Environmental Engineering Reference
In-Depth Information
It is within the interests of both contractual parties that the project does not fail.
While the investor carries the financial risk, the state faces a loss of reputation and
consequently fewer investments.
4.9 The Desertec Concept Fulfills all Investment
Requirements
Since the definition of investment is a widely discussed topic within investment
arbitration, it was necessary to assess if the Desertec Concept fulfills all possible
requirements. When the Salini tribunal set up these requirements—(1) a contribu-
tion (in cash, in kind or in labor), (2) certain duration of performance, (3) partici-
pation in the risks of the transaction, and (4) a contribution to the economic
development of the host state)—different approaches developed. These are the
subjective, objective and liberal approaches. The subjective approach claims that
only the definition of the BIT is relevant to determine the definition of investment.
The objective approach views the requirements of Art. 25(1) of the ICSID Con-
vention, the Salini criteria and the BIT definition as relevant. Finally, the liberal
approach fits in the middle of the two other approaches as it claims that only certain
parts of the Salini test are necessary besides the basic requirements of Art. 25(1) of
the ICSID Convention and the BIT definition. Although the subjective approach
seems to be favored, this did not exclude the ongoing application of what are known
as the Salini elements. One of the latest decisions in 2009 illustrated that some
tribunals even added more requirements to the definition of investment according to
Art. 25(1) of the ICSID Convention. Furthermore, one ICSID tribunal mentioned in
2010 that the question of investment definition is still unanswered. The different
approaches taken by ICSID tribunals and the literature emphasize the uncertainty
which is closely related to the issue of “what is an investment?” Due to the fact that
it is difficult to predict which approach a possible ICSID tribunal might follow, the
Desertec Concept must meet the strictest requirements. If the project is in accor-
dance with the objective approach, the risk that it is not considered to be an
investment is significantly minimized.
The Desertec Concept meets all the necessary requirements of the objective
approach. First of all, it is an investment according to the G/M-BIT. Since the
definition within the BIT is not very narrow, the Desertec Concept easily fulfills this
prerequisite. With regard to the requirement of Art. 25(1) of the ICSID Convention,
this is a bit more difficult. Without a doubt, the Desertec Concept is a significant
contribution and has a certain duration. Besides the fact that the complete project
costs around 400 billion euros, it will take at least 30-40 years before the investor
withdraws from the project. However, the element risk is already causing some
difficulties. As mentioned above, there is a need to financially support the project.
The PPP should include a PPA to secure the investor
s money. Both tools could
exclude the Salini requirement of “risk” because the investor does not want to run
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