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4 J. World Investment 909 (2003)
When Pre-Investment or Development Costs May or May Not be Regarded as Part of Investment under Article 25(1) of the ICSID Convention - The Mihaley Case

handle is hein.journals/jworldit4 and id is 909 raw text is: When Pre-Investment or Development Costs May
or May Not Be Regarded as Part of Investment
under Article 25(1) of the ICSID Convention
The Mihaly Case
C. CHATTERJEE*
1. INTRODUCTION
It is about forty years now that the Convention on the Settlement of Investment
Disputes between States and Nationals of Other States, 1965 (the ICSID Convention) has
been in operation,' and yet, in most of the cases referred to ICSID tribunals, the
Respondents have raised objections to jurisdiction on the grounds either that consent
had not been given by them or that the subject-matter of the disputes did satisfy the
criteria of being an investment under the Convention.
Recently, in the arbitration Mihaly International Corporation v. The Democratic Socialist
Republic of Sri Lanka,2 the principal issue that an ICSID tribunal was asked to consider was
whether any pre-investment expenditure-that is, expenditure incurred in preparatory
work for an investment-should be regarded as part of an actual investment. In
practice, in many cases, such expenditures are usually treated as part of an actual
investment; in this case, it was decided that, in the absence of any actual consent given
by the Respondent, such expenditures which were incurred by a foreign investor could
not be regarded as expenditures forming part of the investment.
It is the purpose of this article to discuss some of the important issues that were
raised in this arbitration, namely, the status of pre-investment expenditures under the
ICSID Convention and whether, on the basis of an alleged assignment of a claim by a
private foreign investor, the government of which is not a party to the ICSID
Convention, an ICSID tribunal may entertain a claim filed by a corporation eo nomine,
the government of which was a party to the relevant bilateral investment treaty (BIT).
* LL.M. (Cambridge), LL.M., Ph.D. (London); Barrister; Law Department, London Metropolitan University.
It is understood that a second phase of this case has been considered by an lcsi Tribunal, but the award
remains unpublished.
The author may be contacted at: <c.chatterjee@londonmet.ac.uk.
I This Convention came into force on 14 October 1966.
2 Case No. ARB/00/02, Final Award rendered 15 March 2002, Sompong Sucharitkul, President, Andrew
Rogers and David Suratgar, Arbitrators, as reproduced in 41 International Legal Materials 867, 2002. The Award
is also available at 17 ICsi Rev.-F.I.L.J. 142, 2002, 14 World Trade and Arbitration Materials 21, 2002, and
<<http://www.worldbank.org/icsid/cases/mihaly-award.pd>.

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