Originally from Investor-State Arbitration--Lessons for Asia

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There is a general crisis of legitimacy as far as investment arbitration is concerned. Before dealing with the defence of necessity, I would like to create the climate in which the defence has been considered so as to make the point that so far the few arbitration tribunals that have dealt with the defence, have done so in a manner that did not do justice to the state that pleaded the defence. This position has to be understood in the context of a climate of investment arbitration that contains expansive trends inimical to the interests of the states which concluded the treaties. It is a climate that has perhaps pleased professional practitioners of the law in the area but many academic commentators have been wary of the trends as overextensions of the law that may eventually undermine the system itself and bring about its collapse. To a large extent this situation comes about as a result of events that have been described in some of the earlier contributions. These events may be detailed. There are inconsistent awards in respect of the same fact situations.1 A large number of disputes arising from the economic crisis in Argentina raise the issue as to whether contractual protection should be the only factor that is to be considered when such disputes arise. The public law nature of such disputes has seldom been taken into account.2 But more important is the fact that there have been expansionary interpretations of investment treaties in recent times. For example, the umbrella clause which has been in existence from 1954 has suddenly been dusted up and given interpretations that were probably never intended by the parties which drafted them. A similar accusation could be made in respect of the fair and equitable standard of treatment which has been in existence from the Havana Charter in 1948 but has been given extensive interpretations by arbitral tribunals since 2000.