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Advancing Doctrine through Devil’s Advocacy: A Response to Alan O. Sykes

Part of: Alan O. Sykes, “Economic ‘Necessity’ in International Law”

Published online by Cambridge University Press:  20 January 2017

Alberto Alvarez-Jimenez
Alberto Alvarez-Jimenez*
Affiliation:
Faculty of Law, University of Waikato, New Zealand, [email protected]
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Alan Sykes’ editorial comment, Economic “Necessity” in International Law, provides a multi-layered analysis of the defense of “necessity” in international investment disputes. Sykes’ main proposition is that the obligation to compensate investors for government measures prejudicing their investments during economic emergencies mitigates the risk of moral hazard and incentivizes States to “select the least expensive way to protect their interests (the optimal policy instrument).” Otherwise, he contends, “actors will take risks that imperil them to an excessive degree if they can save themselves by imposing costs on others.” Sykes nonetheless argues that payment of the compensation could be deferred in light of the emergency, and not be subject to market interest rates.

Type
Symposium on Alan O. Sykes, “Economic ‘Necessity’ in International Law”
Information
AJIL Unbound , Volume 109 , 2015 , pp. 175 - 180
Copyright
Copyright © American Society of International Law 2015

References

1 See Sykes, Alan O., Economic “Necessity” in International Law, 109 AJIL 296, 321 – 22 (2015)CrossRefGoogle Scholar.

2 See id. at 299.

3 See id. at 320.

4 Treaty Between the United States of America and the Argentine Republic Concerning the Reciprocal Encouragement and Protec tion of Investment, Arg.-U.S., Nov. 14, 1991, 31 ILM 124.

5 See Sempra Energy International v. The Argentine Republic, Decision on the Argentine Republic’s Application for Annulment of the Award, Icsid Case No. Arb/02/16, para. 200 (June 29, 2010), 49 ILM 1445 (2010).

6 See CMS Gas Transmission Company v. Argentine Republic, Decision of the ad hoc Committee on the Application for Annul ment of the Argentine Republic, Icsid Case No. Arb/01/8, para. 146 (Sep. 25, 2007), 14 ICSID Rep. 251.

7 See Draft Articles on the Responsibility of States for Internationally Wrongful Acts, Report of the International Law Commission on the work of its fifty-third session, 19 UN Gaor Suppl. No. 10, at 43, UN Doc. A/56/10 (2001), reprinted in [2001] 2 Y.B. Int’l L. Comm’n 26, UN Doc. A/CN.4/Ser.A/2001/Add. 1.

8 For the potential of this provision in dealing with economic crises, see Sacerdoti, Giorgio, Bit Protection and Economic Crises: Limits to Their Coverage, the Impact of Multilateral Financial Regulation and the Defense of Necessity, 30 ICSID Review 1, 17 (2013)Google Scholar. Sykes only briefly mentions these measures in the Bit context, as opposed to the Gats context. See Sykes, supra note 1, at 303 n. 28.

9 Contrary to GATT Article XII, which is aimed at economic crises, Article XIX has a much narrower focus: specific domestic industries facing economic hardship. The support the latter provision offers for the temporary suspension of Wto obligations in times of economic collapse is thus more limited.

10 This is not to say that the case law under GATT Article XX and, in particular, the necessity test, cannot be of assistance when assessing the existence of alternative means under ILC Draft Article 25 in investor-State litigation. See Continental Casualty v. Argen tine Republic, Award, Icsid Case No. Arb/03/9, paras. 192–200 (Sep. 5, 2008); and Alvarez-Jimenez, Alberto, New Approaches to the State of Necessity in Customary International Law: Insights from WTO Law and Foreign Investment Law, 19 Am. Rev. Int’l Arb. 463 (2010)Google Scholar. When authorized, the suspension of obligation in WTO law exists for the benefit of WTO members only and does not address compensation for private parties.

11 See Sykes, supra note 1, at 321.

12 See id.

13 See id. at 318.

14 See id. at 317.

15 See El Paso Energy International Company v. The Argentine Republic, Award, ICSID Case No. ARB/03/15, para. 624 (Oct. 31, 2011). The Annulment Committee rejected an application for annulment. See El Paso Energy International Company and the Argen tine Republic, Decision of the ad hoc Committee on the Application for Annulment of the Argentine Republic, ICSID Case No. ARB/03/15, (Sep. 22, 2014), esp. on this point at para. 254.

16 An analysis of whether the requirement should be interpreted strictly or flexibly in light of particular facts is an issue that de serves further elaboration.

17 See Sykes, supra note 1, at 320.

18 Suspension of compensation may consist in delaying payment of the damages awarded from the date of breach until a specific date. Interest rates lower than market rates would also be included until such a date.

19 The proceedings in CMS v Argentina started on July 26, 2001, and the award was rendered on May 12, 2005.

20 The proceedings in Total v. Argentina began on October 12, 2003, and the decision on liability was issued on December 27, 2010.

21 The proceedings in Continental v. Argentina commenced on January 17, 2003, and the tribunal handed down its award on Septem ber 5, 2008.

22 The annulment proceedings in CMS v. Argentina started on September 8, 2005, and ended on Sept 25, 2007.

23 The annulment proceedings in Continental v. Argentina began on January 2, 2009, and were completed on September 16, 2011.

24 The annulment proceedings in Sempra v. Argentina commenced on January 25, 2008, and finished on June 29, 2010.

25 Apparently, the analysis of the suspension of compensation should be made on the basis of the average of both the length of arbitration and annulment proceedings. There is a jurisdictional issue that prevents from adding these two averages. Only the tribunal, not the ICSID ad hoc annulment committee, has jurisdiction to defer payment. The latter cannot make this decision on its own. Thus, adding the two averages is information that is of no value to any committee.

26 Sykes, supra note 1, at 321.

27 Not to mention that there are other factors to be considered: the probabilities of litigation and of investors’ success in their claims.

28 See Vienna Convention on the Law of Treaties, 1155 Unts 331, May 23, 1969.

29 See North American Free Trade Agreement Free Trade Commission, Notes of Interpretation of Certain Chapter 11 Provisions (July 31, 2001).

30 See 2012 U.S. Model Bilateral Investment Treaty, art. 18; and Nolan, Michael D. & Sourgens, Frederic G., The Limits of Discretion? Self-Judging Emergency Clauses in Bilateral Investment Agreements, Y.B. Int’l Inv. L. & Pol’y 363 (2010 – 2011)Google Scholar.

31 See LG&E Energy Copr. v. The Argentine Republic, Decision on Liability, ICSID Case No. ARB/02/1, para. 260 (Oct. 3, 2006) 46 ILM 40 (2007).

32 The LG&E tribunal found the duration of the Argentine crisis to be much shorter than did the CMS tribunal. For the former, the crisis ran from December 1, 2001 until April 26, 2003, while for the latter, it ran from August 17, 2000 to some time at the end of 2004 or beginning of 2005. See id., at paras. 226–29; Cms Gas Transmission Company v. The Argentine Republic, ICSID Case No. ARB/01/8, Award, paras. 250, 441 (May 12, 2005), 14 ICSID Rep. 158.

33 See Continental Casualty v. Argentine Republic, Award, ICSID Case No. ARB/03/9, paras. 159 & 220 (Sep. 5, 2008).