Studies On The Effects Of State Of Necessity Defence Clauses In Investor-State Dispute Settlement

The state of necessity defence clauses in the legal regime of international investment generally apply to measures relating to the response of the host country to a critical situation,ensuring the regulatory power of the host country by blocking the potential legal consequences of emergency measures,including the necessity rule in customary international law and the non-precluded measures clauses in international investment treaties.The absence of the effect rules leads the arbitral tribunal to have great discretion on the legal effects of the state of necessity defence clauses,and to make different decisions on nearly identical cases.Many existing viewpoints on the effects of the state of necessity defence clauses focus on the protection of different values,theoretical disputes have focused on whether such provisions can suspend the treaty obligations of the host state,whether and how they can preclude the wrongfulness of emergency measures and the responsibility of the host state,the complexity of the issue of effects stems not only from the fact that the respective effects of the necessity rule and the non-precluded measures clauses are in dispute,but also from the lack of an agreed interpretative relationship between them.On the basis of a systematic interpretation of ILC Draft Articles on Responsibility of States for Internationally Wrongful Acts,the analysis and reflection of the theories of priority interest,the limitation of free will of the state and the unjust enrichment,as well as the views of reference on the expropriation and compensation,the effects of the necessity rule at the level of customary international law are more appropriately interpreted as precluding the wrongfulness of the conduct of the host state and thereby exempting the state from liability,including compensation.Moreover,the invocation of the necessity rule does not give rise to an obligation of compensation,as there is currently insufficient evidence of the existence of relevant international practice and the theoretical basis is weak.Non-precluded measures clauses in international investment treaties should be considered as a relatively independent lex specialis,since they differ from the necessity rule in respect of the nature of the disputes and the scope of the obligations involved,therefore,the reasons and conclusions of the interpretation of the effects of the necessity rule are not necessarily applicable to such clauses.The effects of the non-precluded measures clauses should be interpreted in a way that the agreement and practice of the states parties should take precedence and is consistent with the purpose of contracting,which gives priority to ensuring the normal exercise of regulatory powers of the host state.The non-precluded measures clauses should not be interpreted as having the effect of excluding the application of the treaty,but could only preclude the wrongfulness of the conduct of the host state in the context of an investment treaty,thereby precluding state responsibility for breaches of treaty obligations.Moreover,the interpretation of the non-precluded measures clauses as accompanied by an obligation to compensate is incompatible with the principle of purposive interpretation.Moreover,the interpretation of the non-precluded measures clauses being accompanied by an obligation of compensation is incompatible with the principle of purposive interpretation.At the customary international law level,although there is no obligation to compensate by invoking the necessity rule,the process of determining the extent of loss can be explored to guide and simplify the negotiation of the amount of compensation,losses of the investors should be at least partly attributable to investment risks or the crisis itself and not to host country measures.In the context of international investment treaties,non-precluded measures clauses have unique advantages in realizing the reform aim of the interests balance of international investment law,therefore,it is necessary to clarify the interpretation of the effects of existing clauses while considering the supplement of specific validity rules to further avoid contradictions.In addition,attention should be paid to the coordinated interpretation of the non-precluded measures clauses and the related effect clauses: on the one hand,the non-precluded measures clauses shall be deemed to be the agreement of the contracting parties to limit the obligations of the treaty and shall prevail over the clauses of the treaty which declare that there shall be no derogation from the obligations of the contracting parties;on the other hand,if the host state voluntarily compensates,national treatment and most favoured nation standards must be met for foreign investors.Lastly,in order to reconcile the tendency of sovereign states to strengthen their regulatory powers with the need to avoid the abuse of the non-precluded measures clauses,the self-adjudicative nature of the non-precluded measures clauses should be carefully interpreted,consideration could also be given to including a notification obligation in investment treaties.