On 19 October 2018, the Dutch government adopted a new Model Bilateral Investment Treaty (BIT). The text narrows the definition of a qualifying "investor" and "investment" and expressly permits arbitral tribunals to take into account a qualifying investor's non-compliance with human rights guidelines when awarding compensation. These changes appear to respond to public concerns regarding the abuse of Dutch BITs by "mailbox" companies and a perceived imbalance favouring the protection of investors' interests over the State's policy-making and regulatory powers.
The Dutch government will now need to obtain authorisation from the European Commission in order to (re)negotiate existing or new BITs (excluding existing intra-EU BITs).
What is a BIT?
A BIT is an agreement between two States offering reciprocal protection of investments in their respective territories. BITs are signed and ratified by States, but those who benefit from the treaty protections are typically investors. Model BITs are used by States as preferred templates when negotiating or renegotiating their BITs.
What's new in the Dutch Model BIT?
It defines a qualifying "investment" as requiring an expectation of gain or profit and the assumption of risk (i.e. it adopts the majority of the Salini criteria). It also expressly states that "claims to money" cannot constitute qualifying investments if they relate to contracts for the sale of goods and/or services.
The definition of a qualifying "investor" in the Model BIT requires Dutch-registered entities to have (i) substantial business activities in The Netherlands or (ii) be indirectly or directly owned by a Dutch national or Dutch registered entity that has substantial business activities in the country.
Article 23 of the Model BIT permits the arbitral tribunal dealing with a claim under the BIT to take into account an investor's non-compliance with its commitments under the UN Guiding Principles on Business and Human Rights (UNGP) and the OECD Guidelines for Multinational Enterprises (OECD Guidelines) when awarding compensation. The OECD Guidelines state, amongst other things, that enterprises and their business partners should contribute to economic and social progress, that their systems and practices should foster confidence and mutual trust with the societies they operate in and that they should engage with relevant stakeholders.
How will this impact investors?
Dutch claimants have referred...