Definition of Investment in International Investment Agreements

The document analyzes the legal implications of defining 'investment' in international investment agreements (IIAs). It contrasts the traditional, broad asset-based definitions—often modeled on early German treaties—with more recent, precise approaches adopted by Canada, the U.S., ASEAN, and COMESA. The author highlights the tension between 'objective' and 'subjective' tests used by ICSID tribunals to determine jurisdiction, warning states that vague definitions can lead to unexpected arbitral rulings that exceed domestic legal understandings of foreign investment.

• Most IIAs historically used a broad, asset-based definition of investment, largely modeled on the 1960 Germany-Malaysia Bilateral Investment Treaty, which describes investment as "every kind of asset."
• Broad definitions in IIAs can lead to assets being classified as investments by tribunals even when they do not qualify as such under the host state's domestic laws, such as a contract for pre-inspection services in the case of Société Générale de Surveillance SA v. Pakistan.
• For arbitrations under the ICSID Convention, tribunals often apply a "double barrel" test, requiring the asset to meet the definition of investment in both the specific IIA and Article 25 of the ICSID Convention.
• The 'objective approach' to ICSID jurisdiction, exemplified by the Salini v. Morocco case, requires an investment to meet five specific criteria: duration, regularity of profit and return, assumption of risk, substantial commitment, and significance for the host state’s development.
• The 'subjective approach' rejects independent objective criteria for ICSID jurisdiction, arguing instead that the definition of investment should be determined by the consent and language agreed upon by the parties in the IIA.
• Canada has adopted an 'exhaustive approach' in its Model Foreign Investment Protection Agreement (FIPA), using a closed list of qualifying assets and specific exclusions to increase predictability.
• The U.S. Model BIT and the U.S.-Rwanda BIT (2008) use a non-exhaustive approach but include a limiting requirement that the asset must possess "the characteristics of an investment," such as commitment of capital, expectation of profit, or assumption of risk.
• The COMESA Investment Agreement (CCIA) limits the scope of intellectual property rights (IPR) by requiring them to be associated with a business operating in the host state, and explicitly excludes market share and loans to governments.
• The 2009 ASEAN Comprehensive Agreement combines a traditional asset list with footnotes requiring assets to exhibit characteristics of an investment (commitment of capital, expectation of gain, or assumption of risk) and excludes claims arising solely from commercial contracts for the sale of goods or services.

APA

Malik, M. (2009). Definition of Investment in International Investment Agreements. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/best_practices_bulletin_1.pdf

Chicago

Malik, Mahnaz. Definition of Investment in International Investment Agreements. International Institute for Sustainable Development, 2009. https://www.iisd.org/system/files/publications/best_practices_bulletin_1.pdf.

Wikipedia

{{cite report |last1=Malik |first1=Mahnaz |title=Definition of Investment in International Investment Agreements |publisher=International Institute for Sustainable Development |date=August 2009 |url=https://www.iisd.org/system/files/publications/best_practices_bulletin_1.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{malik2009definition, author = {Malik, Mahnaz}, title = {{Definition of Investment in International Investment Agreements}}, institution = {International Institute for Sustainable Development}, year = {2009}, month = aug, url = {https://www.iisd.org/system/files/publications/best_practices_bulletin_1.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }