state. There are notable exceptions though, such as the Protocol to the Germany–Costa Rica BIT, which provides that German nationals who have permanently resided for over 10 years in Costa Rica should be denied protection under the treaty.

Faced with the issue of allegedly conflicting residences of an investor, the tribunal in Binder v Czech Republic concluded that the term ‘residence’ had to be interpreted autonomously under international law. The tribunal’s understanding of place of ‘residence’ in that case was the state to which investor had ‘strong attachment’, in particular private and family life rather than professional and commercial activities.

Types of assets

German investment treaties generally define ‘investments’ broadly as ‘every kind of asset’ and provide a non-exhaustive list of forms of investments that expressly enjoy protection under the relevant treaty. In line with the global treaty practice, that list is usually grouped into several asset classes, in particular (i) movable and immovable property, as well as property rights (mortgages, liens, pledges, etc); (ii) shares and other forms of interest in companies; (iii) claims to money or other performance having an economic value;  (iv) intellectual property (copyrights, patents, utility designs, trademarks, goodwill, etc); (v) public rights and concessions (eg, rights to exploration and extraction of natural resources).

The precise language used to define each specific category of assets in the definition of ‘investment’ varies from treaty to treaty.

For instance, the Germany–Afghanistan BIT provides that in order to qualify as ‘investment’, claims to money must have been used to ‘create an economic value’, while claims to performance having an economic value must arise ‘under contract or by concession’.

In turn, the Germany–China BIT requires that claims to money or economic performance must be ‘associated with an investment’.

The Germany–Hong-Kong BIT expressly lists ‘minority participation’ in a company as a form of investment, whereas the Germany–Yemen BIT lists among the permissible investments other rights ‘given by law, by contract or by decision of the authority’ in accordance with the host state’s legislation.

Compliance with host state’s legislation

A significant body of German investment treaties contain a requirement that in order to enjoy protection under the respective treaty, investments must be made in accordance with the host state’s laws and regulations. Examples include the Germany–Philippines BIT, the Germany–Kuwait BIT and the Germany–Bahrain BIT.

Indirect investments

A number of German investment treaties expressly specify that both direct and indirect investments state enjoy treaty protection. Examples include the Germany–China BIT, the Germany–Iran BIT and the Germany–Jordan BIT. The Germany–Iran BIT also contains a definition of ‘indirect’ investments – investments made through a company having its seat in the territory of the other contracting state, which is fully or partially owned by the investor. The 2008 version of Germany’s Model BIT also touches upon the definition of ‘indirect’ investments, specifying that ‘indirect’ investments mean investments, which the investor implements via a company situated in the other contracting state.

Modification of the form of investment

Most German investment treaties contain provisions establishing that the alteration of the form of the assets invested by investors occurring after making of the investment do not affect their classification under the treaty as protected ‘investments’.

Several treaties (eg, the Germany–Tanzania BIT and the Germany–Qatar BIT) also provide that such alteration must not be in conflict with the legislation of the host country or previously issued approvals.

Prior authorization and excluded assets

Several German investment treaties specify that in certain cases, securing a relevant approval for investment is necessary to extend the treaty protection to such investments (eg, the Germany–Haiti BIT and the Germany–Mali BIT). Such provisions generally apply to investments made by German investors in the territory of the other contracting state.

The specific language of this requirement varies from treaty to treaty. For instance, the Germany–Mali BIT specifies that only those investments that ‘received written approval in accordance with the laws and regulations [on] foreign investments’ qualify as ‘investments’ under the treaty, whereas the Germany–Singapore BIT states that the treaty extends to investments made in Singapore and ‘approved in writing’ by Singapore’s government.

A number of German investment treaties contain express restrictions on specific categories of assets that would be considered as investments.

For instance, the Germany–Mexico BIT expressly excludes certain sale and financial contracts with a duration of less than three years from the scope of protected investments and envisages specific criteria where such transactions would otherwise qualify as protected ‘investments’ (eg, longer duration, purpose, risk, etc).

Another example is the Germany–Liberia BIT, which excludes land assets in Liberia from the scope of protected investments. Similarly, the Germany–Oman BIT excludes ‘ownership of land and real estate’ in Oman from the scope of the treaty’s provisions on national treatment and most-favoured nation treatment.

FET standard

Most German investment treaties explicitly provide for an obligation of contracting states to treat investors fairly and equitably.

At the same time, German investment treaties generally do not list specific duties that states might owe to investors under the rubric of fair and equitable treatment, such as prohibition of denial of justice, effective means of protection of rights, etc.

In some treaties, the obligation of fair and equitable treatment is grouped together with the obligation of protection and security (eg, the Germany–Nigeria BIT).

FET and minimum standard

Most German investment treaties do not expressly address the relationship between fair and equitable treatment standard and the minimum standard under customary international law. At the same time, the Germany–Qatar BIT deviates from this practice and specifies that the states should accord investments fair and equitable treatment ‘in accordance with the principles of international law’.

Direct and indirect expropriation

Some German investment treaties (in particular, older BITs) specifically define what is understood by ‘expropriation’ in the treaty. For instance, the Germany–Sierra Leone BIT defines ‘expropriation’ as the ‘taking away or restricting of any property right which in itself or in conjunction with other rights constitutes an investment’. Many BITs also employ the term ‘nationalisation’ alongside ‘expropriation’ in the context of taking of investments by states (eg, the Germany–Nepal BIT).

Several BITs expressly state that investors enjoy protection from both direct and ‘indirect’ expropriation (eg, the Germany–Afghanistan BIT and the Germany–Angola BIT). The same formulations are used in the 1998 and 2008 versions of German Model BITs. At the same time, the majority of German investment treaties provide that investments should not be subjected to other measures, the effect of which would be tantamount to expropriation (eg, the Germany–Barbados BIT and the Germany–Kenya BIT).

Several German investment treaties also describe in more detail what form ‘expropriation’ may take when applied to investments in the form of shares in companies. For instance, the Germany–Saint Vincent and Grenadines BIT states that expropriation covers situations where the economic substance of a company in which an investment was made is severely impaired. By the same token, the Germany–Russia BIT provides that expropriation also occurs where state measures adversely impact the economic activity of the company invested in, provided such impact causes substantial harm to the investment.

Criteria for lawful expropriation

The majority of German investment treaties set forward three principal requirement for lawful expropriation: (i) expropriation must be conducted for public benefit, (ii) expropriation must be followed by compensation and (iii) the expropriating state must ensure the possibility for an investor to have the legality of the expropriation and the amount of compensation reviewed in accordance with the principle of due process (eg, Germany–Afghanistan BIT and Germany–Egypt BIT, see also German Model BIT 2008).

The precise formulation of the ‘public benefit’ requirement varies from treaty to treaty; it is sometimes referred to as ‘public utility’ (eg, the Germany–Guinea BIT) or ‘general good’ (eg, the Germany–Mozambique BIT).

Similarly, the specific formulation of the ‘due process’ requirement varies in different treaties. For instance, the Germany–Tanzania BIT requires that expropriation should be subject to ‘review by due process of law’ (see also German Model BIT 2008), the Germany–Guinea BIT in turn requires that expropriation must be capable of being ‘verified by ordinary proceedings’. The Germany–Kuwait BIT requires that expropriation be conducted ‘in accordance with domestic laws of general application’.

Compensation standard

Most German investment treaties focus on the following aspects of compensation for expropriated investments:

• the amount of compensation should correspond to the value of the investment before the expropriation occurs or is announced;
• compensation must be paid without delay and must be freely transferable;
• the state should take steps to determine the amount of compensation and pay it before or on the date of expropriation.

This approach is expressly followed in 1991, 1998 and 2008 versions of the German Model BIT. Some German investment treaties in their text also expressly incorporate the Hull formula of ‘prompt, adequate and just’ compensation (eg, the Germany–Kuwait BIT).

Several treaties contain different wording when it comes to valuation standards for the purpose of compensation, eg, the Germany–Bosnia and Herzegovina BIT requires that the compensation correspond to the ‘market value’ of the investment; the Germany–Liberia BIT refers in this context to ‘fair value’, while other treaties refer simply to ‘value’ (eg, the Germany–Kenya BIT) or ‘full value’ (eg, the Germany–Turkey BIT).

The Germany–Kuwait BIT is particularly noticeable as it contains detailed requirements as to the assessment of the value of compensation, referring to ‘recognised principles of valuation’ as well as such valuation and accounting concepts as ‘capital invested’, ‘replacement value’, ‘appreciation’ and ‘current returns’.

Another example is the Germany–Jamaica BIT, which also requires that the assessment of the amount of compensation include all relevant factors, including ‘public knowledge’ about expropriation that may affect the value of the investment.

The requirement that compensation must be ‘realisable’ and ‘transferable’ is also common to many German treaties (eg, the Germany–Oman BIT). The Germany–Tanzania BIT contains an exception to this rule by providing that based on considerations of ‘national reconstruction’, each state may deny the investor the right to transfer compensation out of the country and may demand from the investor that the received compensation is reinvested.

Finally, many German treaties also require that the compensation be provided to the investor ‘without delay’ (eg, the Germany–Nepal BIT), whereas the Germany–Iran BIT also requires the state to compensate any related costs in case of the delay in making compensation for expropriated assets.

Interest on compensation

Many German investment treaties mention that the amount of compensation should factor in relevant interest payable until the investor receives the compensation.

The majority of those treaties refer to the ‘usual bank interest’ (eg, the Germany–Barbados BIT and the Germany–Jamaica BIT), while several treaties contain references to particular benchmark rates such as Euribor (eg, the Germany–Oman BIT) or ‘prevailing commercial rate, however, in no event less than the current LIBOR’ (eg, the Germany–Kuwait BIT).

Full protection and security

The majority of German investment treaties envisage obligations by states to ensure protection and security for investments by investors. The precise language used by investment treaties varies from treaty to treaty. For instance, the Germany–China BIT refers to 'constant protection and security', whereas the Germany–Benin BIT refers to ‘full protection and security in accordance with the principles of international law'.

1. Extent of obligation

The formulation of the obligation to provide “protection and security” in Germany’s investment treaties is not uniform. Most BITs provide for “full protection and security”⁸³, others simply “protection and security”⁸⁴ or “full protection”.⁸⁵ The Germany-Liberia and Germany-Venezuela BITs provide for “full protection and security of the law”.⁸⁶

2. Customary international law

A few treaties specify that the covered investments shall enjoy full protection and security “in accordance with the principles of international law”⁸⁷ or “in accordance with customary international law”.⁸⁸

Sources of commitments

The majority of German investment treaties contain a formulation that the host state should observe any obligations it assumes in connection with investments in its territory made by investors from the other contracting state. Treaties refer in this context to 'obligations' (eg, the Germany–Yemen BIT), 'commitments' (eg, the Germany–Oman BIT) or 'obligation deriving from a written commitment' (eg, the Germany–Ethiopia BIT) undertaken by states towards the investors.

In the majority of cases, German investment treaties are silent on the form in which such obligations can be assumed by the state, however there are some exceptions. In particular, the Germany–Nepal BIT refers to obligations entered into by the state 'by agreement'; the Germany–Mexico BIT refers to 'obligation in writing'; the Germany–Qatar BIT refers to 'any contractual obligation' and the Germany–Swaziland BIT mentions obligations 'under any agreement'.

Content of commitments

It is rather unusual for German investment treaties to set out specific rules on the contents of obligations protected under umbrella clauses. An exception here is the Germany–Oman BIT, which provides that if the content of a particular obligation assumed by the state towards the investor is different from the rules of the treaty, the terms of the obligation shall prevail to the extent they are more favourable to the investor.

Free transfer

Most German investment treaties contain provisions ensuring free transfer/repatriation of payments in connection with the investment. The types of payments that are usually captured by these provisions include returns on investment, repayment of loans, the proceeds from investment's liquidation or sale, as well as amount of compensation for expropriated investments (eg, the Germany–Jordan BIT and the Germany–Oman BIT). The Germany–Guinea and the Germany–Bahrain BIT, for instance, also extend the free transfer provision to the capital and additional financing necessary to maintain investments.

A rather typical requirement for the freedom of transfer obligation that is commonly found in German investment treaties is that such transfers must be allowed 'without delay'. Some treaties such as the Germany–Oman BIT clarify that 'without delay' means the period normally required for transfer formalities, but not exceeding two months since the date of request for such transfer. The Germany–Trinidad and Tobago BIT also separately mentions in the context of freedom of transfer the obligation for states to ensure execution of court cases in civil, administrative and criminal cases through equitable, non-discriminatory and good faith application of their laws.

Most German investment treaties also envisage a scenario where the exchange rate for certain currencies is unavailable, providing that in such scenario, the applicable exchange rate shall be the cross-rate applied by the International Monetary Fund for conversion of relevant currencies into special drawing rights.

Wars and conflicts

Most German investment treaties contain guarantees for the investors that in case of losses suffered as the result of wars, conflicts, revolutions and national emergencies the foreign investors shall receive equal treatment in terms of their right to compensation on par with investors from that state or third states (eg, the Germany–Oman BIT). The general feature of such an obligation is that it usually envisages freedom of transfer of any such compensation in the majority of investment treaties (eg, the Germany–Bahrain BIT).

>Movement of personnel and goods

Another typical feature included in the majority of German investment treaties is the guarantees granted by states concerning the movement of goods and persons in connection with the investment. For instance, the Germany–Tajikistan BIT provides that the states should abstain from hindering movement of goods directly intended for the investment, as well as the goods ordered by the company that is the subject matter of investment in the territory of that state or third states.

Non-impairment

Many German investment treaties contain non-impairment provisions, requiring states not to impair investments by arbitrary or discriminatory measures.

Limitations of state’s obligations

Many German investment treaties contain provisions aimed at limiting the obligations of states under a treaty in connection with measures taken to protect public order, public health or public morals. The majority of these exceptions are mentioned in connection with the national treatment and most-favoured nation treatment obligations (eg, the Germany–Jordan BIT).

Yet, some treaties contain more elaborate provisions limiting states’ obligations for certain actions. For instance, the Germany–Botswana BIT prescribes limitations on the application of the treaty in connection with Botswana's financial assistance programmes aimed at developing local industries to the extent such programmes do not significantly impair investments by German investors. In turn, the Germany–Oman BIT limits Oman's obligations to accord NT and MFN to German investors in connection with 'grants and soft loans in connection with specific development and social programs'.

Denial-of-benefits clauses are not common in German BITs; however, such provisions can be found in some of the multilateral treaties to which Germany is a party, such as article 17(1) of the Energy Charter Treaty.

Fork-in-the-road clauses and parallel proceedings

Some German investment treaties envisage provisions aimed at reducing the risk of parallel proceedings in domestic courts and arbitration. For instance, the Germany–Mexico BIT contains a fork-in-the-road provision barring a German investor who already submitted the matter to arbitration from referring the same matter to Mexico’s domestic courts (and vice versa).

A number of German investment treaties also contain provisions preventing submission of the dispute to arbitration if the domestic court has not reached the judgement in the same case (eg, the Germany–Angola BIT).

Further, some investment treaties prevent the home state of the investor from pursuing diplomatic protection of that investor until proceedings in arbitration were concluded or unless the respondent state failed to comply with the award (eg, the Germany–UAE BIT).

In addition, several German investment treaties also expressly deal with the risk of parallel proceedings in the fora envisaged by the investment treaty and the fora prescribed in the investment contract between the investor and the host state. In particular, the Germany–Mexico BIT provides that a dispute arising from an obligation assumed by the state and protected by the BIT's umbrella clause shall only be settled under the terms of the respective obligation.

In turn, the Germany–Ethiopia BIT provides that if an investor invokes the dispute settlement mechanism envisaged under an investment contract concluded with the host state, the dispute resolution mechanism prescribed in the treaty can only be invoked if the competent body under the investment contract fails to reach the decision within the 18-months term or if such body 'disregards the provisions of the treaty'.

Exhaustion of local remedies

Several German investment treaties contain provisions establishing the requirement of exhaustion of local remedies. For instance, the Germany–Peru BIT and the Germany–Uruguay BIT provide that the dispute between the investor and the host state should first be submitted to the domestic courts of the host state and may only be submitted to arbitration once the domestic courts have reached their decision or if no such decision has been reached within 18 months.

Applicable law

Provisions expressly addressing the matter of the law that the investment tribunal should apply to the substance of the dispute are not very common in German investment treaties, however there are several treaties that do contain such guidance. In particular, the Germany–Argentina BIT and the Germany–Peru BIT provide that the arbitral tribunal should decide the dispute on the basis of the respective investment treaty, other applicable international treaties, domestic law of the host state (including its conflict of law rules) and general principles of international law. The tribunal in Deutsche Telekom v India clarified that the decision which law, domestic or international, governs a specific issue in investment arbitration needs to be determined in each case depending on the nature of the issue.

Cooling-off period

Many German investment treaties contain provisions requiring the investor and the host state to seek an amicable solution to the dispute within some time period (cooling-off period). Examples of such treaties include the Germany–UAE BIT, the Germany–Angola BIT and the Germany–Kuwait BIT. The most often used time period prescribed in German treaties for the cooling-off negotiations is six months.

Federal Ministry for Economic Affairs and Climate Action

Federal Ministry for Economic Affairs and Climate Action

Generally, external counsel are used. To the best of our knowledge, Germany usually does not use a formal public procurement process but it does request offers from several law firms before retaining counsel for its defence against investment treaty claims.

Germany has signed and ratified the Washington Convention. The Convention entered into force for Germany on 18 May 1969. The relevant law passed for the purpose of implementing the Convention in Germany is the Law on the Convention of 18 March 1965 on the

Settlement of Investment Disputes

Between States and Nationals of Other States (Gesetz zu dem Übereinkommen vom 18. März 1965 zur Beilegung von Investitionsstreitigkeiten zwischen Staaten und Angehörigen anderer Staaten (InvStreitÜbkG)).

Germany has ratified the New York Convention on 30 June 1961. The relevant law implementing the Convention in Germany is the Law on the Convention of 10 June 1958 on the Recognition and Enforcement of Foreign Arbitral Awards (Gesetz zu dem Übereinkommen vom 10. Juni 1958 über die Anerkennung und Vollstreckung ausländischer Schiedssprüche).

Non-ICSID arbitrations seated in Germany are governed in the same manner as other arbitrations (ie, by the provisions in Book 10 of Germany’s Code of Civil Procedure).

As of the date of preparation of this guide, Germany has not been a party to an adverse investment treaty award.

Germany historically has maintained a positive attitude to investment arbitration from being a pioneer of bilateral investment treaties (the first bilateral investment treaty was concluded in 1959 between Germany and Pakistan) to having one of the widest networks of bilateral investment treaties up to this date.

German courts are generally supportive of enforcement of investment arbitration awards, as well as of investor-state arbitration proceedings. For instance, in its recent judgment, the Higher Regional Court of Berlin reportedly

Investment guarantee scheme overseen by the Federal Ministry of Economy and Climate Action

Germany's investment guarantee scheme overseen by the Federal Ministry of Economy and Climate Action offers a wide range of foreign investment guarantee options for German investors. The investment guarantees usually cover the capital invested by the investor in a foreign country, but may also extend to the returns on such investments (eg, in the form of interest or dividends). The guarantee scheme generally accepts for coverage investments in the form of equity (whether acquired upon company's creation or purchased from former shareholders), as well as shareholder loans and commercial loans on conditions that are similar to equity investments; investments structured through holding companies; rights under concessions and product sharing agreements, etc.

The requirements posed to the German outward investments that intend to benefit from the German government's investment guarantees include:

• long-term character;
• pursuance of German national interests;
• economic viability and entrepreneurial character;
• positive impact in the host country and Germany; and
• presence of legal instruments bestowing legal protection on such investments (eg, investment treaties or local legislation).

The guarantees scheme can cover the following risks incurred by investors:

• expropriation of investment;breach of contract;
• war risks;
• payment embargoes and moratoriums; and
• capital transfer and currency convertibility risks.

The general period of duration of investment guarantees offered by the German government is 15 years.

• Nordzucker v Poland
• BayWa r.e. Renewable Energy GmbH and BayWa r.e. Asset Holding GmbH v Spain, ICSID (Case No. ARB/15/16)
• Aharon Naftali Biram, Gilatz Spain SL, Redmill Holdings Ltd and Sun-Flower Olmeda GmbH v Kingdom of Spain (ICSID Case No. ARB/16/17)
• Deutsche Bank AG v Democratic Socialist Republic of Sri Lanka (ICSID Case No. ARB/09/2)
• Deutsche Telekom AG v The Republic of India (PCA Case No. 2014-10)
• Adem Dogan v Turkmenistan (ICSID Case No. ARB/09/9)
• ESPF Beteiligungs GmbH, ESPF Nr. 2 Austria Beteiligungs GmbH, and InfraClass Energie 5 GmbH & Co. KG v Italian Republic (ICSID Case No. ARB/16/5)
• HOCHTIEF Aktiengesellschaft v Argentine Republic (ICSID Case No. ARB/07/31)
• Inmaris Perestroika Sailing Maritime Services GmbH and others v Ukraine (ICSID Case No. ARB/08/8)
• Marion Unglaube v.Republic of Costa Rica (ICSID Case No. ARB/08/1)
• RWE Innogy GmbH and RWE Innogy Aersa S.A.U. v Kingdom of Spain (ICSID Case No. ARB/14/34)
• Saar Papier Vertriebs GmbH v. Republic of Poland (I)
• Mr. Franz Sedelmayer v The Russian Federation
• Siemens AG v The Argentine Republic (ICSID Case No. ARB/02/8)
• SolEs Badajoz GmbH v Kingdom of Spain (ICSID Case No. ARB/15/38)
• STEAG GmbH v Kingdom of Spain (ICSID Case No. ARB/15/4)
• The PV Investors v Spain (PCA Case No. 2012-14)
• Bernhard von Pezold and others v. Republic of Zimbabwe (ICSID Case No. ARB/10/15)
• Werner Schneider (Walter Bau Ag) v The Kingdom of Thailand
• A.M.F. Aircraftleasing Meier & Fischer GmbH & Co KG v Czech Republic (PCA Case No. 2017-15)
• Antaris Solar GmbH and Dr. Michael Göde v The Czech Republic (PCA Case No. 2014-01)
• Rupert Joseph Binder v Czech Republic
• Blusun SA. Jean-Pierre Lecorcier and Michael Stein v Italian Republic (ICSID Case No. ARB/14/3)
• Daimler Financial Services AG v Argentine Republic (ICSID Case No. ARB/05/1)
• ECE Projektmanagement International GmbH and Kommanditgesellschaft PANTA Achtungsechzigste Grundstücksgesellschaft mbH & Co v The Czech Republic (PCA Case No. 2010-5)
• Fraport AG Frankfurt Airport Services Worldwide v.Republic of the Philippines (I) (ICSID Case No. ARB/03/25)
• Fraport AG Frankfurt Airport Services Worldwide v Republic of the Philippines (II) (ICSID Case No. ARB/11/12)
• GEA Group Aktiengesellschaft v Ukraine (ICSID Case No. ARB/08/16)
• Gustav F W Hamester GmbH & Co KG v Republic of Ghana (ICSID Case No. ARB/07/24)
• Enrique Heemsen and Jorge Heemsen v. Bolivarian Republic of Venezuela (PCA Case No. 2017-18)
• InterTrade Holding GmbH v The Czech Republic (PCA Case No. 2009-12)
• JSW Solar (zwei) GmbH & Co.KG, Gisela Wirtgen, Jürgen Wirtgen, and Stefan Wirtgen v Czech Republic (PCA Case No. 2014-03)
• Photovoltaik Knopf Betriebs-GmbH v The Czech Republic (PCA Case No. 2014-21)
• Reinhard Hans Unglaube v Republic of Costa Rica (ICSID Case No. ARB/09/20)
• Saar Papier Vertriebs GmbH v Republic of Poland (II)
• Sana Consulting & Management GmbH v The Russian Federation
• ST-AD GmbH v The Republic of Bulgaria (PCA Case No. 2011-06)
• Stadtwerke München GmbH and others v Kingdom of Spain (ICSID Case No. ARB/15/1)
• TRACO Deutsche Travertin Werke GmbH v The Republic of Poland
• Peter Franz Vöcklinghaus v Czech Republic
• Voltaic Network GmbH v The Czech Republic (PCA Case No. 2014-20)
• Wintershall Aktiengesellschaft v Argentine Republic (ICSID Case No. ARB/04/14)

• Mainstream Renewable and others v Germany
• Strabag and others v Germany
• AHG v Iraq
• CIC Renewable and others v Italy
• DCM Energy and others v Spain
• E.ON SE and others v Spain
• El Jaouni v Lebanon
• Encavis and others v Italy
• Fin.Doc and others v Romania
• Ghenia v Libya
• Hamburg Commercial Bank v Italy
• HeidelbergCement and others v Egypt
• Hela Schwarz v China
• Kruck and others v Spain
• KS and TLS Invest v Spain
• Landesbank Baden-Württemberg and others v. Spain
• LSG Building Solutions and others v Romania
• Mihaljevic v Croatia
• Portigon v Spain
• RWE v Netherlands
• Scholz Holding v Morocco
• TS Villalba and others v. Spain
• Unionmatex v Turkmenistan
• Uniper v Netherlands
• VM Solar Jerez and others v Spain

Rudolf Dolzer/Yun-I Kim, Commentaries on Selected Model Investment Treaties (2013), chapter on Germany

Stefan Huber/Christoph Benicke (eds), Linking Private and Public International Law: The Example of Determining Corporate Nationality in Germany’s Investment Treaty Network, Amsterdam Center for International Law, No. 2020-07

Karl-Heinz Böckstiegel, Stefan Kröll, Patricia Nacimento (eds), Arbitration in Germany, The Model Law in Practice, second edition (2015), chapter on Investment Arbitration and the Participation of State Parties in Germany.

See also:

https://www.bmwk.de/Navigation/DE/Service/Investitionsschutzvertraege/investitionsschutzvertraege.html

https://www.bmwk.de/Redaktion/DE/Artikel/Aussenwirtschaft/investitionsschutz.html

https://publishup.uni-potsdam.de/opus4-ubp/frontdoor/deliver/index/docId/540/file/BITSStudie.pdf