Standard Chartered Bank v. The United Republic of Tanzania
ICSID · Investment (ICSID and treaty) · Tanzania · 2 Nov 2012
Why it matters
This case clarifies that for a parent company to claim BIT protection, it must actively participate in making the investment, not merely hold shares in a subsidiary that made the investment. The Tribunal emphasized the reciprocal nature of BITs and rejected jurisdiction where the claimant disavowed control over the subsidiary. It sets a precedent on the 'active contribution' requirement for corporate groups.
Summary
Standard Chartered Bank (SCB), a UK company, claimed that Tanzania breached the UK-Tanzania BIT regarding a loan made to Independent Power Tanzania Limited (IPTL) for a power plant. The loan was originally made by Malaysian banks, then restructured and eventually purchased by SCB's Hong Kong subsidiary (SCB HK) in 2005. SCB argued that it was an investor under the BIT because it owned SCB HK. Tanzania objected to jurisdiction, arguing that SCB had not made any investment in Tanzania, the investment was made by SCB HK, a Hong Kong entity. The Tribunal agreed with Tanzania. It held that under the BIT, an investor must actively contribute to the investment. SCB did not show that it controlled SCB HK or directed the purchase; in fact, SCB disavowed reliance on control. The Tribunal found that SCB failed to demonstrate its active participation in the investing process. Therefore, the Tribunal lacked jurisdiction. The case underscores that BIT protection does not automatically extend to all subsidiaries of a national of a contracting state; the national must itself be the one making the investment.
The detail
Parties: Standard Chartered Bank v. The United Republic of Tanzania
Case number: ICSID Case No. ARB/10/12
Outcome: The Tribunal dismissed the arbitration for lack of jurisdiction. Each side bears its own legal expenses; arbitration costs split 50/50.
Applicable law: UK-Tanzania BIT (1994); ICSID Convention
Issues in play: The key issue was whether Standard Chartered Bank (UK) had made an 'investment' under the BIT when the loan was actually purchased by its Hong Kong subsidiary. The Tribunal required active contribution by the investor, not just ownership through a subsidiary.
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