Yukos, Investment Round-Tripping, and the Evolving Public/Private Paradigms

The 2014 Yukos arbitration awards were powerful illustrations of the benefits for investors of using investment round-tripping structures through offshore companies. The paradox is that such structures are now understood to be susceptible to misuse and targeted by global transparency initiatives. Investment round-tripping is at the crossroads of two opposing legal paradigms: the public law paradigm, which looks through corporate entities that are devoid of economic substance, and the traditional private law paradigm, which favors party autonomy and upholds the private ordering of investment structures. This article examines how these paradigms are evolving in contiguous legal disciplines that fall on opposite sides of the public/private divide (corporate law, tax, money-laundering regulations and investment arbitration). It advocates more adherence in investment arbitration to the public law paradigm, an evolution that would restrict access to the institution by round-tripping but cleaves more closely to the need for greater financial transparency