When the Investor Is Also a State

Aişe Gül Akkoyun
Sep 5, 2025
3 min read

Updated: Aug 5

Sovereign capital, hostile regulation, and a jurisdictional question the treaty regime has never fully settled.

Background

Two developments in the first week of September 2025 look, at first glance, like ordinary business news. Read together, they point at a structural problem in investment protection.

The first is Orsted. In August 2025, the United States Bureau of Ocean Energy Management issued a stop-work order halting construction of Revolution Wind, a 700 MW offshore wind project supplying Rhode Island and Connecticut. The project was close to completion. Reporting put the cost of the halt at more than USD 2 million a day, with cancellation estimated to carry well over USD 1 billion in additional costs. In early September, Orsted announced a heavily discounted rights issue of roughly USD 9.4 billion to shore up its capital structure.

The second is Temasek, Singapore's state investment company, which is undergoing a strategic overhaul in how it allocates capital across sectors and jurisdictions.

The connection is not thematic. It is legal. Both are State-linked investors, and that status changes what happens when a host State turns hostile.

The problem with being a State-owned claimant

The Danish state is Orsted's largest shareholder, holding just over half the company. Temasek is wholly owned by the Government of Singapore. Under most investment treaties an investor is defined by nationality and corporate form, and on a plain reading both would qualify. The complication arises at the forum.

Article 25 of the ICSID Convention gives the Centre jurisdiction over disputes between a Contracting State and a national of another Contracting State. Whether a State-owned enterprise counts as such a national is not answered by the text. The working position, drawn from Aron Broches, the Convention's principal architect, is that a State-owned company should not be disqualified merely because the State owns it, unless it is acting as an agent for the government or discharging an essentially governmental function.

That formulation is workable but soft. It turns on function rather than ownership, and function is exactly what becomes contested when a State investment vehicle pursues strategic assets abroad. An entity that presents itself as a commercial investor when claiming protection may look considerably more governmental when viewed from the respondent State's side.

Why this is becoming harder to avoid

The energy transition has pushed State capital into precisely the sectors where host States are most likely to intervene: offshore wind, grid infrastructure, critical minerals, ports. These are also the sectors where economic security arguments are now routinely made.

The result is a growing category of disputes in which the claimant is partly State-owned, the respondent is regulating on national security or industrial policy grounds, and the jurisdictional question is genuinely open rather than formal.

Orsted's situation illustrates the practical stakes without requiring any speculation about litigation. A regulatory order halted a nearly complete project; the losses were immediate and quantifiable; the response was a capital raise rather than a claim. Whether that reflects a judgement about the merits, about the forum, or simply about timing is not something an outsider can know. But it is the kind of decision a dataset could illuminate if the underlying variables were tracked.

What would be worth measuring

Ownership threshold: at what level of State shareholding do respondents actually raise a Broches objection, and how often does it succeed?
Sector concentration: are State-owned claimants over-represented in energy, infrastructure and minerals relative to their share of outward investment generally?
Response choice: when a State-linked investor suffers a regulatory loss, how often does it arbitrate, litigate domestically, recapitalise, or exit?
Asymmetry: do respondent States that themselves deploy sovereign capital abroad raise the objection less frequently?

The last of these is the most interesting and the least studied. If the objection is raised selectively, it is functioning less as a jurisdictional rule than as a bargaining position.

The open question

The treaty regime was designed around a clean separation: States regulate, private parties invest, and the mechanism protects the latter from the former. Sovereign wealth funds and State-majority utilities do not fit that picture. They are investors by function and States by ownership.

So the question is whether the Broches test, which asks what the entity is doing rather than who owns it, remains adequate when the entity's commercial strategy and its home State's industrial policy are the same document. Or whether investment protection needs a category it currently lacks: the investor that is also, unavoidably, a sovereign.