‘Duration’ as a Critical Tool for Defining IICs

In a preparatory report for the second session of the WG, held in Paris on 13-15 March 2024, two elements characterising IICs have been identified, namely a subjective and objective one. The former circumscribes the notion of IICs to contracts entered into between a State (or a SOE or state agency) and a private foreign investor. The latter requires that the contract ‘relate to the establishment and operation of one or more lasting economic activities by the foreign investor in the host State, which are not merely speculative but imply some substantial commitment to its development’. The report points also out that the identification of these contracts can be achieved either by elaborating a specific normative definition or by providing some examples. While the subjective element does not pose particular challenges, the objective one is more blurred. In particular, to define an IICs one may start from the four elements provided by the ‘Salini’ test to identify an investment. Among those, special regard must be placed to the duration of the investment. I will argue that IICs must be thus identified in light of the debate around the so-called Long-Term Contracts (LTCs). According to the UPICC 2016, which implemented the outcomes of the UNIDROIT Working Group on LTCs, the latter are defined as ‘contract[s] which is to be performed over a period of time and which normally involves, to a varying degree, complexity of the transaction and an ongoing relationship between the parties’. A valuable term of reference is also provided by the Statements of Standard Accounting Practice (particularly, SSAP 9). It will be also posited that the objective requirement characterising IICs is presumed for a number of LTCs, such as concession, production sharing, and build-operate-and-transfer agreements.