Philippe Gruslin v. Malaysia (II)
ICSID · Investment (ICSID and treaty) · Malaysia · 27 Nov 2000
Why it matters
This case is a landmark on the territorial scope of bilateral investment treaties and the definition of investment. It held that portfolio investments in stock exchange securities do not automatically qualify as protected investments unless they are in an 'approved project' as defined by the host state. The award also clarified that the term 'investment' in the dispute resolution clause is limited by the treaty's territorial and definitional provisions.
Summary
Philippe Gruslin, a Belgian national, invested about US$2.3 million in the EAMEC portfolio, a Luxembourg mutual fund that invested part of its assets in Malaysian stocks listed on the Kuala Lumpur Stock Exchange (KLSE). In September 1998, Malaysia imposed exchange controls, and the value of the KLSE investments fell to zero. Gruslin claimed that Malaysia breached the 1979 Intergovernmental Agreement (IGA) between the Belgo-Luxemburg Economic Union and Malaysia, and sought ICSID arbitration under Article 10 of the IGA. Malaysia objected to jurisdiction on three grounds: (1) the investment was not made 'in the territory' of Malaysia; (2) Gruslin did not own the KLSE assets directly; and (3) the investment was not in an 'approved project' as required by Article 1(3) proviso (i) of the IGA. The sole arbitrator, Gavan Griffith QC, first held that the IGA requires investments to be made in the territory of the host state. He then focused on the 'approved project' issue, finding that the KLSE investment did not qualify because the approval by the Capital Issues Committee (CIC) for listing securities was not an approval of a 'project' within the meaning of the IGA. The tribunal therefore upheld Malaysia's objection and dismissed the claim for lack of consent. Each party bore its own costs and half of the tribunal's fees.
The detail
Parties: Philippe Gruslin v. Malaysia (II)
Case number: ICSID Case No. ARB/99/3
Outcome: The tribunal upheld Malaysia's jurisdictional objection and dismissed the claim for lack of consent under the IGA and ICSID Convention.
Applicable law: ICSID Convention; Belgium-Luxemburg Economic Union-Malaysia Intergovernmental Agreement (IGA) of 22 November 1979; Malaysian exchange control regulations
Issues in play: The definition of 'investment' under the IGA, particularly whether portfolio investment in KLSE-listed securities qualified as an 'approved project' under Article 1(3) proviso (i), and whether the investment was made 'in the territory' of Malaysia.
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