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 before dispute can be submitted to local courts; a further 18 months before dispute can be submitted to international arbitration.

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

Bolivia (9 November 1990)

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

Brazil (-)

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 (only in relation to arbitration)

Yes

Yes

Bulgaria (10 March 1988)

Yes

Yes

Yes

Yes

Yes

No

No

Expropriation amount only

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 before dispute can be submitted to local courts; a further 18 months before dispute can be submitted to international arbitration.

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

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

Croatia (28 September 2000)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Cuba (22 November 1998)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Czech and Slovak Federal Republic (2 August 1992)

Yes

Yes

Yes

Yes

Yes

No

No

No

Dominica (11 May 1986)

Yes

Yes

Yes

Yes

Yes

No

No

No

East Timor (-)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Ecuador (12 February 1999)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

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

Estonia (12 January 1997)

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

Greece (15 July 1963)

No

Yes

Yes

Yes

Yes

No

No

No

Guatemala (29 October 2006)

No

Yes

Yes

Yes

Yes

No

No

Guinea (-)

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

Hungary (7 November 1987)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

India (13 July 1998)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Indonesia (2 June 2007)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Iran, Islamic Republic (23 June 2005)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Israel (-)

Yes

Yes

Yes

Yes

Yes

No

No

No

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

Latvia (9 June 1996)

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

Lithuania (27 June 1997)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Macedonia (17 September 2000)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Madagascar (-)

Yes

Yes

Yes

Yes

Yes

6 months

No

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

Malta (14 December 1975)

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 (1 December 2009)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

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 before dispute can be submitted to local courts; a further 18 months before dispute can be submitted to international arbitration.

Yes

Yes

Philippines (1 February 2000)

Yes

Yes

No

Yes

Yes

6 months

Yes

Yes

Poland (24 February 1991)

Yes

Yes

Yes

Yes

Yes

6 months

No

Expropriation and free transfer of payments only

Portugal (23 April 1982)

Yes

Yes

Yes

Yes

Yes

No

No

No

Qatar (19 January 1999)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Romania (12 December 1998)

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

Slovenia (18 July 1998)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

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 before dispute can be submitted to local courts, 24 months before disputes can be submitted to arbitration

Yes

Yes

Uruguay (29 June 1990)

Yes

Yes

Yes

Yes

Yes

6 months before dispute can be submitted to local courts; a further 18 months before dispute can be submitted to international arbitration.

Yes

Yes

USSR (5 August 1991)

Yes

Yes

Yes

Yes

Yes

6 months

No

Expropriation amount and free transfer of payments only

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 (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

Substantive protections

Procedural rights

BIT contracting party or MIT

Protection and security

Most-favoured-nation (MFN)

Umbrella clause

Cooling-off period

Local courts

Arbitration

Energy Charter Treaty (16 April 1998)

Yes

Yes

Yes

Yes

Yes

3 months

Yes

Yes

1. Nationality of companies

Most German investment treaties contain very broad definitions of qualifying German companies. A typical definition would define a qualifying company as “any juridical person and any trading or other company or association, with or without legal personality, which has its headquarters (or seat) on German territory, regardless of whether or not its business is intended to make a profit.”¹

While some BITs use the “seat” test for defining “investor” in respect of both contracting parties,² many treaties provide for a different definition of the term “investor” of the other contracting state (ie, the state other than Germany). For example, some German BITs require the company from the other contracting state to be merely constituted in the territory of that state.³ Other BITs use the main place of business for determining the nationality of the non-German investor.⁴ Other BITs require that the companies of both contracting parties have their seat and have been constituted (and/or be lawfully existent) in the territory of the contracting party.⁵ In addition to the latter two requirements, the Germany-Belarus BIT requires that the company from Belarus be entitled to make capital investments.⁶ The Germany-Ukraine BIT requires that the Ukrainian company be involved in an “economic activity”;⁷ and the Germany-Georgia BIT defines a Georgian company qualifying as an investor as “any economic subject with seat in the territory of the Republic of Georgia”⁸.

Some treaties require that the company incorporated in the territory of the other contracting party should be directly or indirectly controlled by citizens of that state.⁹ For instance, the Germany-Brunei Darussalam BIT limits the protection to those companies of which nationals of Brunei Darussalam have a “controlling interest”.¹⁰

The definition of the German investor does not normally require the entity to have legal personality,¹¹ whereas the definition of the investors of the other contracting states, in contrast, often does.¹² Other BITs extend the same broad definition of the investor, as applied to German investors, ie, not requiring legal personality and referring only to the seat as the relevant criterion to establish nationality, to the investors of the other contracting party.¹³

2. Nationality of individuals

Most of Germany’s BITs provide that the nationality of a natural person shall be determined by the law of the respective contracting party.¹⁴ The Germany-Poland BIT¹⁵, Germany-USSR BIT¹⁶ and Germany-Yugoslavia BIT¹⁷, in contrast, refer to the “permanent domicile” of the natural person. Many German BITs provide that nationality can be proved by a passport issued by the competent authorities of one contracting party.¹⁸ Some BITs exclude nationals of the home state who have been living in the host state for more than five years unless it can be proven that the investment comes directly from abroad.¹⁹

1. Eligible assets

Most German investment treaties define “investment” in a very broad manner to include “every kind of asset”. The treaties then go routinely on to add that this definition comprises in particular “(a) Movable and immovable property as well as any other rights in rem, such as mortgages, liens and pledges; (b) Shares of companies and other kinds of company interests; (c) Claims to money which has been used to create an economic value or claims to any performance having an economic value; (d) Intellectual property rights, in particular copyrights, patents, utility models, commercial designs and models, trademarks, trade names, trade and company secrets, technical processes and goodwill; (e) Rights arising from public-law treaties, including rights for the prospecting and exploiting of natural resources.”²⁰ Some German BITs set forth further restrictions, requiring, for example, that the asset (i) be held in the territory of that contracting party;²¹ (ii) be an approved investment;²² or (iii) be reported to competent government agencies.²³ Some German BITs stipulate that investments should be made for the purpose of establishing (lasting) economic relations.²⁴ Similarly, the Germany-Mexico BIT requires the asset to be acquired or used in order to achieve an economic objective or other management objectives.²⁵

2. Indirect control of assets

While most German BITs are silent on this issue, a limited number explicitly include assets controlled indirectly, ie, invested by an investor of one contracting party through a company that is fully or partially owned by the investor and having its seat in the territory of the other contracting party.²⁶

3. Exclusion of certain assets

Certain German investment treaties exclude from their scope certain types of assets, such as (i) German governmental debt pursuant to the 1953 Treaty on German External Debts;²⁷ (ii) real estate;²⁸ (iii) commercial transactions;²⁹ and (iv) grants and loans in connection with specific development and social programmes.³⁰

4. Commencement of coverage

Most German investment treaties protect all existing investments, including those made before the entry into force of the BIT,³¹ whereas others protect investments made after a specific date.³² Some treaties expressly provide that they apply only to disputes that arise out of investments made after their entry into force.³³ Similarly, other BITs expressly state that they do not apply to disputes that arose prior to their entry into force.³⁴ The Germany-China BIT provides that standards of national treatment and arbitrary and discriminatory measures do not apply to non-conforming measures existing at the time of entry into force.³⁵

5. Territorial coverage

Some German BITs cover the entire German territory, including the continental shelf and the exclusive economic zone,³⁶ with some BITs making exceptions for air navigation in respect of the Land Berlin.³⁷ Other BITs expressly cover the entire territory under each state’s sovereignty as well as the maritime zones where a state exercises sovereign rights in accordance with international law.³⁸

6. Accordance with local laws

Most German BITs oblige each contracting party to admit investments in accordance with its respective laws.³⁹ Under these treaties there is thus no right for the investor to be admitted into the host country.⁴⁰ Some German BITs provide that as regards investments made in the territory of the other contracting party (ie, not Germany), the treaty shall only apply to investments which have been approved (under specific legislation or for purposes of the treaty).⁴¹

1. Illustrations of the FET standard

Most German investment treaties simply provide that each contracting party shall accord fair and equitable treatment to investments.⁴²

2. Customary international law

One German investment treaty expressly equates the obligation to provide fair and equitable treatment with the international minimum standard.⁴³

1. Right to regulate for a public purpose

All German investment treaties provide protection against expropriation without adequate compensation and for public benefit,⁴⁴ social interest⁴⁵ or public necessity.⁴⁶ The Germany-Ethiopia BIT additionally sets forth the requirement of the absence of discrimination,⁴⁷ and the Germany-Hong Kong BIT requires lawfulness,⁴⁸ whereas the Germany-India, Germany-Kuwait, Germany-Mexico, Germany-Oman and Germany-USSR BITs combine these additional requirements.⁴⁹ The Lebanon BIT requires the expropriation to be accompanied with adequate compensation, for public benefit, non-discriminatory and in accordance with due process.⁵⁰

2. Indirect expropriation

A few German investment treaties expressis verbis protect against direct as well as indirect expropriation.⁵¹ Most German BITs cover measures that are “tantamount to expropriation”.⁵² The Germany-Liberia BIT stipulates that the notion of an expropriation encompasses situations where the government restricts the use or administration of the enterprise to such an extent that it amounts to an outright expropriation.⁵³ Many German BITs expressly provide protection for the existence of a company if the host state interferes with its economic substance in a significant manner.⁵⁴ Finally, numerous treaties also specifically provide for MFN treatment in relation to expropriation matters.⁵⁵

3. Compensation

Most German BITs provide that the compensation shall be equivalent to the investment expropriated, it shall be actually realisable and it shall be freely transferable.⁵⁶ Some BITs state that fair compensation shall mean compensation equal to the value of the expropriated investment at the time of the expropriation⁵⁷ or at the time when the threatened expropriation became publicly known, whichever is earlier.⁵⁸

It is commonplace to find provisions for the payment of interest in German BITs. Some BITs refer to the normal commercial rate of interest.⁵⁹ Other BITs refer to the LIBOR.⁶⁰ The Germany-Israel BIT provides for the payment of interest upon the terms applicable to the nationals of the contracting party effecting the expropriation or nationalisation.⁶¹

Some BITs provide that provisions shall have been made in an appropriate manner at or prior to the time of expropriation for the determination and payment of such compensation.⁶² Most German BITs provide for the (actual) payment of the compensation without (undue) delay.⁶³ Some BITs limit the period of delay to a ceiling of two months.⁶⁴

4. Right to arbitration

Most German BITs provide for broadly worded rights to arbitration covering all matters. The Germany-Bulgaria and Germany-USSR BITs, in contrast, only provide a right to arbitration where the dispute “relates to the amount of compensation payable” as a result of an expropriation of property.⁶⁵

5. Reviewable in courts

Most of Germany’s investment treaties require that the legality of expropriation or similar measures and the amount of compensation shall be reviewable in courts.⁶⁶ The court review does not exclude the right to resort to international arbitration.⁶⁷

6. Expropriation as sovereign power expression

Some German BITs define expropriation as acts of sovereign power.⁶⁸

1. Common limitations

Most German BITs explicitly provide that the provision of MFN and NT does not extend to the benefits of membership of a customs or economic union or a common market or free trade area, nor to taxation treaties or concessions.⁶⁹ Many German BITs provide that MFN and NT provisions do not oblige a contracting state to extend to investors resident in the territory of the other contracting state tax privileges, tax exemptions and tax reductions which according to its tax laws are granted only to investors resident in its territory.⁷⁰

Most German BITs provide that measures that have to be taken for reasons of public security and order, public health or morality shall not be deemed “treatment less favourable”.⁷¹

Some German BITs entitle the contracting parties to set forth specific conditions on the admission of a given investment, notwithstanding the NT and MFN standards.⁷²

The Germany-Lebanon BIT stipulates that measures applied by Lebanon to promote individual investment projects from Arab countries for development purposes are considered compatible with the provisions on national treatment and most-favoured-nation treatment, provided they do not substantially impair the investments and activities of German investors in connection with any investment. (The same applies to investments by Arab investors in real estate.)⁷³

Some BITs exclude the entry, sojourn and activity of an employee from the coverage of the NT and MFN.⁷⁴

The Germany-Portugal BIT states that restrictions on the access to medium and long-term loans are not inconsistent with the MFN and NT standards.⁷⁵

2. Scope

Generally, the MFN and NT protections guaranteed by German BITs apply to “investments” and “investors” as regards their administration, utilisation, usage and enjoyment of their investment. Some BITs extend the application of both standards to “activities associated with such investments”.⁷⁶

3. Limitation on national treatment (only)

While some German investment treaties do not contain an NT standard at all,⁷⁷ other German BITs have a reciprocity clause in relation to NT. For example, the Germany-Mauritius BIT states that national treatment shall be granted “in consideration of the fact that NT in like matters is also granted by the other contracting party”.⁷⁸ These treaties were all concluded prior to the mid-1970s.

Further specific exclusions can be found occasionally. For example, the Germany-Swaziland BIT specifically allows policies “of preferential employments of own nationals of either Contracting Party”.⁷⁹ Similarly, the Germany-Congo BIT provides that Congo is entitled to provide preferential credits or tax advantages to its nationals, in spite of the national treatment provision, to correct factual injustices, to the extent that those measures do not damage competition.⁸⁰ Other German BITs provide that special measures taken by the contracting party other than Germany to develop local industries are not covered by NT and MFN, provided those measures do not substantially impair investments of German investors.⁸¹

4. Limitations on “most-favoured-nation” standard (only)

The Germany-South Africa BIT provides that promoting domestic not-profit development organisations with foreign shareholdings does not fall within the scope of MFN treatment.⁸²

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

1. Scope

All of Germany’s investment treaties contain an umbrella clause.

2. Qualification of the obligation

Certain BITs provide that the disputes arising from other obligations the state has entered into in writing should only be redressed under the terms and conditions of the contracts underlying the obligations.⁸⁹ Similarly, the Germany-Pakistan BITspecifies that if a contract between an investor and a contracting state provides a dispute resolution mechanism, the investor can invoke only that dispute resolution mechanism concerning the issues arising under that contract. However, with regard to issues arising under the umbrella clause, the investor is entitled to use the dispute settlement procedures provided in the BIT.⁹⁰

Most German BITs provide that the contracting parties shall respect, observe or comply with “all commitments, obligations it has entered into or assumed with regard to the investment.”⁹¹ A limited number of German BITs, by contrast, provide only for the protection of those obligations that the contracting party may have entered into “with regard to investments in its territory by agreement”.⁹² Similarly, the Germany-Israel BIT’s umbrella clause refers to the “other obligations that it may have incurred by virtue of any investment agreement”.⁹³

1. Free transfer of payments

Although the expression of the right is not uniform, all German investment treaties contain a provision that requires the contracting parties to permit investors freely to transfer investments, investment returns and the proceeds from liquidation.

Many treaties further stipulate that the transfers shall be made “without delay”.⁹⁴ The term “without delay” is defined in many protocols as two months, commencing on the date on which the relevant request has been forwarded to the competent authorities;⁹⁵ in the case of the Germany-Thailand BIT, by contrast, the maximum transfer period is two months.⁹⁶

Restrictions can be found in several treaties. For example, the Germany-Senegal BIT states that the free transfer guarantee applies only to investments whose particular importance for the economic development has been specifically recognised by the host state.⁹⁷ Certain BITs provide that in the event of exceptional balance of payments difficulties, the transfer of the proceeds from liquidation may be restricted.⁹⁸ Sometimes the latter exception is granted only to the contracting state other than Germany.⁹⁹ The Germany-Portugal BIT provides that if money is temporarily withheld, the investor is entitled to interest.¹⁰⁰

Most German BITs further provide that the rate of exchange of currency should be in accordance with the regulations of the International Monetary Fund,¹⁰¹ failing which some BITs provide for the application of the exchange rate of the contracting party in whose territory the investment is situated.¹⁰²

3. Non-impairment

Most of Germany’s BITs impose upon the contracting parties an obligation not to impair the management, maintenance, use, enjoyment or disposal of investments through arbitrary or discriminatory measures.¹⁰³

4. Armed conflict/civil unrest

Most German investment treaties protect investors against the risk of war and internal armed conflicts. Specifically, most treaties state that covered investors whose investments suffer losses owing to war or other armed conflict shall be accorded national treatment and most-favoured-nation treatment with regard to compensation paid to other investors.¹⁰⁴

Some BITs stipulate that in case of a conflict between the two contracting parties, the provisions of the BIT shall remain in force, “without prejudice to the right of taking such temporary measures as are permitted under the general rules of international law”.¹⁰⁵ Similarly, a number of Germany’s investment treaties specify that the BIT will remain in force irrespective of whether consular or diplomatic relations exist between the contracting parties.¹⁰⁶

1. Fork-in-the-road

The Germany-China BIT provides that if the issue that has been brought to Chinese courts, an arbitration may be initiated only as long as the matter can be withdrawn by the investor in accordance with Chinese law.¹⁰⁷ The Germany-Mexico BIT and Germany-Paraguay BIT provide that if a national or company of a contracting state submits a dispute to arbitration, neither he nor his investment that is an enterprise may initiate or continue proceedings before a national tribunal.¹⁰⁸

2. Res judicata

The Germany-Ethiopia BIT and Germany-Mexico BIT provide that if the German investor proceeds in an Ethiopian or Mexican court or some other contractually agreed forum, arbitration under the BIT can be initiated only if the court or the chosen forum has not yet rendered a decision that finally disposes of the case.¹⁰⁹ Other treaties provide that where the foreign investor has submitted the dispute to the courts of the other contracting state, he is only entitled to go to arbitration in cases where he claims that the court decision itself violates the treaty.¹¹⁰

3. Exhaustion of local remedies

The right of a German investor to commence arbitration under the Germany-China BIT is dependent upon the submission of the dispute to Chinese administrative review procedure according to Chinese law.¹¹¹

4. Failure to conciliate or litigate

Many BITs oblige the investor to litigate in local courts for a specific period of time.¹¹² Under the Germany-India BIT, the right to refer a dispute to arbitration is limited to circumstances in which agreement cannot be reached to refer the matter to conciliation.¹¹³

5. ICSID or ad-hoc arbitration

Unlike the modern German investment treaties, some of the older German BITs do not provide for investor-state arbitration at all.¹¹⁴ Where the other contracting party is a signatory to the ICSID Convention, German BITs routinely provide for ICSID arbitration unless the parties provide otherwise.¹¹⁵ If the other contracting party is not a signatory to the ICSID Convention, the treaties normally provide for international ad hoc arbitration, with the necessary appointments being made by the president of the Court of International Arbitration of the International Chamber of Commerce in Paris,¹¹⁶ or, alternatively, according to the ICSID Additional Facility Rules.¹¹⁷ Some treaties also allow investors to pursue an arbitration claim through an ad hoc tribunal constituted in accordance with the UNCITRAL or other arbitration rules.¹¹⁸

Other BITs allow the investor to choose one of the following venues: (i) the courts of the contracting party where the investment was made; (ii) international arbitration under UNCITRAL, ICSID, ICC or other agreed rules (forums provided by ECT are similar).¹¹⁹ The Germany-Madagascar BIT and Germany-Philippines BIT provide the option of either litigation in courts or ICSID arbitration.¹²⁰ The Germany-Ethiopia BIT allows the investor to choose one of the following venues: (i) the courts of the Contracting Party where the investment was made; (ii) an ad hoc tribunal constituted in accordance with the UNCITRAL; (iii) arbitration under ICSID Convention; (iv) arbitration under Additional Facility Rules.¹²¹

Finally, a number of German BITs extend the rules on the constitution of an ad hoc arbitral tribunal and procedure of the inter-state arbitration to investor-state arbitration mutatis mutandis, with the president of the tribunal to be appointed in case of default of consent either by the president of the ICJ, ICC, Stockholm Chamber of Commerce or PCA.¹²²

6. Time limits

The Germany-Mexico BIT requires that a claim be commenced within four years of the investor having first acquired, or from the moment he should have acquired, knowledge of the facts giving rise to the alleged breach.¹²³ Under the Germany-China BIT, the dispute can be brought to arbitration only if the dispute still exists three months after the investor has brought the issue to the review procedure.¹²⁴

7. Applicable law

German investment treaties that provide a right to refer a dispute to ICSID are generally silent as to what law or laws are to govern the parties’ dispute. Where such treaties are silent as to governing law, the applicable law is likely to be determined in accordance with article 42 of the ICSID Convention. Article 42 provides that in the absence of an agreement between the parties, the tribunal shall apply the law of the contracting state party to the dispute (including its rules on the conflict of laws) and such rules of international law as may be applicable.

With respect to ad hoc arbitration, some BITs provide that arbitral tribunals must have regard to the remainder of that treaty’s terms, the relevant national law rules of the contracting state where the investment was made and generally recognised principles of international law when arbitrating the dispute.¹²⁵ The Germany-Lebanon BIT and Germany-Mexico BIT provide that the arbitral tribunal shall decide the dispute in accordance with the provisions of the BIT and the applicable rules and principles of international law.¹²⁶ Other German BITs are silent on the issue.

The ECT provides for the application of the ECT and applicable rules and principles of international law to the merits of the dispute.¹²⁷

Government entity to which claim notices are sent

The Federal Ministry of Economics and Technology(Department V c).

Government department which manages investment treaty arbitrations

The Federal Ministry of Economics and Technology.

Internal/External Counsel

External counsel is used. No formal public procurement process has been used so far.

Washington Convention implementing legislation

Germany signed the Washington Convention on 27 January 1966 and ratified it on 18 April 1969. The convention entered into force on 18 May 1969. See “Übereinkommen zur Beilegung von Investitionsschutzstreitigkeiten zwischen Staaten und Angehörigen anderer Staaten”, BGBl 1969 II, p 369 et seq.

New York Convention implementing legislation

Germany acceded to the New York Convention on 30 June 1961. No reservations are in force in respect of the New York Convention. See “Übereinkommen vom 10 Juni 1958 über die Anerkennung und Vollstreckung ausländischer Schiedssprüche”, BGBl 1961 II, p 121.

Legislation governing non-ICSID arbitrations

Germany’s general arbitration law (section 1029 et seq of the German Code of Civil Procedure) governs non-ICSID investment arbitration seated in Germany.

Attitude of government towards investment treaty arbitration

The attitude is quite positive, as demonstrated by the fact that Germany has entered into 135 BITs. No other country has entered into as many investment treaties. All of the modern BITs contain investor-state arbitration clauses.

Attitude of local courts towards investment treaty arbitration

German courts are generally supportive of international arbitration, including investment treaty arbitration. In a recent annulment case, the Higher Regional Court of Frankfurt declined to vacate an award on jurisdiction rendered by an arbitral tribunal sitting under a bilateral investment treaty concluded between two EU member states. Specifically, the court rejected the argument that the consent clause in the treaty was invalid by virtue of article 344 of the Treaty on the Functioning of the European Union. It held that this provision gave the European Court of Justice exclusive competence only with regard to disputes between EU member states, rather than to investor-state disputes.¹²⁸ The decision is currently being reviewed by the German Federal Supreme Court.

As regards enforcement, German courts allow for enforcement against state-owned assets that are used for commercial purposes (ius gestionis). Where the assets are used for sovereign purposes (ius imperii), they enjoy immunity.¹²⁹ While the German courts have not heard any enforcement cases under article 54 of the ICSID Convention, the German Federal Court of Justice held in another recent case relating to an ad hoc investment treaty arbitration that by agreeing to a provision in a bilateral investment treaty which states that the arbitral award should be enforced “according to domestic law”, a state submits to the jurisdiction of such domestic courts with respect to the recognition and enforcement of the award, but only as long as the arbitral tribunal renders the award within the scope of the arbitration clause. A state party’s failure to challenge the jurisdictional award and its continued participation in the subsequent arbitration cannot be viewed as a waiver of immunity from enforcement.¹³⁰

Investment guarantees of the Federal Republic of Germany

1. Qualifying criteria

An investment guarantee may be granted if the following requirements are fulfilled:

·the investor must be domiciled in Germany;

·there must be an explicit German interest in the realisation of the project abroad;

·the project must be a new direct investment (no portfolio investment);

·the investment must be an economically feasible and sound project;

·the project must contribute to host country development;

·appropriate environmental standards are to be observed;

·there must be positive reverse effects on Germany;

·the investment must enjoy sufficient legal protection in the host country; and

·the application for a guarantee has to be handed in before the first contribution is made.

2. Substantive protections

Investment guarantees cover losses resulting from the following political risks:

·expropriation risk – nationalisation, expropriation or sovereign acts which in their effects are equivalent to expropriation;

·breach of contract risk – the breach of legally binding commitments made by the government or other entities directed or controlled by the government, in as much as the project company is entitled to these commitments and these commitments are specified in the guarantee policy (for detail please refer to our leaflet on breach of contract);

·war risk – war or other armed conflicts, revolutions or civil disturbance or terrorist acts associated with such events;

·moratorium risk – payment embargoes or moratoriums; and

·convertibility and transfer risk – impossibility of converting or transferring amounts deposited with a sound bank for their transfer to the Federal Republic of Germany.

The question whether one of these risks has occurred is evaluated in the event of loss by verifying the actual circumstances on the basis of German principles of law and in consideration of international law.

3. Means by which an investor can invoke the protections

As soon as the investor anticipates a political risk he must immediately inform PricewaterhouseCoopers Aktiengesellschaft Wirtschaftsprüfungsgesellschaft. At this early stage, loss prevention measures will be initiated by diplomatic channels. The objective is to save the continuity of the investment. Unlike property insurance, the German government does not wait until the loss has actually occurred but becomes active at an early stage.

In the case of loss, the indemnification to be paid by the German government is calculated on the basis of the evidence provided by the insured. The indemnification is to compensate the insured for the loss he or she incurred. In calculating the indemnification, the gross loss is taken as a basis, ie, the current market value of the investment at the time of loss, though not more than the covered contribution value.

The process of determining the indemnification starts with a plausibility check on the basis of the balance sheets and profit and loss accounts of the project company provided by the investor. If the claimed loss is higher than the actual value of the investment and therefore the accuracy of the claimed loss is doubted, the investment has to be assessed by applying measures accepted by business management. The resulting value serves as a basis for the calculation of the indemnification.

The amount of indemnification is reduced by the uninsured percentage of generally 5 per cent to be borne by the insured.

Saar Papier Vertriebs GmbH v Poland, award of 16 October 1995

Franz Sedelmayer v Russian Federation, award of 7 July 1998

Siemens AG v Argentine Republic, ICSID Case No ARB/02/08, award of 7 February 2007

Fraport AG Frankfurt Airport Services Worldwide v Republic of the Philippines, ICSID Case No ARB/03/25, award of 16 August 2007

OKO Pankki Oyj v Republic of Estonia, ICSID Case No ARB/04/6, award of 19 November 2007

Peter Franz Vocklinghaus v. Czech Republic, award of 1 January 2008

Wintershall AG v Argentine Republic, ICSID Case No ARB/04/14, award of 8 December 2008

Nordzucker v Poland, award of 1 January 2009

Walter Bau AG v Thailand, award of 1 July 2009

Georg Nepolsky v. Czech Republic, award of 1 February 2010

Inmaris Perestroika Sailing Maritimes Services GmbH v Ukraine, ICSID Case No ARB/08/8, Decision on Jurisdiction of 8 March 2010

Gustav FW Hamester GmbH & Co KG v Republic of Ghana, ICSID Case No ARB/07/24, award of 18 June 2010

GEA Group Aktiengesellschaft v Ukraine, ICSID Case No ARB/09/6, award of 11 March 2011

Vattenfall AB, Vattenfall Europe AG, Vattenfall Europe Generation AG v Federal Republic of Germany, ICSID Case No. ARB/09/6, award of 11 March 2011

Binder v Czech Republic, award of 1 July 2011

Hochtief AG v The Argentine Republic, ICSID Case No. ARB/07/31, Decision on Jurisdiction of 24 October 2011

Adem Dogan v Turkmenistan, ICSID Case No. ARB/09/9, Decision on Jurisdiction of 29 February 2012

Marion Unglaube v Republic of Costa Rica, ICSID Case No. ARB/08/1, award of 16 May 2012

Reinhard Unglaube v Republic of Costa Rica, ICSID Case No. ARB/09/20, award of 16 May 2012

InterTrade Holding GmbH v The Czech Republic, award of 7 June 2012

Daimler Financial Services AG v Argentine Republic, ICSID Case No. ARB/05/1, award of 22 August 2012

Deutsche Bank AG v Democratic Socialist Republic of Sri Lanka, ICSID Case No. ARB/09/2, award of 31 October 2012

Vattenfall AB and others v Federal Republic of Germany, ICSID Case No. ARB/12/12

Bernhard von Pezold and Others v. Republic of Zimbabwe, ICSID Case No. ARB/10/15