Should Investment Treaties Contain Public Policy Exceptions?

The increasing inclusion of exceptions in newly concluded investment treaties, together with the divergent manner in which tribunals and annulment committees have approached these provisions, suggests that a greater understanding of their role and purpose is needed. In particular, the question whether exceptions operate as permissions or as defenses is a crucial but unaddressed issue that has significant implications for both litigation and practice and, in turn, implications for the stability of the regime. This Essay argues that as a starting point, exceptions should be understood as permissions that limit the scope of the substantive treaty obligations, and not as defenses invoked to justify prima facie unlawful conduct. Understanding exceptions as permissions has several advantages, including the avoidance of double-counting a government’s motivation for its conduct or, more problematically, failing to take regulatory purpose into account when determining whether a government has complied with the treaty’s substantive obligations. Understanding exceptions as permissions also sends signals to adjudicators in relation to issues such as the appropriate standard of review. The Essay also explores the desirability of including exceptions in treaties in light of recent innovations that clarify the substantive content of investment obligations. Although the uncertain analytic character of existing exceptions risks constraining rather than preserving regulatory space, they may be an important failsafe in light of current institutional arrangements for investor-state dispute settlement, which effectively preclude review for error of law. The Essay concludes that the relationship between standards of investment protection and exceptions needs further consideration, and suggests that governments negotiating investment treaties ought to more holistically consider the aims of the regime and the role of exceptions therein

Variations on a Theme: Comparing the Concept of Necessity in International Investment Law and WTO Law

The concept of necessity is used in many legal systems to delimit permissible from prohibited measures where such measures negatively affect the regime\u27s primary values, such as human rights, liberalized trade, and protection of foreign investment. International investment tribunals have adopted a variety of approaches to the question of whether a measure is necessary to achieve its objective in relation to a number of provisions of investment treaties, including non-precluded measures clauses and fair and equitable treatment. Yet their approaches to this form of analysis are inconsistent and generally not analytically robust. By comparison, WTO tribunals have developed relatively sophisticated methods for analyzing a measure\u27s necessity to achieve its objective in the context of general exceptions, sanitary and phytosanitary measures and technical regulations. The WTO approach generally takes into account a number of factors, including the importance of a measure\u27s objective, a measure\u27s effectiveness at achieving that objective, and the availability of alternative measures. Importantly, WTO tribunals generally undertake this analysis with a degree of deference, in recognition of the right of governments to set their own policy priorities. Investment tribunals could usefully employ aspects of the WITO approach to necessity\u27 in the context of non-precluded measures, fair and equitable treatment, non-discrimination, and non-expropriation. Such an approach would go some way toward the development of a consistent, coherent bod of cases in relation to the concept of necessity in international investment law, providing greater certainty for both host states and investors

Variations on a Theme: Comparing the Concept of Necessity in International Investment Law and WTO Law

The concept of necessity is used in many legal systems to delimit permissible from prohibited measures where such measures negatively affect the regime\u27s primary values, such as human rights, liberalized trade, and protection of foreign investment. International investment tribunals have adopted a variety of approaches to the question of whether a measure is necessary to achieve its objective in relation to a number of provisions of investment treaties, including non-precluded measures clauses and fair and equitable treatment. Yet their approaches to this form of analysis are inconsistent and generally not analytically robust. By comparison, WTO tribunals have developed relatively sophisticated methods for analyzing a measure\u27s necessity to achieve its objective in the context of general exceptions, sanitary and phytosanitary measures and technical regulations. The WTO approach generally takes into account a number of factors, including the importance of a measure\u27s objective, a measure\u27s effectiveness at achieving that objective, and the availability of alternative measures. Importantly, WTO tribunals generally undertake this analysis with a degree of deference, in recognition of the right of governments to set their own policy priorities. Investment tribunals could usefully employ aspects of the WITO approach to necessity\u27 in the context of non-precluded measures, fair and equitable treatment, non-discrimination, and non-expropriation. Such an approach would go some way toward the development of a consistent, coherent bod of cases in relation to the concept of necessity in international investment law, providing greater certainty for both host states and investors