Social media companies have been growing exponentially, penetrating new markets and remain omnipresent in everyone's daily life.  Having little or no power to control the spread and operation of social media platforms in their territory, governments sometimes overreact and implement regulations blocking a social media platform’s operation in its entirety.  This article explores the legal consequences of governmental blocking/banning of social media platforms arising out of states’ obligations under international investment agreements (“IIA”).  More specifically, this article attempts to answer the question of whether social media companies—having merely a virtual presence in host economies—could benefit from protections against expropriation enshrined in IIAs.

In doing so, this paper first examines the characteristics and business models of social media platforms.  The paper then defines what constitutes a government ban/blocking of social media platforms by delving deeper into the types and methods currently in use.  Moving forward, this paper breaks down the assets of social media companies and assesses whether those assets fall within the coverage scope of IIAs and the ICSID convention.  By identifying end-user license agreements as possibly-to-be-affected assets of social media companies in cases of government blocking, the paper then observes the “admission,” “establishment,” “legality,” “economic contribution,” and “territoriality” requirements provided in IIAs.  After identifying expropriation as the most likely to be breached protection, the paper focuses on discussing the possibility of expropriation of contractual rights of social media platforms.  Finally, the paper examines any potential host state defenses that can be invoked in response to investor-state dispute settlement (ISDS) claims arising from a government’s ban/blocking of social media platforms.

Browsing social media has become an integral part of our daily life.  With the average person in 2021 spending two hours and 24 minutes online and with 4.2 billion users worldwide,1Deyan Georgiev, How Much Time Do People Spend on Social Media in 2021?, TECHJURY, June 29, 2021, https://techjury.net/blog/time-spent-on-social-media/#gref/X1 social media platforms have grown to penetrate even the most remote areas of the globe.  Today, Facebook, YouTube, TikTok, Instagram, WhatsApp, and Spotify are the most popular applications used worldwide.2David Curry, Most Popular Apps (2020), BUSINESS OF APPS, July 6, 2021, https://www.businessofapps.com/data/most-popular-apps/X2  According to a 2020 study, the average number of social media accounts for one person is 8.8,3Brian Dean, Social Network Usage & Growth Statistics: How Many People Use Social Media in 2021?, BACKLINKO, Apr. 26, 2021, https://backlinko.com/social-media-users/X3 and 300 hours of video are uploaded on YouTube every single minute.4Danny Donchev, 37 Mind Blowing YouTube Facts, Figures and Statistics – 2021, FORTUNELORDS, Jan. 12, 2021, https://merchdope.com/youtube-stats/X4

Historically, the contents of traditional media such as newspapers, films, television, and radio, were controlled by states or large corporations. Only the privileged few were able to create, publish, or telecast media content.  With the advent of the internet and services such email, wikis, blogs, and YouTube, this monopoly ended, providing leeway for everyone to create, publish, and share their content.  As the famous YouTube slogan “broadcast yourself!” suggests, anyone with an internet connection became a broadcaster of their own media content.

Nowadays, businesses and governments rely heavily on social media5See Ines Mergel & Stuart Bretschneider, A Three-Stage Adoption Process for Social Media Use in Government, 73 PUB. ADMIN. REV. 390 (2013).X5 to interact with each other, advertise their products, and services, communicate with the public, provide public services, and even advance their political campaigns.6Pinar Yildirim, How Social Media is Shaping Political Campaigns, KNOWLEDGE AT WHARTON, Aug. 17, 2020, https://knowledge.wharton.upenn.edu/article/how-social-media-is-shaping-political-campaigns/.X6  The US Supreme Court in 2017 classified social media platforms as “principal sources for knowing current events, checking ads for employment, speaking, and listening in the modern public square, and otherwise exploring the vast realms of human thought and knowledge.”’7Packingham v. North Carolina, 137 S. Ct. 1730, 1737 (2017).X7

In parallel, the need to regulate social media platforms has been growing as rapidly.  During the past decade, initiatives for regulation have been coming from the European Union, US politicians, and privacy activists.8Alex Rochefort, Regulating Social Media Platforms: A Comparative Policy Analysis, 25 COMM. L. & POL’Y 225 (2020).X8  While those initiatives were coming from countries that adopted ideologically democratic attitudes towards open cyberspace and internet freedom,9Ronald Deibert, Authoritarianism Goes Global: Cyberspace Under Siege, 26 J. DEMOCRACY 64, 65 (2020).X9 other countries like China,10See Guangchao Charles Feng and Steve Zhougshi Guo, Tracing the Route of China’s Internet Censorship: An Empirical Study, 30 TELEMATICS & INFOMATICS 335 (2020).X10 Russia, North Korea, and Nigeria11Lianrui Jia & Stanislav Budnitsky, Branding Internet Sovereignty: Digital Media and the Chinese–Russian Cyberalliance, 21 EUR. J. CULTURAL STUDIES 594 (2018). X11 tend to perceive internet freedom as a threat and are inclined to apply restrictive ideologies.12Anders Henriksen, The End of the Road for the UN GGE Process: The Future Regulation of Cyberspace, 5 J. Cybersecurity 1 (2019).X12  While referring to this divide between democratic and restrictive approaches toward the internet, Clyde Crews framed the phenomenon as “splinternet.”13L.S., What is the “splinternet”?, THE ECONOMIST, Nov. 22, 2016, https://www.economist.com/the-economist-explains/2016/11/22/what-is-the-splinternet/.X13  

Countries blocking social media platforms belong to restrictive ideology groups.  As social media platforms are powerful tools to share public opinions, repressive governments, where critiques of the ruling elite and military are subject to censorship, have a hard time censoring the decentralized social media content.  A much simpler solution is to block the platform in its entirety and eliminate the problem itself.  When blocking social media platforms, countries provide controversial and vague reasons, ranging from the impossibility of censorship to unstable political situations, and protection of public morals.14DANIEL ALEXANDROV, ET AL., DIGITAL TRANSFORMATION AND GLOBAL SOCIETY 139 (2018).X14  

Where the blocking of the social media platform can be in conformity with the local laws and regulations, it can nevertheless violate international obligations enshrined in international investment agreements (“IIA”).  Therefore, this paper examines whether blocking social media platforms in the host economy would violate protections against expropriation in IIAs and whether social media companies can resort to investor-state dispute settlement (ISDS) to address the platform blockings.  This paper does not examine the physical assets of social media companies and focuses merely on the virtual presence of social media companies in host economies.

The article will first examine the characteristics and business models of social media platforms.  Then, it will define what constitutes a governmental ban/blocking of social media platforms by delving into the types and methods presently employed.  The paper will then break down the virtual assets of social media companies and will assess those towards the coverage scope of IIAs and the International Centre for Settlement of Investment Disputes (ICSID) Convention.  By identifying the possibly-to-be-affected assets of social media companies in case of government blocking, the paper will then observe the “admission,” “establishment,’” “legality,” “economic contribution,” and “territoriality” requirements provided in IIAs.  After determining the expropriation as the most likely-to-be-breached protection, the paper will concentrate on discussing the government blocking of social media platforms as an expropriation of contractual rights.  Finally, the paper will observe any possible host state defenses that can be invoked against ISDS claims to arise out of the government’s ban/blocking of social media platforms.

In this paper, the author argues that the government’s blocking of social media platforms can amount to an indirect expropriation of contractual rights and that there exists a fair chance for social media companies to overcome the jurisdictional stage of a possible ISDS case.  In doing so, the paper will analyze the existing IIAs and draw extensively on identifying cases in ISDS jurisprudence, including the Iran-US claims tribunal, WTO, ICJ, and PCIJ decisions supporting its position.

It is important to note, that the paper does not intend to portray the current ISDS system as efficiently equipped to deal with government blocking of social media platforms.  There are conflicting awards addressing the issues of territoriality, the contribution of assets/money, contribution to the economic development of the host state, admissibility, legality requirements, and the issues connected with intangible assets.  Therefore, it is not the intention to analyze where the prevailing view of the investment tribunals on the issues to be discussed stands.  Instead, the paper intends to prove that there exists a chance/possibility that the investment tribunals will exercise their jurisdiction over the social media company disputes and will rule that the blocking of the relevant social media companies would amount to an indirect expropriation of the claimant's contractual rights.

As social media platforms are free to use, many mistakenly presume that the data generated by the platforms is of no value.1Tama Leaver, The Social Media Contradiction: Data Mining and Digital Death, 16 M/C J. (2013).X1  In fact, YouTube, Facebook, TikTok, and others are profit driven commercial platforms.

Social media companies collect data from the users that join their platform, and the data generated by them has a huge monetary value.  social media platforms primarily generate profit based on targeted advertisements, which target the audience based on the user’s personal data.  social media users are a huge audience, and businesses, politicians, and even traditional media companies spend enormous financial resources to advertise their products and services to them or to advance their political campaigns with them.2Grace Manthey, Presidential Campaigns Set New Records for Social Media Ad Spending, EYEWITNESSNEWS, Oct. 29, 2020, https://abc7.com/presidential-race-campaign-spending-trump-political-ads-biden/7452228/.X2 

An excerpt from the November 2007 Facebook user agreement provides:

By posting User Content to any part of the Site, you automatically grant, and you represent and warrant that you have the right to grant, to the Company an irrevocable, perpetual, non-exclusive, transferable, fully paid, worldwide license (with the right to sublicense) to use, copy, publicly perform, publicly display, reformat, translate, excerpt (in whole or in part) and distribute such User Content for any purpose on or in connection with the Site or the promotion thereof, to prepare derivative works of, or incorporate into other works, such User Content, and to grant and authorize sub-licenses of the foregoing.3Facebook, Terms of Use, FACEBOOK, Feb. 10, 2007, https://web.archive.org/web/20070210022156/http://www.facebook.com/terms.php X3 

Although these kinds of agreements have become a rarity, the main business model of social media companies remains to collect and repackage the gathered data into trends and patterns for the later use and extraction of profit.  Personal data collected by social media companies has become a new commodity.  Social media platforms are new goldmines where the mineral that is being extracted is the user data.  To provide some metrics, the annual worldwide average revenue per user (“ARPU”) of META was reported to be $29.25 during the 2019 period,4Facebook Inc., Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, For the fiscal year ended December 31, 2019, at 48 (Jan 29, 2020), available at http://d18rn0p25nwr6d.cloudfront.net/CIK-0001326801/45290cc0-656d-4a88-a2f3-147c8de86506.pdf/.X4 which sheds some light on why its market capitalization was $720 billion in August 2020.5Trefis Team, Facebook Added Over $350 Billion in Value Since 2016. Can It Repeat?, FORBES, Aug 5, 2020, https://www.forbes.com/sites/greatspeculations/2020/08/05/facebook-added-over-350-billion-in-value-since-2016-can-it-repeat/?sh=482832617f4d/.X5 

While for social media platforms, the primary way of generating profit remains advertisement, some platforms rely on a mix of income stream methods.  One such combination of income methods is to sell subscriptions in exchange for premium features (YouTube/LinkedIn).

In short, social media platforms evolve rapidly, and it is impossible to categorize or discuss all of the types as they introduce new features with every new release.  What is essential is that social media platforms grow their user base and penetrate new digital economies rapidly without the need to have a physical footprint in the foreign economy.

A. Defining the Social Media Company Ban/Blocking

What does banning a tech company entail?  Governments can employ a wide array of tools and techniques to block the social media platform's access.  Such techniques include but are not limited to:  blocking the specific domain name; blocking the IP address; or else requesting the search engines to remove specific content from search results.  Governments use their powers to order internet service providers (“ISP”) to restrict access to particular websites.  For the purpose of this analysis, inaccessibility is an essential and necessary component for the measure to be considered a ban.

The blocking of the service can be classified as national, local or inner.6Ekaterina Shireeva et al., Blocking Social Media. Reasoning and Legal Grounds, INT’L CONFERENCE ON DIGITAL TRANSFORMATION & GLOBAL SOC., 139, 142 (2017).X6  With national blocking, one or all social media platforms become inaccessible from anywhere in the country.  North Korea's isolation from the internet and China's great firewall7Harsh Taneja & Angela Wu, Does the Great Firewall Really Isolate the Chinese? Integrating Access Blockage with Cultural Factors to Explain Web User Behavior, 30 THE INFORMATION SOC, 297, 297 (2014).X7 fall into this category.  Local blocking refers to either when the service is blocked partially in some cities/regions or when one or several ISPs block the service, but it remains accessible through others.  An example is the 2015 Tajikistan social media ban, where five ISPs blocked social media platforms, but the access was possible through others.8Megan Eaves, Access to social media sites blocked in Tajikistan, LONELY PLANET, Aug, 26, 2015, https://www.lonelyplanet.com/news/access-to-social-media-sites-blocked-in-tajikistan.X8   Inner blocking occurs when the company or organization blocks access to internet services, including social media platforms for its employees.  Such blocking is common practice in universities and companies and is driven by productivity concerns.  As inner blocking is done by private organizations and has a limited effect on the accessibility of the service (the social media platform could be accessed outside the organization network), this type of blocking falls outside the scope of this analysis.

The duration of the blocking is also of significance.  Investment tribunals take into account the duration of expropriatory measures together with the intent and effect caused.9Azurix Corp. v. Argentine Rep., ICSID Case No. ARB/01/12, Award, ¶¶ 308–322 (July 14, 2006).X9  Tribunals also consider the "duration and intensity of the economic deprivation suffered by the investor"10Telenor Mobile Commc’ns A.S. v. Rep. of Hungary, ICSID Case No. ARB/04/15, Award, ¶ 70 (Sept 13, 2006).X10 when examining the measure.11LG&E Energy Corp., LG&E Capital Corp. and LG&E Int’l Inc. v. Argentine Rep., ICSID Case No. ARB/02/1, Decision on Liability, ¶ 189–193 (Oct. 3, 2006).X11  For the reasons mentioned above, short-term site-blocking causing minor economic consequences for the social media company are unlikely to constitute violation of IIAs.

B. Defining the Banning Measures

Recently, Instagram and Facebook were banned by the Russian courts for “carrying out extremist activities.”12Pjotr Sauer, Russia bans Facebook and Instagram under “Extremism” Law, GUARDIAN, Mar. 21, 2022, https://www.theguardian.com/world/2022/mar/21/russia-bans-facebook-and-instagram-under-extremism-lawX12  In 2020, TikTok was banned in India in accordance with the decision of the Ministry of Electronics and Information Technology under section 69A of India’s Information Technology Act by invoking the grounds of security of state and public order.13Ministry of Electronics & IT, Government Blocks 118 Mobile Apps Which are Prejudicial to Sovereignty and Integrity of India, Defence of India, Security of State and Public Order, PRESS INFORMATION BUREAU, Sept. 2, 2020, https://www.pib.gov.in/PressReleasePage.aspx?PRID=1650669.X13  Likewise, for failing to remove offensive content, access to YouTube was blocked for 1000 days in 2015 by the Pakistan Telecommunication Authority, following an order of the Supreme Court of Pakistan.14Hassan Belai Zaidi, “No Solution But to Persist with YouTube Ban,” DAWN, Feb. 7, 2015, https://www.dawn.com/news/1162061/.X14  

Remarkably, cases have been recorded where no formal regulation or decision has been adopted when blocking access to the social media platform.  For example, in 2021, the Attorney General of Nigeria announced the indefinite ban of Twitter15Twitter, originally known for its microblogging service, has recently evolved into X.X15 in an oral statement.  Such ban was in violation of Nigeria’s laws and constitution.16Akinola Akintayo, Nigeria’s Ban on Twitter Has No Legal Basis, SCROLL.IN, June 29, 2021, https://scroll.in/article/998731/nigerias-ban-on-twitter-has-no-legal-basis/.X16  Similarly, the Armenian government adopted no official announcement or regulation when blocking access to the TikTok platform for 43 days during the 2020 military conflict.17NetBlocks, TikTok Restricted in Azerbaijan and Armenia Amid Clashes Over Nagorno-Karabakh, NetBlocks, 2020 https://netblocks.org/reports/tiktok-restricted-in-azerbaijan-and-armenia-amid-clashes-over-nagorno-karabakh-3An4pky2 /.X17 

When governments fail to adopt specific regulations or acknowledge their role in blocking access to internet platforms, tribunals may interpret this as a breach of due process obligations in either the context of expropriation (See the decision in AIG Capital Partners v. Kazakhstan)18AIG Capital Partners, Inc. and CJSC Tema Real Estate Co. v. Rep. of Kazakhstan, ICSID Case No. ARB/01/6, Award, ¶ 10.5.1. (Oct. 7, 2003).X18 or fair and equitable treatment (“FET”) (see in Cairn Energy v. India).19Cairn Energy PLC and Cairn UK Holdings Ltd. v. Rep. of India, Permanent Court of Arbitration, Final Award, ¶ 1722 (Dec. 21, 2020).X19  Additionally, when governments do not announce or conceal the fact that they blocked access to the platform, issues of attribution under customary international law of state responsibility could arise.20Simon Olleson, Attribution in Investment Treaty Arbitration, 31 ICSID REV. - FOREIGN INVEST. L. J. 457 (2016), 472.X20 

Before discussing possible violations of IIA protection standards, it is of paramount importance to understand whether the assets of social media companies qualify as “investments” at all and thereby benefit from IIA protections.  The existence of a covered investment is a procedural prerequisite for resorting to dispute settlement provisions of an IIA and for the tribunal’s jurisdiction.1ZACHARY DOUGLAS, THE INTERNATIONAL LAW OF INVESTMENT CLAIMS 162 (2009).X1 

There is no generally agreed definition of “investment” and therefore the coverage of IIAs varies from treaty to treaty.2Christoph Schreuer, Investments, International Protection, in MAX PLANCK ENCYCLOPEDIAS OF INTERNATIONAL LAW 37 (Oxford University Press, 2013).X2  Some early IIAs, like the first-ever concluded bilateral investment treaty (“BIT”) between Germany and Pakistan, cover only capital investments in the form of “foreign exchange, goods, property rights, patents, and technical knowledge.”3Treaty for the Promotion and Protection of Investments Between Pakistan and the Federal Republic of Germany, Nov. 25, 1959, art. 8.1, 475 U.N.T.S. 23 [hereinafter Germany – Pakistan].X3  In subsequent treaties, states often agreed on a more expansive and detailed list of investments to be covered.  New generation IIAs typically contain a defined list of assets that could qualify as “investments” and benefit from the protection of the treaties.  These “investments” vary from concessions and debt instruments to intellectual property rights (“IPR”), and contractual rights.4See Treaty Between the Government of the United States of America and the Government of [Country] Concerning the Encouragement and Reciprocal Protection of Investment, Apr. 20, 2012, art. 1 [hereinafter US Model BIT].X4  

As the great majority of the IIAs were signed between 1959 and 2000,5UNCTAD, The Changing IIA Landscape: New Treaties and Recent Policy Developments, IIA ISSUES NOTES 157 (2019).X5 prior to the existence of either the digital economy or social media companies, they were typically drafted with physical assets and traditional services in mind, and do not address the specificities of digitalization or specifically consider forms of innovative investments.6UNCTAD, The Changing IIA Landscape: New Treaties and Recent Policy Developments, IIA ISSUES NOTES 157 (2017).X6  

For that reason, though 98% of IIAs contain a defined list of “investments,”7Atanasova Dafina, Definition of Investment, JUS MUNDI, Aug. 14, 2023, https://jusmundi.com/en/document/wiki/en-definition-of-investment/.X7 definitions covering digital platforms are hardly ever found.  However, where the list of covered “investments” contains no express reference to digital platforms, certain assets of social media companies may still fall under the defined list of “investments.”  Alternatively, the digital platforms/assets could still fall under the broad-asset-based definitions of IIAs,8JESWALD SALACUSE, THE LAW OF INVESTMENT TREATIES 177 (2nd ed. 2015). X8 such as “every kind of asset,” or “every kind of economic interest,” which leave broad room for interpretation to include undefined and possibly innovative types of assets.9Eniko Horváth & Severin Klinkmüller, The Concept of “Investment” in the Digital Economy: The Case of Social Media Companies, 20 J. WORLD INVEST. & TRADE 577, 590 (2019).X9  

A. Assets of Social Media Companies as “Investments”

Though social media platforms possess both tangible and intangible assets, given tangible assets are already extensively analyzed in scholarship and the controversies arising thereof are well established, this analysis focuses on intangible assets.  Such intangible assets forming part of social media companies include patents, trademarks, trade secrets, know-how, contractual rights, equity, and data.10E.g. Ross & Ward, supra note 17.X10 

The first and only instance where a technology platform initiated an ISDS claim is that of Uber’s dispute notice issued against Columbia.  The notice of dispute listed what Uber asserted to be protected “investments” of the company submitted under the 2012 US - Colombia Trade Promotion Agreement, including:11The United States - Colombia Trade Promotion Agreement, Nov. 22, 2006.X11 

“intellectual property rights,” including the right to license and use the Uber Platform, including the Uber applications, websites, content, and products, as well as the Uber trademark and associated goodwill, in Colombia; and [ ] “intangible . . . property rights,” including the network of contacts between Uber (through a subsidiary) and Uber riders and Driver Partners, as applicable, to access and use the Uber Platform in Colombia.12Uber Technologies, Inc. and Uber Colombia, S.AS. v. Colombia, Notice of Dispute under the United States – Colombia Trade Promotion Agreement, Dec. 30, 2019.X12 

Uber’s assets in many respects are similar to the intangible assets of social media platforms.  In this case, Uber had a limited physical presence in Columbia.13Id, p. 2.X13  What is surprising is that Uber listed the network of contacts between Uber, riders, and driver-partners as part of the affected investments by Columbia’s measure, which required “telecommunication companies in Colombia to suspend transmissions, data storage, and access to the Uber Platform in Colombia.”14Id.X14 

One can draw parallels between the ban of Uber in Columbia and the blocking of social media companies.  While the case was eventually settled without reaching the adjudication stage, it shows that ISDS could be a powerful method of addressing the ban of digital platforms.

B. Contractual Rights as “Investments”

Whether the end-license user agreements (“User Agreements”) fall under the protection of IIAs will depend on the definition of “investment” incorporated in the respective IIAs.  Formulations used in the IIAs can vary from treaty to treaty:  some treaties expressly mention contractual rights15See, e.g., Treaty Between the Government of the United States of America and the Government of the Republic of El Salvador for the Encouragement and Reciprocal Protection of Investment, Mar. 10, 1999, art. 1(d)iii.X15 whereas others contain formulations like “claims to money,”16See, e.g., Agreement Between the Republic of Chile and The Republic of South Africa for the Reciprocal Promotion and Protection of Investments, Nov. 12, 1998, art. 1(2)c.X16 “claim to performance,” and “right to future income,”17See, e.g., Agreement Between the Republic of Turkey and the Republic of Tunisia Concerning the Reciprocal Promotion and Protection of Investments, May 29, 1991, art. 1.X17 each of which can be interpreted to cover contractual rights.  Most notably, the treaty entered into between Denmark and Slovenia in 1999 mentions “claims to money and claims to performance pursuant to contract having an economic value” as a covered investment.18Agreement Between the Government of the Republic of Slovenia and the Government of the Kingdom of Denmark Concerning the Promotion and Reciprocal Protection of Investments, May 12, 1999, art. 1(1)(iii).X18  Analyzing all different types of provisions found in IIAs, Dolzer and Schreuer concluded that “practically all investment treaties state that contracts are covered by the term ‘investment.’”19RUDOLF DOLZER & CHRISTOPH SCHREUER, PRINCIPLES OF INTERNATIONAL INVESTMENT LAW 69 (2nd ed. 2012).X19 

While contractual rights continue to be listed in IIAs, a rising trend is to limit the scope of investment and leave out mere “[c]ommercial contracts for the sale of property or services by a national or enterprise in the territory of a Contracting Party.”’20Agreement between the United States of Mexico and Spain for the Promotion and the Protection of the Investments, June 23, 1995, art. 1.2(i). X20  This approach, which originated in NAFTA21North American Free Trade Agreement, Dec. 17, 1992.X21 and has been relied upon by tribunals,22Bayview Irrigation Dist. and Others v. United Mexican States, ICSID Case No. ARB(AF)/05/1, Final Award, ¶ 104 (June 19, 2007); Apotex Inc. v. United States of America, ICSID Case No. UNCT/10/2, Award on Jurisdiction and Admissibility, ¶ 239 (June 14, 2013).X22 was identically imported to subsequently concluded IIAs in order to narrow the scope of their application.23Gantz, David A. “Increasing Host State Regulatory Flexibility in Defending Investor-State Disputes: The Evolution of U.S. Approaches from NAFTA to the TPP.” The International Lawyer 50, no. 2 (2017): p 231.X23  However, the approach to exclude mere contractual rights is by no means used in all IIAs concluded after 1992 and is non-existent in IIAs concluded prior to 1992.  The latter provides broad leeway to consider User Agreements with social media platforms to fall under the definition of the “investment.”

When interpreting IIAs, tribunals have arrived at conflicting conclusions.  Where tribunals like that in Alps Finance and Trade AG v. Slovakia24Alps Finance and Trade AG v. Slovakia, UNCITRAL, Award (Mar. 5, 2011).X24 were against commercial contracts being classified as investments without certain qualities like duration, contribution, and risk25Id, ¶ 103-106.X25, others were inclined otherwise.  In Tidewater v. Venezuela, the tribunal found that “investment is capable of including [...] tangible and intangible assets, including contractual rights”, and thereby held that the scope of the IIA protection could be extended to include contractual rights.26Tidewater Investment SRL and Tidewater Caribe, C.A. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/10/5, ¶ 118.X26

When discussing social media user agreements, it is essential to address those in totality and not in isolation.  Thus, for example, some social media platforms have penetrated foreign digital economies in a way that the entire population has contracted to use the social media platform.  This should be observed distantly from the mere commercial or service contracts especially given the enormous underlying value of those commercial contracts in totality.

A notable development towards considering the contracts in totality as “investments” is the award in EMV v. Czech Republic,27European Media Ventures SA v. The Czech Republic, UNCITRAL, Partial Award on Liability (July 8, 2009).X27 in which the tribunal ruled that contracts presented by the claimant were investments28Id. ¶ 40.X28 under the Belgium Luxembourg Economic Uniuon - Czech Republic BIT.29Agreement between the Belgium-Luxembourg Economic Union and Czechoslovak Socialist Republic on the Reciprocal Promotion and the Protection of Investments, Apr. 24, 1989. X29  A similar type of reasoning was employed by the Mytilineos v. Serbia30Mytilineos Holdings SA v. The State Union of Serbia & Montenegro and Rep. of Serbia (I), UNCITRAL, Partial Award on Jurisdiction, (Sept. 8, 2006).X30 tribunal, which referred to the combined effect of nine contracts and found that they could constitute “investments”31Id. ¶¶ 125, 136.X31 under the broad asset-based definition of the Greece - Serbia BIT (1997).32Agreement between the Government of the Hellenic Republic and the Federal Government of the Federal Republic of Yugoslavia on the Reciprocal Promotion and Protection of Investments, June 25, 1997. X32  Therefore, it is possible that the tribunals in the case of a hypothetical dispute will look at the user agreements with the social media companies in totality rather than in isolation.

In their 2018 article, EnikÅ‘ Horváth and Severin Klinkmüller note that “the user agreements could be terminated within a matter of several clicks [by users themselves] and do not involve long-term commitments by either party.”33E.g. Horváth, supra note 43.X33  However, it will be erroneous to presume that millions, or even billions, of users would want to terminate their contracts because the state adopts a regulation to block the operation of the platform.  That said, if terminated/made ineffective by a state itself, the user agreements will become subject to interference by a third, uninvolved party (the state regulation).  Such measures will interfere with the rights and obligations of the parties to the contract and can potentially violate protections enshrined in respective IIAs.

A. Territoriality

Social media companies’ assets need to meet certain additional requirements to qualify as an “investment” under IIAs.  The place where those assets are held will be decisive since the IIAs are limited in their application to only the specified and mutually agreed-on territory.  Many IIAs explicitly refer to “investments made in the territory in the definition of investment.  Territorial requirements could be spotted in the applicability of the dispute settlement provisions as well.  By way of an example, the Energy Charter Treaty dispute settlement provisions limit the possible disputes to be submitted for international arbitration to the investments made “in the Area of the [Contracting Party]”.1The Energy Charter Treaty, Dec. 17, 1994, art. 26.1 [hereinafter ECT].X1

Other IIAs, like the Argentina – US BIT, contain separate provisions providing a definition of territory.2Treaty between United States of America and the Argentine Republic Concerning the Reciprocal Encouragement and Protection of Investment, Nov. 14, 1991, art. I.1.f [hereinafter US-Argentina].X2  Those define territory as the territory of a contracting party,”3E.g. Agreement Between the Swiss Federal Council and the Government of the Republic of Armenia on the Promotion and Reciprocal Protection the Investments, Nov. 19, 1998, art. 1.4.X3 “some part of the territory,”4E.g. Agreement Between the Government of the Federal Republic of Germany and the Palestine Liberation Organization for the Benefit of the Palestinian Authority Concerning the Encouragement and Reciprocal Protection of Investments, July 10, 2000, art. 1(4)b.X4 or outside the land territory of the state extending to the ‘exclusive economic zone,’”5Agreement Between the Macedonian Government and the Spanish Government on the Promotion and Reciprocal Protection of Investments, June 20, 2005, art. 1(4)a.X5 and even any “part of the sea upon which sovereignty/jurisdiction is exercised.”6Id. at art. 1(4)b.X6 

Fewer others, like the Spain - Morocco BIT, contain no specific provision on the definition of the term territory.7Spain and Morocco Agreement on the Promotion and Mutual Protection of Investments, Sept. 27, 1989, 1669 U.N.T.S. 209.X7  It is important to note that where parties do not specify the territorial scope in the IIA and nor can such intention be inferred from the IIA, the treaty applies in respect of the state’s entire territory pursuant to Article 29 of the Vienna Convention on the Law of Treaties (“VCLT”), which provides, “[u]nless a different intention appears from the treaty or is otherwise established, a treaty is binding upon each party in respect of its entire territory.”8Vienna Convention on the Law of Treaties, May 23, 1969, art. 29, 1155 U.N.T.S. 331 [hereinafter VCLT].X8 

While with tangible assets, the territoriality requirement is easily ascertainable,9Ioan Micula, Viorel Micula and others v. Romania (I), ICSID Case No. ARB/05/20, Decision on Jurisdiction and Admissibility, ¶ 125-127 (Sept. 24, 2008).X9 things become complicated with mixed or purely intangible assets.  With mixed types of assets, the investment operation as a whole is considered.  Tribunals referred to the “sufficient portion”’10E.g. SGS Société Générale de Surveillance S.A. v. Rep. of Paraguay, ICSID Case No. ARB/07/29, Decision on Jurisdiction, ¶ 117 (Feb. 12, 2010).X10 of an investment or the general unity of an investment operation11E.g. Ceskoslovenska Obchodni Banka, AS v. Slovak Rep., ICSID Case No. ARB/97/4, Decision on Objections on Jurisdiction, ¶ 72 (May 24, 1999). X11 to be located in the host state’s territory when addressing the territorial nexus of IIAs.

The borders and definition of territory become even more complicated when it comes to assets of an intangible nature.  While defining the scope of protected investments, many IIAs refer to “intangible” forms of assets.  The first-ever concluded BIT between Germany and Pakistan in 1959 already lists some forms of IPRs.12E.g. Germany – Pakistan, art 8.1, supra note 37.X12  Intellectual property rights, know-how, goodwill, rights to perform the commercial activity, titles to money or to any performance having an economic value, and contracts, are regularly listed as part of covered investments in the overwhelming majority of IIAs.13Simon Klopschinski, Christopher S. Gibson, Henning Grosse Ruse-Khan, X13 

As subjecting abstract and borderless assets, like contracts, IPRs, and know-how, to the state’s territory makes little sense, tribunals have identified separate criteria to link intangible assets to a host state’s territory.14Id.X14  The Abaclat v. Argentina decision serves as a significant breakthrough from the onerous territorial requirements and offers a solution that can be applied for social media companies’ intangible assets.  Deciding on a claim submitted by around 60,000 bondholders (as separate claimants), the majority of the tribunal found:

[...] that the determination of the place of the investment firstly depends on the nature of such investment.  With regard to an investment of a purely financial nature, the relevant criteria cannot be the same as those applying to an investment consisting of business operations and/or involving manpower and property.  With regard to investments of a purely financial nature, the relevant criteria should be where and/or for the benefit of whom the funds are ultimately used, and not the place where the funds were paid out or transferred.15Abaclat and Others (formerly Giovanna A. Beccara and Others) v. Argentine Rep., ICSID Case No. ARB/07/5, Decision on Jurisdiction and Admissibility, ¶ 374 (Aug. 4, 2011).X15 

When discussing the Abaclat decision, it is important to mention that the Abaclat jurisdictional and admissibility decision was a matter of controversy and generated a lengthy dissent by Professor George Abbi-Saab,16Abaclat v. Argentine Rep., ICSID Case No. ARB/07/5, Dissenting Opinion of Professor Georges Abi-Saab, (Aug. 4, 2011).X16 in which he specifically addressed the findings of the tribunal on the territorial scope of the US - Argentina BIT.  Notably, Abbi-Saab argued that the territorial link is inherent in Article 25 of the ICSID Convention, despite the lack of such wording in it.17Id. ¶ 74.X17  This view is also supported by Report of the Executive Directors on the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States referring to the flow of investment in the territory as the “primary purpose of the Convention”.18Report of the Executive Directors on the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, at ¶ 12 (Mar. 18, 1965) [hereinafter ICSID].X18  For the aforementioned reasons, intangible assets will have additional difficulties qualifying as “investments” in the host state’s territory under the ICSID convention.

Similarly, in Nova Scotia Power v. Venezuela (II), the contractual rights to coal were at stake, which had no actual physical presence in the Venezuelan territory.  There the tribunal found:

[t]he contractual rights to coal under the Confirmation Letters are properly characterized as an intangible asset.  The coal to be purchased was located in Venezuela, but NSPI carried out no physical in-country activities in connection with this and had no established, physical, in-country presence.  . . .  A contractual right by its very nature has no fixed abode in the physical sense, for it is intangible.  However, a lack of physical presence is not per se fatal to meeting the territoriality requirement . . ..19Nova Scotia Power Inc. v. Bolivarian Rep. of Venezuela II, ICSID Case No. ARB(AF)/11/1, Excerpts of Award, ¶ 130 (Apr. 30, 2014).X19 

The tribunal also pointed out that the appropriate criteria for understanding whether the contractual rights could be considered investments is the benefit to the host state concerned.  To borrow the tribunal’s words, “[the] ‘benefit’ does not necessarily have to be economic development, a highly subjective element.”20Id. X20  In other instances hedging agreements and promissory notes were qualified as investments, in Deutsche Bank v. Sri Lanka21Deutsche Bank AG v. Democratic Socialist Rep. of Sri Lanka, ICSID Case No. ARB/09/2, Award, ¶ 14 (Oct. 31, 2012).X21 and Fedax v. Venezuela,22Fedax N.V. v. Rep. of Venezuela, ICSID Case No. ARB/96/3, Award, ¶ 29 (Mar. 9, 1998).X22 cases respectfully.

Accordingly, if generating an economic benefit for the host state, intangible assets such as contracts, IP rights, and others can be localized to the host state’s territory without the need to have any on-the-ground physical presence.

B. Contribution of Money and Assets

When defining the ordinary meaning of investment under the VCLT,23E.g. VCLT, supra note 74, at art. 31.1.X23 ICSID and non-ICSID tribunals have identified and followed criteria referred to as the Salini criteria.24E.g. Salini Costruttori S.p.A. and Italstrade S.p.A. v. Kingdom of Morocco, ICSID Case No. ARB/00/4, Decision on Jurisdiction, ¶ 52 (July 16, 2001). X24  The contribution of money or assets is one of the requirements of the Salini criteria.  This consideration is of particular importance when it comes to intangible assets of social media companies.

According to the Poštová banka and Istrokapital v. Greece tribunal, “[a]n investment, in the economic sense, is linked with a process of creation of value.”25Poštová banka, a.s. and Istrokapital SE v. Hellenic Rep., ICSID Case No. ARB/13/8, Award, ¶ 361 (Apr. 9, 2015).X25  Notably, the Abaclat tribunal referred to the created value of the investment while discussing investments with no physical presence in the host country.  Ruling that the purchase of security entitlements is a contribution of capital, the tribunal also found that “the only requirement regarding the contribution is that it be apt to create the value that is protected under the BIT.”26E.g. Abaclat, Decision on Jurisdiction and Admissibility, supra note 82, at ¶ 365.X26 

Keeping the types of assets of social media companies in mind, it is important to mention that the contribution of capital is not only limited to the contribution of financial resources but can take different forms.  As identified by the Deutsche Bank v. Sri Lanka tribunal, “[a] contribution can take any form.  It is not limited to financial terms but also includes know-how, equipment, personnel[,] and services.”27E.g. Deutsche, supra note 88, at ¶ 297.X27  Additionally, in the L.E.S.I. v. Algeria tribunal’s words, “the investor [should] commit some expenditure, in whatever form, in order to pursue an economic objective.”28L.E.S.I., S.p.A. and Astaldi, S.p.A. v. People's Democratic Rep. of Algeria, ICSID Case No. ARB/05/3, Decision on Jurisdiction, ¶ 72 (July 12, 2006).X28 

As social media platforms provide services to 58.11% of the world population, it will be difficult to argue before the arbitral tribunal that social media companies have not provided services to the host economy.  social media services are heavily relied upon by the businesses who chose to market their products/services.  As earlier discussed, heads of states, ministries, and other government officials themselves are heavy users of social media when it comes to communicating with the public.29Arthur Mickoleit, Social Media Use by Governments: A Policy Primer to Discuss Trends, Identify Policy Opportunities and Guide Decision Makers, 26 OECD WORKING PAPERS ON PUBLIC GOVERNANCE (2014), p. 44.X29 

It is worth mentioning that the tribunals have not defined any minimum amount of expenditures to meet the contribution requirements and limited themselves to formulations like “significant”30RSM Production Corporation v. Grenada, ICSID Case No. ARB/05/14, Award, ¶ 240 (13 March 2009).X30 or “substantial”31Strabag SE v. Libya, ICSID Case No. ARB(AF)/15/1, Award, ¶ 132 (June 29, 2020).X31 contributions.  The Phoenix Action v. Czech Republic tribunal went even further to find that even nominal price “is not a bar to a finding that there exists an investment”.32Phoenix Action, Ltd v. Czech Rep., ICSID Case No. ARB/06/5, Award, ¶ 119 (Apr. 15, 2009).X32  Social media companies spend enormous amounts to offer their services in new markets.  According to the Macrotrends.com data, Facebook’s expenditure for a period of 12 months as of March 31, 2021, was USD 56.243 billion, USD 3.858 billion for Twitter, and USD $2.252 billion for Pinterest.33Macrotrends, Expenses, MACROTRENDS, June 30, 2021, https://www.macrotrends.net/stocks/charts/PINS/pinterest/operating-expenses; https://www.macrotrends.net/stocks/delisted/TWTR/twitter/revenue; https://www.macrotrends.net/stocks/charts/META/meta-platforms/operating-expensesX33 

The expenditures of social media companies associated with the host economy include but are not limited to (1) expert costs to conduct market research targeting the host economy; (2) marketing and sales expenses aimed at the host economy; (3) server and technology maintenance expenses for every additional user and their uploaded content; (4) translation expenses to have the platform accessible in the local language of the host country; (5) increased expense of content moderators to address the unwanted content uploaded from the host country; and (6) local trademark and patent registration expenses  (See e.g. Facebook Inc SEC filing).34E.g. Facebook Inc., supra note 18, at 61.X34  Hence, with social media companies, ISDS tribunals would have no difficulties identifying substantial or significant expenditures directed towards the host economy to pursue economic objectives.

C. Contribution to the Development of the Host State’s Economy

Tribunals have considered the contribution to the development of the host state’s economy as an additional requirement for the identification of an investment.  Such requirements can be found in the preambles of IIAs35E.g. US Model BIT, supra note 42.X35 and the ICSID Convention.36E.g. Convention on the Settlement of Investment Disputes between States and Nationals of Other States (1965) at Preamble.X36  Tribunals have found that such contribution should be “substantial,”37Malaysian Historical Salvors SDN, BHD v. Malaysia, ICSID Case No. ARB/05/10, Award on Jurisdiction, ¶ 143 (May 17, 2007).X37 and that “serv[ing] the public interests”38E.g. Salini, supra note 91, at ¶ 57.X38 meets that requirement.  Thus, for similar reasons as discussed in the previous section, it will be plausible to argue that social media companies contribute to the host state's development by serving the public interests.

D. Admission, Establishment, and Legality Requirements

There is no customary obligation under general international law for states to admit foreign investments.  Each state is free to decide its internal rules for admission and establishment of investments.  The states can choose to admit all kinds of investments or limit admission to certain types of investments or sectors.39E.g. Dolzer, supra note 53, at 88. X39  As indicated by Dolzer and Schreuer, the admission requirement refers to the “right of entry” of the investment.  In contrast, the right of establishment refers to the conditions under which the investor “is allowed to carry out its business during the period of the investment.”40Id. at 92.X40 

While the formulation of admission requirement provisions in IIAs can have implications on states’ obligations to amend their inner legislation, that rarely happens.41Id. at 94.X41  Many treaties refer to admission requirements providing that those must be “in accordance with [local] legislation,”42Treaty between the Federal Republic of Germany and [Country] concerning the Encouragement and Reciprocal Protection of Investments, 2008, art. 2.1.X42 thus creating no obligation for the contracting state to amend its inner legislation.  Other treaties containing admission requirements provide lists that either include or exclude specific sectors from admission.  It is worth mentioning that unfavorable admission or establishment requirements could be trumped by the operation of national treatment (“NT”) and most favored nation (“MFN”) clauses if incorporated in the relevant IIAs.43E.g. Dolzer, supra at 53.X43

While social media companies operate in cyberspace and care little about the admission and establishment requirements, those still play a deciding role.  What is essential with admission requirements is that non-compliance with those might limit the state’s scope of consent and the investor's right to resort to ISDS.44Id. at 96.X44 

As social media platforms are unique and operate anywhere where the internet is accessible, they do not bother establishing a physical presence in host economies, needless to say, undergoing the lengthy admission and establishment procedures existent under local legislations.  Thus, their operation in the host economy can run against local laws and regulations unless the local legislation allows it.  Therefore, the virtual operation of social media companies raises issues regarding the legality of the investments.

Requirements of legality can be found under the definition of investments or elsewhere in the IIA.45Id. at 92.X45  The definition of investments under the Germany - Philippines BIT provides for admission, acceptance, or establishment of investments “in accordance with the respective laws and regulations of either Contracting State.”46Agreement Between The Federal Republic Of Germany And The Republic Of The Philippines For The Promotion And Reciprocal Protection Of Investments, Apr. 18, 1997, art. 1.1.X46  Similarly, many IIAs extend their coverage to investments made “in accordance with [the contracting state’s] laws and regulations” without referring to the admission and establishment.47Agreement between the Government of the Hong Kong Special Administrative Region of the People's Republic of China and the Government of the United Arab Emirates for the Promotion and Reciprocal Protection of Investments, June 16, 2019, art. 1.1.d.X47  While both examples require investments to be made in accordance with the laws and regulations of the host state, the legality requirement is distant from admission requirements.48Michael Polkinghorne & Sven-Michael Volkmer, The Legality Requirement in Investment Arbitration - Jurisdiction in Investment Treaty Arbitration, in IAI SERIES NO. 8 (November 2017), p. 37.X48  The legality requirement is broad and relates to all possible cases of illegality, whereas the admission requirements refer to the legality of pre-approval,49ÖztaÅŸ Constr., Const. Materials Trading Inc. v. State of Libya, ICC Case No. 21603/ZF/AYZ, Final Award, ¶ 115 (June 14, 2018).X49 necessary permissions50Cengiz Ä°nÅŸaat Sanayi ve Ticaret A.S v. Libya, ICC Case No. 21537/ZF/AYZ, Award, ¶ 293 (Nov. 17, 2018).X50 or admission prerequisites.51E.g. Deutsche, supra note 87, at 300.X51 

Not all IIAs contain express legality requirements when it comes to defending the scope of covered investments.52E.g. ECT, supra note 68, art. 1.6.X52  Absent such requirements, the illegality of the investment serves no bar at least for the jurisdiction of the tribunal.53Ascom Group S.A., Anatolie Stati, Gabriel Stati and Terra Raf Trans Traiding Ltd. v. Rep. of Kazakhstan, SCC Case No. 116/2010, Award, ¶ 812 (Dec. 19, 2013).X53 

As social media companies typically do not attempt to register their platforms in host countries, it might be difficult to argue that an unregistered platform operating solely on the internet meets the admission requirements provided that such requirements exist under the host country’s legislation.  Nevertheless, it is worth mentioning that investment arbitration tribunals have considered that only severe54E.g. Energoalians LLC v. Rep. of Moldova, UNCITRAL, Award, ¶ 261 (Oct. 23, 2013).X54 and non-trivial55E.g. Quiborax S.A., Non-Metallic Minerals S.A. v. Plurinational State of Bolivia, ICSID Case No. ARB/06/2, Decision on Jurisdiction, ¶ 266 (Sept. 27, 2012).X55 violations could meet the illegality bar.56E.g. Olympic Ent. Grp. AS v. Ukraine, PCA Case No. 2019-18, Award, ¶ 60 (Apr. 15, 2021).X56  Therefore, if there are no express investment policies against social media platforms, the illegality requirement won’t be met.57Tethyan Copper Co. Pty Ltd. v. Islamic Rep. of Pakistan, ICSID Case No. ARB/12/1, Decision on Jurisdiction and Liability, ¶ 1445 (Nov. 10, 2017).X57 

What is crucial in the context of this article is that the state’s failure to prosecute the unlawful situation estops the state from invoking an illegality objection in front of the tribunal.  Numerous tribunals have supported this view.  In Desert Line v. Yemen58Desert Line Projects LLC v. Rep. of Yemen, ICSID Case No. ARB/05/17, Award ¶ 105 (Feb. 6, 2008).X58 the tribunal found that, “the host state which has for some time tolerated a legal situation is thereafter precluded from insisting later, against the investor, that the situation was unlawful from the beginning.”59E.g. Dolzer, supra note 53, at 94.; Desert Line Projects LLC v. Republic of Yemen, ICSID Case No. ARB/05/17, ¶ 97-110.X59 

Similarly, in Railroad Development v. Guatemala, the tribunal pointed out the non-objection by the government to the unlawful situation and concluded that it would be against the principles of fairness to accept the jurisdictional objection on the grounds of unlawfulness.60R.R. Dev. Corp. (RDC) v. Rep. of Guatemala, ICSID Case No. ARB/07/23, Award, ¶ 82 (June 29, 2012).X60  The Mabco v. Kosovo tribunal adopted the same approach, stating that illegality cannot be raised as a jurisdictional defense if the state was aware of it and raised no objections.61Mabco Constrs. SA v. Rep. of Kosovo, ICSID Case No. ARB/17/25, Decision on Jurisdiction, ¶ 409 (Oct. 30, 2020).X61   Therefore, an illegality of jurisdictional objection cannot be raised if (1) the state was aware of the unlawful situation, and (2) the state did not object to the existence of an unlawful situation.

The operation of social media companies will likely meet both of the above criteria.  First, it would be absurd to argue that the government did not know about the illegal operation of the social media platform as all the information is readily accessible on the internet.  Second, states did not object to the situation of unlawfulness created by the operation of social media platforms, and—which is more important—state officials themselves heavily rely on social media.   As already discussed, heads of state and government officials are everyday users of social media platforms in their official capacity,62See, e.g., Zhaoyin Feng, China and Twitter: The Year China Got Louder on Social Media, BBC, Dec. 29, 2019, https://www.bbc.com/news/world-asia-china-50832915/.X62 and they use social media platforms as their primary channel of communication with the public.63Stacy Dixon, World Leaders with the Most Twitter Followers as of June 2020, STATISTA, Apr. 28, 2022, https://www.statista.com/statistics/281375/heads-of-state-with-the-most-twitter-followers/.X63 

Protections against both direct and indirect expropriation can be found in virtually all IIAs.1E.g. Dolzer, supra note 53, at 89. X1  However, in practice, states rarely directly expropriate the property as it will create an unfavorable image and hurt the country's investment climate.2Christoph Schreuer, The Concept of Expropriation under the ETC and other Investment Protection Treaties, TDM 5 (2005).X2  As pointed out by the Metalclad tribunal:

measures equivalent to expropriation include covert or incidental interference with the use of property which has the effect of depriving the owner of . . . the use or reasonably-to-be-expected economic benefit of property even if not necessarily to the obvious benefit of the host State.3Metalclad Corporation v. The United Mexican States, ICSID Case No. ARB(AF)/97/1, ¶ 103 (Aug. 30 2000).X3 

As customary international law does not per se preclude states from expropriating alien property,4E.g. Dolzer, supra note 53, at 100. X4 one of the criteria for any expropriation to be lawful is the payment of or a reasonable offer to pay compensation.5Rusoro Mining Ltd. v. Bolivarian Rep. of Venezuela, ICSID Case No. ARB(AF)/12/5, Award, ¶ 407 (Aug. 22, 2016).X5  At the time of writing, the author is unaware of any cases where the government has paid or offered to pay compensation after blocking a social media platform.  For those reasons, the study will exclude the discussion of the lawfulness of expropriation from its scope.  Similarly, the article will leave out the discussion of regulatory powers of host states in relation to expropriation, since it is highly fact-dependent, and it will be speculative to try to define a universal formula addressing all social media platform blocking cases.

A. Expropriation of Contractual Rights

As the main business of social media platforms is to collect data from their users, they require the users to enter into user agreements with the social media platform they are registering with.  Some platforms go even further and provide that such user agreements also apply to the users who have not registered with the platform but have nevertheless used it.6Tiktok, Terms of Service, TIKTOK, February 2019, https://www.tiktok.com/legal/terms-of-service?lang=en/.X6  User agreements are periodically updated and adjusted to the needs of specific countries and regions where the user is located.  The courts in the US have determined that user agreements are valid and enforceable7ProCD, Inc. v. Zeidenberg, 86 F.3d 1447, 1450–53 (7th Cir. 1996); Microsoft Corp. v. Harmony Computs. & Elecs., 846 F. Supp. 208 ¶ 1455 (E.D.N.Y. 1994).X7 and create a proper balance between the parties’ rights and obligations.8Perry Viscounty et al., Social Networking and the Law: Virtual Social Communities Are Creating Real Legal Issues, 18 BUS. L. TODAY 58 (2009) at 59-60.X8 

Social media platforms extract their profit by relying on such agreements, in the case of Facebook, resulting in a profit of approximately USD 30 per user.  Hence, it should be discussed whether the ban of the social media platform in a foreign country could amount to an indirect expropriation.

The terms of use of TikTok (US) provide, “[b]y accessing or using our Services, you confirm that you can form a binding contract with TikTok, that you accept these Terms and that you agree to comply with them.”9Tiktok, Terms of Service, TIKTOK, February 2019, https://www.tiktok.com/legal/terms-of-service?lang=en/.X9 

Agreements like this are widespread, and users of the platform validly consent and are bound by these obligations stipulated therein.  As discussed in the preceding chapters, the contractual rights could constitute investments under certain IIAs.  By blocking the social media platforms, a state interferes with the user agreements of social media companies and users to the extent that they deprive the agreements of any value. 

The expropriation of contractual rights has been considered possible by the Permanent Court of International Justice (PCIJ) in Certain German Interests in Polish Upper Silesia case where the court found that by taking possession of the Chorzow factory, the respondent expropriated the contractual rights of the company.10Certain German Interests in Polish Upper Silesia (Merits), PCIJ Series A. No 7, Judgment, 44 (May 25, 1926).X10  Similarly, Iran—US claims tribunal in Amoco International Finance Corp v. Iran case found that, “[e]xpropriation, . . . may extend to any right which can be the object of a commercial transaction, i.e., freely sold and bought, and thus has a monetary value.”11Amoco Int’l Fin. Corp. v. Gov. of the Islamic Rep. of Iran, Nat’l Iranian Oil Co., Nat’l Petrochem. Co. and Kharg Chem. Co. Ltd., IUSCT Case No. 56, Partial Award (Award No. 310-56-3), ¶ 108 (July 14, 1987).X11 

In the Siemens v. Argentina, the tribunal analyzed Germany - Argentina BIT, and concluded that contractual rights in terms of the Treaty may be expropriated.12Siemens A.G. v. Argentine Rep., ICSID Case No. ARB/02/8, Award, ¶ 267 (Jan. 17, 2007).X12  While referring to the contract between the state and the investor, the tribunal observed that the state could incur international responsibility if it used its “superior governmental power” to interfere with the contract execution.13Id. at ¶¶ 253, 258.X13 

The tribunal in EMV v. Czech Republic found that “the rights contained in a contract between an investor and another private party are capable of being expropriated by the State.”14European Media Ventures SA v. The Czech Republic, Partial Award on Liability, ¶ 84 (8 July 2009).X14  Nevertheless, the tribunal emphasized that the state would expropriate the contractual obligations if it substantially amended or terminated contracts between two private parties.

Likewise, in another ICSID case, L.E.S.I. v. Libya,15L.E.S.I., supra note 95.X15 the tribunal found that the contractual rights could be indirectly expropriated where the expropriation “can result from a substantial loss of contractual rights.”16Id. at 131.X16  In Saipem v. Bangladesh tribunal found that the contractual rights arising out of ICC arbitration award are capable of being expropriated.17Saipem S.p.A. v. People's Rep. of Bangladesh, ICSID Case No. ARB/05/7, Decision on Jurisdiction and Recommendation on Provisional Measures, ¶ 127-128 (Mar. 21, 2007).X17  Other tribunals found that contractual rights fall under the broad concept of expropriation18See, e.g., Bayindir Insaat Turizm Ticaret Ve Sanayi A.S. v. Islamic Rep. of Pakistan, ICSID Case No. ARB/03/29, Award, ¶ 441 (Aug. 27, 2009).X18 and in some cases form an integral part of investments can be expropriated.19Caratube Int’l Oil Co. LLP and Devincci Salah Hourani v. Rep. of Kazakhstan (II), ICSID Case No. ARB/13/13, Award, ¶ 822 (Sept. 27, 2017).X19 

 If these decisions are projected on the scenario of a government blocking social media platforms, there is a likely chance that the tribunals will consider user agreements as being capable of expropriation.  As social media platforms heavily rely on user agreements to operate and derive substantial profit from such user agreements, those should be considered an integral part of their investment.  When blocking the social media platforms, governments exercise their superior powers by ordering ISPs to suspend the operation of the social media platforms.  They interfere substantially with the contractual rights of social media companies by depriving them of the possibility to extract user data and generate profit from the sales.  Therefore, there is a likely prospect that ISDS tribunals will consider the user agreements being expropriated by the State.

Social media companies are increasingly becoming subject to interference by state regulatory authorities.  The recent TikTok ban in India and Pakistan, as well as the ban on Telegram in Russia and Indonesia are prime examples of such severe interference.  When blocking1See Rajesh Roy & Shan Li, India Bans TikTok, Dozens of Other Chinese Apps After Border Clash, THE WALL STREET J., June 30, 2020, https://www.wsj.com/articles/india-blocks-dozens-of-chinese-apps-including-tiktok-following-border-clash-11593447321/.X1 or threatening to block2See Tali Arbel, Matt O'Brian, & Matt Ott, US Bans WeChat, TikTok from App Stores, Threatens Shutdowns, AP NEWS, Sept. 19, 2020, https://apnews.com/article/donald-trump-us-news-ap-top-news-international-news-technology-a439ead01b75fc958c722daf40f9307c/.X2 the operation of a social media platform in its entirety, it has become standard practice to refer to national security concerns,3See Himanshu Rajpurohi & Tilak Dangi, Is India’s Ban on TikTok and other Apps Justified by the WTO National Security Exception?, REGULATING FOR GLOBALISATION, June 30, 2020, http://regulatingforglobalization.com/2020/10/27/is-indias-ban-on-tiktok-and-other-apps-justified-by-the-wto-national-security-exception/. X3 protection of public morals,4See Declan Walsh, Pakistan Lifts Facebook Ban but 'Blasphemous' Pages Stay Hidden, THE GUARDIAN, May 31, 2010, https://www.theguardian.com/world/2010/may/31/pakistan-lifts-facebook-ban/.X4 “unstable political situation[s],”5E.g. Shireeva, supra note 20, at 144.X5 and the “violation of the inviolability of private life.”6Id.X6  Recently, Nigeria indefinitely suspended the operation of Twitter, and issued a statement:  “Micro-blogging site was being used to undermine ‘Nigeria’s corporate existence’ through the spreading of fake news that [had] ‘violent consequences.’”7ABC Sunday Extra, Nigeria’s Twitter Ban, (June 27, 2021), https://www.abc.net.au/radionational/programs/sundayextra/nigerias-twitter-ban/13410424/.X7

While States can provide justifications for blocking social media platforms including, in some cases, based on internal laws and regulations, blocking measures should still be assessed having in mind the host state’s international obligations governed by public international law.  As states cannot invoke their domestic law as a justification for their otherwise wrongful conduct under international law, a thorough examination of possible defenses under general international law will be necessary.8International Law Commission Draft Articles on Responsibility of States for Internationally Wrongful Acts, June 9, 2001, art. 3.X8

 A. Necessity as a Defense

 Where a necessity defense can be included in IIAs,9E.g. US-Argentina, supra note 69, art. XI.X9 it also forms part of general international law.10International Law Commission Draft Articles on Responsibility of States for Internationally Wrongful Acts, June 9, 2001, art. 25.X10  Necessity provisions found in IIAs provide a more detailed definition referring to the situations of “public order,” “restoration of international peace or security,” and “essential security interests.”11E.g. US-Argentina, supra note 69, art. XI.X11  Observing the analogy between treaty provisions and customary international law, the annulment committee in CMS v. Argentina, distinguished the two approaches.  The committee found that the IIA provision refers to “the conditions under which the treaty [might] apply.”12CMS Gas Transmission Co. v. Argentine Rep., ICSID Case No. ARB/01/8, Decision of the Ad hoc Committee on Argentina's Application for Annulment, ¶ 129 (Sept. 25, 2007).X12  In contrast, Article 25 of the International Law Commission’s Articles on State Responsibility excludes the application of the defense “unless certain stringent conditions are met.”13Id.X13  Additionally, it is worth noting that states themselves need to bear the burden of proof when invoking the necessity defense.14Unión Fenosa Gas, S.A. v. Arab Rep. of Egypt, ICSID Case No. ARB/14/4, Award, ¶ 8.38 (Aug. 31, 2018).X14 

When it comes to necessity as a ground for precluding the wrongfulness of the conduct under general international law, states need to be aware that necessity defense will be accepted in exceptional situations only.15Gabčíkovo-Nagymaros Project (Hung. v. Slovk.), 1997 I.C.J. 92, ¶ 51 (Sept. 25, 1997).X15  In the words of the Gabcikovo-Nagymaros judgment in Hung v Slovakia, (1) an “essential interest” of the state must be at stake, (2) such interest must be threatened by “grave and imminent peril” (3) the wrongful act must be “the only means” of safeguarding the interest and (4) the state itself must not have contributed to the wrongful act in question.16Id., at ¶ 52.X16 

As the defense of necessity existing both in IIAs and under customary international law has a high bar, most cases of government blocking of social media platforms will fall below that threshold.  Reasons such as the protection of public morals or disagreement with the platform’s content would fall short of the necessity defense. However, social media platform blocking connected with military conflicts or the spread of violence may meet the bar of the necessity defense, depending on the circumstances.

B. National Security Exception as a Defense

It has been a long-standing practice for states to rely on their national security interests when acting in violation of the General Agreement on Tariffs and Trade (GATT).17The General Agreement on Tariffs and Trade, Oct. 30, 1947.X17  Article XXI of the GATT provides, “[n]othing in this Agreement shall be construed to require any contracting party to furnish any information the disclosure of which it considers contrary to its essential security interests.”18Id., art. XXI(a) (emphasis added).X18

The national security exception clauses were later “imported” into other international economic treaties, including many IIAs.19SEBASTIÁN BLANCO & ALEXANDER PEHL, NATIONAL SECURITY EXCEPTIONS IN INTERNATIONAL TRADE AND INVESTMENT AGREEMENTS: JUSTICIABILITY AND STANDARDS OF REVIEW 2 (1st ed. 2020) [hereinafter Blanco].X19  Unlike GATT Article XXI—which has only recently been interpreted by a tribunal20Russia — Measures Concerning Traffic in Transit, WT/DS512, Report of the Panel, (Apr. 26, 2019).X20 —the security exception clauses enshrined in investment treaties were a subject of controversial scholarly debate and interpretation.  As rightly observed by Sebastián Blanco and Alexander Pehl, “[t]he race between the interpretation of national security clauses and treaty modifications keeps the arbitrators entertained and investors undecided.”21E.g. Blanco, supra note 168, at 2.X21 

National security clauses enshrined in IIAs operate as exceptions, allowing states to adopt measures that would have been otherwise inconsistent with their treaty obligations under the respective IIA.  Starting as early as 1959, references to national security exceptions could be spotted in IIAs.22E.g. Germany-Pakistan, supra note 41, Protocol Point 2.X22  The national security exception clauses could be included as carve-outs addressing only certain treatment standards23Id. art. 3(3).X23 or as a free-standing provision in the IIAs.24E.g. US-Argentina, supra note 72, art. XI.X24 

The formulation of the clause plays a deciding role.  The GATT provision already cited above uses the “it considers” formulation, which allows the state to judge itself the existence of the essential security interest.  In contrast, in investment arbitration, many clauses do not include the self-judging “it considers”  or “it determines to be” formulations.  As of 2020, there were no instances recorded where the arbitral tribunal ruled on “it considers” formulation clauses concerning IIAs.25E.g. Blanco, supra note 168, at 43.X25  Instead, when referring to the Article XI of the “famous” Argentina - US BIT,26E.g. US-Argentina, supra note 69, art. XI.X26 tribunals ruled that “national security exception” clauses are not self-judging,27CC/Devas (Mauritius) Ltd., Devas Emps. Mauritius Priv. Ltd., and Telcom Devas Mauritius Ltd. v. Rep. of India, PCA Case No. 2013-09, Dissenting Opinion of Arbitrator David R. Haigh, ¶ 79 (July 25, 2016).; Moraes, Henrique Choer, Souza, Andre de Mello e, and Veiga, Pedro da Motta. X27 unless the treaty explicitly provides so.28Mobil Expl. and Dev. Inc. Suc. Arg. and Mobil Arg. S.A. v. Argentine Rep., ICSID Case No. ARB/04/16, Decision on Jurisdiction and Liability, ¶ 1037 (Apr. 10, 2013).X28  The tribunals also observed that while states have some degree of deference when assessing the “essential security interest” situations, such deference is not unlimited.29Deutsche Telekom AG v. Rep. of India, PCA Case No. 2014-10, Interim Award, ¶ 235 (Dec. 13, 2017).X29 

Accordingly, in the case of a hypothetical dispute arising out of the blocking of an social media platform, the wording of an IIA will play an essential role.  If the national security exception clause has an “it considers” type formulation, it will be in principle possible for the state to argue that the blocking of the social media platform is done to protect their essential security interest.  In alternative scenarios, such an argument may not stand as the scrutinizing of the measure at hand to decide whether the measure was adopted to aid the state’s essential security interest or not will fall within the jurisdiction of the tribunal.

Social media companies with only a virtual presence in host economies will face a plethora of jurisdictional and procedural hurdles when submitting an ISDS claim.  Importantly, they will need to first prove that intangible assets such as user agreements constitute covered investments within the meaning of the relevant IIA and, if relevant, the ICSID convention.  They will also have to present additional evidence supporting that their investments have met the admission, establishment, and legality requirements present in IIAs and customary international law.  However, as demonstrated above, social media companies will have little difficulty in conquering this stage due to their widespread nature.

Perhaps, the most controversial of all for social media companies will be to meet the territoriality requirements of the IIAs given their virtual presence in the host economy.  However, even in light of the numerous cases attaching great importance to the territorial link, it was still possible to identify decisions that give little importance or disregard the territoriality requirements when it concerns intangible assets such as contractual rights.  Tribunals supporting the latter, the milder territoriality approach still ask that the company’s operation involves a contribution of assets or the investment to contribute to the development of the host state’s economy.  As presented above, social media companies will have no difficulty submitting evidence supporting the latter.

Turning to the discussion of expropriation, social media companies’ likely-to-be-expropriated assets are user agreements, which become ineffective and deprived of value once the government interferes and bans the operation of the platform.  As ISDS and international law tribunals have recognized the possibility of commercial contracts to be expropriated in a number of cases, if the jurisdictional and procedural requirements are met, social media companies have a realistic chance to successfully argue an expropriation claim arising out of the social media ban.

As for the host states, it will be impractical to resort to national security and necessity defenses to get the claims dismissed, as the bar of meeting those is extremely high.  The social media blockings that occur for “veiled” reasons of censorship will likely fall short of the necessity or national security exception defenses’ requirements.

To conclude, on the one hand, we have a rapidly evolving digital economy disregarding the borders and disrupting the traditional conceptions of territoriality in international law, and on the other hand, the IIA framework is perplexed in notions of territoriality and brick and mortar businesses.  The advent of the internet and digital services’ industry continues to prove the impracticability of such an approach, threatening to leave out the internet industry from the IIA protections.  Despite these difficulties, even under the current ISDS framework, social media companies have a realistic chance of success if they resort to ISDS in case of social media platform blocking by governments.