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  • Author or Editor: Apurva Mudliar x
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Apurva Mudliar

Article 15 of the ECT contains the subrogation clause which provides for the transfer of rights that foreign investors might have vis-à-vis the host country to the insurance agency of the home State (or the home State itself) which indemnifies the foreign investor under an investment insurance or guarantee. By virtue of Article 15, the host party is obliged to recognise assignment of all the rights and claims to the indemnifying party. The indemnifying party shall receive the same treatment and the same payments due pursuant to those rights and claims as the investor (party indemnified) was entitled to receive by the ECT in respect of the investment concerned under all the circumstances. Also, the contracting Party is not allowed to assert the received indemnification pursuant to an investment insurance or guarantee as a defence, counterclaim, right of set-off in any proceeding under Article 26.

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Apurva Mudliar

Article 17 of the ECT is the so- called ‘denial of benefits clause’. It safeguards the home state contracting party against the ‘free riders’, i.e., the nationals of third countries who could gain rights despite the fact that the contracting parties to the ECT did not agree on according them those benefits. Article 17 allows the contracting party to reserve the right to deny the benefits set out in Articles 10–16 of the ECT to: (i) the legal entities which are owned or controlled by nationals of a third state and do not have substantial business activity in the contracting party in which it is organized; and (ii) the investments of investors of third states towards which the respondent contracting party took certain economic and political measures.