1887

OECD Working Papers on International Investment

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.

English

Investment Treaties and Shareholder Claims for Reflective Loss: Insights from Advanced Systems of Corporate Law

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.

English

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