Do the SALINI Criteria apply to the Definition of an Investment provided in Annex 1 of the 2006 and 2016 SADC Protocol on Finance and Investment? An Assessment

Abstract

An investment is the subject matter in an investor-state dispute settlement (ISDS or international arbitration) or litigation case. Therefore, there can be no such dispute if there is no investment to which the dispute relates. The challenge in this regard lies in that there is no uniform definition of an investment in ISDS. Across jurisdictions, legal instruments such as bilateral investment treaties (BITs), treaties with investment provisions (TIPs), investment contracts and legislation provide different definitions of an investment. However, if an investor-state dispute arises, these definitions are not always final, since there are different methods of assessing the existence of an investment, depending on the applicable legal instrument and arbitration rules. For example, arbitration tribunals formed in terms of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention) follow a two-step process which starts with a consideration of the definition of an investment in terms of the underlying legal instrument, followed by an assessment of the existence of an investment in terms of Article 25(1) of the ICSID Convention. Salini Construttori SPA and Italstrade SPA v Kingdom of Morocco is a landmark ICSID ISDS case that proposed four criteria that an investment should meet in terms of Article 25(1) of the ICSID Convention. On the other hand, ISDS cases based on the United Nations Commission on International Trade Law (UNCITRAL) Arbitration Rules or other non-ICSID rules determine the existence of an investment by reference to the relevant legal instrument only. However, the tribunal in Romak SA (Switzerland) v Republic of Uzbekistan held that the Salini criteria are applicable to UNCITRAL arbitration, and by implication, to other non-CSID arbitrations and possibly even litigation. The 2006 Annex 1 of the SADC Protocol on Finance and Investments (SADC FIP) defines an investment broadly as any asset, while the 2016 Annex 1 defines an investment as an enterprise incorporated in a SADC Member State and owned by SADC nationals. Furthermore, the 2006 Annex 1 refers investor-state disputes to ICSID or UNCITRAL arbitration, while the 2016 Annex 1 refers such disputes to the courts of host states. This article has two objectives. Firstly, it seeks to determine if, as was held in Romak, the Salini criteria can be applied to the definition of an investment in non-ICSID arbitration and litigation arising from the 2006 or 2016 Annex 1s respectively. Secondly, the article will assess the implications of such an application of the Salini criteria to the protection of foreign investments in the SADC.