Commentary to the Austrian Model Investment Treaty

The document analyzes the Austrian Model Investment Treaty, noting that while it introduces innovations to protect public welfare and limit 'treaty shopping,' it retains problematic features such as an expansive umbrella clause, a vague Fair and Equitable Treatment (FET) standard, and a lack of transparency in investor-state dispute settlement.

• The Austrian Model BIT introduces a 'police powers' carve-out in Article 7, which protects non-discriminatory measures designed to safeguard public welfare objectives—such as health, safety, and the environment—from being classified as indirect expropriation.
• The Model BIT contains a particularly expansive umbrella clause that equates any breach of contract between an investor and a host State or its entities with a violation of the treaty, potentially increasing State liability for actions of sub-national or quasi-commercial entities.
• The treaty's Fair and Equitable Treatment (FET) provision is considered a 'free-standing' obligation because it does not explicitly link the standard to the customary international law minimum standard of treatment, which may expose the State to a higher, more unpredictable standard of conduct.
• To prevent 'treaty shopping' and the use of 'mailbox companies,' the Model BIT requires natural persons to have 'dominant and effective nationality' and enterprises to carry out 'substantive business' in their home country, supplemented by a 'denial of benefits' clause.
• The Model BIT lacks provisions to ensure transparency in investor-state arbitration, failing to mandate public access to awards or address arbitrator conflicts of interest and the need for an appellate mechanism.
• While the Model BIT includes articles on the environment (Article 4) and labour (Article 5) to discourage 'races to the bottom,' these provisions are limited to guarding against the weakening of laws and regulations and do not protect the improvement of standards that might negatively impact investors.
• The treaty's transfer of payments article includes flexibilities to restrict transfers for bankruptcy, creditor rights, and anti-money laundering, but it lacks explicit provisions for balance of payments crises or economic emergencies.
• The Model BIT allows investors to initiate arbitration without first exhausting domestic administrative or judicial remedies, though it does require a 60-day period for attempted negotiation or consultation.

APA

Bernasconi-Osterwalder, N., & Johnson, L. (2011). Commentary to the Austrian Model Investment Treaty. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/austrian_model_treaty.pdf

Chicago

Bernasconi-Osterwalder, Nathalie, and Lise Johnson. Commentary to the Austrian Model Investment Treaty. International Institute for Sustainable Development, 2011. https://www.iisd.org/system/files/publications/austrian_model_treaty.pdf.

Wikipedia

{{cite report |last1=Bernasconi-Osterwalder |first1=Nathalie |last2=Johnson |first2=Lise |title=Commentary to the Austrian Model Investment Treaty |publisher=International Institute for Sustainable Development |date=September 2011 |url=https://www.iisd.org/system/files/publications/austrian_model_treaty.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{bernasconiosterwalder2011commentary, author = {Bernasconi-Osterwalder, Nathalie and Johnson, Lise}, title = {{Commentary to the Austrian Model Investment Treaty}}, institution = {International Institute for Sustainable Development}, year = {2011}, month = sep, url = {https://www.iisd.org/system/files/publications/austrian_model_treaty.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }