The 2019 Morocco Model BIT: Moving Forwards, Backwards or Roundabout in Circles?

Author Notes

Abstract

The Moroccan Model Bilateral Investment Treaty (BIT) (2019) adds to a growing body of ‘new-generation’ model BITs that have fuelled the conversation on reforming the investment arbitration system. Broadly speaking, such agreements have attempted to rethink means of dispute resolution and traditional investment protection standards while adding detailed investor obligations and standards of conduct. In that context, this article discusses the provisions of the Moroccan Model BIT (2019), highlighting not only progressive developments but also areas of concern. Upon comparing the provisions of the BIT with those of other ‘new-generation’ investment agreements, as well as existing treaty practice, the authors offer the following findings.

Firstly, the provisions on the jurisdictional aspects clearly exclude from the scope of the BIT investors owned or controlled by an entity from a third State and investments made with funds of illegal origin. Secondly, the Moroccan Model BIT sets out a ‘like circumstances’ test in the national treatment provision and restricts the application of the most favoured nation provision to situations in which another (foreign) investment has effectively been treated differently by the host State through actual measures. A mere import of a more favourable provision from another BIT is herewith excluded. Thirdly, while the BIT contains detailed provisions on corporate social responsibility with reference to international standards set by the International Labour Organization (ILO) and the Organisation for Economic Co-operation and Development (OECD), it notably omits reference to any environmental or social impact assessment requirement as a specific investor obligation. Fourthly, in order to balance State regulatory powers with investment protection, the Moroccan Model BIT circumscribes conduct amounting to a breach of the fair and equitable treatment (FET) standard, and specifically excludes the doctrine of legitimate expectations. Fifthly, while the BIT protects investors against not only direct but also indirect expropriation, it creates uncertainty by adopting inconsistent provisions as to what constitutes the latter. Sixthly, the Moroccan Model BIT (2019) adds various novelties in the dispute resolution section. For example, it allows for States to bring claims against foreign investors.

I. INTRODUCTION

Investment arbitration has seen some major developments in the short time of its existence. Only seven decades have come between the birth of a mostly disregarded means of dispute resolution between a foreign investor and its host State, and the proliferation of investment arbitrations in the past 20 years. Having experienced some public backlash, in particular during the Transatlantic Trade and Investment Partnership (TTIP) negotiation process, the crucial term of the current momentum is ‘reform’. The United Nations Commission on International Trade Law (UNCITRAL) Working Group III is discussing systemic reform and various incremental reform options; in parallel, some States are introducing changes to their foreign policy by terminating or renegotiating their bilateral investment treaties (BITs).³ In such negotiations States use a well-known tool: model BITs.

A model BIT constitutes a draft of a BIT that can be used as a blueprint in negotiations. It shows the approach of the State to its counterparts and allows for a discussion of common objectives, which might ultimately lead to the ratification of a BIT. Some recently published model BITs, such as the Dutch Model BIT, have attracted the attention of the legal community and have been discussed widely.⁴ In contrast, the latest Moroccan Model BIT has attracted little scholarly attention—a gap that this article seeks to close.

In 2015, the Moroccan Government established a working group charged with the drafting of a new model BIT.⁵ The working group analysed the current climate of investment arbitration, with particular regard to Morocco, its existing BITs and economic priorities.⁶ A year later, the working group finished its first draft, on which it invited comments in 2017.⁷ In July 2018, it then submitted the final draft to the United Nations Conference on Trade and Development (UNCTAD) for review.⁸ Once the review was over, Morocco published the new Model BIT in December 2019. In recent years, Morocco has concluded various new BITs.⁹ Two of them were concluded after the Moroccan Model BIT (2019) (Brazil (2019) and Japan (2020)) and they are discussed at appropriate junctures in the article.

Generally, the Moroccan Model BIT (2019) can be placed in a group of ‘new-generation’ model BITs published in the past eight years. These are: the South African Development Community (SADC) Model BIT (2012); the Brazilian Model BIT (2015); the Pan African Investment Code (PAIC) (2016); the Colombian Model BIT (2017); and the Dutch Model BIT (2019). These model BITs have in common one main characteristic that makes them examples of a new generation: they include provisions on investor obligations in addition to the standard investor protection mechanisms. Hence, they constitute a two-way street, in that they impose obligations on the host State as well as the foreign investor.

To this end, in the following sections, this article first sets out the jurisdictional aspects of the Moroccan Model BIT (2019). Secondly, it explains its substantive protection standards and investor obligations. Thirdly, it concludes with an analysis of the dispute resolution procedure under the Moroccan Model BIT.

II. JURISDICTIONAL ASPECTS OF THE MOROCCAN MODEL BIT (2019)

Before a tribunal discusses the substantive aspects of the dispute and whether a breach has occurred, it uses its Kompetenz-Kompetenz to determine whether it has jurisdiction to hear the dispute at stake.¹⁰ The Moroccan Model BIT (2019) contains the classic features that must be analysed: (i) what constitutes a protected investment?; (ii) which investors are protected?; (iii) it even lists examples of situations that are not supposed to be covered by the BIT. Hence, before a violation of a BIT provision can be claimed, multiple factors determine whether the investment and/or the investor are protected under the agreement.

A. Investment: Jurisdiction Ratione Materiae (Article 3.3)

Article 3.3 of the Moroccan Model BIT (2019) defines the term ‘investment’ ‘to mean the assets invested in good faith by an investor of a Party in the territory of the other Party, which contribute to the sustainable development of the latter Party and which involves a certain duration, a capital commitment or other assimilated resources, an expectation of profit and risk-taking’.¹¹ The latter four factors (contribution to the development of the host State, a certain duration, capital commitment, and an expectation of profit and the taking of risk), which are known as the ‘Salini criteria’, have not only found their way into the most recent BIT with Nigeria, but have also been included in many other BITs.¹² Interestingly, the BITs concluded with Brazil and Japan do not provide for the definition of the Moroccan Model BIT (2019).¹³

Moreover, article 3.3 further shapes the term ‘investment’ by setting out a non-exhaustive list of forms that the investments may take and additional characteristics with which the investment has to comply. It ends with a list of forms of investments that are excluded from the scope of the Moroccan Model BIT (2019). In all, we note four general factors:

First, the opening sentence of article 3.3 of the Moroccan Model BIT (2019) sets out that the investment must be made in good faith. This requirement is explained in more detail in the rest of the provision. According to the text, the investment must be made in good faith, respecting the laws, regulations and investment policy that are in force in the host State. Hence, it is similar to the ‘clean hands’ requirement.¹⁴ It further clarifies that investments are excluded from the scope of the BIT if they are made in violation of the laws and regulations of the host State. Therefore, the good faith requirement is essentially a legality requirement obliging the investors not only to comply with the obligations under the present BIT¹⁵ but also with all the applicable laws of the host State. Pursuant to article 41.1 of the Moroccan Model BIT (2019), the applicable law in the dispute is the host State’s domestic law in addition to the BIT and international law. Hence, the tribunal has the power to determine whether the investor has respected the domestic law of the host State and hence acted in good faith. The consequence of a decision against the investor for not complying with the domestic law of the host State is a denial of access to dispute resolution under the BIT. Given that the good faith requirement is included in article 3.3, which sets out the characteristics of a protected investment under the BIT, failure to comply with said requirement would make the investment not protected by the BIT. Hence, a tribunal finding bad faith in the investment would have to decline jurisdiction over the dispute.

Secondly, the investment must contribute to ‘sustainable development’. This abstract term is illustrated by a comment on the Moroccan Model BIT (2019):

both parties confirm their understanding that the contribution of the investment to sustainable development can be measured by an increase of the production capacity, economic growth, the quality of the created jobs, the duration of the investment, the transfer of technology and the reduction of poverty.¹⁶

Interestingly, and contrastingly, the drafters of the Colombian Model BIT have decided ‘to avoid the discussions on whether a particular investment contributed towards the development of the host party, which has led to some inconsistencies in the jurisprudence’.¹⁷ If Morocco aims to conclude a BIT with a State excluding the ‘development’ discussion, the outcome of the negotiations will not be foreseeable.

The third factor is the so-called ‘commerciality’ requirement of article 3.3. The provision states that the investment must be of a certain duration, involve a capital commitment or other assimilated resources, or an expectation of profit and risk taking. This can be seen as a clarification of the requirement of the investment to be part of an enterprise or a commercial undertaking, which generally involves the above characteristics.¹⁸

Fourthly, article 3.3 requires the investment to have an ‘important’ physical presence in the host State. This departs from the well-known ‘substantial business activity’ requirement, as contained in article 3.4 as well as in other model BITs—for example, in article 1(c) of the Dutch Model BIT, which is supposed to exclude ‘purely mailbox companies’.¹⁹ Having an important physical presence goes beyond the substantial business activity requirement as it involves more commitment to a physical presence in the territory of the host State. From a pure policy perspective, this brings along jobs and investment in the local infrastructure through premises that the investor will be acquiring or renting sur place. Similar requirements can also be found in other model BITs such as the Colombian Model BIT, which expects the ‘intention [of the investor] to maintain a long-term presence in the Host Party’.²⁰

To illustrate the various forms that the investment can take, article 3.3 provides for a non-exhaustive list of possible investments. These comprise shares, movable or immovable property, concessions, licences, corporate debt instruments and intellectual property rights. In this regard, the drafters are not going down the Colombian way by providing for an exhaustive list, which can be amended by the Bilateral Investment Council, an entity similar to a joint committee that administers the BIT, to review and recommend the inclusion of other forms of investment.²¹

Finally, some forms of investments are excluded from the scope of the Moroccan Model BIT (2019), as previously mentioned. They comprise debt securities issued by a party or by a government enterprise or loans to a party or a government enterprise; portfolio investments as well as holding entities; claims arising solely from commercial contracts on the sale of goods and services; loans for less than three years; trade finance loans, a judgement obtained in administrative or judicial proceedings; expenses incurred by the investor before the actual establishment of his investment in the territory of the host State; the value (and other intangible rights) of a brand; letters of credit; or any other form of debt not mentioned in the Moroccan Model BIT (2019).

B. Investor: Jurisdiction Ratione Personae (Article 3.4)

In addition to the protection of ‘investments’, the Moroccan Model BIT (2019) also protects ‘investors’. The definition of the term ‘investor’ as found in article 3.4 encompasses any ‘natural or legal person of a Party, other than a branch or a representative office, who invests in good faith in the territory of the other Party’.²² As a consequence, the jurisdiction ratione personae of a tribunal hearing a case on an alleged breach of the Moroccan Model BIT (2019) covers both individuals and legal persons that hold the nationality of the other State party to the BIT. However, it does not protect dual citizens of both parties unless they have both their residence and ‘centre of interests’ in the territory of one party.²³ This rule sounds squarely like an ‘effective nationality’ requirement.²⁴ In the recent BIT with Brazil, this requirement was omitted from the text of the ratione personae requirement.²⁵

Furthermore, the provision clarifies which legal entities are protected: legal persons constituted or organised in accordance with the laws and regulations of a State party, (a) which have their headquarters, central administration or principal place of business in the territory of that State and carry out substantial economic activities within (?) the scope of this Agreement in the territory of that Party; (b) which is owned or controlled directly or indirectly by a natural person of that Party or by a legal person as described in (a). In particular, the phrase ‘substantial business activity’ will catch an attentive reader’s attention. In addition to having an ‘important’ physical presence in the host State, the investor must, therefore, show that it satisfies additional criteria with regard to its business activity. Article 3.4 further includes a ‘substantial business activities’ test. Four criteria are to be taken into account when assessing the latter: (i) the amount of investment (the value) brought to the host State; (ii) the number of jobs created; (iii) the investment’s effect on the local community; and (iv) the time for which the business has been operational.

Finally, the Moroccan Model BIT (2019) does not protect legal entities, which are owned or controlled by natural or legal persons having the nationality of a third State or the nationality of the host State. Hence, it limits the protection accorded to investors who have an effective link to the State parties to the BIT. Consequently, investors whose majority is owned, or which is controlled by an entity having the nationality of a third State, do not benefit from the protection of the BIT.

C. Temporal Scope

The Model BIT limits its scope of applications quite extensively to all investments made before or after the entry into force of the BIT (article 2.1). However, it only applies to State measures adopted after the BIT’s entry into force (article 2.2). Moreover, pursuant to article 2.3, it effectively excludes any dispute that arose before the BIT’s entry into force. Hence, the BIT does not apply retrospectively. Nonetheless, it protects all existent and new investments equally as of its entry into force.

D. Limits

In addition to the protection of specific investments and investors, the Moroccan Model BIT (2019) also clearly excludes some types of investments. As already stated, pursuant to article 3.3, the investment must be made in good faith. This is fostered by article 2.6, which states that investments made with funds of illegal (or dubious) origin are not protected by the BIT.

Moreover, articles 2.4 and 24 state that the Moroccan Model BIT (2019) is not applicable to tax measures. This is a known approach: for instance, article 21(1) of the Energy Charter Treaty²⁶ also excludes taxation measures from the scope of the agreement.

III. SUBSTANTIVE PROTECTION STANDARDS

A. Fair and Equitable Treatment (Article 6.1)

FET is perhaps the most controversial and frequently contested of all investment protections commonly found in international investment agreements.²⁷ While a review of the criticism against the FET obligation in investor–State dispute settlement (ISDS) far exceeds the scope of this discussion, one of the key concerns has been the interpretation of open-textured FET provisions to ‘restrict host-country administrative and governmental action to a degree that threatens the policymaking autonomy of that country’.²⁸ In response to this difficulty, some developing countries have removed the FET obligation altogether from their recently drafted model BITs.²⁹ Despite such trends, the Moroccan Model BIT (2019) maintains the FET obligation as the standard for treatment of investors and their investments. However, the BIT takes certain innovative measures that attempt to safeguard against the interpretation of the FET obligation in an over-broad manner.

(i) Limited scope of FET protection

Article 6.1 of the Moroccan Model BIT (2019) describes the standard of protection to be accorded to foreign investors and their investments, which includes both FET and full protection and security (FPS). It states that the FET obligation is breached when either a measure or a series of measures amount to: (i) a denial of civil, criminal or administrative justice; (ii) a fundamental violation of the rights of the defence; (iii) manifestly unjustified discrimination on grounds including gender, race or religious beliefs; (iv) abusive treatment of the investor, including harassment, coercion and duress.³⁰ Further, article 6.3 circumscribes various State regulatory actions from FET claims, by stating that any measure necessary to protect public order, health or to the environment shall not amount to an FET breach as long as the measures were not applied in a discriminatory, unjustified or abusive manner.³¹

This attempt at an exhaustive codification of what constitutes a breach of the FET standard seeks to steer clear of both an unqualified FET standard and the so-called ‘minimum standard of treatment’ in international law.³² Such an approach is also found in the European Commission–Canada Comprehensive Economic and Trade Agreement (CETA).³³ The creation of an exhaustive list of claims that can be considered a violation of FET is perceived as a welcome attempt to bring greater certainty to the treaty provision.³⁴ However, there remains doubt about whether an exhaustive list would in fact have such an effect. This is because the terms included in the exhaustive list are inevitably open textured. For example, the concept of denial of justice encapsulates the minimum standard of the protection of aliens or the customary international law standard of treatment.³⁵ Further, denial of justice is inextricably linked to the concept of due process,³⁶ which is yet again a common point of reference for the minimum standard of treatment in international law.³⁷ In fact, one may be forgiven for thinking that a provision such as article 6.1 is simply old wine in a new bottle.³⁸ Therefore, while the approach of the Moroccan Model BIT (2019) is certainly different in form, it is difficult to determine the extent to which such an approach is substantively different or novel.

Finally, Moroccan treaty practice is yet to steer clear of the minimum standard of treatment. For example, the Japan–Morocco BIT (2020) specifically states that parties shall treat investments in accordance with customary international law, including FET. It continues by stating that ‘the customary international law minimum standard of treatment of aliens refers to all customary international law principles that protect the investments of aliens’.³⁹ Notwithstanding the above tautology, the provision clearly establishes the customary international law minimum standard as the level of protection granted, in contrast to the approach under the Moroccan Model BIT (2019).

(ii) Exclusion of investors’ expectations (article 6.4)

The Moroccan Model BIT (2019) explicitly rules out any reliance of the concept of legitimate expectations under FET. Under article 6.4 any failure to take action that results in undermining the expectations of an investor does not constitute a violation of the FET clause.⁴⁰ Further, it clarifies that a change in the legislative framework of a party shall not per se constitute a violation of FET.⁴¹

The notion of legitimate expectations has attracted significant criticism as constituting an impediment against the regulatory authority of the State.⁴² Typically, investors’ legitimate expectations are breached when specific assurances from a competent governmental authority are violated, regulations are applied to investors in an arbitrary or discriminatory manner, or the regulatory framework is altered in a manner that has the effect of removing reasonable benefits that the investor relied upon when making the investment.⁴³ In practice, investment arbitration tribunals have found a breach of legitimate expectations as constituting an independent ground for an FET violation.⁴⁴ An alternative view taken by some tribunals argues that the violation of legitimate expectations may be considered as one of many elements of an FET breach.⁴⁵

The Moroccan Model BIT (2019) appears to exempt itself from this discussion by explicitly excluding the concept of investors’ expectations from its FET clause. A similar approach is found in the text of the Trans-Pacific Partnership (TPP).⁴⁶ However, such a radical position appears to overlook the importance of an expectation of regulatory stability for investors.⁴⁷ A preferable approach would entail viewing both legitimate expectations of the investor and the State’s right to regulate in the public interest as competing constituent factors of the FET obligation.⁴⁸ It is noteworthy that treaties signed by Morocco, subsequent to the 2019 Model BIT, do not contain this explicit omission.⁴⁹ This supports the view that in practice, recourse to legitimate expectations is significant for investors and thus, difficult to omit entirely from the FET standard.

(iii) Obligation to provide full protection and security (article 6.1b)

FPS requires States to act with due diligence to defend investments from physical harm or actual damage, through the exercise of its police powers.⁵⁰ This is in contrast with the broader FET obligation, which is concerned with the effect of State legislative, executive or judicial measures. The Moroccan Model BIT (2019) highlights this point by stating that the FPS obligation only refers to physical security of investors and their investments, without any reference to any other obligation whatsoever.⁵¹ The emphasis on the phrase ‘without any reference to any other obligation whatsoever’ is noteworthy as an attempt to prevent the FPS standard from being extended to an obligation to provide legal security. Previously, tribunals have found that where the FPS obligation is not qualified by any limiting clause (as in the case of the Moroccan Model BIT (2019)), its ordinary meaning can be extended beyond physical security.⁵² For example, in Biwater Gauff (Tanzania) Ltd v United Republic of Tanzania the Tribunal held that the FPS standard implies:

the State’s guarantee of stability in a secure environment, both physical, commercial and legal. It would in the Arbitral Tribunal’s view be unduly artificial to confine the notion of ‘full security’ only to one aspect of security, particularly in light of the use of this term in a BIT, directed at the protection of commercial and financial investments.⁵³

Such decisions by tribunals elucidate the rationale behind the Moroccan Model BIT (2019)’s clause explicitly restricting the FPS obligation to physical security. However, it is worth noting that such a construction may not be watertight. For example, it still leaves open the possibility that physical security includes the obligation to provide an effective legal system to prosecute those responsible for causing physical harm to the investment.⁵⁴ Similarly, it may also allow claims for legal injury that has occurred as a consequence of physical harm to a claimant’s investment, such as loss of goodwill.⁵⁵

(iv) Absence of an umbrella clause

The Moroccan Model BIT (2019) is significant for its omission of any provision resembling an umbrella clause. Although umbrella clauses are defined broadly, typically they extend the scope of treaty protections to contractual agreements entered into by the State or State entities and the foreign investor.⁵⁶ Their main function, therefore, is to elevate a contractual breach to a breach of the treaty. In keeping with its attempts to specifically delineate the scope of broad investor protections, the Moroccan Model BIT (2019) provides that the breach of a contract between the State and a non-national shall not constitute a violation of FET or FPS.⁵⁷

The omission of umbrella clauses from model BITs is not unprecedented and can be understood as part of the backlash against broad investor protections in traditional BITs. Recent model BITs that are conspicuous for their omission of umbrella clauses include, the Brazilian Model BIT (2015), the Colombian Model BIT (2017) and the Indian Model BIT (2015).⁵⁸

B. Non-discrimination: National Treatment (Article 7) and MFN (Article 8)

The prohibition of discrimination has a long history in international law. Apart from the International Convention on the Elimination of All Forms of Racial Discrimination from 1965, various international agreements address the principle of non-discrimination.⁵⁹ Generally, this article understands the term ‘discrimination’ as treating similar things differently and treating different things similarly. The principle of non-discrimination is also known to international investment protection.

If States want to include a non-discrimination standard, they normally will have recourse to two standards: national treatment (NT) and most favoured nation treatment (MFN). Both NT and MFN are unlike other substantive protection standards such as the FET or expropriation standard, as they do not set a specific and independent bar. They have been described as ‘comparative’ protection standards.⁶⁰ This is because they require treatment from the host State that is no less favourable than the treatment accorded to the nationals of the host State (national treatment) or to nationals of another foreign State (MFN). Therefore, to understand the scope of the standard, the treatment of the investor must be compared with someone else’s treatment. However, tribunals ‘do not require proof of discriminatory or protectionist intent in order to find a treaty breach’.⁶¹ What counts is the actual treatment according to the facts—independent of the State’s intent. Finally, if the State acts in pursuit of legitimate policy objectives, a different treatment of investors in like circumstances may be justified.⁶²

Below, this article sets out: (i) the ‘like circumstances’ test under the national treatment provision; (ii) the provision on the MFN treatment; and (iii) exceptions to national treatment and MFN.

(i) National treatment and the ‘like circumstances’ test (article 7)

A national treatment provision can be found in many BITs. Their purpose is to create a ‘level playing field between the foreign investor and the local competitor’,⁶³ and ‘to ensure that a national measure does not upset the competitive relationship between domestic and foreign investors’.⁶⁴ In essence, for it to be breached the investors are required to prove that they were treated less favourably than a host State’s national in like circumstances and no justification is applicable. Pursuant to article 7.1 (a) and (b) of the Moroccan Model BIT (2019), the States guarantee to accord to both investors and investments of the other State treatment no less favourable than that of its own nationals in like circumstances. In particular, the provision specifies that the national treatment will be accorded with regards to the management, maintenance, use, enjoyment, sale or liquidation of their investments.

A clarification to the provision notes that Morocco (and the other contracting State) is nonetheless allowed to treat foreign investors and investments differently with regards to certain sectors or economic activities, which are reserved for its own investors as part of its national development program. Here, a note for future trade negotiators is required. The term ‘development program’ is not further defined or limited in scope by the Model BIT. Consequently, this provision must be born in mind when negotiating trade agreements on the basis of the Moroccan Model BIT. In particular, the risk of accepting a reference to a broad and open ‘development program’ must be discussed. This is because such formulation theoretically allows the host States to discriminate and justify their measures with reference to their development program.

Furthermore, article 7.2 sets out a test to determine ‘in like circumstances’. It states that four different elements must be taken into account: (a) the objective and the nature of the measure concerned by the investment; (b) the real and potential impact of the investment on the population and the environment and on local, regional or national development; (c) the location of the investment and the sector where the investment is made and the goods or services consumed or produced by the investment; (d) the public or private origin of the investment. Additionally, the drafters state that a closer examination of the ‘in like circumstances’ requirement shall not be limited to one of the before-mentioned elements. In other model BITs such a ‘like circumstances’ test does not exist. Hence, the Moroccan Model BIT (2019) is stricter than other model BITs.⁶⁵ It does not seem as though the drafters anticipate allowing a tribunal to add to the above criteria. A purely textual interpretation shows that article 7.2 lays down a test, which must be based ‘on the following elements’. The provision then lists four elements and does not refer to any additional points. Whereas not expressly prohibited, the drafters do not anticipate the inclusion of additional elements. As a consequence, the tribunal’s examination of ‘like circumstances’ must be limited to the elements laid down by article 7.2.

Whereas the ‘like circumstances’ requirement is known to other BITs, they generally do not include a specific test and only include the term ‘like circumstances’.⁶⁶ This has led to discussion in investment disputes.⁶⁷ In various North American Free Trade Agreement (NAFTA) disputes a ‘like circumstances’ test under art 1102(1) has been brought up.⁶⁸ An exemplary interpretation of the term ’circumstances’ can be found in ADN v Mexico:

The ordinary meaning of the word ‘circumstances’ under Article 1102 requires an examination of the surrounding situation in its entirety (Methanex, supra page 63 at para. 37). Accordingly, the application of the national treatment standard involves a comparative measure; and all ‘circumstances’ in which the treatment was accorded are to be taken into account in order to identify the appropriate comparator. The dictionary meaning of the word ‘circumstance’ refers to a condition, fact, or event accompanying, conditioning, or determining another, or the logical surroundings of an action.⁶⁹

Furthermore, a reference to the ‘likeness’ of circumstances can be found in the Feldmann award. The tribunal decided that ‘the “universe” of firms in like circumstances are those foreign-owned and domestic-owned firms that are in the same business’.⁷⁰ The four elements included in the Moroccan Model BIT (2019) are a lot more detailed and will most likely make it easier for tribunals to interpret the ’like circumstances’ requirement as they single out a test the tribunal must follow.

(ii) MFN treatment (article 8)

The second non-discrimination provision is the ‘most favoured nations treatment’.⁷¹

Generally, MFN clauses are invoked with regard to substantive rights. In the past decade, however, tribunals have extended the scope of the MFN provision to include procedural matters, ie the dispute resolution mechanism included in one treaty but not in another.⁷² The reason for this practice was to avoid certain mandatory pre-arbitration requirements such as, for example, the exhaustion of local remedies or a certain negotiation time. Some treaties have taken this into account and now expressly exclude procedural matters.⁷³

Morocco has concluded treaties with MFN provisions since the 17th century and has already been involved in an MFN dispute in the 19th century.⁷⁴ An examination of the Moroccan Model BIT (2019) shows that the State continues to include MFN provisions in its international agreements. Article 8 of the Moroccan Model BIT (2019) includes such an MFN clause. Specifically, it states that, without prejudice to its laws and regulations, each State shall grant investors and investments treatment no less favourable than that which it accords, in similar circumstances, to investors of a third State.⁷⁵ Similar to article 7, it clarifies that this provision is applicable with regard to the management, maintenance, use, enjoyment, sale or liquidation of the investments. It also makes mandatory the Moroccan Model BIT (2019) with regards to ‘like circumstances’.

The drafters of the Moroccan Model BIT (2019) have learned from previous decisions, as referred to above, and have excluded ‘provisions relating to the settlement of investment disputes provided for in other international agreements, including agreements containing a chapter on investment, concluded between a Party and a third State’.⁷⁶ Consequently, an investor cannot invoke the MFN clause to use the arbitration clause of another BIT.

Finally, article 8.4 of the Moroccan Model BIT (2019) contains an important clarification as to the MFN standard. It states that substantive obligations contained in other international investment treaties and trade agreements do not constitute ‘treatment’, and therefore cannot give rise to a violation of the MFN provision. Moreover, article 8.4 adds that the absence of measures adopted or maintained by the host State under such substantive obligations cannot give rise to an MFN breach either. Consequently, this paragraph essentially excludes the possibility to import substantive obligations from other treaties. Read in conjunction with article 8(3), both procedural and substantive rights from other international treaties are excluded. This means that an investor cannot rely on the clause contained in another BIT to argue that it has been treated less favourably. To be able to invoke the MFN clause, the investor must show that its less favourable treatment stems from actual measures from the host State as regards another investor. Therefore, a more favourable clause in another BIT does not equal more favourable treatment of the initial investor in and of itself. An actual action of the host State vis-à-vis the other investor is needed. This adds another layer of restriction to the standard.

(iii) Exceptions to NT and MFN (article 9)

Finally, the Moroccan Model BIT (2019) contains a provision listing exceptions to the NT and MFN standards. As already mentioned, the NT standard cannot be invoked with regard to the treatment of foreign investors and investments in comparison with nationals active in certain sectors or economic activities, which are reserved for the State’s own investors as part of its national development program.

Article 9 of the Moroccan Model BIT (2019) sets out additional exceptions. It states, in particular, that the provisions of articles 7 and 8 shall not be interpreted as obliging a Party to extend to investors of the other Party the benefits of any treatment, preference or privilege arising from the following: (a) any form of regional co-operation such as free trade agreements (FTAs) or customs unions; (b) existing international bilateral or multilateral investment agreements; (c) tax measures; (d) subsidies of a State granted exclusively by that State to its own investors within the framework of national development activities and programs; (e) contracts concluded by a State or by a public enterprise.⁷⁷

Moreover, the Moroccan Model BIT (2019) clarifies in article 9.2 that the ‘treatment’ referred to in article 7 does not preclude different treatment from being accorded to foreign investors through objective regulatory distinctions justified by legitimate development policies. Again, the development exceptions seem to play an important role and the Moroccan Government wants to maintain the regulatory power to accord certain advantages to foreign investment that contributes to the development of the country. Of course, this leaves the door open for regulatory actions being disguised as development policies.

C. Expropriation (Article 10)

The protection against expropriation is among the main guarantees accorded to investors under investment treaties. Expropriation is classified into two categories. Direct expropriation involves the legal transfer of private property to the State by means of transfer of title or outright seizure.⁷⁸ Indirect expropriation is often described as a ‘regulatory taking’ or when State regulation interferes with private property in a manner that effectively deprives the owner of the economic value of the property, even if they retain legal title or physical possession.⁷⁹ In contrast to direct expropriation, indirect expropriation has been far more contentious in ISDS. This is because indirect expropriation has expanded the possible causes of action for investors against host States.⁸⁰ Thus, some recent State practice has categorically omitted indirect expropriations as an example of investor protection.⁸¹ However, the Moroccan Model BIT (2019) protects investors against both direct and indirect forms of expropriation.

The Moroccan Model BIT (2019) aims to strike a balance between investor protection against expropriation and the host State’s regulatory powers. However, its attempt to draw the line between indirect expropriation and legitimate public policy is unsatisfactory as it fails to adhere to a single coherent approach. At least two approaches to indirect expropriation can be identified from arbitral practice—namely the ‘police powers’ approach and the ‘proportionality’ test.

The ‘police powers’ approach is reflected in article 10.1 of the Moroccan Model BIT (2019).⁸² Under this approach tribunals consider a tripartite test to determine whether a State measure amounts to expropriation. If the measure is: (a) in the public interest; (b) not discriminatory; and (c) in accordance with due process, it is deemed not to constitute expropriation and the investor is not entitled to compensation. The difficulty of such an approach is that only ‘illegal regulatory takings’ will qualify as expropriation, which perhaps excessively narrows the scope of investor protection.⁸³

The ‘proportionality’ test, in contrast, analyses the context and purpose of State measures to determine whether they were appropriate considering the harm caused to the investor. In other words, tribunals consider whether the effect of the measure on the investors’ property rights was disproportionate to the policy objective of those measures.⁸⁴ This approach is found in article 10.8 of the Moroccan Model BIT (2019), which provides a list of indicative factors to distinguish between legitimate State regulation and expropriation. These include the effect of the regulatory measures on the economic value of the investment, the duration of the measure, whether the measure was contrary to the investors’ legitimate expectations and whether the measure was disproportionate to the public interest it protected.⁸⁵

Thus, the inclusion of provisions reflecting both the above disparate approaches suggests a lack of clarity in the Moroccan Model BIT (2019). While the Model BIT undoubtedly seeks to emphasise that legitimate public policy measures do not constitute expropriation, its provisions invite uncertainty as to how investment tribunals may approach claims of indirect expropriation.

The Moroccan Model BIT (2019) also appears to consider the intention behind a State measure as significant to a finding of expropriation. In this context, article 10.8(c) notes the right of States to regulate under principles of customary international law relating to the police powers of the State, and finds that legislative and regulatory measures in good faith shall not constitute indirect expropriation.⁸⁶ However, the view that good-faith regulatory measures shall not amount to indirect expropriation is concerning, because this would put a significant burden on the claimant to offer insight into State intent and demonstrate that the impugned measures were not in good faith. Further, the subjective intention behind a State regulatory measure is usually not required to establish expropriation.⁸⁷ Case law suggests that it is the effect of the measures on private property, rather than the intent behind those measures, that must be considered.⁸⁸ Thus, it remains to be seen whether the Moroccan Model BIT (2019)’s provision will be interpreted by tribunals as incorporating a subjective intent requirement. It is worth mentioning, however, that the Japan–Morocco BIT (2020), which dedicates an annexure to discussing the scope of expropriation, does not contain any reference to good faith, and prescribes to the customary international law standard.⁸⁹ This is also the case with the Brazil–Morocco BIT (2019).⁹⁰

D. Investor Obligations (Article 18)

The Moroccan Model BIT (2019) aligns itself with the approach of several contemporary model BITs by providing a specific chapter on investor obligations.⁹¹ Article 18 provides the broad duty of investors to adhere to domestic laws and international obligations, with some specific references to the disclosure of information relating to the investment for tax and other administrative purposes. Further, article 19 contains obligations not to engage in corruption, money laundering or financing of terrorist activities.⁹² However, it is article 20 that merits greatest attention as it lays down obligations concerning the social and environmental responsibility of the investor—one of the hallmarks of modern investment agreements, which attempt to balance the asymmetry between States and investors in investment arbitration.

(i) Provisions against corruption, money laundering and terrorist financing (article 19)

The provisions against corruption, money laundering and financing of terrorist activities in the Moroccan Model BIT (2019) are quite conventional in their content. Pursuant to article 19.1, investors may not promise or grant an undue pecuniary or other advantage, either directly or through intermediaries, to any public official, their family members or associates with the intention of obtaining any preferential treatment related to an investment project.⁹³ Further, pursuant to article 19.2, investors are required to adhere to internationally recognised principles against money laundering and terrorist financing.⁹⁴ Similar provisions are provided in several other new-generation BITs including the SADC Model BIT (2012),⁹⁵ the Brazilian Model BIT (2015)⁹⁶ and the PAIC (2016).⁹⁷ Here, a detail worth noting is that, in contrast to the Moroccan Model BIT (2019), both the SADC Model BIT (2012) and the PAIC (2016) also view aiding, abetting and conspiracy to engage in corruption or bribery as violations of investor obligations.

Under article 19.4, investors and their investments do not have the right to initiate dispute resolution procedures under the Moroccan Model BIT (2019) if they are found to be in breach of the obligations against corruption, money laundering and terrorist financing. Further, the host State is entitled to raise the issue as a jurisdictional bar during dispute resolution procedures. The provisions on dispute settlement procedure are discussed in more detail in Section III of this article.

(ii) Social and environmental responsibility of the investor (article 20)

The Moroccan Model BIT (2019) adds to the growing trend of new-generation model BITs sensitive to environmental protection and human rights. Article 20 operates on the premise that investors have a duty to contribute to the sustainable development of the host State. Pursuant to this objective, the Moroccan Model BIT (2019) refers to the ILO’s Tripartite Declaration of Principles on Multinational Enterprises and the Social Policy, and the OECD Guidelines for Multinational Enterprises (OECD Guidelines) as standards towards which investors must endeavour.⁹⁸ This replicates the approach of several recent model BITs such as the .Dutch Model BIT (2019),⁹⁹ the Colombian Model BIT (2017)¹⁰⁰ and the SADC Model BIT (2012),¹⁰¹ all of which refer to various ILO instruments and the OECD Guidelines as voluntary standards for investors.¹⁰²

Considering recent discourses that criticise investment arbitration as adverse to the interests of local communities where investments projects are located,¹⁰³ contemporary model BITs often specifically address the relationship between investors and the local community. In this context, article 20 of the Moroccan Model BIT (2019) provides that investors and their investments must seek to contribute to the sustainable development of both the host State and the local community through responsible practices.¹⁰⁴ Further, investors must attempt to build human capital and contribute to the creation of jobs.¹⁰⁵ Unfortunately, as is evident from the language used, these investor obligations are quite imprecise especially when compared with trends in other modern model BITs drafted in the African context. For example, the PAIC (2016) specifically states that the investors’ use of local natural resources must respect rights of local populations and avoid practices such as land grabbing.¹⁰⁶ Similarly, the SADC Model BIT (2012) requires investors to conduct an environmental and social impact assessment, which must be made available to the local communities for comment prior to the establishment of the investment project.¹⁰⁷ However, this level of specificity is not the dominant practice. For instance, the Brazilian Model BIT (2015) refers to the obligations of the investor vis à vis the local community in similarly vague terms.¹⁰⁸

A key part of investors’ social and environmental obligations in the Moroccan Model BIT (2019) is the duty to manage and operate investments in accordance with international human rights and environmental law.¹⁰⁹ Although such provisions are an established feature in several contemporary model BITs,¹¹⁰ there are several interesting approaches towards enforcing investors' compliance with international human rights and environmental norms. In this context, the Moroccan Model BIT (2019) requires an investment arbitration tribunal to take into account any breaches of the above obligations attributable to the investor, while determining the amount of compensation, thereby possibly reducing the amount of compensation awarded.¹¹¹ A very similar approach is also taken by the Dutch Model BIT (2019), which states that a tribunal must consider non-compliance by the investor of its commitments under the United Nations (UN) Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises while deciding the amount of compensation claimant-investors are awarded.¹¹² Although the practice of investment tribunals has witnessed human rights issues being considered while determining compensation for investors even in the absence of treaty provisions,¹¹³ such clauses ensure that tribunals have the authority to penalise investors for breaches of international human rights and environmental protection norms. However, other model BITs have taken different approaches that preclude such matters being addressed through investment arbitration. For instance, under its ‘Investor Liability’ clause the SADC Model BIT (2012) states that investors ‘shall be subject to civil actions for liability in the judicial process of their [h]ome State’ if their conduct leads to ‘significant damage, personal injuries or loss of life in the [h]ost State’.¹¹⁴ Although this provision does not specifically deal with issues such as human rights protection or environmental harm, it is not difficult to conceptualise the application of this provision to such issues.¹¹⁵ Further, the Colombian Model BIT (2017) takes yet another approach to ensure that investor operate investments in accordance with international human rights and environmental law. According to its ‘Denial of Benefits’ clause, an investor may be denied treaty protections altogether if they have inter alia ‘committed serious human rights violations’, or ‘caused serious environmental damage in the [t]erritory of the [h]ost Party’.¹¹⁶

The approach taken by the Moroccan Model BIT (2019) is perhaps the more conservative of the above-discussed approaches. The SADC Model BIT (2012) and the Colombian Model BIT (2017) view a breach of human rights and environmental obligations as a direct and independent cause of action and a ground to deny investors treaty protections, respectively. In contrast, the Moroccan Model BIT (2019) considers such breaches as mitigating factors while awarding compensation only if an investment claim is filed against the host State.

(iii) Lack of environmental impact assessment

Perhaps the most notable shortcoming of the Moroccan Model BIT (2019) is the absence of any investor obligation to assess the environmental and/or social impact of the investment project. The omission is especially stark when compared with other modern environmentally progressive investment codes, which emphasise the importance of such provisions. For example, the SADC Model BIT (2012) specifies that investors must conduct an environmental and social impact assessment as per the requirements of inter alia the host State, the home State¹¹⁷ or the International Finance Corporation’s performance standards on Environmental and Social Impact Assessment,¹¹⁸ whichever is more rigorous in relation to the investment in question.¹¹⁹ Similarly, the PAIC (2017) requires both investors and the host State to conduct environmental impact assessments.¹²⁰ Finally, as a part of its provisions on corporate social responsibility, the Dutch Model BIT (2019) reaffirms ‘the importance of investors conducting a due diligence process to identify, prevent, mitigate and account for the environmental and social risks and impacts of its investment’.¹²¹ Considering the Moroccan Model BIT (2019)’s attempt to position itself as a modern international investment agreement with sustainable development as a central concern,¹²² and significant discussion on the relevance of environmental impact assessments (EIAs) in ISDS,¹²³ the omission of the requirement to conduct an impact assessment of an investment project presents a significant lacuna. The omission of an EIA obligation from the Moroccan Model BIT (2019) is especially surprising given that the Nigeria–Morocco BIT (2016) provides for EIA obligations.¹²⁴ However, it is worth noting that neither the Brazil–Morocco BIT (2019) nor the Japan–Morocco BIT (2020) provide specific EIA obligations.

IV. DISPUTE RESOLUTION UNDER THE MOROCCAN MODEL BIT (2019)

A. General Overview of the Procedure to be Followed

The investment dispute resolution procedure under the Moroccan Model BIT (2019) consists of multiple steps. Its drafters decided to include a provision in the Moroccan Model BIT (2019) allowing for investment arbitration between the investor and the State. Whereas such means of investment dispute resolution was not included in the BIT with Brazil, the most recent BIT with Japan allows for investment arbitration.¹²⁵ Under the Moroccan Model BIT (2019), the claimant (the investor) will have to inform the opposing party of their intent to start legal proceedings. After a mandatory round of negotiations, it will have to exhaust local remedies. Only if the matter has not been finally decided within 30 months may the claimant initiate an investment arbitration. Exigencies of space exclude a detailed analysis of the arbitral proceedings, but a short summary of the procedural steps foreseen in the Moroccan Model BIT (2019) may be of help.

To commence the proceedings, article 29.1 requires the instituting party to send a notice of dispute, as well as a detailed memorial to the other party. It is unusual that a detailed memorial must already be sent out before a dispute resolution body is constituted.¹²⁶ In addition, it is crucial for counsel to be extremely cautious: the note must contain all disputed measures which are alleged to be unlawful, as article 32.2 limits the scope of a later arbitration to the measures identified in the first notice.

If the notice was sent to the host State (the investor being the claimant), a joint committee, as well as the national contact point, will co-ordinate and ensure that all domestic administrative procedures are exhausted.¹²⁷ The joint committee is also in charge of administering consultations and negotiations between the disputing parties, which are, among others, required by article 31.1 for a dispute to be allowed to be submitted to arbitration (as in CETA, the Colombian Model BIT and the Draft PAIC).¹²⁸ Similarly, the Colombian Model BIT considers a dispute ‘to have been submitted to Dispute Settlement [sic] with the commencement of Consultations [sic]’.¹²⁹ Interestingly, the already-mentioned joint committee has the power to add and amend procedural rules.¹³⁰ Of course, this can only be done prior to a given dispute. As a result, the joint committee can add procedural rules and requirements to the BIT. However, if a dispute is submitted pursuant to the procedural rules mentioned in article 33.1 of the Moroccan Model BIT (2019), the joint committee cannot change the course of the proceedings any further. This is because the dispute was submitted under a given set of procedural rules available at the time of registration of the dispute.

If the above-mentioned negotiations under article 29 (domestic administrative procedures, consultations and negotiations) fail, article 32.2 requires the claimant to exhaust all local remedies under article 31 (submission of the dispute to the competent local courts). Moreover, pursuant to article 31.3, if the domestic courts render a final decision within 30 months (2.5 years), this is where the dispute stops. Consequently, the disputing parties are barred from commencing an investment arbitration. Hence, pursuant to article 32.2, only after negotiations and the exhaustion of local remedies, an investment arbitration can be initiated. In this regard, article 33.1 allows a choice between ICSID, ICSID Additional Facility, UNCITRAL and any other set of rules as agreed between the disputing parties. As already mentioned above, the request for arbitration can only refer to disputed measures as singled out in the notice of a dispute (see article 29.1 and step 1.). Such a provision has already found its way into several new generation trade agreements.¹³¹ The CETA between the EU and Canada contains a similar requirement.¹³² Once the request for arbitration has reached an arbitral institution, the arbitral rules of the institution take over and determine the procedure.

There is one addition that the Moroccan Model BIT (2019) makes: pursuant to articles 39.1 and 39.2, right after the constitution of the tribunal, the host State can introduce a request under the ‘frivolous claim’ provision, which allows the tribunal to do away with any obviously frivolous claim, without having to discuss its own jurisdiction. This is similar to article 21(2) of the Dutch Model BIT (2019) and rule 41(5) of the ICSID Arbitration Rules.¹³³ If a claim is submitted under the ICSID Rules, the provisions of the Moroccan Model BIT (2019) will supersede rule 41(5) (as specified in the rule itself).

Once the disputing parties have gone through the above steps, the proceedings can begin. One novelty that the Moroccan Model BIT (2019) brings along is the possibility for the host State to bring claims against the investor. Similarly, the Colombian Model BIT expressly provides that the host State ‘may submit claims against the Claimant Investor’.¹³⁴ Absent any specific provision, it seems as though claims from the State will have to follow the same procedural rules.

(i) General observations

As we have seen, investment dispute resolution under the Moroccan Model BIT (2019) follows squarely the already existing principles as established in previous decades. Nonetheless, various points attract attention and must be mentioned when analysing the new Moroccan Model BIT (2019). This section lists them and briefly explains the consequences.

(ii) Non-compliance with investor obligations

Pursuant to article 28.3, the investor loses the right to submit a dispute to dispute resolution if it is in breach of its obligations as contained in Articles 18 et seq. The host State is able to use this provision to render the tribunal incompetent. Objections must this be raised at the jurisdictional phase. The same rule is repeated in article 32.1, which states that ‘[a]n investor may not submit a dispute to arbitration […] if it is found that its investment was made through corruption, money laundering or misrepresentation/fraud’.¹³⁵ Another repetition of this principle can be found in article 19.4, which states that investors and their investments do not have the right to initiate dispute resolution procedures under the Moroccan Model BIT (2019) if they are found to be in breach of the obligations against corruption.

(iii) Institution of proceedings

Whereas in classic international investment arbitration, the investor generally starts legal action against its host State alleging a breach of its obligations, the Moroccan Model BIT (2019) also allows the host State to commence proceedings against the investor. Article 28.4 renders the provisions on the investors’ obligations effective and enforceable.

(iv) Time bar

Article 28.6 contains a temporal condition. Pursuant to said provision, the commencement of dispute resolution is only possible within three years of the moment when the investor became or was made aware of the BIT breach and its damage. As such this constitutes a safeguard mechanism against disputes on measures that are too far in the past. In this regard, the Moroccan Model BIT (2019) is similar to the Colombian Model BIT and the SADC.¹³⁶ Interestingly, the time bar contained in article 18(4) of the Dutch Model BIT (2019) is set at five years and therefore more inclusive as the Moroccan Model BIT (2019).

(v) Limit to one dispute

A manifestation of the principle that the same, or substantially the same, dispute cannot be heard twice, can be found in article 28.7. Said provision states that only one procedure relating to the impact of the disputed measures on an investment or investor can be initiated. This can be done by either the investor (or the owner of the investment) or through the investment. This means that the shareholders of a company as well as the parent entity or subsidiary may commence proceedings under the Moroccan Model BIT (2019). A similar provision can be found in the Colombian Model BIT: any claims by the shareholders must be accompanied by written consent of the enterprise.¹³⁷ Furthermore, any damages awarded to the shareholders constitute the final damages of the enterprise.¹³⁸ The consequence of article 18.7 of the Moroccan Model BIT (2019) is that the structure of the investment/investor must be seen as a whole, constituting one single entity having one opportunity to challenge a host State’s measures.

(vi) Exclusion of diplomatic protection

In article 28.10, the Moroccan Model BIT (2019) contains an interesting provision. If contained in an agreement, it constitutes a waiver of the States’ right to diplomatic protection, if the investor submitted the dispute to the dispute resolution proceedings as foreseen by the BIT. As with article 27 of the ICSID Convention,¹³⁹ the drafters of the Moroccan Model BIT (2019) exclude the right of the home State to give diplomatic protection or bring an international claim if the investor as consented to submit the dispute to arbitration under the agreement. If the host State fails to comply with the arbitral award, however, and does not enforce it, article 27(1) of the ICSID Convention keeps the door open for diplomatic protection to ensure enforcement.¹⁴⁰

It is unclear how this corresponds with the waiver of diplomatic protection in the Moroccan Model BIT (2019). Given that diplomatic protection is a right of the States and not of their nationals, the question is whether the States can deliberately forfeit the right to protect their national through diplomatic protection.¹⁴¹ Generally, the rule is that everything, which is not forbidden under international law, is allowed.¹⁴² This is called the Lotus principle. Hence, the baseline is that States can agree to waive such right. On the other hand, it remains unclear if the right to diplomatic protection is ’waivable’—a discussion that exceeds the scope of this article.¹⁴³ With regards to its inclusion in BITs, the authors are not aware of the use of such provision in another BIT.

The consequence of article 28.10 of the Moroccan Model BIT (2019) is the following. The home State cannot claim diplomatic protection for proceedings that have been commenced. This means that the home State cannot espouse its investor’s claim and bring it in another forum. It may, however, try to facilitate the negotiation of a settlement with the host State, after commencement of the arbitration. If the provision is to be understood as waiving diplomatic protection as a means to ensure enforcement of the arbitral award, article 28.10 of the Moroccan Model BIT (2019) becomes relevant as it takes away a last resort from those investors who have a secure standing in their home country.

(vii) No double hatting

A topic discussed frequently in recent times, and which has been subject to debate at UNCITRAL is the phenomenon of ‘double hatting’.¹⁴⁴ In broad terms, ‘double hatting’ means that an arbitrator also acts as counsel in other disputes. They therefore wear two hats—as decision maker in one dispute and as party representative in others. Under scrutiny, the principle is disallowed by article 35.4, which states that ‘[f]or greater certainty, no member of the arbitral tribunal may exercise at the same time the function of arbitrator in a dispute under this Agreement, and as counsel in any another pending or potential arbitration involving a foreign investor and a State’.¹⁴⁵ A similar provision can be found in other new-generation model BITs.¹⁴⁶

(viii) Arbitrator appointment by the disputing parties

Pursuant to article 35.2 of the Moroccan Model BIT (2019), the disputing parties retain the right to appoint the arbitrators hearing the claims. Hence, the drafters of the Moroccan Model BIT (2019) do not follow the latest Dutch Model BIT (2019), which does away with this aspect of party autonomy completely and puts the appointment into the hands of an appointing authority.¹⁴⁷

(ix) Right to impose provisional measures

Contrary to the ICSID Convention, which uses the term ‘recommend’,¹⁴⁸ article 37.8 gives the right to the tribunal to impose provisional measures. This brings further competences into the toolkit of the tribunal and cements the tribunals power with regards to provisional measures. It can now impose legally binding provisional measures, in situations in which the rights of a disputing party must be protected or, to preserve evidence, which is under the control of one of the disputing parties.

(x) No regulation of third-party funding

Interestingly, the Moroccan Model BIT (2019) does not contain any reference to third-party funding and the disclosure thereof. Other model BITs, such as the Dutch Model BIT (article 19.8), the Argentina–Chile FTA, the CETA or institutional rules now expressly oblige the disputing parties to disclose the fact that a third party is funding the arbitration on their behalf.¹⁴⁹ Similarly, the ICSID Secretariat has proposed more extensive rules on the disclosure of third-party funding.¹⁵⁰

(xi) No reference to the MIC

Unlike other recent international agreements containing investment protection mechanisms such as the CETA,¹⁵¹ the EU–Vietnam FTA,¹⁵² the EU–Mexico FTA,¹⁵³ the EU–Singapore FTA¹⁵⁴ and the Dutch Model BIT (2019),¹⁵⁵ the Moroccan Model BIT (2019) does not foresee any transfer of the dispute resolution competencies to a multilateral investment court as envisaged by the European Union. Hence, the current approach of the Moroccan Government as to the ongoing reform discussions at UNCITRAL WG III seems to keep the system of investment arbitration instead of establishing a new dispute resolution forum.

V. CONCLUDING REMARKS

The Moroccan Model BIT (2019) is, surprisingly, not widely discussed in recent scholarship. In contrast, other contemporary model BITs such as the Dutch Model BIT, the Brazilian Model BIT and the Draft PAIC have received more scholarly attention. This divergence, however, is unjustified as the current draft does not constitute an ‘ordinary’ model BIT. The above has shown that the Moroccan Model BIT (2019) contains various characteristics that warrant further discussion.

First, the provisions on the jurisdictional aspects clearly state that investors whose majority is owned, or who are controlled by an entity having the nationality of a third State do not benefit from the protection of the BIT. Furthermore, the Model BIT sets out that investments made with funds of illegal origin are not protected by the BIT. For example, if an investor and its investment were allegedly involved in corruption, this issue can be raised as a jurisdictional bar to the tribunal’s competence.

Secondly, as to the non-discrimination provisions, two things must be noted. The 2019 Model BIT sets out a ‘like circumstances’ test in the NT provision. This will provide further guidance for tribunals interpreting the ‘like circumstances’ requirement of NT provisions. Moreover, the Model BIT’s MFN provision is restrictive and adds another layer of legal certainty. It only allows the application of the MFN provision if another (foreign) investment has effectively been treated differently by the host State through actual measures. A mere import of a more favourable provision from another BIT is herewith excluded.

Thirdly, the Moroccan Model BIT (2019) contains several investor obligations designed to promote corporate social responsibility. Thus, it requires investors to conduct their business according to international standards proposed by the ILO’s Tripartite Declaration of Principles on Multinational Enterprises and the Social Policy, and the OECD Guidelines for Multinational Enterprises. Further, the Moroccan Model BIT (2019) views violations of human rights and environmental obligations as mitigating factors while awarding compensation if an investment claim is filed against the host State. However, it conspicuously omits reference to any environmental or social impact assessment requirement as a specific investor obligation.

Fourthly, the Moroccan Model BIT (2019) aims to ensure that actions taken in legitimate regulatory interests of the State are not construed as FET violations. Thus, it attempts to delineate the scope of FET by enumerating forms of conduct which constitute a violation of its FET provision. Notably, the Moroccan Model BIT (2019) specifically excludes any application of the doctrine of legitimate expectations.

Fifthly, while claims against both direct and indirect expropriation are recognised under the Moroccan Model BIT (2019), it fails to provide clarity on what constitutes indirect expropriation. This is because its provisions not only adopt the ‘police powers’ doctrine but also discuss a ‘proportionality’ test, which are distinct and inconsistent interpretative approaches to finding indirect expropriation.

Sixthly, the dispute resolution section includes various novelties. Under the Moroccan Model BIT (2019) disputes can be brought against foreign investors as well. Therefore, a State can claim a breach of the investors’ obligations under the BIT. Furthermore, the drafters decided to limit the initiation of proceedings to either the investor or the investment. This means, on the one hand, that the shareholders of a company may commence proceedings under the Moroccan Model BIT (2019). On the other hand, a commercial entity must decide, as part of their internal communication, who brings the claim. This also means, that any damages awarded to the shareholders constitute the final damages of the enterprise as a whole.

The drafters also accord the right to the tribunal to impose provisional measures, as opposed to other international instruments such as the ICSID Convention, which only allows for ‘recommendations’. Interestingly, the Model BIT contains a waiver of the home State (of a potential foreign investor) to protect its national through diplomatic protection.

Finally, in terms of the recent debate on a reform of the investment arbitration system, the drafters have taken into account the trend against ‘double hatting’ and have disallowed it. Yet, they have decided to not include any reference to any future dispute resolution mechanism such as a potential Multilateral Investment Court or Appellate Body.

Footnotes

See the termination of India’s BITs, or the recent Termination Agreement between EU Member States.

Kabir AN Duggal and Laurens H van de Ven, ‘The 2019 Netherlands Model BIT: riding the new investment treaty waves’ (2019) 35(3) Arb Intl 1–28; Marike RP Paulsson, ‘The 2019 Dutch Model BIT: Its Remarkable Traits and the Impact on FDI’ (Kluwer Arbitration Blog, 18 May 2020) <http://arbitrationblog.kluwerarbitration.com/2020/05/18/the-2019-dutch-model-bit-its-remarkable-traits-and-the-impact-on-fdi/> accessed 5 May 2021; Nikos Lavranos, ‘The changing ecosystem of Dutch BITs’ (2020) 36(3) Arb Intl 441–457; Adam Paschalidis and Nikos Lavranos, ‘Comparative Analysis between the 2018 and 2004 Dutch Model Bilateral Investment Treaty Texts’ (2019) 4(1) European Investment Law and Arbitration Review Online 89–123.

See Hamed El-Kady and Yvan Rwananga, ‘Morocco’s New Model BIT: Innovative features and policy considerations’ (Investment Treaty News, 20 June 2020) <https://www.iisd.org/itn/2020/06/20/moroccos-new-model-bit-innovative-features-and-policy-considerations-hamed-el-kady-yvan-rwananga/> accessed 5 May 2021.

ibid; according to UNCTAD, Morocco has entered into 85 BITs, of which 10 have been terminated, 25 have been signed but are not yet in force and 50 are in force. More than two-thirds of the BITs have been entered into more than 16 years ago. See UNCTAD, ‘IIAs by Economy: Morocco’ <https://investmentpolicy.unctad.org/international-investment-agreements/countries/142/morocco> accessed 29 April 2021.

ibid.

Morocco concluded BITs with the following countries: Russia (2016), Rwanda (2016), Ethiopia (2016), Nigeria (2016), South Sudan (2017), Zambia (2017), Congo (2018), Brazil (2019) and Japan (2020).

Nigel Blackaby and others, Redfern and Hunter on International Arbitration (6th edn, OUP 2015) para 5.105.

Moroccan Model BIT (2019) art 3.3: Investissement désigne les éléments d’actif investis de bonne foi par un investisseur d’une Partie sur le territoire de l’autre Partie, qui contribuent au développement durable de cette dernière Partie et qui implique une certaine durée, un engagement de capital ou d’autres ressources assimilées, une attente de profit et une prise de risques.

See the Reciprocal Investment Promotion and Protection Agreement between the Government of the Kingdom of Morocco and The Government of the Federal Republic of Nigeria (signed 3 December 2016) art 1; Bilateral Agreement for the Promotion and Protection of Investments between the Government of the Republic of Colombia and the Government of the United Arab Emirates (signed 12 November 2017) art 1; Treaty between the Republic of Argentina and the Republic of Chile for the Promotion and Reciprocal Protection of Investments (signed 2 August 1991, entered into force 1 January 1995) art 8.1; Agreement between the Republic of Rwanda and the United Arab Emirates on the Promotion and Reciprocal Protection of Investments (signed 1 November 2017) art 1; Mainland and Hong Kong Closer Economic Partnership Arrangement Investment Agreement (signed 28 June 2017) art 2; Agreement between Japan and the State of Israel for the Liberalization, Promotion and Protection of Investment (signed 1 February 2017, entered into force 5 December 2017) art 1; for multilateral treaties, see Comprehensive Economic and Trade Agreement between Canada and the European Union (signed 30 October 2016, provisionally entered into force 21 September 2017) (CETA) art 8.1; Trans-Pacific Partnership Agreement (signed 4 February 2016) (TPP) art 9.1; Comprehensive and Progressive Agreement for Trans-Pacific Partnership (signed 8 March 2018, entered into force 30 December 2018 for Australia, Canada, Japan, Mexico New Zealand, Singapore;14 January 2019 for Vietnam; and 19 September 2021 for Peru) (CPTPP) ch 9; Agreement between the Government of the Republic of Korea and the Government of the Republic of South Africa on the Promotion and Protection of Investments (signed 7 July 1995, entered into force 28 June 1997) ch 9, s C; Agreement on Investment among the Governments of the Hong Kong Special Administrative Region of the People’s Republic of China and The Member States of the Association of Southeast Asian Nations (signed 12 November 2017, entered into force 17 June 2019) art 1.

See Accord de coopération et facilitation en matière d’Investissements entre le Royaume du Maroc et la République Fédérative du Brésil (signed 13 June 2019) art 3.1.2; Agreement between the Kingdom of Morocco and Japan for the Promotion and Protection of Investment (signed 8 January 2020) art 1(a).

See Stephen Schwebel, ‘Clean Hands, Principle’ in Max Planck Encyclopedia of Public International Law (OUP March 2013); Patrick Dumberry, ‘The Doctrine of “Clean Hands” and the Inadmissibility of Claims by Investors Breaching International Human Rights Law’ in Ursula Kriebaum (ed), Transnational Dispute Management Special Issue: Aligning Human Rights and Investment Protection (TDM 2013).

See s 2. IV.

Translation provided by the authors.

Kabir AN Duggal and others, ‘Colombia’s 2017 Model IIA: Something Old, Something New, Something Borrowed’ (2019) 34(1) ICSID Rev—FILJ 4.

Fedax NV v Republic of Venezuela, ICSID Case No ARB/96/3, Decision of the Tribunal on Objections to Jurisdiction (11 July 1997); Rudolf Dolzer and Christoph Schreuer, Principles of International Investment Law (2nd edn, OUP 2012) 112.

See (n 4) 13.

See Colombian Model BIT (2017), ‘Investment’ definition, para 1(c).

ibid ‘Functions of the Bilateral Investment Council’, para 1(5).

Moroccan Model BIT (2019) art 3.4: ‘Investisseur désigne une personne physique ou morale d’une Partie, autre qu'une succursale ou un bureau de représentation, qui investit de bonne foi sur le territoire de l’autre Partie’.

See the discussion of ‘centre of interest’ in Michael Ballantine and Lisa Ballantine v The Dominican Republic, PCA Case No 2016-17, Award (3 September 2019) para 560 ff, as well as the attached partial dissent of Marney Cheek.

See the discussion in the Nottebohm Case (Liechtenstein v. Guatemala) (Second Phase) [1955] ICJ Rep 4 22ff.

Accord de coopération et facilitation en matière d’investissements entre le Royaume du Maroc et la République Fédérative du Brésil (signed 13 June 2019) art 3.1.3.

Energy Charter Treaty (opened for signature 17 December 1994, entered into force 16 April 1998) (ECT).

Campbell McLachlan, Laurence Shore and Matthew Weiniger, International Investment Arbitration: Substantive Principles (2nd edn, OUP 2017) 268; Marcela Klein Bronfman, ‘Fair and Equitable Treatment: An Evolving Standard’ in A von Bogdandy and R Wolfrum (eds), Max Planck Yearbook of United Nations Law, vol 10 (2006) 665.

UNCTAD, ‘Fair and Equitable Treatment: A Sequel, Series on Issues in International Investment Agreements II’ (UN 2010) 1. The introduction goes on to state: ‘the FET standard raises highly complex and contentious issues as to the types of administrative and governmental action that can be reviewed under the standard and the degree of seriousness of breach that is required to activate a compensable claim. In relation to the latter, there has been a noticeable trend in arbitral practice away from the classic customary international law standard of treatment of aliens towards a less stringent reading of the standard. This approach, taken by a number of tribunals, increases the chances that a wide range of State regulations or measures can be found to infringe the FET standard including those that have a legitimate public purpose. Therefore, this approach poses special challenges for developing countries where the State may be required to intervene in the economy and introduce legislative or regulatory changes more frequently or of a greater magnitude. Of course, any State intervention must observe basic standards of good governance, but an expansive approach to the interpretation of the FET standard, including through overreliance on the doctrine of investors’ legitimate expectations, poses a risk leading to the creation of unbalanced results in the determination of what is contrary to good governance. In particular, an expansive interpretation of minimalist treaty language can give rise to a lack of predictability in the application of the standard. This, in turn, may lead to the undermining of legitimate State intervention for economic, social, environmental and other developmental ends’.

See eg Brazil Model BIT (2015); Draft Pan-African Investment Code (2016) (PAIC); Indian Model BIT (2015).

Moroccan Model BIT (2019) art 6.1(a).

ibid art 6.3.

For references to the ‘minimum standard under international law’ as the standard of investment protection, see ECT (n 26) art 10; Agreement Between the Government of the United Mexican States and the Government of the People’s Republic of China on the Promotion and Reciprocal Protection of Investments (signed 11 July 2008, entered into force 6 June 2009) art 5.

CETA (n 12) art X.9(2).

Nathalie Bernasconi-Osterwalder and Howard Mann‚ ‘A Response to the European Commission’s December 2013 Document “Investment Provisions in the EU-Canada Free Trade Agreement (CETA)”’ (2014) International Institute of Sustainable Development 6.

McLachlan, Shore and Weiniger (n 27) 296 (‘[m]istreatment of foreign nationals by municipal courts was historically a primary focus of the minimum standard of the protection of aliens, encapsulated in the concept of denial of justice’).

Jan Paulsson, Denial of Justice in International Law (CUP 2005) 7 (‘In international law, denial of justice is about due process, nothing else—and that is plenty’).

McLachlan, Shore and Weiniger (n 27) 279; OECD, ‘Fair and Equitable Treatment Standard in International Investment Law’ (2004) OECD Working Papers on International Investment 12.

Patrick Dumberry, ‘Fair and Equitable Treatment’ in Stefanie Schacherer and Makane Moïse Mbengue (eds), Foreign Investment under the Comprehensive Economic and Trade Agreement (CETA) (Springer 2018) 103. The author suggests that while the drafters did not refer to the language of minimum standard of treatment, the treaty provisions substantively cover exactly what the minimum standard of treatment would have. In other words, ‘[t]hat goal has simply been achieved in a different way’.

Agreement Between the Kingdom of Morocco and Japan for the Promotion and Protection of Investment (signed 8 January 2020) art 6 (General Treatment).

Moroccan Model BIT (2019) art 6.4.

ibid art 6.2.

See George K Foster, ‘Investor-Community Conflicts in Investor-State Dispute Settlement: Rethinking “Reasonable Expectations” and Expecting More from Investors’ (2019) 69 Am U L Rev 105; Michele Potestà, ‘Legitimate Expectations in Investment Treaty Law: Understanding the Roots and the Limits of a Controversial Concept’ (2013) 28(1) ICSID Rev—FILJ 88.

McLachlan, Shore and Weiniger (n 27) 311.

Glamis Gold, Ltd v United States, UNCITRAL, Award (8 June 2009) para 627; International Thunderbird Gaming Corporation v Mexico, UNCITRAL, Award (26 January 2006) para 147.

Waste Management, Inc v Mexico II, ICSID Case No ARB(AF)/00/3, Award (30 April 2004) para 98; Mesa Power Group, LLC v Canada, UNCITRAL, PCA Case No 2012-17, Award (24 March 2016) para 502.

TPP (n 12) art 9.6(4) (‘For greater certainty, the mere fact that a Party takes or fails to take an action that may be inconsistent with an investor’s expectations does not constitute a breach of this Article, even if there is loss or damage to the covered investment as a result’).

For further discussion, see Michal Krzykowski, ‘Principle of reasonable and legitimate expectations in international law as a premise for investments in the energy sector’ (2020) International Environmental Agreements: Politics, Law and Economics.

Such a position was taken by the Tribunal in Saluka Investments BV v Czech Republic, UNCITRAL, PCA Case No 2002-04, Partial Award (17 March 2006) para 305 (‘No investor may reasonably expect that the circumstances prevailing at the time the investment is made remain totally unchanged. In order to determine whether frustration of the foreign investor’s expectations was justified and reasonable, the host State’s legitimate right subsequently to regulate domestic matters in the public interest must be taken into consideration as well’).

See Japan–Morocco BIT (2020) (n 39) art 6 (General Treatment). This issue does not arise in the Brazil–Morocco BIT (2019) given that it does not contain an FET obligation altogether. Note that the Brazil–Morocco BIT (2019) contains a provision in art 4(3) expressly refering to arbitrary or discriminatory measures. These have already been found to have a similar legal effect as an FET clause. See BayWa re Renewable Energy GmbH and BayWa re Asset Holding GmbH v Spain, ICSID Case No ARB/15/16, Decision on Jurisdiction, Liability and Directions on Quantum (2 December 2019) para 532.

McLachlan, Shore and Weiniger (n 27) 330–1.

Moroccan Model BIT (2019) art 6.1(b) (emphasis added).

See eg Azurix v Argentina, ICSID Case No ARB/01/12, Award (14 July 2006) para 408; CME Czech Republic BV v Czech Republic, Partial Award, (13 September 2001), [2001] 9 ICSID Rep 121, IIC 61 para 613; Compañia de Aguas del Aconquija SA and Vivendi Universal v Argentina, ICSID Case No ARB/97/3, Award (21 November 2000), IIC 307 (2007) para 7.4.15.

Biwater Gauff (Tanzania) Ltd v Tanzania, ICISD Case No ARB/05/22, Award (24 July 2008) para 729.

See Suez Sociedad General de Aguas de Barcelona SA v Argentina, ICSID Case No ARB/03/19, Decision on Liability (20 July 2010), IIC 443 (2010) para 173 (‘This Tribunal is of the view that the stability of the business environment and legal security are more characteristic of the standard of fair and equitable treatment, while the full protection and security standard primarily seeks to protect investment from physical harm. This said, this latter standard may also include an obligation to provide adequate mechanisms and legal remedies for prosecuting the State organs or private parties responsible for the injury caused to the investor’).

See Asian Agricultural Products Limited (AAPL) v Sri Lanka, ICSID Case No ARB/87/3, Award (27 June 1990) para 106. While the Tribunal accepted that the loss of goodwill could be claimed under an FPS breach, it found on the facts of the case that the Claimant could not establish its loss of goodwill with a sufficient degree of certainty.

Chin Leng Lim, ‘Is the Umbrella Clause not just another treaty clause?’, in Chin Leng Lim (ed), Alternative Visions of the International Law on Foreign Investment: Essays in Honour of Muthucumaraswamy Sornarajah (CUP 2016) 352.

Moroccan Model BIT (2019) art 6.7.

Indian Model BIT (2015).

Universal Declaration of Human Rights (1948) arts 1 and 7; International Covenant on Civil and Political Rights (1966) arts 2(1), 14(1) and 26; International Covenant on Economic, Social and Cultural Rights (1966) arts 2(2), 3 and 7(a)(i); Convention on the Rights of the Child (1989) art 2(1) and (2); Convention on the Elimination of All Forms of Discrimination against Women (1979) art 1; Declaration on the Elimination of All Forms of Intolerance and of Discrimination Based on Religion or Belief (1981) art 1(1); Declaration on the Rights of Persons Belonging to National or Ethnic, Religious and Linguistic Minorities (1992) art 2(1); and many more declarations of and treaties on human rights.

Blackaby and others (n 10) para 8.124.

ibid para 8.126.

Gami Investments Inc v The Government of the United Mexican States, UNCITRAL, Award (15 November 2004), IIC 109 (2004) para 114; Parkerings-Compagniet AS v Republic of Lithuania, ICSID Case No ARB/05/08, Award (11 September 2007) para 371.

Dolzer and Schreuer (n 18) 198.

Archer Daniels Midland Company and Tate & Lyle Ingredients Americas, Inc v United Mexican States, ICSID Case No ARB (AF)/04/5, Award (21 November 2007) para 199.

See Brazilian Model BIT (2015) art 5(3); Colombian Model BIT (2017) ‘National Treatment’; no provision in the Dutch Model BIT (2019); Indian Model BIT (2015) art 4.

ibid.

See eg the discussion of like circumstances in the MFN context in Occidental Exploration and Production Company v Republic of Ecuador, LCIA Case No UN3467, Award (1 July 2004) para 173; Parkerings-Compagniet AS v Republic of Lithuania(n 62) para 369; Bayindir Insaat Turizm Ticaret Ve Sanayi AS v Islamic Republic of Pakistan, ICSID ARB/03/29, Decision on Jurisdiction (14 November 2005) paras 399–411.

SD Myers v Canada, First Partial Award, (13 November 2000) para 250; Marvin Roy Feldman Karpa v United Mexican States, ICSID Case No ARB(AF)/99/1, Interim Decision on Preliminary Jurisdictional Issues (6 December 2000) (also known as Marvin Feldman v Mexico) para 50 ff; Loewen Group, Inc and Raymond L Loewen v United States of America, ICSID Case No ARB(AF)/98/3, Opinion of Sir Ian Sinclair (on merits of the claims under NAFTA art 1102) (9 May 2001); Archer Daniels Midland Company and Tate & Lyle Ingredients Americas, Inc v United Mexican States, ICSID Case No ARB (AF)/04/5, Award (21 November 2007) para 185 ff; and many more.

Archer Daniels Midland Company and Tate & Lyle Ingredients Americas, Inc v United Mexican States (n 68) para 197.

Marvin Roy Feldman Karpa v United Mexican States, ICSID Case No ARB(AF)/99/1, Award (16 December 2002) (also known as Marvin Feldman v Mexico) para 171.

For a discussion of MFN in investment disputes, see Emilio Agustín Maffezini v The Kingdom of Spain, ICSID Case No ARB/97/7, Decision on Jurisdiction (25 January 2000); AAPL v Republic of Sri Lanka (n 55); MTD Equity Sdn Bhd and MTD Chile SA v Republic of Chile, ICSID Case No ARB/01/7, Award (25 May 2004); White Industries Australia Limited v Republic of India, UNCITRAL, Award (30 November 2011); CMS Gas Transmission Company v The Argentine Republic, ICSID Case No ARB/01/8, Award (12 May 2005); Tecnicas Mediambientales Tecmed SA v United Mexican States, ICSID Case No ARB (AF)/00/02, Award (29 May 2003); MCI Power Group LC and New Urbine, Inc v Republic of Ecuador, ICSID Case No ARB/03/6, Award (31 July 2007); Salini Costruttori SpA and Italstrade SpA v The Hashemite Kingdom of Jordan, ICSID Case No ARB/02/13; Plama Consortium Limited v Republic of Bulgaria, ICSID Case No ARB/03/24, Decision on Jurisdiction (8 February 2005); and many more.

EDF International and ors v Argentine Republic, ICSID Case No ARB/03/23, Award (11 June 2012), IIC 556 (2012) para 929; Emilio Agustín Maffezini v Kingdom of Spain, ICSID Case No ARB/97/7, Award on Jurisdiction (25 January 2000), IIC 85 (2000) para 38 ff. Since Maffezini, several tribunals have applied MFN clauses in order to bypass conditions for access to arbitration: see eg Gas Natural SDG, SA v Argentine Republic, ICSID Case No ARB/03/10, Decision on Jurisdiction (17 June 2005), IIC 115 (2005) paras 30–31; Suez, Sociedad General de Aguas de Barcelona SA and InterAguas Servicios Integrales del Agua SA v Argentine Republic, ICSID Case No ARB/03/17, Decision on Jurisdiction (16 My 2006), IIC 236 (2006) para 66.

UNCTAD, ‘Most-Favored-Nation Treatment: A Sequel’, Series on Issues in International Investment Agreements II (UN, 2010) 85–86, (referring to the Chile–Colombia Free Trade Agreement (FTA) (2006) Annex 9.3, the Canada–Peru FTA (200 Annex 804.1 and the Japan–Switzerland Economic Partnership Agreement (EPA) (2009) art 88) <http://unctad.org/en/Docs/diaeia20101_en.pdf> accessed 5 May 2021.

See the discussion of Rights of Nationals of the United States of America in Morocco (France v USA) (Judgment) [1952] ICJ Rep 176 in August Reinisch and Christoph Schreuer, International Protection of Investments: The Substantive Standards (CUP 2020) para 164. See also the reference to Moroccan treaty practice as to MFN since the 17th century in Yas Banifatemi, ‘The Emerging Jurisprudence on the Most-Favoured-Nation Treatment in Investment Arbitration’ [2009] Remedies in International Investment Law 244, 245.

See Moroccan Model BIT (2019) art 8(1).

See ibid art 8(3).

ibid art 9.1.

UNCTAD, ‘Expropriation: A Sequel, Series on Issues in International Investment Agreements II (UN, 2010)’ 6 <https://unctad.org/system/files/official-document/unctaddiaeia2011d7_en.pdf> accessed 5 May 2021.

ibid 12; McLachlan, Shore and Weiniger (n 27) 381–4.

McLachlan, Shore and Weiniger (n 27) 268.

For examples of such practice, see Co-operation and Facilitation Investment Agreement between the Federative Republic of Brazil and [__], [Brazil Model BIT (2015)]; Brazil–Guyana CFIA (signed 13 December 2018) art 7; Brazil–United Arab Emirates CFIA (signed 15 March 2019) art 7; Brazil–Suriname CFIA (signed 2 May 2018) art 7.

Moroccan Model BIT (2019) art 10.1.

Ursula Kriebaum, ‘FET and Expropriation in the Comprehensive Economic Trade Agreement between the European Union and Canada (CETA)’ (2016) 1 Transnational Dispute Management 6.

See eg Azurix Corp v Argentina, Award (n 52) paras 311–12; LG&E Energy Corp, LG&E Capital Corp, LG&E International Inc v Argentina, ICSID Case No ARB/02/1, Decision on Liability (3 October 2006) paras 189, 194–5.

Moroccan Model BIT (2019) art 10.8(b).

ibid art 10.8(c) (emphasis added).

Kriebaum (n 83) 10.

Tippetts, Abbett, McCarthy, Stratton v TAMS-AFFA Consulting Engineers of Iran, the Government of the Islamic Republic of Iran 6 Iran-USCTR 219, 22; Phillips Petroleum Co Iran v Islamic Republic of Iran, the National Iranian Oil Co (1989) 21 Iran-USCTR 79, 115; Antoine Biloune and Marine Drive Complex Ltd v Ghana Investments Centre and the Government of Ghana (Awards) 95 ILR 183 (1993) (1989 and 1990.

See Japan–Morocco BIT (2020) (n 39) art 9 and Annex referred to therein.

See Brazil–Morocco BIT (2019) art 6.

See eg Agreement on Reciprocal Promotion and Protection and of Investments between ___ and the Kingdom of the Netherlands (22 March 2019) (2019 Dutch Model BIT (2019)); Draft Pan-African Investment Code (December 2016) (PIAC (2016)); SADC Model Bilateral Investment Treaty Template (July 2012) (Southern African Development Community (SADC) Model BIT (2012)); Colombian Model BIT (2017); See CFIA between the Federative Republic of Brazil and [__] (Brazilian Model BIT (2015)).

Moroccan Model BIT (2019) art 19.

ibid art 19.1.

ibid art 19.2.

SADC Model BIT (2012) art 10.1 states: ‘Investors and their Investments shall not, prior to the establishment of an Investment or afterwards, offer, promise or give any undue pecuniary or other advantage, whether directly or through intermediaries, to a public official of the Host State, or a member of an official’s family or business associate or other person in close proximity to an official, for that official or for a third party, in order that the official or third party act or refrain from acting in relation to the performance of official duties, in order to achieve any favour in relation to a proposed investment or any licences, permits, contracts or other rights in relation to an Investment.’

Brazilian Model BIT (2015) art 15: ‘Each Party shall adopt measures and make efforts to prevent and fight corruption, money laundering and terrorism financing with regard to matters covered by this Agreement, in accordance with its laws and regulations.’

PAIC (2016) art 21.

Moroccan Model BIT (2019) art 20.3.

Dutch Model BIT (2019) art 7.

100

Colombian Model BIT (2017), ‘Investors Social Responsibility’.

101

SADC Model BIT (2012) art 15.2.

102

In contrast, the PAIC (2016) and the Brazilian Model BIT (2015) provide for investor obligations without reference to the OECD or ILO instruments.

103

See eg Martin Karas, ‘ISDS Regimes and Democratic Practice: Creating Conflict of Interests between Governments, Investors and Local Populations’ (2019) 25(84) Croatian International Relations Review 36–52; Thierry Berger and Jesse Coleman, ‘Getting Community Voices Heard in Investor-State Arbitration’ [2018] Columbia Center on Sustainable Development; Nathalie Bernasconi-Osterwalder and Carin Smaller, ‘Farmland Investments Are Finding their Way to International Arbitration’ [2017] International Institute for Sustainable Development.

104

Moroccan Model BIT (2019) art 20.1.

105

ibid art 20.2.

106

PAIC (2016) art 23(2).

107

SADC Model BIT (2012) art 13.3.

108

Brazilian Model BIT (2015) art 12(2)(c).

109

Moroccan Model BIT (2019) art 20.4.

110

SADC Model BIT (2012) art 15; Brazilian Model BIT (2015) art 14; PAIC (2016) art 24.

111

Moroccan Model BIT (2019) art 20.5.

112

Dutch Model BIT (2019) art 23.

113

Bear Creek Mining Corporation v Republic of Peru, ICSID Case No ARB/14/21 Partial Dissenting Opinion of Professor Philippe Sands (30 November 2017).

114

SADC Model BIT (2012) art 17. See also Brazilian Model BIT (2015) art 24; Dutch Model BIT (2019) art 7.4.

115

SADC Model BIT (2012) art 17. However, it is worth noting that the commentary to the provision describes it as addressing any potential forum non conveniens issues.

116

Colombian Model BIT (2017) ‘Denial of Benefits’.

117

SADC Model BIT (2012) art 2. Article 2 defines the Home State as ‘in relation to: (1) a natural person, the State Party of nationality or predominant residence of the investor in accordance with the laws of that State Party; (2) a legal or juridical person, the State Party of incorporation or registration of the investor in accordance with the laws of that State Party [and declared as the Home State at the time of registration where required under the law of the Host State]’.

118

International Finance Corporation Performance Standards on Environmental and Social Sustainability (2012).

119

SADC Model BIT (2012) art 13 states: ‘Investors or their Investments shall comply with environmental and social assessment screening criteria and assessment processes applicable to their proposed investments prior to their establishment, as required by the laws of the Host State for such an investment [or the laws of the Home State for such an investment] [or the International Finance Corporation’s performance standards on Environmental and Social Impact Assessment], whichever is more rigorous in relation to the Investment in question.]’. Further, it states that the investor and the host State shall apply the precautionary principle while taking any decision based on the report of the impact assessment.

120

PAIC (2016) art 37.

121

Dutch Model BIT (2019) art 7.3.

122

Moroccan Model BIT (2019) Preamble states, inter alia: ‘Desiring to strengthen their economic and investment relations, in accordance with the objective of sustainable development in its dimensions economic, social and environmental and without compromising the rights of the Parties to adopt general measures relating in particular to the protection of health public, environment, safety and workers rights, in accordance with the standards provided for by international agreements’; see also El-Kady and Rwananga (n 5).

123

See Graham Mayeda, ‘Integrating Environmental Impact Assessments into International Investment Agreements: Global Administrative Law and Transnational Co-operation’ (2017) 18(1) JWIT 131; Valentina Vadi, ‘Environmental Impact Assessment in Investment Disputes: Method, Governance and Jurisprudence’ (2010) 30 Polish YB of Intl L 169.

124

Reciprocal Investment Promotion and Protection Agreement Between the Government of the Kingdom of Morocco and the Government of the Federal Republic of Nigeria (2016) art 14.

125

See Accord de coopération et facilitation en matière d’investissements entre le Royaume du Maroc et la République Fédérative du Brésil (signed 13 June 2019) art 19(3), which only allows for diplomatic protection proceedings under the BIT. See also Agreement between the Kingdom of Morocco and Japan for the Promotion and Protection of Investment (signed 8 January 2020) allowing recourse to investment arbitration art 16(4).

126

See International Chamber of Commerce (ICC) Arbitration Rules (2017 and 2020 versions) art 4(3) and the guidelines on the ICC website ‘Filing a request’ <https://iccwbo.org/dispute-resolution-services/arbitration/filing-a-request/> accessed 5 May 2021.

127

Moroccan Model BIT (2019) art 29.2.

128

ibid art 29.3.

129

Colombian Model BIT (2017) ‘Scope of Application of Investor State Dispute Settlement’, para 8; ‘Consultations between the Covered Investor and a Contracting Party and presentation of Notices’; PAIC (2016) art 42.1.b.

130

Moroccan Model BIT (2019) art 33.4.

131

See Colombian Model BIT (2017) ‘Submission of a claim before a Court of Law or Arbitral Tribunal’, para 5; Comprehensive Economic and Trade Agreement between Canada and the EU arts 8.19 and 8.22.1(e).

132

CETA (n 12) arts 8.19 and 8.22.1(e)

133

ICSID Rules of Procedure for Arbitration Proceedings (ICSID Arbitration Rules) (April 2006).

134

See the Colombian Model BIT (2017) ‘Disputes and Claims Raised by the Respondent State’.

135

Free translation by the authors.

136

See Colombian Model BIT (2017) ‘Conditions in order to submit a Claim to Consultations (2)’; SADC Model BIT (2012) art 29.4(d).

137

See Colombian Model BIT (2017) ‘Claims Presented by Shareholders of an Enterprise’.

138

ibid.

139

Convention on the Settlement of Investment Disputes between States and Nationals of Other States (opened for signature 18 March 1965, entered into force 14 October 1966) (ICSID Convention).

140

Christoph Schreuer, ‘Investment Protection and International Relations’ in August Reinisch and Ursula Kriebaum (eds), The Law of International Relations—Liber Amicorum Hanspeter Neuhold (Eleven International Pub 2007) 347.

141

For more information on diplomatic protection, see Erich Vattel, The Law of Nations, or the Principles of Natural Law Classics of International Law bk II ch VI 136 (ed C Fenwich, transl 1916); John Dugard, ‘Articles on Diplomatic Protection’, Audiovisual Library of International Law <https://legal.un.org/avl/ha/adp/adp.html>; John Dugard, ’Diplomatic Protection’ [2009] Max Planck Encyclopedia of International Law; Draft articles on Diplomatic Protection 2006, Official Records of the General Assembly, Sixty-first Session, Supplement No 10 (A/61/10).

142

SS Lotus (France v Turkey) (1927) PCIJ Rep Series A No 10.

143

In this regard, not even the Draft Articles on Diplomatic Protection foresee the possibility of waiving the right to diplomatic protection. On the other hand, Vienna Convention on Diplomatic Relations Vienna Convention on the Law of Treaties (opened for signature 23 May 1969, entered into force 27 January 1980) 1155 UNTS 331 (VCLT) art 32 allows for a waiver of the diplomatic immunity from jurisdiction of diplomats. Whereas diplomatic immunity can be waived, it is unclear whether the same is possible with a State’s right to diplomatic protection of its national.

144

See Report of Working Group III (Investor–State Dispute Settlement Reform) on the work of its thirty-fifth session (New York, 23–27 April 2018), A/CN.9/935, 14 May 2018 para 78.

145

Free translation by the authors. The original provision reads : ‘Pour plus de certitude, aucun membre du Tribunal arbitral ne peut exercer en même temps la fonction d’arbitre, au titre d’un différend soulevé dans le cadre du présent Accord, et d’avocat dans un autre arbitrage en cours ou potentiel impliquant un investisseur étranger et un État.’

146

See the Colombian Model BIT (2017) ‘Composition of the Arbitral Tribunal’, para 3.d., which states that arbitrators shall ‘refrain’ from acting as counsel in other proceedings; Dutch Model BIT (2019) art 20.5; SADC Model BIT (2012) art 29.13.

147

See Duggal and van de Ven (n 4) and Dutch Model BIT (2019) art 20(1); for a discussion of the role of an appointing authority, see, eg, Sarah Grimmer, ‘The Expanded Role of the Appointing Authority under the UNCITRAL Arbitration Rules 2010’ (2011) 28(5) J of Intl Arb 501–17; Peter Tzeng, ‘Appointing Authorities: Self-Appointment, Party Appointment and Non-Appointment’ in Freya Baetens (ed), Legitimacy of Unseen Actors in International Adjudication (Studies on International Courts and Tribunals) (CUP 2019) 164–88.

148

ICSID Convention (n 137) art 47 and ICSID Arbitration Rules (n 131) r 39.

149

Treaty between the Republic of Argentina and the Republic of Chile for the Promotion and Reciprocal Protection of Investments (signed 2 August 1991, entered into force 1 January 1995) art 8.27; CETA (n 12) art 8.26.; Investment Arbitration Rules of the Singapore International Arbitration Centre (1st edn, 1 January 2017) (SIAC IA Rules 2017) r 24(l) (‘the Tribunal shall have the power to: … order the disclosure of the existence of a Party’s third-party funding arrangement and/or the identity of the third party funder and, where appropriate, details of the third-party funder’s interest in the outcome of the proceedings, and/or whether or not the third-party funder has committed to undertake adverse costs liability’).

150

See ICSID, Proposals For Amendment of the ICSID Rules r 23, Working Paper #4, (28 February 2020), <https://icsid.worldbank.org/sites/default/files/amendments/WP_4_Vol_1_En.pdf> accessed 5 May 2021.

151

See CETA (n 12) art 8.29.

152

See EU–Vietnam Investment Protection Agreement art 3.41.

153

See Resolution of Investment Disputes of the recent negotiations of the EU–Mexico Agreement art 14 of s [X].

154

See EU–Singapore Investment Protection Agreement art 3.12.

155

Duggal and van de Ven (n 4) and Dutch Model BIT (2019) art 15(1).

Author notes

Postgraduate student, Master in Economic Law, Sciences Po Law School, Paris, France. Email: [email protected].

PhD researcher, King’s College London, UK; Research Assistant, Prof J Martin Hunter, UK; Lawyer, Quinn Emanuel Urquhart & Sullivan (Schweiz) GmbH, Zurich, Switzerland. Email: [email protected]. The authors are grateful to Elsa Paparemborde, Dr Constance Castres Saint-Martin, Benjamin Silva, Supritha Suresh and the two anonymous peer reviewers for their input.

This is an Open Access article distributed under the terms of the Creative Commons Attribution License (https://creativecommons.org/licenses/by/4.0/), which permits unrestricted reuse, distribution, and reproduction in any medium, provided the original work is properly cited.

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Article Contents

The 2019 Morocco Model BIT: Moving Forwards, Backwards or Roundabout in Circles?

Abstract

I. INTRODUCTION

II. JURISDICTIONAL ASPECTS OF THE MOROCCAN MODEL BIT (2019)

A. Investment: Jurisdiction Ratione Materiae (Article 3.3)

B. Investor: Jurisdiction Ratione Personae (Article 3.4)

C. Temporal Scope

D. Limits

III. SUBSTANTIVE PROTECTION STANDARDS

A. Fair and Equitable Treatment (Article 6.1)

(i) Limited scope of FET protection

(ii) Exclusion of investors’ expectations (article 6.4)

(iii) Obligation to provide full protection and security (article 6.1b)

(iv) Absence of an umbrella clause

B. Non-discrimination: National Treatment (Article 7) and MFN (Article 8)

(i) National treatment and the ‘like circumstances’ test (article 7)

(ii) MFN treatment (article 8)

(iii) Exceptions to NT and MFN (article 9)

C. Expropriation (Article 10)

D. Investor Obligations (Article 18)

(i) Provisions against corruption, money laundering and terrorist financing (article 19)

(ii) Social and environmental responsibility of the investor (article 20)

(iii) Lack of environmental impact assessment

IV. DISPUTE RESOLUTION UNDER THE MOROCCAN MODEL BIT (2019)

A. General Overview of the Procedure to be Followed

(i) General observations

(ii) Non-compliance with investor obligations

(iii) Institution of proceedings

(iv) Time bar

(v) Limit to one dispute

(vi) Exclusion of diplomatic protection

(vii) No double hatting

(viii) Arbitrator appointment by the disputing parties

(ix) Right to impose provisional measures

(x) No regulation of third-party funding

(xi) No reference to the MIC

V. CONCLUDING REMARKS

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