THE AUTHORS:
Javier Manuel Tordesillas Rodríguez, Attorney at Cuatrecasas and Ph.D. Candidate at Universidad Pontificia Comillas (ICADE)
Nour Yazbeck Morell, Attorney at Cuatrecasas
As the global economy continues to digitize, intangible assets are becoming central to business models and sources of competitive advantage. In this sense, intangible assets —and particularly data assets— are emerging as critical considerations in Investor-State Dispute Settlement (ISDS), as they pose new challenges and risks for investors and states.
Most investment arbitration agreements predate the digital economy and do not explicitly address the protection of intangible assets. This creates uncertainty and potential conflicts between the interests of investors and states, particularly in terms of regulating data as well as other intangible assets. In this sense, the arbitral case law —and specifically the case law derived from investment arbitration tribunals— that has analysed the treatment of intangible assets is limited and rather inconsistent, leaving many questions open and unsolved.
Regulations and policies regarding the digital economy adopted by numerous states may also have implications for the protection of intangible assets in ISDS, as they may affect the rights and obligations of foreign investors and host states. For instance, in terms of data, some of these regulations and policies may impose data-sharing or disclosure obligations on investors, which could potentially reduce the value or exclusivity of their data.
Accordingly, one area where these questions are becoming particularly pressing is social media. The rapid proliferation of social media platforms has led to significant regulatory actions across the globe. In the past decade, numerous countries have blocked access to certain social media companies, and even more of them have passed content moderation or data use laws. In either case, investors may claim that these regulations and policies amount to a breach of their rights under investment agreements, such as unfair or discriminatory treatment, expropriation, or denial of justice, among other standards. As stated by Aram Aghababyan in the 2023 ITA in Review Journal, “[W]here the blocking of the social media platform can be in conformity with local laws and regulations, it can nevertheless violate international obligations enshrined in international investment agreements (“IIA”).”
This situation raises fundamental questions about how these assets will be treated under existing investment laws and treaties, such as whether social media platforms per se can be considered a “protected investment” under the auspices of investment laws and treaties. Consequently, this issue has become a relevant aspect which bilateral investment treaties have to account for. To bring an answer to this question, one can attempt to look at how arbitration tribunals have decided similar cases related to other intangible assets.
Are Intangible Assets Protected Investments?
Despite the rareness of cases of this nature to date, one can consider the Bridgestone v. Panama, Award, 14 August 2020 by which an ICSID tribunal found that an intangible asset —in this case, a registered trademark— did indeed qualify as a protected investment. This decision came as a result of the investor’s success in proving that it had consistently committed capital towards that investment. This precedent is not to be taken lightly, as it paves the way for considering other intangible assets that could potentially be recognized as protected investments under ISDS.
On this note, data is one of the most prominent and contentious types of intangible assets in the digital economy. Data refers to any information that can be collected, stored, processed, analysed, or exchanged in digital form. It can have various sources and forms, such as personal, non-personal, raw, processed, or aggregated. However, given the diversity and complexity of data, it is not surprising that there is no clear and consistent definition or classification of data in international law, including in investment agreements. In the EU Data Governance Act, for instance, Article 2(1) defines data as “any digital representation of acts, facts or information and any compilation of such acts, facts or information, including in the form of sound, visual or audio-visual recording.”
In this context, legal scholars have sought to understand the intersection of data and investment arbitration, particularly its classification as a “protected investment” under the distinct applicable treaties. For instance, within the framework of International Centre for Settlement of Investment Disputes (ICSID) arbitrations, the Salini test mandates that an investment must entail a commitment of resources, a certain duration, an element of risk, and a contribution to the economic development of the host state, to comply with the definition of investment under Article 25 of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (1965) (ICSID Convention). From our perspective, in the absence of a specific legal provision, data should be recognized as a protected investment as long as it has the capacity or potential to generate returns to its owners.
Data as an Intangible Asset – Methods for Data Valuation
This is not an easy task. One primary challenge is the lack of a universally accepted and objective valuation method or standard for data, as its worth can vary based on users, purposes, or contexts. In fact, considering its highly globalized and transnational nature, the Organisation for Economic Co-operation and Development (OECD) has exerted efforts to determine the value of data (Measuring the Value of Data and Data Flows).
However, let us take a step backward to see how this is decided. To prove a breach of standards, such as expropriation, in ISDS, there must be substantial impairment to the value of the investment. However, quantifying the value of data is rather complex. For many companies, data is their most valuable asset, and its monetization often comes from assignment or selling. This complexity is illustrated to some extent in the ongoing case of Einarsson and GSI v. Canada (Einarsson Case), which will be discussed in more detail.
There are four potential ways to consider data as a covered investment under applicable international investment agreements, and which, consequently, will outline its form of valuation:
- The data itself as the investment: This approach considers raw data as a standalone asset if it is created through lawful and substantial processes, considering the business resources dedicated (workforce, capital and opportunity cost, among others),
- The underlying contractual rights as the investment: This approach considers the value of the agreements dealing with rights over the use of data, such as a license or a concession, if it generates compensations such as a revenue stream to the investor,
- Intellectual property rights over data as the investment: This approach refers to the value of data protected according to intellectual property laws such as copyright or trade secrets, as long as they are recognized and protected by the host state’s laws or by an international treaty,
- Data as part of a business enterprise: This approach considers the market value of an enterprise beyond its tangible assets or profitability given the data possessed, which occurs when data is an integral or essential component of the enterprise’s assets.
Potential Breaches of ISDS Standards
To constitute a breach of standards, such as expropriation, under ISDS and investment arbitration agreements, data would need to be subject to a measure by the host state that substantially deprives the investor of the value, use, or control of the investment, either directly or indirectly. Said measures include:
- Taking or seizing data, such as by confiscating, nationalizing, or requisitioning data from the investor, without adequate compensation or due process,
- Using or copying data, such as by accessing, processing, or reproducing data from the investor, without authorization or remuneration,
- Disclosing or sharing data, such as by releasing, publishing, or transferring data from the investor, without consent or protection,
- Restricting or prohibiting data, such as by blocking, censoring, or banning data from the investor, without justification or proportionality.
Of course, not every measure by the host state that affects data would amount to a breach, as states have the right and duty to regulate in the public interest, such as for the protection of health, safety, environment, or human rights. This is precisely the challenge faced by host states when drafting and enforcing public policy, and eventually by the ISDS tribunals, which must balance the interests and expectations of both the investor and the host states. The purpose, nature, and impact of such measure, as well as the relevant legal and factual context, will need to be considered.
An Empirical Case Study: The Einarsson Case
A case study worth exploring is the already mentioned and yet unresolved Einarsson Case, which concerns the Canadian Government’s handling of proprietary marine seismic data owned by Geophysical Services Incorporated (GSI), a company incorporated under the Canada Business Corporations Act and owned by Mr. Theodore Einarsson and his two sons. In this case, the marine seismic data provides valuable data about the subterranean geological formations, which aids in identifying oil and gas reserves.
GSI’s business model involved creating, licensing, storing, processing, and reprocessing the aforementioned seismic data. According to the notice of arbitration, the cost of creating this seismic data was approximately USD 781 million, and its licensing agreements were worth USD 2.53 billion.
Despite the economic investment in resources needed to obtain this data, and its economic value in the following transactions, the Canadian government applied several regulations which required the submission of seismic data to Canadian authorities. This conflicted with the company’s care towards the data, as it was guarded as a trade secret, governed by strict licensing agreements that mandated confidentiality. This is precisely what the Claimant argued during its years-long national litigation, concluding with the Supreme Court of Canada’s unfavourable decision.
GSI argued that Canada’s regulatory regime constituted an indirect expropriation of their data and IP rights as well as a breach of the fair and equitable treatment standard, undermining the fair market value of their company, potentially breaching the obligations under the North American Free Trade Agreement (NAFTA). In this case, the Claimants carried the burden of convincing the tribunal that the data would qualify as an “investment” as per Article 1139 of NAFTA. In this sense, Claimants make particular reference to their own investment in terms of time, effort and money in GSI, depicting the data as an investment in and of itself.
On the other hand, the Canadian Government argued that it had acted within its sovereign limits as it was entitled to regulate in the public interest. In this sense, it claimed that the measures were non-discriminatory and necessary, and attributed the Claimant’s losses to their own business risks rather than regulatory breaches. Specifically, the Canadian Government’s regulatory framework mandates the submission and public disclosure of seismic data collected for oil and gas exploration, while guaranteeing a confidentiality period. It highlighted the policy of balancing data confidentiality to attract investment with public disclosure to spur exploration, aiming to benefit the public while providing a clear and stable regulatory framework for operators.
The tribunal’s task will be complex. Initially, it must determine whether ‘data’ qualifies as a protected investment. Following this, it must assess whether Canadian regulations have breached NAFTA’s investment arbitration standards. If a breach is found, the tribunal will then need to quantify the value of the data. This dispute may balance public interest against investment incentives or redefine IP rights in data-related arbitration.
Key Considerations
The Einarsson Case is particularly significant, highlighting the need for a detailed understanding of data and intangible assets as investments. Its outcome will set a precedent for governmental regulatory freedom concerning data and intellectual property rights.
This case also parallels emerging data-sharing obligations in the European Union. The Digital Markets Act, Digital Services Act, and Data Governance Act require technological companies to share data with private and public entities, often with minimal compensation.
All in all, given the ever-increasing relevance of data in the digital economy and the inevitable rise in regulation, we eagerly anticipate new efforts to explore the boundaries of investment arbitration in resolving these disputes. Striking a balance between public interest and investment initiatives will be crucial, opening up possibilities for future developments in this dynamic field.
ABOUT THE AUTHORS
Javier Manuel Tordesillas Rodríguez is a Spanish-qualified attorney specializing in international arbitration and human rights. He advises in a wide range of matters and sectors (energy, construction, engineering, etc.), particularly in arbitral proceedings before the main arbitral institutions (ICSID, ICC, etc.). Javier is member of Cuatrecasas’ Doctoral Program and Ph.D. Candidate in International Arbitration and Human Rights at Universidad Pontificia Comillas (ICADE). Javier also holds an LL.M. in Human Rights and is admitted to the Madrid Bar.
Nour Yazbeck Morell is a Spanish-qualified attorney admitted to the Madrid bar. She is part of Cuatrecasas’ Program on International Advocacy. Her practice encompasses all areas of international arbitration, intellectual property, and technology law. She advises and has published on a wide range of matters regarding data protection, privacy and artificial intelligence applied and in relation to international arbitration. Nour also actively engages in matters of public international law and has been selected to be the Spanish national administrator for the 2025 Philip C. Jessup Moot Court.
*The views and opinions expressed by authors are theirs and do not necessarily reflect those of their organizations, employers, or Daily Jus, Jus Mundi, or Jus Connect.
