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CYIL 7 ȍ2016Ȏ NON ǧ PRECLUDEDMEASURES IN INTERNATIONAL INVESTMENT ARBITRATION
As a result,
the
legal NPM provision (“the NPM clause”) in the bilateral investment
treaty (“the BIT”) is today anything but a long dormant treaty clause,
5
which dormancy
was probably true the last time at the beginning of the new millennium. It may be
submitted that the NPM clause,
6
with its objectives listed in detail, restricts protection
of foreign investors, embedded in BITs to the advantage of the host state, embracing
it with a certain regulatory latitude,
7
even if it is to the detriment of the investor in
extraordinary
8
circumstances.
The search for the state’s space to manoeuvre in a way incompatible with its
treaty obligations towards investors is driven by need for it, and thus under the NPM
clause the BIT shall not prevent (“preclude”) both its parties from taking
e.g.
“
the
actions, which are necessary for the protection of essential security, the maintenance of
public order, or to respond to a public health emergency
.”
9
Consequently, the NPM
clause immediately reduces the scope of the arbitral tribunal’s review of state policies,
which allow for actions, embedded in the relevant NPM clause.
Simultaneously, it also reduces the chances of arbitrators’ second guessing about
the gravity of all circumstances, which after smouldering in the host state for some
time finally escalated into an unsustainable situation and adoption of the non-
precluded measures. An occurrence of a well drafted NPM clause as an expression
of the state of necessity defence in BIT has a powerful effect. It keeps the host state,
following its objectives, included in the NPM provision, away from breaching on
its own treaty obligations toward foreign investors from the other party to the BIT,
which leads to establishing practically no liability of the acting host state.
In addition, it is notable, that the importance of NPM clauses in several
international legal writings was accentuated, while making a bridging link to the
GATT and the WTO law, which operates with its own sophisticated multi-layered
version of the necessity doctrine.
10
According to Ranjan,
11
“NPM provisions are
5
BURKE-WHITE W., VON STADEN A.: Investment Protection in Extraordinary Times: The
Interpretation and Application of Non-Precluded Measures Provisions in Bilateral Investment Treaties,
Virginia Journal of International Law
, 2007–2008, Vol. 48, No. 2, p. 311 (pp. 307-410).
6
References to NPM provisions vary. See
e.g.
TOMKA, P.: Defences Based on Necessity Under
Customary International Law and on Emergency Clauses in Bilateral Investment, in KINNEAR, M.,
FISCHER et al. /ed./:
Building International Investment Law: The First 50 Years of ICSID
, Kluwer Law
International, The Hague, 2015, pp. 477-494.
7
RANJAN, P.: Non-Precluded Measures in Indian International Investment Agreements and India’s
Regulatory Power as a Host Nation,
Asian Journal of International Law
, 2012, Vol. 2, No. 1, p. 122.
8
Some authors refer also to “exigent circumstances.” See
e.g.
SYKES, A.: Economic “Necessity” in
International Law,
The American Journal of International Law
, 2015, Vol. 109, No. 2, pp. 296-323.
9
BURKE-WHITEW., VON STADEN A.: Investment Protection in Extraordinary Times,
op. cit
., p. 311.
10
HENCKELS, C., MITCHELL, A.D.: Variations on a Theme: Comparing the Concept of “Necessity”
in International Investment Law and WTO Law,
China Journal of International Law
, 2013–2014,
Vol. 14, No. 1, pp. 93-164.
11
RANJAN, P.: Non-Precluded Measures in Indian International Investment Agreements,
op. cit
., p. 121.