This paper analyses the scope of application and definitions used in international investment agreements (IIAs). IIAs specify not only their geographical and temporal coverage, but, most importantly, their subject-matter coverage. This is done primarily through the definitions of the terms "investment" and "investor", which form the main focus of this paper. The definition of "investment" determines economic interests, to which governments extend substantive IIA protections, while the definition of "investor" specifies the range of individuals and legal entities that can benefit from the treaty. To a large extent, the definitions outline the boundaries of a country´s exposure to possible investor-State claims. The outcomes of many arbitral decisions of the past decade have depended on a tribunal´s interpretation of whether a particular transaction or asset qualified as a protected investment and/or whether the claimant qualified as a protected investor.

This paper not only considers how investment and investor have been defined in existing investment agreements but also how different definitions have been interpreted. With respect to the definition of investment, while the broad and open-ended asset-based definition has remained wide-spread in BITs focusing on investment protection, newer agreements have used techniques for narrowing the scope of the definition. This trend is likely to have been a reaction to those arbitral awards which interpreted open-ended definitions in an over-extensive manner. In particular, some treaties started to use a closed-list definition instead of an open-ended one and introduced certain objective criteria or elements to determine when an asset can be considered an investment, explicitly exclude certain types of assets and employ other narrowing techniques. Arbitral practice has further highlighted the importance of a provision clarifying that the treaty should apply only to those investments that are made in accordance with host State law.

An additional complication that has emerged with regard to the term "investment" is the interrelationship between its scope under the applicable IIA, on the one hand, and under Article 25(1) of the International Centre for Settlement of Investment (ICSID) Convention, on the other. Tribunals have differed as to which of the two should be treated as decisive as well as to the exact meaning of "investment" under the ICSID Convention, which requires the existence of an "investment" but does not define the term. Recent arbitral awards established requirements for there to be an investment over which an ICSID tribunal has jurisdiction. In order to qualify as an "investment" it should have: a certain duration, an expectation of profit, an element of risk, and a substantial commitment of capital. An important question in this debate is whether an investment must contribute to the economic development of the host State in order for the ICSID Convention to apply.