Study On Prudential Exception Clauses In International Investment Agreements

As an important tool to maintain the rights of the host states to regulate and protect financial safety,prudential exception clauses are included by more and more international investment agreements.However,the existing prudential exception provisions are not well drafted and need some amendments.According to present clauses,the measures that could be exempted by prudential exceptions should be"measures taken for prudential reasons",which is too broad to apply.In some International Investment Agreements,the scope of prudential exception is limited to"measures relating to financial services",a phrase whose explanation may be differently.Moreover,the anti-abuse provision in prudential exception clauses is also not practicable.The prudential exception clauses often include contents about dispute settlements,According to which the investor-state arbitration tribunals do not have the power to arbitrate problems relating to prudential exceptions,and these problems should be settled by the countries' co-decision.This dispute settlement procedure is useful for host states to protect their finance systemPrudential exceptions can justify host states' measures which violate the other provisions of the same BITs,including the transfer clause and expropriation clauses.To some extent,security exceptions have the same function as to the protection of financial safeties.However,the standards of security exceptions are not easy to fulfill,as a result,prudential exception is more useful at the context of protecting financial safety.