OECD Working Papers on International Investment

ISSN: 
1815-1957 (online)
DOI: 
10.1787/18151957
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Selected studies on international investment and investment policy prepared for use within the OECD. They address such issues as investment agreements, dispute settlement, fair and equitable treatment, most favored nation treatment, and corruption.
 

Investment Treaties and Shareholder Claims for Reflective Loss: Insights from Advanced Systems of Corporate Law You or your institution have access to this content

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Author(s):
David Gaukrodger1
Author Affiliations
  • 1: OECD, France

23 July 2014
Bibliographic information
No:
2014/02
Pages:
33
DOI: 
10.1787/5jz0xvgngmr3-en

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Corporate law in advanced domestic legal systems on the one hand, and typical treaties for the protection of foreign investment on the other hand, treat claims for damages by company shareholders differently. Advanced domestic systems generally bar shareholders from claiming for reflective loss – loss that arises from injury to "their" company (such as a decline in the value of shares). The claim for the loss belongs to the injured company and not to its shareholders. In contrast, shareholder claims for reflective loss have been widely permitted under typical investment treaties over the last 10 years. Ongoing OECD-hosted inter-governmental dialogue on investment law is considering whether there are policy reasons justifying the different approaches to shareholder claims for reflective loss.

This paper examines shareholder claims for reflective loss under investment treaties in light of comparative analysis of advanced systems of corporate law. The paper considers the impact of allowing shareholder claims for reflective loss on key characteristics of the business corporation. The paper also explores possible responses by different categories of investors to the availability of shareholder claims for reflective loss under investment treaties.

Keywords:
shareholder rights, transferability of shares, comparative law, domestic impact of investment law, reflective injury, international investment law, derivative loss, derivative injury, shareholder remedies, investment treaties, board of directors, stockholders, creditors, treaty shopping, settlement, international investment agreements, access to justice, agency costs, reflective loss, corporate law, international investment, creditors’ rights, derivative action, business corporations, entity shielding, competitive neutrality, level playing field, bilateral investment treaties, consistency of arbitral decisions, shareholders, international economic law, loan covenant, judicial economy, stockholder remedies, separate legal personality, international arbitration, investment arbitration, shareholder claims, arbitrators, investor-state dispute settlement, consistency, limited liability, company law, foreign investment
JEL Classification:
  • F21: International Economics / International Factor Movements and International Business / International Investment ; Long-Term Capital Movements
  • F23: International Economics / International Factor Movements and International Business / Multinational Firms ; International Business
  • F53: International Economics / International Relations, National Security, and International Political Economy / International Agreements and Observance ; International Organizations
  • F55: International Economics / International Relations, National Security, and International Political Economy / International Institutional Arrangements
  • F63: International Economics / Economic Impacts of Globalization / Economic Development
  • G32: Financial Economics / Corporate Finance and Governance / Financing Policy ; Financial Risk and Risk Management ; Capital and Ownership Structure ; Value of Firms ; Goodwill
  • G34: Financial Economics / Corporate Finance and Governance / Mergers ; Acquisitions ; Restructuring ; Corporate Governance
  • G38: Financial Economics / Corporate Finance and Governance / Government Policy and Regulation
  • K23: Law and Economics / Regulation and Business Law / Regulated Industries and Administrative Law
  • K33: Law and Economics / Other Substantive Areas of Law / International Law
  • K41: Law and Economics / Legal Procedure, the Legal System, and Illegal Behavior / Litigation Process
 
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