Necessity in international investment law. State responsibility towards foreign investors and the necessity defence

The thesis focuses on the analysis of the state of necessity under international investment law, in particular in the light of the recent case law. The interest in this topic is strictly related to the recent attention devoted to international investment law by international scholars. International investment law has developed mainly in the last two decades, particularly through the extraordinary increase of international investment agreements, with over 2500 bilateral investment treaties (BITs) granting protection to foreign investors in host State. The last few years have also witnessed a rise of investment arbitration. In this regard, the ICSID (International Centre for Settlement of Investment Disputes between States and Nationals of other States) system has turned out to be a forum for adjudicating claims arising from the alleged violations of BITs. Today 147 States are parties to the ICSID Convention and investors in those State may bring claims directly to host Sates. Arbitral tribunals have thus come to deal with substantive issue of investment protection in the efforts of solving disputes between private investors and host States. In the ICSID context, more than 40 cases actually pending have been brought against the Republic of Argentina. Claimants (for the most part American private investors) have alleged that the Argentine Government’s regulatory measures adopted to cope with financial crisis that hit the country in late 2001 had breached a number of BITs obligations. In most of the cases already decided, Argentina invoked the necessity defence to justify the alleged violations of the applicable BITs, relying on both the emergency clause included in the applicable US-Argentina BIT and on the customary rule of necessity. Arbitral tribunals did not deal with the necessity defence in the same way and this situation led to inconsistent decisions. The present work offers a systemic study of this issue. The first task of the research is to outline the concept of necessity under general international law. Indeed, under general international law, the concept of necessity has been subject to an evolving interpretation. The United Nations International Law Commission (ILC) has codified the state of necessity as a circumstance precluding wrongfulness in article 25 of its 2001 Articles on Responsibility of States for Internationally Wrongful Acts (ILC Articles). This work has been the first (and only) attempt at codifying the state of necessity under international law. In particular, article 25 affirms that a State may not invoke necessity as a ground for precluding the wrongfulness of an act not in conformity with an international obligation, unless the act is the only way for the State to safeguard an essential interest against a grave and imminent peril. Article 25 has come to be considered as reflecting customary international law on necessity. When considering how the concept of ‘necessity’ is applied in the different fields of international law, the role of the emergency clauses included in international treaties and their relationship with the necessity defence under customary international law is worth mentioning. Since such provisions refer to a situation of ‘emergency’, which is similar to the concept of ‘necessity’, they are frequently interpreted through reliance on article 25 of the ILC Articles. However, the ILC has drafted ‘necessity’, as a secondary rule of international law. Article 25 is indeed a circumstance precluding the wrongfulness of a conduct which is in breach of an international obligation. Instead, emergency clauses are primary rules of international law. Such clauses justify the non performance of certain treaty obligations under exceptional circumstances. Consequently, an act of the State which meets the requirements of such provisions is lawful under the treaty. It follows that article 25 of the ILC Articles and the treaty-based emergency clauses operate at different levels and deal with different situations. Therefore, the former cannot be relied upon for interpreting the latter. This thesis aims at demonstrating that the primary-secondary rule approach may be also relied upon in the framework of investment arbitration. As a matter of fact, the ICSID Tribunals in the above mentioned cases involving Argentina had to face the question of invocation of the necessity defence both under article 25 of the ILC Articles and under the emergency clause of the applicable BIT and came to different conclusions as to the relationship between these two provisions. While some Tribunals have excluded the application of the necessity defence (relying almost exclusively on article 25 of the ILC Articles), others have come to divergent conclusions (applying instead the emergency clause included in the US-Argentina BIT). In this respect, the thesis shows that treaty-based emergency clauses should be considered as primary rules of international law, distinct from the customary rule of necessity defence (qualified as secondary rule of law). Accordingly, a State may derogate from its treaty obligations under the specific circumstances provided in the emergency clause, without relying on the state of necessity as codified in article 25 of the ILC Articles. This thesis is mainly devoted to the analysis of the case law relating to the Argentine economic crisis. As a matter of fact, the issue of the necessity defence has been dealt with in such instances. Nevertheless, the aim of the research is to offer a systemic framework of the matter. This is also an effort to define a matter of public international law in the context of investment protection.