Study On Indirect Claims Of Shareholders In International Investment Arbitration

When a company's rights are compromised,whether shareholders can file indirect claims based on their indirect losses is one of the hot topics in international investment law nowadays.When the measures taken by the host state directly affect the rights of shareholders(such as the right to share dividends,the right to participate in resolutions of shareholders),the shareholders' claims may be filed against the host state's measures in accordance with international law.However,when the host state's measures affect only the company's rights,the measure generally affects shareholders' economic interests only.Therefore,it is worth discussing whether shareholders have the right to file claims based on the violation of company rights.In customary international law,shareholder protection is mainly through diplomatic protection.The International Court of Justice in Barcelona case did not have the right to exercise indirect claims when the shareholder's interest in the infringement of the company's rights was indirectly lost.In view of the limitations of diplomatic protection,more and more cases have adopted international arbitration methods.Contemporary investment agreements usually include equity in a broad concept of investment,but lack of further explanation for investment.Therefore,there will be such problems: What is the legal basis for indirect claims of shareholders?Does the ICSID Convention allow shareholders' indirect claims? How far is the protection of shareholders? Are there any specific restrictions? Does the shareholder's indirect claim conflict with domestic law and customary international law? What risks will arise from the indirect claims of shareholders in practices?The jurisdictional clause of the ICSID Convention clarifies disputes between investors and the host state,but it does not clearly state that shareholders can file claims for indirect losses.Based on the recognition of the equity of the investment,the tribunal's extensive case interpretation of the investment definition was too broad and gradually recognized the shareholders' indirect claims.While acknowledging that shareholders' right to indirect claims under international investment agreements protects shareholders' rights in investment arbitration,a large number of shareholder claims also have some impacts on the host state,allowing shareholders to exercise indirect claims and allowing different levels of shareholders to seek relief through arbitration,resulting in a large number of multiple claims.In addition,when the shareholders receive indirect protection through the remedial procedures of the local company,there is also a double protection problem.This at the same time harmed the rights of the company's creditors and other shareholders and increased the difficulty of responding to the host government.This paper attempts to analyze the above issues in detail and combines the typical cases of international investment arbitration to elaborate the exercise of the indirect claims of shareholders.With the advancement of our country's "going out" policy,this article analyzes the attitude and countermeasures that China should hold regarding shareholders' exercise of indirect claims through the strategic background of the Belt and Road Initiative.This article is divided into three chapters to discuss.The first chapter introduces the background knowledge of the indirect claims of shareholders.First,to solve the problem of indirect shareholders' claims,the meaning of indirect shareholders' claims should be clarified.The author believes that according to the losses suffered by shareholders,the shareholders' claim rights can be divided into direct claims and indirect claims.The Barcelona case distinguishes company's rights from shareholders' rights,shareholder rights and shareholder interests.The right of direct claim refers to the right to make a claim directly if the direct rights of shareholders are damaged.These direct rights include the right to share dividends,management rights,voting rights,and the right to allocate surplus assets.In the international investment law,if the host state's wrongful act infringes the equity of the foreign shareholder in the company,the shareholder is entitled to make a claim for the wrongdoing of the host country based on the investment agreement signed by the host government and the country of citizenship of the shareholder.This article focuses on the indirect claims ofshareholders.Whether shareholders can exercise indirect claims on their indirect losses is a controversial topic in the academic community,including the meaning of the indirect claims of shareholders,the legal basis,and the controversy.The second part of the first chapter first analyzes whether the shareholders can exercise the right of indirect claims under customary international law through the case of the International Court of Justice.When the Barcelona case was established and the company was illegally infringed by the host state,the company's nationality was in principle qualified to protect the company and denied the right of the company's shareholder's country of citizenship to claim on behalf of the company.When a shareholder's direct rights are infringed,shareholders can directly file a claim.The subsequent Diallo case also affirmed the claim for the Barcelona case.Under customary international law,shareholders are usually not entitled to exercise indirect claims.Therefore,indirect claims has produced a series of controversies.Dispute one:Under the customary international law,shareholders are not entitled to exercise indirect claims.However,under the international investment agreement,shareholders have the right to exercise indirect claims.In fact,the views are conflicting.Dispute two: In domestic law,shareholders are generally prohibited from exercising indirect claims,which is inconsistent with the right of shareholders to exercise indirect claims in international investment arbitration.Dispute 3: Allowing shareholders to exercise indirect claims may cause shareholders to unbalance rights and obligations of specific investments,give shareholders the right to indirect claims instead of allowing them to assume corresponding obligations,resulting in an imbalance between rights and obligations.The second chapter of this article mainly discusses through three cases of the international arbitration tribunal.First,the CMS v.Argentina case illustrates the scope of shareholder protection,that is,whether the shareholders' rights and the shareholders' investment interests belong to the protection of the shareholders.Second,through the case of Camuzzi v.Argentina,the author analyzes the legal basis of indirect shareholder claims and learns that international investment agreements are the basis of indirect claims.Thirdly,the case of Damiler v.Argentina illustrates the issue of the admissibility of indirect shareholders' claims under the ICSID Convention,whether the jurisdiction clause of Article 25 of the ICSID Convention has jurisdiction over indirect claims of shareholders.The tribunal,based on the broad definition of theinvestment in the international investment agreement itself and the tendency of the tribunal to freely explain the equity investment,supported some indirect claims of shareholders.The tribunal considered that international law does not prohibit shareholders from indirectly claiming compensation.If the contracting parties do not impose restrictions in a form specifically agreed to in the investment agreement,they should not excessively restrict the meaning of the terms of the bilateral investment agreement.Although some cases of tribunals recognize shareholders' indirect claims,this does not constitute a new rule of international law because it does not satisfy the psychological and material elements that form international habits.The third chapter of this article,based on the risk arising from the indirect claims of shareholders,elaborates the prevention of the legal risk about the indirect claims.Allowing shareholders to exercise indirect claims,on the one hand,is conducive to protecting investors and increasing their chances of filing relief procedures for losses.On the other hand,it also causes some negative effects,such as multiple claims,damage to creditors and other shareholders' rights.China is a big country that attracts foreign capital,and it is also a country with great demand and potential for foreign investment.Considering that China is entering a period of high investment agreement with other countries,we should calmly analyze the current development trend,base ourselves on reality,and pay close attention to the experience of other countries in this field,and improve the investment dispute resolution system in the Chinese-foreign investment agreement.Great benefit.To deal with the negative impact and challenges caused by the indirect claims of shareholders,the author believes that the necessary restrictions should be set in the international investment agreement.The international investment agreements concluded by China should pay attention to the negative impact of shareholders' indirect claims and set up necessary restrictive measures so as to jointly create a friendly investment environment with the State party to protect investment.