The Titanic Struggle Between Diametrically Opposed Conceptions of ‘Investment’ Continues…

The existence of an investment gives an ICSID tribunal jurisdiction ratione materiae. To ascertain its existence, an ICSID tribunal may look to the subjective (BIT) meaning of ‘investment’, to its objective (or ‘Salini’) meaning under Article 25(1) ICSID Convention, or both. The Salini criteria looks at the outlay’s financial contribution, duration, risk, and contribution to the economic development of the host state (‘the fourth criterion’).

Members of the Malaysian Historical Salvors v Malaysia (‘Malaysian Salvors’) annulment committee came to polarised conclusions on whether an investor’s outlay must fall within Salini-esque outer limits of an ‘investment’, in particular the fourth criterion, as a jurisdictional condition. Judge Shahabuddeen argued in the affirmative while Judge Schwebel and Judge Tomka argued in the negative. As of today, the titanic struggle between diametrically opposed conceptions of ‘investment’ continues, as arbitral practice and treaty practice make no significant strides toward resolving the longstanding disagreement. This is not without profound implications.

This article proposes to remove the quantitative requirements of the Salini criteria as a possible solution to the controversy. This approach considers a greater variety of outlays as investments while respecting the raison d’être of ICSID, striking a practical balance between flexibility and predictability on the definition of ‘investment’.

Points of Disagreement on the Definition of ‘Investment’

In Malaysian Salvors, Mr. Michael Hwang, the sole arbitrator, declined jurisdiction on the grounds that the investor’s outlay failed to contribute to the economic development of Malaysia and thus did not satisfy the objective Salini definition of ‘investment’.

The subsequent annulment committee was divided on the definition of ‘investment’. On one hand, dissenting Judge Shahabuddeen endorsed the Salini criteria generally and the fourth criterion concretely as necessary jurisdictional hurdles on two fronts. First, he emphasised the need to devise outer limits to the definition of ‘investment’ to avoid an “overly capacious” and therefore superfluous definition. He posited that these cannot often be deduced from investment treaties that commonly use unhelpfully broad asset-based definitions of ‘investment’. Second, he argued that, pursuant to the VCLT, the ordinary meaning of ‘investment’ shall be interpreted in light of the object and purpose of the Convention as understood from the Preamble, which includes the economic development of the host state. On the other hand, Judge Schwebel and Judge Tomka robustly rejected the Salini criteria as an excessively circumscribing and limiting interpretation of ‘investment’. They argued that the Convention was expressly left undefined recognising that different states may qualify different types of assets as investments.

Both approaches are problematic. The subjectivist approach risks threatening the integrity of ICSID as an institution dedicated to investment-related disputes because states may potentially agree to arbitrate any kind of dispute. In turn, the objectivist approach presents two problems. First, the imposition of outer limits arguably is neither supported by the travaux preparatoires nor by VCLT interpretative guidance. Second, the Salini criteria will not stand the test of time. As Salini‘s outer limits are mostly positional, they lack the ability to capture emerging types of foreign investment, such as those in the entertainment industry catalysed by social media, that might not strictly comport; their contributions may appear smaller, the risks difficult to measure, and the duration briefer than industrial projects. By setting these standards, the Salini test inadvertently limits investment projects to large-scale contracts from particular industries and excludes others despite there being no support for such discrimination in the Convention, at least not of jurisdictional nature.

Sluggish Developments in Arbitral Decisions and Treaty Practice

Treaty practice’s attempt to reconcile the controversy has had limited success. Jean Ho has argued that newcomer treaties, like the ACIA, with more precise definitions of ‘investment’, could address the disagreement by clearly evidencing what parties consider constitutes an ‘investment’. This would certainly address Judge Shahabuddeen’s concern about the insufficiency of BIT definitions and could potentially offset the need for the Salini criteria. However, these treaty developments are less significant than they appear. First, the common position in investment treaties remains the adoption of a general definition of ‘investment’. Second, treaties with added precision are still, in practice, subject to the Salini criteria. Beijing Urban Construction Group Ltd v Yemen is an example of a tribunal that, despite recognising the detail in the BIT definition, considered the existence of an investment according to the Salini principle. Third, proponents of the Salini doctrine will still argue that it is necessary to use Salini whatever the level of precision to ensure that investment treaty parties cannot agree to bring virtually any type of dispute within the realm of ICSID.

Accordingly, only the select few treaties that incorporate the Salini definition of investment as their own could potentially address the controversy. For example, Article 9.1 of the 2015 Trans-Pacific Partnership contains a more specific rendition of ‘investment’ and broadly reflects the Salini criteria. This approach may successfully resolve the controversy by enabling the continued reliance on the Salini criteria while doing so in a way that does not compromise the subjective meaning of ‘investment’. By this reasoning, there would be no need to find textual support for the Salini definition of investment as its legitimacy is bolstered by its inclusion in the instrument of consent.

In arbitral practice, two developments have sought to address the disagreement. First, “the current weight of arbitral jurisprudence leans in favour of a dual meaning of protected investment”, collating both objective and subjective meanings of ‘investment’ into a single two-tier jurisdictional test. The double keyhole approach may appear to reconcile the disagreement by validating both approaches; however, if it is understood to continue subjecting the BIT meaning to the outer limits of the Salini criteria (as did the Beijing Urban tribunal), subjectivists will continue to flag the Salini criteria as an unjustifiable restriction on party autonomy, should the parties’ BIT contain a comparatively wider conception of ‘investment’. The second development relates to the particularly problematised fourth criterion. Some tribunals, like in Quiborax v Bolivia, have removed it altogether from the Salini analysis. This approach appears to preserve some parameters to the definition of ‘investment’ while eliminating the arguably burdensome threshold imposed by the fourth criterion. Still, the inevitable drawback with any development in arbitral practice is that, owing to a lack of precedent, subsequent tribunals technically have no obligation to follow suit.

Exploring the Proposal to Remove the Size Requirements of Salini

It is imperative to achieve uniformity in the definition of investment. As it stands, the investment regime can “neither effectively protect nor promote foreign investment” – its very object and purpose – “if States and economic actors do not know ex ante whether their transactions constitute investments” and thus whether they are “subject to protection in the first place.” Thus, to resolve the controversy, the better approach could be to opt for a double keyhole approach whose objective meaning is informed by a Salini test which is devoid of its associated quantitative thresholds. By removing all size requirements, the objective definition of ‘investment’ can encompass a greater variety of investments, such as those arising from the entertainment industry as abovementioned, giving subjectivists the assurance of flexibility, while simultaneously respecting the raison d’être of ICSID, giving objectivists predictability and reliability on the definition of ‘investment’. The trade-off here is that, given the preservation of the Salini criteria, the question about its textual legitimacy lingers. Notwithstanding, given that there is no obvious answer in this regard, it seems at least plausible that subjectivists and objectivists may compromise on this point in the pursuit of a uniform and operational definition of investment.


This article has outlined the points of the division on the definition of ‘investment’ and has contended that the sluggish developments in the treaty and arbitral practice have largely failed to resolve the controversy. Accordingly, it has explored an alternative approach that has some potential to reconcile the clashing attitudes notwithstanding a necessary trade-off.


Sonia Anwar-Ahmed Martinez is a SOAS LLB and UCL LLM graduate and future trainee solicitor at Herbert Smith Freehills. She has a particular interest in public and private international law and alternative dispute resolution.