Henckels: When the ‘Exception’ is an Element of the Rule: The Structural Status of Investment Treaty Exception Clauses

Caroline Henckels (Monash Univ. - Law) has posted When the ‘Exception’ is an Element of the Rule: The Structural Status of Investment Treaty Exception Clauses. Here's the abstract:

This paper discusses the structural status of exception clauses in investment treaties. It addresses two related questions: (1) whether an exception is an element of the substantive investment obligations in the sense of being a limitation on their scope, such that those obligations are inapplicable to measures that come within the exception — or whether an exception is an affirmative defence that operates to justify a prima facie breach of the obligations; and (2) the relationship between security and public order exceptions and the defence of necessity at customary international law — in particular, whether such clauses are lex specialis vis-à-vis the defence of necessity. Investment tribunals have reached differing conclusions as to these issues, creating uncertainty about the nature of states’ treaty commitments to foreign investors. Several claims remain outstanding against Argentina relating to the emergency measures it adopted in response to its economic crisis of 2001-2002, and a treaty exception is likely to be a significant issue in these cases. Moreover, the increasing prevalence of exception clauses in newly concluded and proposed treaties (such as the CETA and the TTIP) suggests that there is a need to better understand their status. Examining the decided cases and considering the implications of different interpretations of the structural status of exception clauses permits two conclusions, subject always to the text of the provision at issue: (1) that exceptions are limitations on the scope of the treaty obligations, and are not affirmative defences; (2) that security and public order exceptions are conceptually separate from the customary defence of necessity, and are not lex specialis manifestations of the defence between the treaty parties. These conclusions have practical implications for the allocation of the burden of proof.