The National-Law Layer of Investment Disputes
International investment arbitration, including the ICSID format, is a rare and demanding process whose first qualifying filter is often national law. Before a dispute reaches an international tribunal, it must be established whether the object in dispute is an investment and whether the claimant is an investor within the meaning of the Georgian law on the promotion and guarantees of investment activity. It is precisely this law that shapes the concepts and guarantees forming the initial grid of the tribunal's analysis: the definitions of investment and investor, the legal regime of the foreign investor, the inviolability of investment and the conditions of compensation. The treaty layer stands on the second level of that sequence.
Investment and Investor — the Qualifying Concepts
An investment is any kind of property or intellectual value, or right, that is invested and used for the purpose of deriving possible profit in entrepreneurial activity carried out on the territory of Georgia. Such a value or right may consist of monetary funds, a share, stocks and other securities; immovable and movable property — land, buildings, installations and other material values; the right to use land or other natural resources, including a concession, a patent, a licence, know-how, experience and other intellectual values; as well as any other property or intellectual value or right recognised by law.
An investor is a natural or legal person, as well as an international organisation, that carries out investment in Georgia. A foreign investor is a citizen of a foreign state; a stateless person who does not permanently reside on the territory of Georgia; a citizen of Georgia permanently residing abroad; and a legal entity registered outside the borders of Georgia. Investment may be made in an object of any form of ownership, provided investment in it is not prohibited by law; in objects listed by the law, investment may be made only on the basis of the corresponding special permit or licence.
Rights and Guarantees of the Investor
In carrying out investment and entrepreneurial activity, the rights and guarantees of a foreign investor may not be less than the rights and guarantees enjoyed by natural and legal persons of Georgia, except in cases established by legislation. An investor has the right to open current and other accounts in any currency at banking institutions in Georgia, to take loans from banking and financial institutions in Georgia or abroad, or from natural or legal persons, and to purchase stocks, bonds and other securities, as well as property both in Georgia and abroad.
The rights to possess, use and dispose of the results of investment may, by decision of the investor, be transferred to another person in the manner established by law, and the parties' relationship on such transfer is regulated on a contractual basis. After the payment of taxes and mandatory levies, a foreign investor has the right to convert profit and other monetary funds at the market rate and to repatriate them abroad without restriction; the investor also has the right to export property in its ownership abroad. This last right may be restricted only by a court decision founded on law — in connection with bankruptcy, the commission of a crime or the non-performance of a civil obligation.
Inviolability of Investment and Deprivation
Investment is fully and unconditionally protected by the legislation in force in Georgia. Deprivation of an investment is permissible only in cases directly established by law, by decision of a court, or in a state of urgent necessity established by an organic law, and only with appropriate compensation. A decision on deprivation, as well as the terms of compensation, may be appealed to a Georgian court, unless otherwise provided by agreement of the parties or by an international treaty of Georgia. It is precisely this provision that opens the way to transferring a dispute into an international format where the parties have so agreed or a treaty so provides.
The Conditions of Compensation
Compensation granted to the investor must correspond to the actual market value of the deprived investment directly at the moment the deprivation occurred. Compensation must be paid without any delay and must include the loss suffered by the investor from the moment of deprivation until the payment of the compensatory amount. A foreign investor has the right to convert the compensation at banking institutions at the market rate and to transfer it abroad freely and without hindrance. These conditions serve before a tribunal as the yardstick for assessing whether the state has acknowledged the full price of the deprivation.
Frequently Asked Questions
Why does national law matter in international arbitration?
The national-law concepts of investment and investor are the initial qualifying grid: without them neither the subject matter of the dispute nor the tribunal's jurisdiction can be established.
Who is a foreign investor?
A citizen of a foreign state, a stateless person not permanently residing in Georgia, a citizen of Georgia permanently residing abroad, and a legal entity registered outside Georgia.
When may an investment be deprived?
Only in cases directly established by law, by court decision or in a state of urgent necessity established by an organic law, and only with appropriate compensation.
How is compensation determined?
By the actual market value at the moment of deprivation, paid without delay and including the loss incurred from deprivation until payment.
May profit be taken abroad?
Yes, after paying taxes and levies a foreign investor enjoys the unrestricted right of repatriation.
How We Help on Legal.ge
The prospects of an investment dispute are assessed first within the grid of Georgian guarantees — from the qualification of the investment to the conditions of compensation. We will assess the strong and weak sides of your case, prepare the grounds for transferring the dispute into an international format and represent you before the tribunal. Contact us on Legal.ge — an investment dispute demands an exact strategy from the very first step.