Over the course of past two weeks, Uzbekistan has hosted the President of Singapore, H.E. Halimah Yacob and the Minister of Justice, H.E. K. Shanmugam. It is reported that a visit of the City-State's officials has been quite fruitful, resulting in two nations inking several "deals to boost cooperation", in trade and tourism.
Against this background and considering the success of the Singapore-Uzbekistan business forum held earlier this year, there is little doubt that one will witness an increase in foreign direct investments from Singapore to Uzbekistan in years to come. What guarantees and protections would Singaporean companies and individual investors enjoy doing business in this emerging jurisdiction? In this post, I will briefly overview those accorded to Singaporean investors and their investment under the Uzbekistan-Singapore BIT.
Temporal Scope of Application and Language
Uzbekistan-Singapore BIT was signed almost 20 years ago, on 15 July 2003, and entered into force four months later, on 23 November 2003. However, the BIT's substantive provisions also apply to investments made before the treaty entered into force.
The BIT was signed for the initial term of 15 years following which the treaty "shall remain in force until the expiration of twelve months from the date" either State notifies the other "of its decision to terminate" the BIT. According to the treaty's 'sunset clause', investments made prior to the State's notice of termination becomes effective shall enjoy treaty-protections for a "further period of ten years".
The BIT is authenticated in English and Uzbek languages, and provides that the English text shall prevail "in the event of divergence in the text of interpretation". This seemingly minor provision is, in fact, of utmost practical significance. To wit, had the Turkey-Turkmenistan BIT 1992 contained the 'prevailing language clause', the parties would have saved much time and legal costs, and, most importantly, the treaty would not have generated two diverging interpretations in Kılıç v. Turkmenistan (ICSID Case No. ARB/10/1) and Çap and Sehil v. Turkmenistan (ICSID Case No. ARB/12/6).
The above cases and the fact that States name "inconsistency of arbitral decisions", "lack of predictability" and "increasing duration and costs of the procedure" as prime reasons to reform Investor-State Dispute Settlement (ISDS) system begs the following questions. Are the States architects of their own misfortune? Should not the sovereigns focus on improving treaty-drafting techniques, rather than attempt to fix something that is not arguably broken? The answer to these and other questions about the ISDS reform will be given in future posts, this post, however, is less ambitious in its scope.
The Notion of "Investment"
As far as the material scope of Uzbekistan-Singapore BIT is concerned, the treaty adopts a so-called 'asset-based' definition of investment. Considering that such definition often leads to disputes whether a certain asset possesses characteristics of investment (see e.g., Romak v. Uzbekistan (UNCITRAL, PCA Case No. AA280), Uzbekistan and Singapore limited the treaty's scope to investments that are "permitted by each Contracting Party" in accordance with domestic laws and regulations and "are specifically approved in writing by the competent body designated by the Contracting Party".
It is noteworthy that in comparison to modern BITs (cf. e.g., Uzbekistan-Korea BIT 2019), Uzbekistan-Singapore BIT contains no other qualifications for the definition of "investment". It remains to be seen whether the 'approval in writing' clause would be sufficient to avoid disputes about tribunal's jurisdiction ratione materiae.
Personal Scope of Application
The personal scope of the BIT under review includes citizens of either State or companies "incorporated or constituted under the law in force of either of the Contracting Parties". Again, unlike modern BITs, Uzbekistan-Singapore BIT does not address any issues related to investors dual-nationals or investors foreign companies that are controlled by nationals of a host-State. Coupled with the absence of a 'denial of benefits' clause, this seems to be a perfect recipe for disputes as to the tribunal's jurisdiction ratione personae (see e.g., Tokios Tokeles v. Ukraine (ICSID Case ARB/02/18)).
According to the BIT, the approved investments shall enjoy "fair and equitable treatment [FET] and protection". However, in contrast to modern BIT (see e.g., Uzbekistan-Turkey BIT 2017), the FET clause in Uzbekistan-Singapore BIT is not qualified, granting tribunals a wide discretion in defining the standard's meaning.
While the treaty does not guarantee national treatment of investors and their investments, Uzbekistan's investment legislation does. According to BIT's article 15, the provisions of the legislation in that part shall arguably prevail over the treaty provisions.
Further, Uzbekistan-Singapore BIT requires the Contracting Parties to provide "treatment no less favorable" than that they accord to investors and investments from any third State, subject to the standard exceptions. The MFN clause is silent as to whether it applies to substantive protections only or covers the ISDS provisions too, again leaving this issue to arbitrators (see e.g., Maffezini v. Spain (ICSID Case ARB/97/7).
The treaty expressly protects investors against expropriation or "measures having effect equivalent to" expropriation (i.e. indirect expropriation) requiring a host-State to not take such measures unless they are for legitimate-purpose and non-discriminatory and "against compensation", being "the value immediately before expropriation".
When assessing the prospects of their claim, investors should be mindful of the treaty's article 11 safeguarding the Contracting Parties' right to regulate and carving out measures "directed to the protection of ... essential security interests ... public health or prevention of diseases and pests in animals or plants" from the BIT's scope.
Investor-State Dispute Settlement (ISDS)
Uzbekistan-Singapore BIT's ISDS provisions are fairly standard: they neither contain a 'fork-in-the-road' clause nor require an investor to exhaust local remedies. Note, however, that a treaty expressly bars claims "with respect to any act or fact that took place or any situation that ceases to exist" before the BIT entered into force.
According to the BIT, any dispute "in connection with investment" shall, as far as possible be settled through negotiations. If the dispute cannot be resolved within 6 month from the date any party gave a notice of intention to negotiate, any party may request the dispute to be submitted to conciliation or arbitration under the ICSID Convention which Uzbekistan and Singapore are parties to.
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If you want to learn more about national investment legislation and international investment treaties of Uzbekistan and other Central Asian States, check out a new book I co-edited with Kiran Gore, Kabir Duggal and Crina Baltag 'International Investment Law and Investor-State Disputes in Central Asia: Emerging Issues' published by Kluwer Law International.