In recent months, countries such as Ukraine, the United Kingdom, Germany and the Council of the European Union, at the suggestion of the European Commission, have invoked the application of the Energy Charter Treaty’s Denial of Benefits Clause to investments made and/or controlled by investors of Russian and/or Belarusian origin, with varying nuances and scope. These initiatives have brought to the forefront of the arbitral community’s debates the unresolved controversy over the requirements that Contracting States must meet when invoking Denial of Benefits clauses, in order for them to be effective against investors of the “other Contracting Party”, by depriving them of the possibility of bringing an investment arbitration against the State that has validly invoked the Denial of Benefits, or by obliging the Arbitral Tribunal hearing the potential investment arbitration to declare its inadmissibility, lack of jurisdiction or dismissal on the merits, depending on whether, in view of the wording of the clause, the Denial of Benefits is considered to be a question of admissibility, jurisdiction or merits. The purpose of this article is to shed some light on the current trends in this neverending debate by, first, examining the text of the Denial of Benefits clauses contained in international investment agreements in force at the date of this article in order to identify recurring formal and substantive criteria for the exercise of the right to deny the protection of an international investment agreement and, second, analysing the interpretation of these criteria by Arbitral Tribunals.
Iurgium [previously Spain Arbitration Review]