The Ad Hoc Committee Annulment Decision in Malaysian Historical Salvors: The Meaning of ‘Investment’ Re-established?

Member States to the International Centre for Settlement of Investment Disputes (ICSID) Convention, as well as their companies and economic operators, are interested in guaranteeing meaningful protection for their investments. This is done by granting jurisdiction to ICSID arbitral tribunals to hear disputes between private persons and states party to the ICSID Convention in cases where a valid Bilateral Investment Treaty (BIT) is present. Because such tribunals’ jurisdiction is limited to investment disputes, the definition of ‘investment’ as embodied in Article 25 of the ICSID Convention and the relevant BIT is of paramount importance. In fact, the definition of investment will have a bearing on whether or not a given economic activity by a company or a private person can be protected via a so-called Investment Treaty Arbitration. In turn, this rather technical issue will have direct practical economic consequences for companies and investors. Unfortunately, both the meaning of investment and the manner in which the ICSID Convention and BITs have been interpreted have been addressed in contradictory manners by various ICSID tribunals, creating unpredictability and damaging the level playing field of investors’ protection. However, the ad hoc Committee’s Decision on the Application for Annulment in Malaysian Historical Salvors v. The Government of Malaysia (hereinafter ‘MHS Annulment Award’) appears to have re-established a proper meaning and method of interpreting the term investment, which, it is argued, should be followed by future tribunals. If this were to happen, companies and economic operators will be able to enjoy both predictability and full protection of their investments.