CYIL vol. 7 (2016)

402

KATARÍNA CHOVANCOVÁ

CYIL 7 ȍ2016Ȏ

then comment on the

Continental

award, with the main object being the WTO

oriented arbitral tribunal’s selective reliance on the WTO necessity testing in its entire

vicissitude. At the very end, the article suggests a balanced invocation of the WTO

concept of necessity and drawing on the WTO jurisprudence by investment arbitral

tribunals in the future. Simultaneously, the final section draws some conclusions on

the contemporary convergence of international investment and trade.

2. Non-Precluded Measures – Structure and Classification

Although being firmly tied with BITs, starting with the first European modern

BIT, concluded in 1959 between Germany and Pakistan, NPM clauses are more than

one decade older. Actually, they paved their way into the US Friendship, Commerce

and Navigation treaties, signed soon after World War II. As a part of the BIT, the

NPM clause may be included in the main text of the treaty, or, which happens very

rarely, in the attached protocol to the treaty.

Traditionally, a basic form and structure

of the NPM clause always incorporates several compartmentalised elements.

Firstly, there is “

the nexus

” required between the measure taken by the host state

and a desirable objective, which should be attained by the measure.

Secondly,

the scope of applicability of the clause defines its mutual intercourse with other

provisions of the BIT, in which the NPM clause is included. In addition, every

carefully drafted NPM clause will lay down all objectives that may be followed by

the host state through adoption of the measures, which are not precluded by the

BIT itself, although deviating from it when being relied on.

A lack of diligence with regard to an accurate specification of the nexus and

permissible objectives, while accommodating perhaps a lax approach of the BIT parties

toward the NPM clause, may in the end costs them dearly. As two commentators

rightly pointed out,

“…these terms determine whether states or investors will bear the

costs of state action in exceptional circumstances.”

Undoubtedly, omniscient negotiators

ought to think twice before they leap when drafting their NPM provision in BIT.

On the whole, the wording of NPM clauses in various BITs might seem similar,

but it is never identical, depending on the needs and consensus of negotiators. To

illustrate the outputs of various negotiating techniques, three practical model NPM

provisions adopted in Indian BITs may serve as an illustrative example.

The first

ordinarily applied “Model NPM” clause mirrors an NPM provision in the Model

Indian BIT and incorporates only a tenuous nexus requirement, because when being

BURKE-WHITEW., VON STADEN A.: Investment Protection in Extraordinary Times,

op. cit

., p. 325.

The nexus requirement does not implicate only a relationship of the measure and its objective, but

indicates also an extent of review of this relationship by arbitrators in the later investment arbitration.

Ibid

., p. 329.

RANJAN, P.: Non-Precluded Measures in Indian International Investment Agreements,

op. cit

., p. 34.