When threatened by crises such as global terrorism, financial collapse, pandemic diseases, and natural disasters, states may resort to measures that harm the interests of foreign investors protected under the bilateral investment treaty (BIT) regime. Many such BITs, however, contain heretofore under-studied clauses that preclude liability for state actions taken in response to exceptional circumstances. These non-precluded measures (NPM) clauses effectively transfer the risk of and costs associated with state action in exceptional circumstances from the host-states of international investments to the investors. In two recent cases brought against Argentina in response to the Argentine financial crisis, ICSID tribunals have interpreted the NPM clause in the U.S.-Argentina BIT in radically different ways, with one tribunal holding Argentina liable and the other excusing Argentina from compensating investors. This article provides the first detailed study of NPM clauses in international investment law. It argues that NPM clauses are, in fact, a widespread element of the international law of foreign investment. To guide states, investors, and arbitral tribunals, the article offers a framework for the interpretation of NPM clauses, based on the practice of key states including the U.S., Germany, and India. In so doing, the article imports the margin of appreciation doctrine from European human rights law into international investment arbitration as a mechanism for determining the scope of deference to be accorded to critical state policies by ad hoc arbitral tribunals. More generally, the article argues that the risk-allocation function performed by NPM clauses is of considerable significance to the depth of international legal cooperation, the response of states to international crises, and the flow of international investments
