Historically, investors whose investments were expropriated or
nationalised by the Host State had few rights of redress. The
options were limited to seeking to enforce their rights in the
national courts of the Host State or appeal to their own Home State
to place commercial, diplomatic, or military pressure on the Host
State depending on the nature of the said investment.

However, the international community has taken a conscious step
to promote investment into developing nations by creating avenues
for foreign investors to protect their rights over the last 50
years. The first key development was the creation of the Convention
on the Settlement of Investment Disputes between States and
Nationals of Other States (hereinafter referred to as “the
ICSID Convention”) in 1965. This led to the establishment of
the International Centre for the Settlement of Investment Disputes
(“ICSID”) as a division of the International Bank for
Reconstruction and Development (“World Bank”). Arising
from the ICSID Convention, there has been an exponential growth in
the number of investment treaty arbitrations that have been filed
with ICSID as foreign investors seek to protect and enforce their
rights by relying on the protection afforded in Bilateral
Investment Treaties (“BITs”) between the State the
foreign investor is investing in and the Host State.

The arena of investment treaty arbitration is a burgeoning one
and is seen by arbitrators, practitioners, and academics alike as
the epitome of international arbitration. It is seen as creating a
powerful regime for the resolution on investor-state disputes and
as overcoming a barrier to the flow of investment into the less
developed or developing countries. It is also perceived as creating
a powerful and vigorous regime for the enforcement of awards handed
down by ICSID perhaps even more favourable than those awards handed
down by other arbitral institutions such as the International
Chamber of Commerce (“ICC”), the London Court of
International Arbitration (“LCIA”) and the American
Arbitration Association (“AAA”), to name but a few.


ICSID is an autonomous international institution established
under the ICSID Convention. 163 countries are signatories to the
ICSID Convention and 154 countries are contracting States. The
ICSID Convention which is a multilateral treaty formulated by the
World Bank, came into force on 14th October 1966. The aim of the
ICSID Convention is to remove major impediments to international
flows of private investment posed by non-commercial risks and to
provide specialised international methods for the resolution of

investment treaty disputes. It was created as an impartial
international forum for providing facilities for the resolution of
legal disputes between eligible parties through conciliation or
arbitration procedures. Malaysia acceded to the ICSID Convention in
October 1966 and has entered into BITs with 67
countries.1 There has been a rapid expansion of
ICSID’S caseload. At the end of 2019, the number of
conciliation and arbitration cases registered with ICSID since its
inception has reached 745. ICSID’s membership has increased
following the ratification of the ICSID Convention by Djibouti,
albeit that there have been recent denunciations by the Republic of
Bolivia, Venezuela, and Ecuador. There are rumblings that other
countries in the developing world may elect to follow suit.

It should be noted that apart from the ICSID Convention, there
have been other development in the form of free trade agreements
and regional trade agreements which also provide for the resolution
of investment treaty disputes between an investor and the Host
State. Examples of this include the North American Free Trade
Agreement (“NAFTA”) and the Asean Investment Treaty to
name but a few. There have also been industry specific treaties
which also provide for the resolution of investment treaty claims
such as the Energy Charter, which address energy disputes.


Investment disputes generally arise when an investor, who may be
an individual or a limited company, or a party to a joint venture
or shareholder, has its investment in a contracting Host State
nationalised, expropriated or unfairly treated by the said Host
State. The investor can then, through the BIT with the Host State,
resort to an investment treaty arbitration or conciliation under
the ICSID Arbitration or Conciliation Rules.


The Washington Convention or ICSID Convention gives no
definition of “investment”. Article 25 of the ICSID
Convention in conferring jurisdiction on the Centre, merely
provides as follows:

“Article 25(1) (1) The jurisdiction of the Centre shall
extend to any legal dispute arising directly out of an investment,
between a Contracting State (or any constituent subdivision or
agency of a Contracting State designated to the Centre by that
State) and a national of another Contracting State, which the
parties to the dispute consent in writing to submit to the Centre.
When the parties have given their consent, no party may withdraw
its consent unilaterally.”

Georges R. Delaume has attempted to explain the rationale for
this approach:2

“The term ‘investment’ is not defined in the
Convention. This omission is intentional. To give a comprehensive
definition… would have been of limited interest since any such
definition would have been too broad to serve a useful purpose [or]
might have arbitrarily limited the scope of the Convention by
making it impossible for the parties to refer to the Centre a
dispute which would be considered by the parties as a genuine
‘investment’ dispute though such dispute would not be one
of those included in the definition in the

Having said that, most BITs have a provision which defines
“investment”. In the context of Malaysia’s
experience, for example, the UK-Malaysia BIT states the

Article 1 – Definition:

“For the purposes of this Agreement

(1) (a) “investment” means every kind of asset and
in particular, though not exclusively, includes:

(i) movable and immovable property and any other property
rights such as mortgages, liens, or pledges;

(ii) shares, stock and debentures of companies or interest
in the property of such companies;

(iii) claims to money or to any performance under a contract
having a financial value;

(iv) intellectual property rights and goodwill;

(v) business concessions conferred by law or under contract,
including concessions to search for, cultivate, extract, or exploit
natural resources.

(b) The said term shall refer:

(i) in respect of investments in the territory of the United
Kingdom of Great Britain and Northern Ireland, to all investments
made in accordance with its legislation, and

(ii) in respect of investments in the territory of Malaysia,
to all investments made in projects classified by the appropriate
Ministry of Malaysia in accordance with its legislation and
administrative practice as an “approved

It can therefore be seen that a somewhat prescriptive approach
has been adopted by Malaysia in seeking to define investments in
some of its BITs. This approach in itself is not entirely uncommon
across BITs. At this juncture it would be pertinent to point out
that a number of older BITs involving Malaysia and some foreign
States refers to the specific term “approved project”. In
these BITs it is not sufficient for a foreign investor to satisfy
the requirements that its project or contract amounts to an
“investment” alone. There is an additional hurdle to pass
in order to be entitled to protection under these BITs, namely,
that the project or contract must be afforded the status of an
“approved project”.

The Government of Malaysia takes the view that a project is
afforded an “approved project” status when the foreign
investor has obtained the express approval of the Ministry of
International Trade and Industry (“MITI”) within the
Government of Malaysia, designating the said project as an
“approved project”. The mere fact that the Government of
Malaysia has entered into a contract with a foreign investor does
not automatically afford such an investor protection under a BIT
where the clauses relating to “approved projects” are

The problem with this approach or requirement for a project to
be afforded an “approved project” status is that there
appears to be no clear or uniform guidelines published by MITI as
to the precise procedure involved in securing such a status to
entitle the investor to protection. It appears to be arbitrary to
an extent. In recognition of this, the term “approved
project” is presently being removed from the BITs that the
Government of Malaysia is negotiating or re-negotiating with
foreign States.

This concept of an “approved project” status is not
peculiar to Malaysia alone. Singapore, Thailand, the Philippines,
and Indonesia appear to have a similar concept, save that the
wording of the relevant clauses are somewhat different. This is
apparent from a consideration of the following BITs:

(a) BIT between Malaysia and the Belgo-Luxemburg Economic

“Article 1 – Definitions

(3) T he term “investment” shall comprise every kind
of assets and more particularly, though not exclusively:

Provided that such assets when invested:

(i) in Malaysia, are invested in a project classified as an
‘approved project’ by the appropriate Ministry in Malaysia,
in accordance with the legislation and the administrative practice,
based thereon;”

(b) BIT between Singapore and Pakistan:

“Article 2.

  1. This Agreement shall only apply:

(a) in respect of investments in the territory of the
Republic of Singapore, to all investments made by nationals and
companies of the Islamic Republic of Pakistan, which are
specifically approved in writing by the competent authority
designated by the Government of the Republic of Singapore and upon
such conditions, if any, as it shall deem fit;”

(c) BIT between Belgium and Indonesia:

“Article 9.

The protection accorded to investors by the provisions of
the present Agreement shall apply:

(d) in the territory of the Republic of Indonesia only to
investments which have been approved by the Government of the
Republic of Indonesia pursuant to the stipulations contained in the
Foreign Investment law No.1 of 1967 or other relevant laws and
regulations of the Republic of Indonesia;”

(d) BIT between The Netherlands and the Republic of The

“Article 2

This Agreement shall apply only to investments brought into,
derived from, or directly connected with investments brought into
the territory of one Contracting Party by nationals of the other
Contracting Party in conformity with the former Party’s laws
and regulations, including due registration with the appropriate:
agencies of the receiving Contracting Party, if so required by its

(e) BIT between Thailand and the United Kingdom

“Article 3

(1) The benefits of this Agreement shall apply only in cases
where the investment of capital by the nationals and companies of
one Contracting Party in the territory of the other Contracting
Party has been specifically approved in writing by the competent
authority of the latter Contracting Party.

(2) Nationals and companies of other Contracting Party shall
be free to apply for such approval in respect of any investment of
capital whether made before or after the entry into force of this

It can therefore be seen that the mere fact that a foreign
investor may satisfy the ingredients of what constitutes an
“investment” under a BIT does not necessarily mean that
protection is granted. The said “investment” may also
have to satisfy the additional requirement of being an
“approved investment” in accordance with the express
provisions of the applicable BIT.


The term “investment” is by its very nature broad and
not easily defined. Professor Christoph Schreuer3 has
suggested that an “investment” exhibits the following

(a) the project must have a certain duration;

(b) there is regularity of profit and return;

(c) there is an assumption of risk;

(d) the commitment of the investment is substantial; and

(e) there must be a significant contribution to the Host
State’s development.

Whilst the notion of investment and its definition has not
become a serious barrier to jurisdiction in investor-state
arbitrations, there are nevertheless differing views as to what
constitutes an “investment” within the meaning of Article
25 of the ICSID Convention. Tribunals have to a large extent
approached each such objection to jurisdiction on its own merits
with regard to the individual circumstances of the dispute at

There is a large pool of academics and practitioners
particularly from Europe and the United States of America who take
a very liberal view in interpreting the term
“investment”. There is another school of thought that
adopts a more restrictive approach. This has been discussed in a
number of ICSID decisions.4 It should be noted that
there is no doctrine of stare decisis in so far as ICSID
jurisprudence is concerned.


Malaysia has not been exempted from investment treaty
arbitrations. To date the Government of Malaysia has been named as
a respondent in four investment treaty claims of which three have
been filed under the ICSID Convention and one pursuant to the Asean
Investment Treaty 1997. This is despite Malaysia having no history
of expropriation or nationalisation.

These four cases involving Malaysia are discussed in brief

Phillippe Gruslin v Malaysia, ICSID Case No.

Phillippe Gruslin (“Gruslin”), a Belgian national,
claimed that in January 1996 he made an investment of some US$2.3
million in securities listed on the Kuala Lumpur Stock Exchange
(“KLSE”) through the entity known as the Emerging Asian
Markets Equity Citi portfolio (“EAMEC portfolio”).
Gruslin’s claim against the Government of Malaysia was for
losses in the value of his investment arising from the alleged
breach by the Government of Malaysia of the terms of an
Intergovernmental Agreement with the BelgoLuxemburg Economic Union.
The claim was that the imposition by the Government of Malaysia of
exchange controls in September 1998 constituted a breach of
obligations owed by the Government of Malaysia to Gruslin under the
terms of the said BIT.

The Government of Malaysia argued that Gruslin’s investment
in Malaysia was not an “approved project” within the
meaning of Article 1(3)(i) of the BIT between Malaysia and the
Belgo-Luxemburg Economic Union 5. The Government of
Malaysia also argued that the portfolio and stock market
investments did not fall within the definition of an “approved
project”. Malaysia relied on historical evidence, namely the
correspondence between MITI and various foreign governments and
respective investors who had obtained “approved project”
status for their investment in seeking to sustain this
jurisdictional objection. Gruslin relied on a note exchanged
between the Ministry of Foreign Affairs, Government of Malaysia,
and the Dutch Embassy in Malaysia with regard to the clarification
of the term “approved project”. It reads as follows:

“the term “Approved Projects” under Article
1(3)(i) of the Agreement on Encouragement and Reciprocal Protection
of Investments between Malaysia and the Belgo-Luxemburg Economic
Union should be read together with Article 1(3)(a) to Article
1(3)which. If any project undertaken does not require approval from
the relevant designated Ministries, hence Article 1(3)(i) is not

The tribunal took the view that the note was of uncertain effect
in relation to Gruslin’s investment. The tribunal also took the
view that it was for Gruslin to discharge the burden of proof that
the particular assets in the EAMEC portfolio fell within the
definition of the Article 1(3) of the BIT. The tribunal therefore
rejected Gruslin’s contention that the note had the effect of
abrogating the requirement of proviso (i) to Article 1(3) of the

Gruslin also argued that, as the investment had been approved
pursuant to Article 7 of the KLSE Listing Manual which required
approval of the then Capital Issues Committee (“CIC”) the
said investment should be afforded protection. It was Gruslin’s
position that arising from CIC approval that the listing of any
shares on the KLSE was automatically an investment in an
“approved project” so as to satisfy the requirements of
proviso (i) to Article 1(3) of the BIT between Malaysia and the
Belgo-Luxemburg Economic Union.

The tribunal, however, took the view that the said proviso to
Article 1(3) of the BIT between Malaysia and the Belgo-Luxemburg
Economic Union and the CIC requirement concerned different subjects
such that the approval by the CIC only satisfied a governmental
requirement that the business of a corporation be approved by a
governmental agency. The tribunal was of the view that the approval
by the CIC was not determinative of whether or not the investment
was an “approved project” within the meaning of Article
1(3)(i) of the said BIT. The tribunal therefore upheld the
objection of the Government of Malaysia that Gruslin’s
investment was not an “approved project” attracting
protection under the said BIT.

The investment treaty claim filed by Gruslin was therefore
dismissed on jurisdictional grounds.

Phillippe Gruslin v Malaysia, ICSID Case No.

The is very little public information surrounding this dispute
save that the subject matter of the dispute pertains to a
construction project and that the investment treaty claim was
amicably resolved between the parties. Accordingly, there is no
award handed down by a tribunal.

Malaysian Historical Salvors v Malaysia, ICSID Case No.

Malaysian Historical Salvors Sdn Bhd (“MHS”) entered
into a salvage contract on August 1991 to salvage the wreck and
contents of a sunken vessel, Diana. Disputes arose under that
contract which initially resulted in commercial arbitration between
MHS and Malaysia. MHS was dissatisfied with the outcome of the
arbitration proceedings and subsequently commenced proceedings
before the Malaysian Courts in which MHS was unsuccessful.

Some years later, MHS instituted an investment treaty claim
pursuant to Article II of the ICSID Convention, alleging that the
Government of Malaysia confiscated MHS’s property and that the
national courts denied MHS justice and due process of law

The Government of Malaysia raised a jurisdictional objection in
the investment treaty claim, namely, that the salvage contract was
not an investment within the meaning of the BIT between the United
Kingdom and Malaysia and also that it was not an “approved
project”. The Government of Malaysia contended that a marine
salvage contract simply did not fall within the meaning of the
definition of an “investment” under the Article 1(a)(i)
to (v) of the UK-Malaysia BIT or Article 25 of the of the ICSID

In asserting that the salvage contract was not an “approved
project”, the Government of Malaysia contended that MHS had
not submitted an application to MITI for its investment to be
classified as an “approved project” in order to enjoy
protection under the relevant BIT. It was further contended that
the onus lay on the party seeking protection under the BIT to make
an application to MITI, it being immaterial whether the protection
sought under the relevant BIT is for the manufacturing sector or
nonmanufacturing sector. The Government of Malaysia argued that no
undue emphasis should be placed on the execution of the salvage
contract by a government department on behalf of the Government of
Malaysia as all contracts entered into by the Government of
Malaysia have to be signed by authorised persons pursuant to the
provisions of Section 2 of the Government Contracts Act 1949, which
reads as follows:

“All contracts made in Malaysia on behalf of the
Government shall, if reduced to writing, be made in the name of the
Government of Malaysia and may be signed by a Minister, or by any
public officer duly authorized in writing by a Minister either
specially in any particular case, or generally for all contracts
below a certain value in his department or otherwise as may be
specified in the authorization.”

The Government of Malaysia also argued that the fact that a
number of Ministries within the Government of Malaysia were
involved did not accord “approved project” status to the
salvage contract concerned. Much reliance was placed by the
Government of Malaysia on the reasoning of the tribunal in the
Gruslin decision.

The tribunal7 which consisted of Michael Hwang SC as
sole arbitrator, in upholding the Government of Malaysia’s
objection on grounds of jurisdiction, concluded that the salvage
contract did not amount to an “investment” within the
meaning of Article 25(1) of the ICSID Convention. The tribunal
concluded that MHS’s contract was in essence a simple marine
salvage contract. The tribunal opined that the hallmarks of an
investment should be fact specific and there should be a holistic
assessment in determining what constitutes an
“investment”. In this regard, the tribunal held that:

(a) firstly, the tribunal held that the lack of regularity of
profit and return in respect of the salvage contract was

(b) secondly, that the contributions of a financial nature were
made under a commercial salvage contract;

(c) thirdly, the fact that the contract took four years to
complete was a risk that would be associated with the salvage
contract in view of the element of fortuity;

(d) fourthly, the risks that the Claimant assumed under the
contract were inherent in a salvage contract in view of the
“no find no pay” concept and they were normally
commercial risks that would be assumed in salvage contracts;

(e) lastly, the tribunal held that the salvage contract did not
make either a significant or substantial contribution to the
economic development of Malaysia.

The tribunal therefore held that the salvage contract was not
“an investment” and dismissed MHS’s claim on
jurisdictional grounds. The tribunal did not address the arguments
relating to the salvage contract not being an “approved
project” in its award.

MHS thereafter sought to annul the award. The Annulment
Committee by 2:1 majority, subsequently held that the salvage
contract was an “investment”. The majority, which
consisted of Peter Tomka and Stephen Schwebel8 , took
the view that the contract between the Government of Malaysia and
MHS is one of a kind of asset and that what was precisely at issue
between the Government of Malaysia and MHS was a claim to money and
to performance under a contract having financial value. The
majority went on to state that the salvage contract involves
intellectual property rights and the right granted to salvage may
be treated as a business concession conferred under contract.
Hence, by the terms of the agreement, the salvage contract was an
investment. In the majority’s view, there is no basis for an
overly strict, application of the five Salini criteria in every
case as the said criteria are not fixed or mandatory as a matter of
law as these criteria do not appear in the ICSID Convention.

In summation, the majority in the Annulment Committee was of the
view that the tribunal had manifestly exceeded its powers for the
following reasons:

(a) the tribunal altogether failed to take account of and apply
the BIT defining “investment” in broad and encompassing
terms but rather limited itself to its analysis of criteria which
it found to bear upon the interpretation of Article 25(1) of the
ICSID Convention;

(b) the tribunal’s analysis of these criteria elevated them
to jurisdictional conditions, and exigently interpreted the alleged
condition of a contribution to the economic development of the host
State so as to exclude small contributions, and contributions of a
cultural and historical nature; and

(c) the tribunal failed to take account of the preparatory work
of the ICSID Convention and, in particular, reached conclusions not
consonant with the travaux in key respects, notably the decisions
of the drafters of the ICSID Convention to reject a monetary floor
in the amount of an investment, to reject specification of its
duration, to leave the term “investment” undefined, and
to accord great weight to the definition of an
“investment” agreed by the Parties in the instrument
providing for recourse to ICSID.

Mohammed Shahabudeen9 who dissented, held that the
claimant’s outlay did not promote the economic development of
Malaysia in the sense that it did not substantially or
significantly contribute to it. Mohammed Shahabudeen was of the
view that the economic development of the Host State is a condition
of an ICSID investment. In this regard, Mohammed Shahabudeen held

(a) however wide is the competence of parties to determine the
terms of an investment, that competence is subject to some outer
limits outside of their will, if only to measure the width of their
competence within those limits;

(b) the outer limits in this particular dispute included a
requirement that an investment must contribute to the economic
development of the Host State10;

(c) the tribunal was correct in finding that the contribution to
the economic development of the Host State had to be substantial or

(d) the tribunal was also correct in finding that MHS’s
outlay did not promote the economic development of Malaysia in a
substantial or significant manner11;

(e) it is a reversal of the logical process to begin the inquiry
with a consideration of what is an investment under the UK-Malaysia
BIT; and

(f) if the tribunal erred in holding to these effects, it
nevertheless did not manifestly exceed its powers.

The Annulment Committee did not address the arguments relating
to the salvage contract not being an “approved project”
in either the majority award or the minority award.

To date, MHS has taken no steps to re-institute a fresh
investment treaty claim arising from the majority decision of the
Annulment Committee. The majority decision of the Annulment
Committee appears to be the subject matter of controversy among
some academic writers.

Boonyanit Boonsom v Government of Malaysia

This is not a claim under the ICSID Convention but bears
consideration as it is an investment treaty claim under the Asean
Treaty 1987. The Government of Malaysia is a party to the Asean
Investment Treaty 1987 and was a claim registered by the family of
a Thai investor, Boonyanit Boonsom, arising out of the decision
handed down by the Federal Court of Malaysia in Adorna
Properties Sdn Bhd. vs Boonyanit Boonsom

The Thai investor invested in a piece of land in Penang.
However, due to a fraud that was committed in the Land Office in
Penang, the property in question was transferred to a third party
who claimed to have an indefeasible title to the property. The
matter was the subject matter of litigation before the High Court
of Malaya, Court of Appeal of Malaysia and ultimately, the Federal
Court of Malaysia. The Federal Court of Malaysia upheld the
decision of the High Court of Malaya that the purchaser, despite
the fraud, had indefeasible rights to the said piece of land.

The decision of the Federal Court of Malaysia in Adorna
Properties Sdn Bhd. vs Boonyanit Boonsom
was the subject
of much criticism by academic writers. Ultimately, the decision in
Adorna Properties Sdn Bhd. vs Boonyanit Boonsom
was subsequently overruled by another decision of the Federal Court
some years later by way of a decision in Tan Ying Hong v
Tan Sian Sian

The crux of the claim by the family of the Thai investor against
the Government of Malaysia was premised on there being denial of
justice and expropriation in the light of the Federal Court of
Malaysia revisiting its earlier decision in Adorna
Properties Sdn Bhd. vs Boonyanit Boonsom
. Specific
allegations were made as to the integrity or lack thereof of the
judiciary in Malaysia at the material time the Thai investor was
litigating the matter before the national courts. Ultimately, this
investment treaty claim did not proceed to a hearing on the merits.
This dispute was amicably resolved, relatively recently.


Malaysian investors have resorted to investment-treaty claims.
Set out below are some of the relevant disputes.

Telekom Malaysia Berhad v Republic of Ghana

Telekom Malaysia Berhad claimed a sum of approximately USD38
million in respect of their investment in Ghana Telecommunications
Company Limited (“Ghana Telecommunications”) against The
Republic of Ghana pursuant to the Bilateral Investment Treaty
entered into between the parties, in respect of a dispute
concerning Telekom Malaysia Berhad’s interest in Ghana
Telecommunications. The arbitration was held under the UNCITRAL

MTD Equity Sdn Bhd & MTD Chile SA v Republic of
Chile, ICSID Case No. ARB/01/17

This is a case in which a Malaysian company took advantage of
the Chile-Malaysia BIT. This was an investment with regard to the
development of a mixed used planned community in Santiago, Chile.
The site which was zoned for agriculture required rezoning and
applications were made to various Chilean agencies. Approval was
granted and thereafter development commenced. Subsequently, MTD
Equity Sdn Bhd was informed that the project was inconsistent with
the Government of Chile’s urban development policy, by which
time MTD Equity Investment Sdn Bhd had invested substantial monies.
An investment treaty claim was then filed on or about 6th August
2001. On 25th May 2004, the tribunal ultimately found the
Government of Chile liable and ordered payment of approximately
USD6 million together with interest in favour of MTD Equity Sdn Bhd
and its Chilean subsidiary.

Axiata Investments (UK) Limited & Ncell Private
Limited v Federal Democratic Republic of Nepal, ICSID Case No.

This is a claim by a Malaysian telecommunication company called
Celcom Axiata Berhad by way of its English subsidiary in respect of
a telecommunications dispute pursuant to the UK/Nepal BIT. The
tribunal has been constituted and the arbitration is presently
pending. A confidentiality order was issued by the tribunal on 3rd
July 2020 preventing disclosure of the details of the claim.

Ekran Berhad v People’s Republic of China, ICSID
Case No. ARB/11/15

On or about 24th May 2011, Ekran Berhad, gave notice of
arbitration under the China-Malaysia BIT in respect of a dispute
pertaining to the construction of an arts and cultural facility.
This dispute appears to have since been settled and the investment
treaty claim was discontinued on 16th May 2013.

KLS Energy Lanka Sdn Bhd & KLS Energy Lanka
(Private) Ltd v Democratic Socialist Republic of Sri Lanka, ICSID
Case No. ARB/18/39

KLS Energy Lanka Sdn Bhd, is presently involved in a dispute
with the Government of Sri Lanka under the Sri Lanka-Malaysia BIT.
The subject matter of the dispute pertains to renewable energy
generation enterprise valued at USD150 million. The investment
treaty claim is presently ongoing.


Malaysia has entered into Free Trade Agreements with a number of
countries such as Australia, Chile, India, Japan, New Zealand,
Pakistan, Turkey, and the European Union. These Agreements also
contain dispute resolution provisions whereby the disputes arising
under the Free Trade Agreements between a foreign investor and
Malaysia can be resolved by way of arbitration. Malaysia also
entered into the Trans-Pacific Partnership Agreement
(“TPPA”) with twelve Pacific Rim Nations, namely,
Australia, Brunei Canada, Chile, Japan, Mexico, New Zealand, Peru,
Singapore, Vietnam, and the United States of America. However, the
United States of America withdrew from the TPPA on 23rd January
2017. In the light of the United States of America’s
withdrawal, the TPPA investors from the remaining eleven countries
in November 2017, reached an agreement to implement the TPPA, now
renamed as the Comprehensive Progressive Agreement for Transpacific
Partnership (“CPTPP”). The CPTPP has been signed by all
the eleven countries and is now awaiting ratification. Malaysia has
yet to ratify the CPTPP.

The CPTPP has dispute resolution provisions for international
arbitration. These FTAs and the CPPTP will, in future, likely give
rise to investment treaty claims.


In conclusion, the following salient points ought to be given
regard to:

(a) as a foreign investor in Malaysia, it is necessary to have
regard to the terms of the applicable BIT with Malaysia and to
ascertain if there is an “approved project” provision or
requirement subsisting in the said BIT in order to properly
ascertain if the investment is afforded suitable protection;

(b) Malaysian companies or investors looking to invest abroad
should be mindful of the existence of terms of any BITs so as to
ensure that any investment is capable of protection by way of an
investment treaty claim. In this regard, Malaysian companies and
investors should be extremely careful when seeking to invest in
what may be considered “high risk” countries. It is
imperative that a proper review is conducted of the available
investment treaty protection, particularly, where the investments
are capital intensive and if one is entering into agreements with
the Host State directly or a government agency within the Host
State; and

(c) ultimately, the Malaysian experience in investment treaty
disputes, in particular, under the ICSID Convention has been
relatively favourable. Malaysia does not have a history of
expropriation of foreign investments and claims of denial of
justice have to date not succeeded on the merits, which suggests
that the legal framework within Malaysia in terms of the national
court system and the commercial arbitration system provide suitable
avenues for foreign investors to properly enforce their contractual
rights should a dispute arise.


1 The full list can be found on the ICSID website at

2 ‘The Convention on the Settlement of Investment
Disputes Between States and National of Others’ (1996) 1 INT
LAW 64, 70

3 The ICSID Convention: A Commentary (2001)
(“Schreuer”) p. 121 et seq

4 Salini Costruttori S.p.A. and Italstrade S.p.A. v
Kingdom of Morocco ICSID Case No. ARB/00/4; Joy Mining Machinery
Ltd v Arab Republic of Egypt ICSID Case No. ARB/03/11; Bayindir
Insaat Turizm Ticaret Ve Sanayi A.S. v Islamic Republic of Pakistan
ICSID Case No. ARB/03/29; Ceskoslovenska Obchodni Banka, a.s. v
Slovak Republic ICSID Case No. ARB/97/4; PSEG Global Inc and Konya
Ilgin Elektrik Uretim ve Ticaret Ltd Sirketi v Republic of Turkey
ICSID Case No. ARB/02/5; Jan de Nul N.V. Dredging International
N.V. v Arab Republic of Egypt ICSID Case No. ARB/04/13.

5 See Article 1(3) of the BIT between Malaysia and the
Belgo-Luxemburg Economic Union above.

6 Tan Sri Dato’ Cecil Abraham and Dato’ Sunil
Abraham appeared as counsel for the Government of Malaysia in this
investment treaty dispute.




10 Patrick Mitchell v. Democratic Republic of the Congo,
ICSID Case No. ARB/99/7, Decision on the Application for Annulment
of the Award, 1 November 2006 (“Patrick Mitchell v.
DRC”), para. 31.

11 Amco Asia Corporation and others v. Republic of
Indonesia, ICSID Case No. ARB/81/1, Decision on Jurisdiction, 25
September 1983 (“Amco v. Indonesia”). See also id.,
Award, 20 November 1984.

12 [2001] 1 MLJ 241. 13 [2010] 2 MLJ 1.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

Source Google News