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‘Necessary’ in Non-Precluded Measures Provisions in Bilateral Investment Treaties: The Indian Contribution

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Abstract

One of the controversial issues in international investment law disputes has been the interpretation of ‘necessary’ in the non-precluded measures (NPM) provisions in bilateral investment treaties (BITs). investor-state dispute settlement (ISDS) tribunals have employed different methodologies to interpret ‘necessary’ in the NPM provisions ranging from using the customary international law defence of necessity codified in Article 25 of the ILC Articles on State Responsibility to using the World Trade Organization (WTO)’s necessity analysis. However, a robust interpretative framework for ‘necessary’ in BITs’ NPM provisions remains elusive. Given this aspect, the new treaty practice of India to incorporate the least restrictive alternative measure (LRM) test in its newly signed BITs to interpret ‘necessary’ in NPM provisions has regenerated the debate on the interpretation of ‘necessary’ in NPM provisions. This article argues that the incorporation of the LRM test to interpret ‘necessary’ in NPM provisions marks a rejection of the use of the customary international law defence of necessity to interpret the treaty defence of necessity. The article proposes a two-step analytical interpretative framework aimed at operationalizing the LRM test to interpret ‘necessary’ in BITs’ NPM provisions. This framework is deferential to the host State’s regulatory autonomy and will also ensure that States fully comply with their treaty obligations towards foreign investors.

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Notes

  1. Up until the end of 2019, 3284 international investment agreements (IIAs) had been concluded, out of which 2895 were BITs—UNCTAD (2020), p. 106.

  2. Alschner and Hui (2018); Newcombe (2011); Burke-White and von Staden (2008); Pathirana and McLaughlin (2020); Vandevelde (2013), pp. 449 and 451; Kim (2018), p. 289. See also generally Chaisse (2013), p. 332.

  3. Keene (2017), p. 62. Also see Alschner and Hui (2018).

  4. Titi (2014), p. 169.

  5. One example of such an exception is Art. 5.5 of the India–Belarus BIT, which provides: ‘Non-discriminatory regulatory measures by a Party or measures or awards by judicial bodies of a Party that are designed and applied to protect legitimate public interest or public purpose objectives such as public health, safety and the environment shall not constitute expropriation under this Article’.

  6. Keene (2017), p. 62. Also see Alschner and Hui (2018).

  7. Henckels (2018), p. 2825; see also Viñuales (2020), p. 65.

  8. Henckels (2018), p. 2825.

  9. Alschner and Hui (2018).

  10. Ibid.

  11. Indian Model BIT 2016; India–Belarus BIT; India–Kyrgyzstan BIT; India–Taiwan BIT; India–Brazil BIT.

  12. CMS Gas Transmission Company v. The Argentine Republic (2005) (ICSID Case No. ARB/01/8); Enron Corporation and Ponderosa Assets, L.P. v. The Argentine Republic (2007) (ICSID Case No. ARB/01/3); Sempra Energy International v. The Argentine Republic (2007) (ICSID Case No. ARB/02/16); LG&E Energy Corporation v. The Argentine Republic (2006) (ICISD Case No. ARB/02/1); El Paso Energy International Company v. The Argentine Republic (2011) (ICSID Case No. ARB/03/15); Mobil Exploration and Development Inc. Suc. Argentina and Mobil Argentina S.A. v. The Argentine Republic (2013) (ICSID Case No. ARB/04/16).

  13. Argentina–United States BIT 1992.

  14. For more on the Argentine crisis and the ISDS claims see Alvarez and Khamsi (2008), p. 379.

  15. Art. XI of US–Argentina BIT provides, ‘[t]his treaty shall not preclude the application by either party of measures necessary for the maintenance of public order, the fulfilment of its obligations with respect to the maintenance or restoration of international peace or security, or the protection of its own essential security interests’.

  16. See Art. 25 of the ILC Draft Articles on State Responsibility.

  17. The International Court of Justice confirmed that the ILC Articles reflect customary international law in the Case Concerning the Gabcikovo-Nagymaros Project (Hungary v. Slovakia), ICJ Reports 1997, p. 7. Legal Consequences of the Construction of a Wall in the Occupied Palestinian Territory, ICJ Reports 2004, p. 136, at p. 195. Sloane (2012), p. 447.

  18. See CMS Gas Transmission Company v. The Argentine Republic (2005) (ICSID Case No. ARB/01/8); Enron Corporation and Ponderosa Assets, L.P. v. The Argentine Republic (2007) (ICSID Case No. ARB/01/3); Sempra Energy International v. The Argentine Republic (2007) (ICSID Case No. ARB/02/16).

  19. Continental Casualty Company v. The Argentine Republic (2008) (ICSID Case No. ARB/03/9).

  20. See Sykes (2003), p. 403. The interpretation of the term ‘necessary’ in the WTO is not restricted to Art. XX of GATT, but also covers other WTO agreements. For more on this see Mitchell and Henckels (2013), pp. 138–144. Also see Barak (2012), p. 317.

  21. Continental Casualty v. The Argentine Republic (2008) (ICSID Case No. ARB/03/9).

  22. Deutsche Telekom AG v. Republic of India (2017) (PCA Case No. 2014-10).

  23. Stone Sweet (2010), p. 47; Burke-White and von Staden (2010), p. 283.

  24. Stone Sweet (2010). See also Reinisch (2010), pp. 148–149, 156. Also see Desierto (2010), p. 827.

  25. Burke-White and von Staden (2010), p. 283.

  26. Kurtz (2010), p. 368.

  27. Mitchell and Henckles (2013), pp. 162–163.

  28. See UNCTAD (2009).

  29. See Art. 11.3 of India–Mauritius BIT 1998.

  30. See Art. 14 of India–China BIT 2006.

  31. See Art. 21 of Japan–Morocco BIT 2020; Art. 29 of Myanmar–Singapore BIT 2019; Art. 15 of Australia–Uruguay BIT 2019.

  32. See Art. 30 of Myanmar–Singapore BIT 2019. For a discussion on such self-judging emergency clauses in BITs see Nolan and Sourgens (2010), p. 363.

  33. India–Netherlands BIT 1995.

  34. Argentina–United States BIT 1992.

  35. Government of India, Department of Economic Affairs, https://www.dea.gov.in/bipa.

  36. See Ranjan (2019b). Also see Rajput (2017), pp. 5–9.

  37. Also see Sinha (2017), p. 227. The India–Netherlands BIT was terminated on 22 September 2016—see https://www.dea.gov.in/bipa. However, by virtue of the survival clause given in Art. 16(1), the provisions of the treaty for investments made before the termination shall continue to operate for a period of 15 years.

  38. India Model BIT 2016.

  39. Belarus–India BIT 2018.

  40. India–Taipei BIT 2018.

  41. Kyrgyzstan–India BIT 2019.

  42. India–Brazil BIT 2020.

  43. See footnote 2 of India–Taiwan BIT 2002.

  44. See footnote 6 of India–Kyrgyzstan BIT 2019.

  45. See footnote 4 of India–Brazil BIT 2020.

  46. Some of these BITs are Japan–Morocco BIT 2020, Armenia–Singapore Agreement on Trade in Services and Investment 2019, Australia–Uruguay BIT 2019, Australia–Hong Kong Investment Agreement 2019, CARIFORUM States-United Kingdom EPA 2019, Japan–Jordan BIT 2018, Kazakhstan–Singapore BIT 2018, Argentina–UAE BIT 2018 and Singapore–Sri Lanka BIT 2018.

  47. ILC Draft Articles on Responsibility of States for Internationally Wrongful Acts. The restrictive interpretation of the customary law defence was also pointed out by the ICJ in the Case Concerning the Gabcikovo-Nagymaros Project, supra n. 17, p. 7.

  48. Kurtz (2010), p. 325.

  49. LG&E Energy Corporation v. The Argentine Republic (2006) (ICISD Case No. ARB/02/1).

  50. Vienna Convention on the Law of Treaties 1969, 1155 UNTS 331; 8 ILM 679 (1969).

  51. See El Paso Energy International Company v. The Argentine Republic (2011) (ICSID Case No. ARB/03/15) and Mobil Exploration and Development Inc. Suc. Argentina and Mobil Argentina S.A. v. The Argentine Republic (2013) (ICSID Case No. ARB/04/16).

  52. Kurtz (2010), p. 325; Burke-White and von Staden (2008), p. 307; Desierto (2010), p. 827; Mitchell and Henckels (2013), p. 93.

  53. Mitchell and Henckels (2013), p. 110.

  54. CMS Gas Transmission Company v. The Argentine Republic (2005) (ICSID Case No. ARB/01/8), paras. 304 et seq.

  55. Ibid., paras. 353–378; see also Vinuales (2008), p. 81.

  56. Enron Corporation and Ponderosa Assets, L.P. v. The Argentine Republic (2007) (ICSID Case No. ARB/01/3), paras. 333–334.

  57. Ibid., para 309.

  58. Ibid., para. 339. Also see the discussion in Newcombe and Paradell (2009), pp. 494–495.

  59. Sempra Energy International v. The Argentine Republic (2007) (ICSID Case No. ARB/02/16), para. 378.

  60. Ibid.

  61. Burke-White and von Staden (2008), p. 307; Kurtz (2010), p. 325. For a detailed discussion of these cases see Bjorklund (2008), p. 481.

  62. Burke-White and von Staden (2008), p. 344.

  63. Newcombe and Paradell (2009), p. 495.

  64. See also CMS Gas Transmission Co v. The Republic of Argentina (2007) (Annulment Proceedings) (ICISD Case No. ARB/01/8); Sempra Energy International v. The Argentine Republic (2010) (Annulment Proceedings) (ICSID Case No. ARB/02/16); Enron Corporation and Ponderosa Assets, L.P. v. The Argentine Republic (2010) (Annulment Proceedings) (ICSID Case No. ARB/01/3); Mitchell and Henckels (2013), p. 97; Reinisch (2010), pp. 148–149 and 156.

  65. LG&E Energy Corporation v. The Argentine Republic (2006) (ICISD Case No. ARB/02/1), para. 239.

  66. Ibid.

  67. Ibid., para. 245.

  68. Ibid., paras. 257–259. See also Reinisch (2007), pp. 191 and 208.

  69. Also see Kurtz’s criticism of the LG&E tribunal on this point Kurtz (2010), pp. 355–356.

  70. Vienna Convention on the Law of Treaties 1969, supra n. 50. For a detailed commentary on Art. 31(3)(c) of the VCLT see Merkouris (2015).

  71. Mobil Exploration and Development Inc. Suc. Argentina and Mobil Argentina S.A. v. The Argentine Republic (2013) (ICSID Case No. ARB/04/16), para. 1060.

  72. Ibid.

  73. El Paso Energy International Company v. The Argentine Republic (2011) (ICSID Case No. ARB/03/15), para. 613.

  74. Ibid. On using Art. 25 of the ILC Draft Articles on State Responsibility to interpret ‘necessary’ in the NPM provision occurring in the US–Argentina BIT see Dolzer et al. (2011), pp. 715–716.

  75. Mobil Exploration and Development Inc. Suc. Argentina and Mobil Argentina S.A. v. The Argentine Republic (2013) (ICSID Case No. ARB/04/16), para. 1063.

  76. El Paso Energy International Company v. The Argentine Republic (2011) (ICSID Case No. ARB/03/15), paras. 613–626; Mobil Exploration and Development Inc. Suc. Argentina and Mobil Argentina S.A. v. The Argentine Republic (2013) (ICSID Case No. ARB/04/16), paras. 1064–1071. See also Martinez et al. (2010), p. 323.

  77. El Paso Energy International Company v. The Argentine Republic (2011) (ICSID Case No. ARB/03/15), paras. 624 and 656; Mobil Exploration and Development Inc. Suc. Argentina and Mobil Argentina S.A. v. The Argentine Republic (2013) (ICSID Case No. ARB/04/16), para. 1124.

  78. See Paparinskis (2011), p. 73; Simma (2011), pp. 584–585.

  79. Simma (2011), p. 585.

  80. Ibid.

  81. Ibid.; Paparinskis (2011), pp. 70–71.

  82. Paparinskis (2011), p. 65; Kurtz et al. (2014), pp. 280–281.

  83. Paparinskis (2011), p. 68.

  84. Case Concerning Oil Platforms (Islamic Republic of Iran v. United States of America), Separate Opinion of Judge Higgins, ICJ Reports 2003, p. 46.

  85. Paparinskis (2011), p. 73. Also see Ranjan (2019a), p. 98.

  86. Gardiner (2008), p. 315.

  87. Orakhelashvili (2003), p. 537.

  88. A similar erroneous use of Art. 31(3)(c) of the VCLT was made in Philip Morris Products S.A. and Abal Hermanos S.A. v. Oriental Republic of Uruguay (2016) (ICSID Case No. ARB/10/7).

  89. Mobil Exploration and Development Inc. Suc. Argentina and Mobil Argentina S.A. v. The Argentine Republic (2019) (ICSID Case No. ARB/04/16).

  90. Ibid. See also Mobil Exploration and Development Inc. Suc. Argentina and Mobil Argentina S.A. v. The Argentine Republic (2013) (ICSID Case No. ARB/04/16), Separate Opinion of Professor Antonio Remiro Brotons, paras. 25–28; Blanco and Pehl (2019), pp. 55–56.

  91. See the WTO Jurisprudence on ‘necessary’ in GATT Art. XX and GATS Art. XIV—Korea—Measures Affecting Imports of Fresh, Chilled and Frozen Beef, WT/DS161/AB/R, WT/DS169/AB/R (WTO AB 11 December 2000); India—Certain Measures Relating to Solar Cells and Solar Modules, WT/DS456/AB/R (WTO AB 16 September 2016); Dominican Republic—Measures Affecting the Importation and Internal Sale of Cigarettes, WT/DS320/AB/R (WTO AB 25 April 2005); United States—Measures Affecting the Cross-Border Supply of Gambling and Betting Services, WT/DS285/AB/R (WTO AB 7 April 2005); Brazil—Measures Affecting Imports of Retreaded Tyres, WT/DS332/AB/R (WTO AB 17 December 2007); China—Measures Affecting Trading Rights and Distribution Services for Certain Publications and Audiovisual Entertainment Products, WT/DS363/AB/R (WTO AB 19 January 2010); European Communities—Measures Prohibiting the Importation and Marketing of Seal Products, WT/DS400/AB/R (WTO AB 18 June 2014).

  92. For a detailed commentary on the WTO’s Art. XX necessity test see Bossche and Zdouc (2018), pp. 544–574.

  93. Korea—Measures Affecting Imports of Fresh, Chilled and Frozen Beef, WT/DS161/AB/R, WT/DS169/AB/R (WTO AB 11 December 2000), para. 162.

  94. Regan (2007), p. 348; Bown and Tratchman (2009), pp. 129–131; Fontanelli (2012), p. 55; Kapterian (2010), p. 91; McGrady (2008), pp. 162–163.

  95. Neumann and Turk (2003), pp. 232–233.

  96. Mitchell and Henckels (2013), pp. 129–130; Du (2016), pp. 824–826.

  97. Brazil—Measures Affecting Imports of Retreaded Tyres, WT/DS332/AB/R (WTO AB 17 December 2007), para. 156.

  98. Nagy (2020), p. 151.

  99. See Mitchell and Henckels (2013), p. 129.

  100. Du (2010), pp. 1095–1096.

  101. Mitchell and Henckels (2013), p. 129.

  102. For more on the three-step proportionality test see Kingsbury and Schill (2010), pp. 85–88.

  103. Ibid. See also Jans (2000), pp. 239–240.

  104. Burke-White and von Staden (2008), p. 347.

  105. Ibid.

  106. See Born, Morris and Forrest (2020), p. 65. Also see Philip Morris v. Uruguay (ICSID Case No. ARB/10/7), Concurring and Dissenting Opinion, paras. 138–197.

  107. Continental Casualty Company v. The Argentine Republic (2008) (ICSID Case No. ARB/03/9), para. 167.

  108. Ibid., paras. 192–195. The use of WTO jurisprudence to interpret ‘necessary’ in Art. XI of the US–Argentina BIT has been criticised, see Alvarez and Brink (2010), p. 319; Desierto (2010), pp. 827 and 831.

  109. Continental Casualty Company v. The Argentine Republic (2008) (ICSID Case No. ARB/03/9), paras. 196 and 198.

  110. Ibid., para. 198; See also Mitchel and Henckels (2013), p. 93.

  111. Deutsche Telekom v. Republic of India (2017) (PCA Case No. 2014-10).

  112. For more on this case see Kabra (2019), p. 732.

  113. See Art. 12 of the Agreement between the Republic of India and the Federal Republic of Germany for the Promotion and Protection of Investments 1995.

  114. Deutsche Telekom v. Republic of India (2017) (PCA Case No. 2014-10), para. 228.

  115. Ibid., para. 229.

  116. Ibid., para. 238.

  117. Ibid., para. 239.

  118. Kabra (2019), p. 723.

  119. Another ISDS tribunal in PL Holdings v. Poland also said that for a measure to be necessary it implies that there is no least ‘burdensome’ measure to achieve the same objective. However, in this case, the tribunal was not interpreting ‘necessary’ as part of the NPM provision. The tribunal talked of ‘necessary’ in the context of the three-step proportionality test—see PL Holdings SARL v. Republic of Poland [2017] SCC Case No. V 2014/163, para. 355.

  120. Brazil—Measures Affecting Imports of Retreaded Tyres, WT/DS332/AB/R (WTO AB 17 December 2007), para. 210.

  121. Also see Kurtz (2010), p. 369.

  122. Ibid.

  123. Burke-White and von Staden (2008), p. 323; Lowe (2002), pp. 447 and 464–465.

  124. Burke-White and von Staden (2008), p. 323.

  125. Kurtz (2010), pp. 365–370.

  126. Continental Casualty Company v. The Argentine Republic (2008) (ICSID Case No. ARB/03/9), para 196.

  127. Brazil—Measures Affecting Imports of Retreaded Tyres, WT/DS332/AB/R (WTO AB 17 December 2007), paras. 146–147.

  128. European Communities—Measures Prohibiting the Importation and Marketing of Seal Products, WT/DS400/AB/R (WTO AB 18 June 2014), para 5.213. But compare with China—Measures Affecting Trading Rights and Distribution Services for Certain Publications and Audiovisual Entertainment Products, WT/DS363/AB/R (WTO AB 19 January 2010), para. 252. See also Du (2016).

  129. Brazil—Measures Affecting Imports of Retreaded Tyres, WT/DS332/AB/R (WTO AB 17 December 2007), para. 150. See also European Communities—Measures Prohibiting the Importation and Marketing of Seal Products, WT/DS400/AB/R (WTO AB 18 June 2014), para. 5.224.

  130. Kabra (2019), p. 747.

  131. Continental Casualty Company v. The Argentine Republic (2008) (ICSID Case No. ARB/03/9), para. 198.

  132. Ibid.

  133. Ibid.

  134. Ibid., paras. 198–199.

  135. Kabra (2019), p. 748.

  136. Deutsche Telekom v. India (2017) (PCA Case No. 2014-10), para. 219; Kabra (2019), p. 748.

  137. Deutsche Telekom v. India (2017) (PCA Case No. 2014-10), para. 192.

  138. Ibid., para. 290; Kabra (2019), p. 748.

  139. See also Du (2016) and Kurtz (2010), pp. 368–369.

  140. See Continental Casualty Company v. The Argentine Republic (2008) (ICSID Case No. ARB/03/9), paras. 198–99. See also Brazil—Measures Affecting Imports of Retreaded Tyres, WT/DS332/AB/R (WTO AB 17 December 2007), para. 156; European Communities—Measures Prohibiting the Importation and Marketing of Seal Products, WT/DS400/AB/R (WTO AB 18 June 2014), para. 5.261.

  141. See also Brazil—Measures Affecting Imports of Retreaded Tyres, WT/DS332/AB/R (WTO AB 17 December 2007), para. 156.

  142. Kurtz (2010), pp. 368–369.

  143. United States—Measures Affecting the Cross-Border Supply of Gambling and Betting Services, WT/DS285/AB/R (WTO AB 7 April 2005), paras. 309–311.

  144. See Nottage (2016), p. 1015.

  145. Henckels (2016), p. 27.

  146. Kurtz et al. (2014), p. 257.

  147. Ortino (2012), p. 31.

  148. Landau (2009), p. 187; see also Lalive (2010), p. 55.

  149. Ortino (2012), p. 31.

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Acknowledgement

The author is grateful to the peer reviewers of the journal for their very useful comments. The author also thanks Anatarnihita Mishra for her research assistance in writing the article.

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  1. Senior Assistant Professor, Faculty of Legal Studies, South Asian University, New Delhi, India

    Prabhash Ranjan

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Ranjan, P. ‘Necessary’ in Non-Precluded Measures Provisions in Bilateral Investment Treaties: The Indian Contribution. Neth Int Law Rev 67, 473–501 (2020). https://doi.org/10.1007/s40802-020-00180-5

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