CRITICAL ANALYSIS OF REFLEXIVE LOSS CLAIMS IN INTERNATIONAL INVESTMENT DISPUTES

In contemporary times corporations are aggressively making international investments in diverse economic activities. Private corporations seek protection for their investments under international investment treaties. They raise claims under international investment treaties for recovery of compensations for the losses resulting from the actions of the host state regulatory agencies. The right to claim compensation should ideally be available and exercised only by investor corporations. But in certain cases, the shareholders of the investor corporation have also raised claims, for the recovery of losses incurred by the reduction in the share prices. Such claims by shareholders are called reflexive loss claims. In this paper, the authors have adopted the normative doctrinal research method, for examining the enforceability of reflexive losses claims by the shareholders of the investor corporation under an international investment treaty. Most of the matured jurisdictions practice the rule of "no reflexive losses claim" as a matter of policy in their investment law disputes. Accordingly, there is a sense of legal uncertainty internationally regarding the enforceability of reflexive losses claims under international investment treaty. Further the authors in this paper have also tested the feasibility of private ordering solutions to reflexive claims issues. To carry out the analysis, the authors have framed the following research questions – "R.Q. 1" - Whether Reflexive losses claims by the shareholders against the actions of the host state are enforceable under investor-state investment disputes? “R.Q. 2" – Is the private ordering solution feasible for preventing the shareholder from raising the Reflexive losses claims? The authors have used graphical and diagrammatic presentations for explaining the technical aspects of reflexive loss claims. The analysis has revealed that the enforceability of reflexive losses claims is under a dilemma and a sense of uncertainty prevails regarding it. Further the solution of private ordering is legally valid option to overcome reflexive losses claims. But it has chilling effect on the other treaty provisions relating to investment protection.