Good faith limitations on protected investments and corporate structuring

On numerous occasions, investment treaty tribunals have relied—and in some cases refused to rely—on the principle of good faith to ensure that only bona fide investments and investors are protected under the relevant investment treaty. This chapter reviews the jurisprudence on illegal investments and corporate structuring and attempts to expose the purpose of the principle of good faith within this context. This chapter questions whether tribunals should rely on this principle to restrict the definition of investor and investment or whether the plain meaning of treaty provisions should prevail. Although there may be a small role for the principle of good faith in investment treaty arbitration, particularly where domestic regulation falls short of international standards, an expansive application of the principle should be rejected. Instead, tribunals should focus on treaty language and respect domestic regulation in determining what investments and corporate structures the host state wishes to protect