Interpretation of 'Necessity' in International Investment Law

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2022-04

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PIMT Journal of Research

Abstract

“Necessity” as a concept has been employed by many juristic set-ups as a permissible exception to obligations, as and when undertaking those obligations adversely impacts a party’s “primary values.” These could include environmental obligations, human rights, protection of foreign investment or trade. International Investment tribunals have used diverse approaches to interpret the manner in which a measure is ‘necessary.’ This analysis entails adjudicating the objective of a measure with reference to the obligations under investment treaties, including provisions such as fair and equitable treatment and non-precluded clauses. It has been observed that despite the perceptive importance of such a defense, the approach of investment tribunals towards the interpretation of necessity has been inconsistent. Scholars have often argued for investment tribunals to incorporate the consistent World Trade Organization (WTO) jurisprudence towards necessity, as such an interpretation would help in developing a clear body of precedent in international investment law that will provide for more certainty for host nations as well as investors. This paper seeks to explore the existing tribunal decisions on necessity with reference to non-precluded clauses, fair and equitable treatment as well as a possible claim in cases of expropriation.

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