Recent Developments in International Investment Agreements and the

Right of States to Regulate: 2007–2008

Mahnaz Malik, International Institute for Sustainable Development

This paper is provided as part of a series as background documents for the 2nd Annual Forum for Developing Country Investment Negotiators, held in Marrakech, Morocco, 2–4 November 2008. The event was organized by the International Institute for Sustainable Development in partnership with the South Centre and the Moroccan Department of Investment. Support for the Forum has been generously provided by the Danish Ministry of Foreign Affairs, the International Development Research Centre and the Norwegian Agency for Development Corporation. The International Institute for Sustainable Development (IISD) (www.iisd.org) is a Canadian‐based not‐for‐profit organization. As a policy research institute dedicated to effective communication of our findings, we engage decision‐makers in government, business, NGOs and other sectors in the development and implementation of policies that are simultaneously beneficial to the global economy, the environment and social well‐being. IISD’s work on investment seeks to promote investment as a means to achieve sustainable development. Our balanced and insightful approach is reflected in our widely circulated Investment Treaty News bulletin, and our solid expertise has persuaded tribunals in two cases (under ICSID and UNCITRAL) to grant us precedent‐setting standing to intervene in investor‐state disputes with broad public policy implications. We have been engaged to act as advisors to several developing countries in the course of their ongoing investment negotiations. Our work includes the drafting of a Model Agreement on Investment for Sustainable Development, which has won widespread critical acclaim. The South Centre (www.southcentre.org) is an intergovernmental organization of developing countries established by the 1994 Intergovernmental Agreement to Establish the South Centre (deposited with the UN Secretary‐General) which came into force on 31 July 1995. The South Centre currently has 50 developing country Member States. It has its headquarters in Geneva. The South Centre seeks to meet the need for analysis of development problems and experience, as well as to provide policy analysis and research support required by developing countries for collective and individual action, particularly in the international arena. The South Centre’s primary objectives include the promotion of: developing country (South) solidarity and cooperation on development issues; South‐wide collaboration in promoting common interests and coordinated participation by developing countries in international forums dealing with South‐South and North‐South matters, as well as with other global concerns; convergent views and approaches among countries of the South with respect to global economic, political and strategic issues related to evolving concepts of development, sovereignty and security; and better mutual understanding and cooperation between the South and the North on the basis of equity and justice. To meet its objectives, and within the limits of its capacity and mandate, the South Centre responds to requests for policy advice, and for technical and other support from collective entities of the South such as the Group of 77 and the Non‐Aligned Movement. These functions are carried out by means of policy‐oriented research and analysis, negotiations support and technical assistance, and capacity‐building, and by publishing and disseminating widely the results of its work. The South Centre’s main areas of policy expertise include trade, intellectual property, climate change, investment, finance, agriculture and services. The Department of Investment has been in charge of promoting foreign investment in Morocco since 1996. Beyond its mandate to provide information on the country’s potential, the Department creates and implements investment promotion strategies targeting specific sectors to promote the realization of projects. Its plan of action revolves around four main axes: •Identifying different categories of investors and countries initiating foreign investment; •Promoting priority sectors such as tourism, NTIC , electronic and automobile components, textiles, aeronautics and the agro‐alimentary industry; •Coordinating between national institutions and international organizations in the field of investment; and •Locating projects according to the opportunities offered in the different regions of Morocco, in collaboration with the Regional Investment Centres. In order to further the government’s investment policy, while carrying out its mission, the Department of Investment is organized along two main poles, namely cross‐sectional and sector‐oriented: •Two divisions cover investment promotion, communication and cooperation, research and regulations; •Two other divisions are dedicated to activities in priority sectors, agriculture and industry on one hand, tourism and services on the other. To maximize efficiency, these structures benefit from the support of offices in charge of human resources and general affairs. The Department of Investment, along with its initial mandate, also steers the Inter‐Ministerial Investment Commission, an appeal and arbitration body presided by the Prime Minister. The Department of Investment plans to establish an independent agency dealing specifically with promotion in early 2009.

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Second Annual Forum of Developing Country Investment Negotiators

3-4 November 2008

Marrakech, Morocco

Recent Developments in International Investment Agreements and the Right of

States to Regulate: 2007-2008

Mahnaz Malik

1. Introduction

This paper provides an update to “Investment Agreements and the Regulatory State:

Can Exceptions Clauses Create a Safe Haven for Governments?” written by Howard

Mann1 by examining the findings in recent international investment agreements (IIA)

awards relating to expropriation and the right of states to regulate2. It also identifies

developments in the drafting of expropriation provisions in IIAs which explicitly

provide states with the policy space to take regulatory measures in the public interest.

2. The Expropriation Provision in IIAs and the Ability of State to Regulate

The provision requiring governments to compensate investors in the event that their

investment is „expropriated‟ is present in virtually all IIAs. While it may be important

to protect investors from capricious and discriminatory government actions, if IIAs

1 Issues in International Investment Law Background Papers for the Developing Country Investment

Negotiators‟ Forum Singapore, October 1-2, 2007 2 The paper reviews the awards rendered in 2007 and 2008, which are available on the ICSID website

(www.worldbank.org/icsid) listed in Annex A

2

require compensation for foreign investors in order for governments to take otherwise

appropriate new regulatory measures affecting them, then this will certainly have a

major impact on the ability of governments to regulate in the public interest.

The issue, in a nutshell, is whether bona fide regulatory measures such as those to

protect the environment, human health or safety can be considered as expropriations

and thus require compensation under the expropriation clause? The existing arbitral

decisions go in two separate and irreconcilable directions. Some say the key element

is the economic impact of the measure, irrespective of its motivation (Metalclad v.

United States3, TECMED v. Mexico

4). Others say that genuine regulatory measures

fall within the customary international law concept of “police powers” and do not

constitute expropriatary measures (Methanex v. United States5).

These awards reflect the current uncertainty in exactly what would constitute a

measure equivalent to expropriation or an indirect expropriation and therefore attract

compensation, even if it is taken for the public good. This lack of clarity presents a

number of risks for host governments in adopting new measures.

3. Recent Awards Ruling on Expropriation

In 2007, of the 24 IIA awards publicly available, 10 were awards on the merits (7 of

which were awarded in favor of the investor's claim). 7 out of these 10 awards on the

3 Metalclad Corporation v. The United Mexican States (ICSID Case No. ARB(AB)/97/1)

4 Técnicas Medioambientales Tecmed, S.A. v. United Mexican States, ICSID Case No. ARB

(AF)/00/2. (Spain/Mexico BIT) 5 Methanex Corporation v. United States of America, In the Matter of An Arbitration under Chapter 11

of the North American Free Trade Agreement and the UNCITRAL Arbitration Rules, Final Award of

the Tribunal, August 7, 2005. Available at http://www.naftaclaims.comdisputes_us_6.htm.

3

merits last year involved the expropriation provision. In 2008, the much talked about

Biwater v Tanzania decision6 involved a consideration of the expropriation provision,

and is discussed below.

The majority of the IIA awards in 2007 focused on the degree of interference with the

rights of ownership that is required for an act or a series of acts to constitute an

indirect expropriation. The awards reviewed are listed in Annex A.

For example, in Sempra v. Argentine Republic7

, the investor, Sempra, had

complained that its investments in two Argentine gas distribution enterprises had

suffered serious damage as a result of several emergency measures taken by

Argentina during and after its financial crisis. The investor‟s arguments included that

compensation must be paid irrespective of the purpose of the measures taken. On the

other hand, the state argued that the purpose of the measures was relevant to the

determination of an expropriation claim, particularly if such measures are adopted under

the police power of the state and are proportional to the requirements of public interest.

The tribunal in this case chose to first focus on the degree of the impact required to

establish expropriation, and held that the effects on the investment were not sufficient

to meet the threshold. It held that “that in order for a claim of indirect expropriation

to be successful it would be required that “the investor no longer be in control of its

business operation, or that the value of the business has been virtually annihilated”.

As this was not the case in the present dispute, the tribunal rejected the investor‟s

expropriation claim. However, the tribunal did find that Argentina had breached the

fair and equitable provisions, and denied Argentina a defence of necessity both as a

6 Biwater Gauff (Tanzania) Ltd. v.United Republic of Tanzania,ICSID Case No. ARB/5/22

7 Sempra Energy International v. Argentine Republic, ICSID Case No. ARB/02/16 (Argentina-United

States BIT), Award, 28 September 2007.

4

matter of customary international law and under Article 11 of the US-Argentina

bilateral investment treaty.

Similarly, in PSEG v. Turkey8 when examining the investor‟s claim for indirect

expropriation, the tribunal did not find that the threshold of interference that had taken

place satisfied its test, and therefore it rejected the investor‟s claim of indirect

expropriation. The tribunal did award PSEG damages for breach of the fair and

equitable provision. The tribunal in Eastern Sugar v. Czech Republic9 noted that a

violation of the expropriation clause in the BIT would be applicable only if there was

“a substantial deprivation of the entire investment or a substantial part of the

investment.” As such deprivation had not even been alleged by the claimant, the

tribunal rejected the expropriation claim.

In Siemens v Argentine Republic10

, the investor, Siemens, argued that irrespective of

whether or not the purpose of a state measure affects its legality, it does not affect the

state‟s obligation to compensate the investor promptly, adequately and effectively as

plainly stated in Article 4(2) of the Germany-Argentina treaty. It said that the public

purpose of expropriatory measures by the state party in no way alters the legal

obligation to compensate investors affected by those measures. Siemens also stated

that failure to provide prompt, adequate and effective compensation rendered the

expropriation unlawful whether or not it was for a public purpose. On the other hand,

Argentina questioned how the investor had drawn the line to delimit the state‟s

legitimate actions from actions entitling an investor to compensation. Argentina

8 PSEG Global et al. v. Republic of Turkey, ICSID Case No. ARB/02/5, Award, 19 January 2007.

9 Eastern Sugar B.V. v. Czech Republic, SCC Case No. 088/2004 (Czech Republic-Netherlands BIT),

Final 10

Siemens A.G. v. Argentine Republic, ICSID Case No. ARB/02/08 (Argentina-Germany BIT),

Award, 6 February 2007,

5

argued that, if the effect of depriving a person of its property is the criterion for this

purpose, then any regulation would be expropriatory because regulations have a

damaging effect on regulated parties.

The tribunal interpreted the treaty to require that the expropriation be for a public

purpose and compensated. However, the tribunal found that in this case, the

expropriation was unlawful because the measures were not motivated by a public

purpose. It held that, while the public purpose of the 2000 Emergency Law was

evident, its application through the relevant decree to the specific case of Siemens‟

investment and the public purpose of the same were questionable. For these reasons, it

held the expropriation did not meet the requirements of Article 4(2) and therefore was

unlawful. The tribunal awarded Siemens US$217 million in damages for multiple

treaty breaches.

Of the seven awards rendered in 2007 that examined claims based on expropriation,

only two decided in favour of the investor (Siemens v. Argentine Republic and Vivendi

v. Argentine Republic), while five rejected such claims (Enron v. Argentine Republic,

Parkerings v Lithuania, Sempra v. Argentine Republic, Eastern Sugar v. Czech

Republic, PSEG v Turkey). Three of the five tribunals that rejected the expropriation

claims nonetheless found that the host countries had violated other treaty provisions,

in particular the fair and equitable treatment standard (Enron v. Argentine Republic,

Sempra v. Argentine Republic, PSEG v. Turkey).

In 2008, the tribunal in Biwater v Tanzania, concluded that, on a cumulative basis, the

measures in question, i.e. the public announcement of the termination of the contract;

6

the subsequent political rally; the withdrawal of the tax certificate; and finally, the

seizing of the assets of City Water, the immediate installation of DAWASCO, and the

deportation of City Water‟s management, amounted to an expropriation of the

investor‟s investment on the basis of Article 5 of the UK-Tanzania BIT. However,

although the tribunal found that Tanzania's actions in respect of its lease contract with

Biwater amounted to an expropriation and a violation of several standards in the UK-

Tanzania BIT, it concluded that Tanzania did not owe Biwater any compensation

since there was no causal link between the breaches and the losses sustained by

Biwater, as Biwater‟s mismanagement of its investment prior to the breaches had

already been the cause of its own losses.

As can be seen from the above, awards in the last year did not introduce any clarity to

the issue of whether regulatory measures in the public interest will be considered an

expropriation, and therefore require compensation, or whether such measures will be

seen as an exercise of a state‟s police powers and therefore not an expropriation. This

lack of clarity has prompted states, particularly the US and Canada, to draft their

expropriation provision with specific language dealing with regulatory measures.

(These are discussed in the 2007 paper by Howard Mann previously referred to.) The

next section discusses similar responses from other parts of the world that have

occurred more recently.

4. Recent IIA texts on Expropriation

This section examines the developments made with respect to the expropriation

provision in the draft Norwegian Model Agreement for the Promotion and Protection

7

of Investments (“the Model”) circulated for comments earlier this year by the

Norwegian government, and the Investment Agreement for the COMESA Common

Investment Area (CCIA) signed last year.

4.1 The Norwegian Model

Norway‟s model comes at a critical juncture as the Norwegian government considers

whether to resume the signing of BITs, which has remained suspended since the mid-

nineties. The suspension in signing BITs by Norway was prompted by issues

associated with the relationship of the investor-state provisions in BITs and the

Norwegian constitution together with the limitation such agreements may impose on a

government‟s ability to regulate in the public interest particularly with respect to the

compensation for expropriation provisions.

Article 6 of the Norwegian Model provides as follows:

“1. A Party shall not expropriate or nationalise an investment of an investor of the

other Party except in the public interest and subject to the conditions provided for by

law and by the general principles of international law.

2. The preceding provision shall not, however, in any way impair the right of a

Party to enforce such laws as it deems necessary to control the use of property in

accordance with the general interest or to secure the payment of taxes or other

contributions or penalties.”

8

The English translation of the Comments on the Norwegian BITs provides the

following:

“The expropriation provision must provide effective and intentional investor

protection, while safeguarding the regulatory freedom of the state. The aim of an

expropriation provision is to protect established investments from open or

camouflaged expropriation. The provision must at the same time safeguard the state’s

right to implement general regulations and administrative decisions without incurring

liability to pay compensation. The challenge involves finding the correct point of

intersection between regulation/intervention by the authorities that is deemed to be

expropriation (and thus gives rise to claims for compensation) and the measures that

fall outside this category.”

The Norwegian Model‟s approach is to limit what is deemed expropriation pursuant

to the general provisions of international law. Further, the provision contains an item

referring to and safeguarding the general regulatory freedom of the state on its own

territory. The Norwegian Model also departs from the usual provision that

compensation shall be paid in connection with expropriation. The formulation often

used is the so-called “Hull formula” (“prompt, adequate and effective”

compensation). The explanation provided by the Norwegian government for this

departure from standard practice is as follows:

“There are several reasons why these formulations have not been used in the model

agreement. Firstly, there are many different formulations in BITs. Many of the

formulations go further than what we perceive to be current international law, and

9

probably provide greater protection to investors than has been assessed as

appropriate in Norway”.

The approach taken by Norway is an example of how countries are challenging the

existing exposition of the expropriation provision to design a standard that meets the

level of protection they wish to provide foreign investors while expressly retaining

their ability to regulate in the public interest without the fear of compensation claims.

The expropriation provision and the preamble of the Norwegian Model are included

in Annex B.

4.2 COMESA CCIA

The COMESA CCIA is a regional agreement which adapts the standard expositions

found on expropriation in IIAs to suit the level of protection signatory member states

wish to provide to foreign investors.

The CCIA begins with a fairly standard provision on expropriation. Article 20 of the

CCIA provides that host states shall not nationalise or expropriate investments in their

territory or adopt any other measures tantamount to expropriation of investments

except: (a) in the public interest; (a) on a non-discriminatory basis; (b) in accordance

with due process of law; and (c) on payment of prompt adequate compensation. It also

provides that “Appropriate compensation shall normally be equivalent to the fair

market value of the expropriated investment immediately before the expropriation

took place (“date of expropriation”), and shall not reflect any change in value

occurring because the intended expropriation had become known earlier.” The CCIA

10

then states that the compensation may be adjusted to reflect the aggravating conduct

by a COMESA investor or such conduct that does not seek to mitigate damages.

The provision on expropriation is further qualified to take into account the decisions

of some tribunals that have held government regulatory conduct taken in the public

interest to be in breach of the expropriation provision. Several points can be made

here.

Article 20 (6) provides that the article shall not apply to the issuance of compulsory

licences granted in relation to intellectual property rights, or to the revocation,

limitation or creation of intellectual property rights, to the extent that such issuance,

revocation, limitation or creation is consistent with applicable international

agreements on intellectual property.

Article 20 (7) provides that a measure of general application shall not be considered

an expropriation of a debt security or loan covered by this Agreement solely on the

ground that the measure imposes costs on the debtor that cause it to default on the

debt.

Article 20 (8) then contains a critical qualification using strong language often not

seen in BIT, as follows:

“Consistent with the right of states to regulate and the customary international law

principles on police powers, bona fide regulatory measures taken by a Member State

that are designed and applied to protect or enhance legitimate public welfare

11

objectives, such as public health, safety and the environment, shall not constitute an

indirect expropriation under this Article.”

These specific qualifications are bolstered by general exceptions in Article 22 of the

CCIA which creates a detailed list of exceptions for measures taken by a state to

protect public interest and security. Articles 24 and 25 of the CCIA allow a member

state to take safeguard measures in emergency situations and serious balance of

payments or external financial difficulties. The CCIA also includes a preamble

reflecting broader development interests. The relevant provisions in the CCIA are

listed in Annex C.

5. Concluding Remarks

The recent IIA awards do not introduce any additional clarity for states on whether

regulatory measures taken by them that impact the economics of an investment will

be deemed an expropriation. Most of the awards in 2007 focused on the level of the

impact required on the investment before it could be considered as an expropriation, a

test which was not met in most of the cases. Thus the issue of whether the regulatory

measure was an expropriation that required compensation did not arise in these cases.

In the cases that expropriation was found the government measures in question were

not deemed as general regulations in the public interest but more specific measures

affecting the particular investment.

An interesting development in the treaty texts of both developed and developing

countries, as illustrated first by the US and Canadian model BITs and more recently

12

by the Norwegian Model and the CCIA, has been the drafting of the expropriation

provision in a manner that expressly provides states with the policy space to

undertake public interest regulatory measure without the risking the compensation of

investors, a marked departure from the standard, very broad exposition found in IIAs.

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ANNEX A: Awards in 2007

Compañiá de Aguas del Aconquija S.A. and Vivendi Universal v. Argentine Republic,

ICSID Case No. ARB/97/3 (France-Argentina BIT) Award, 20 August 2007

Siemens A.G. v. Argentine Republic, ICSID Case No. ARB/02/08 (Argentina-Germany

BIT), Award, 6 February 2007

Enron Corporation and Ponderosa Assets, L.P. v. Argentine Republic, ICSID Case

No. ARB/01/3 (Argentina- United States BIT), Award, 22 May 2007 (Decision on

Rectification, 25 October 2007)

Parkerings-Compagniet AS v. Lithuania, ICSID Case No. ARB/05/8 (Lithuania-

Norway BIT), Award, 11 September 2007

Sempra Energy International v. Argentine Republic, ICSID Case No. ARB/02/16

(Argentina-United States BIT), Award, 28 September 2007

Eastern Sugar B.V. v. Czech Republic, SCC Case No. 088/2004 (Czech Republic-

Netherlands BIT), Final Award, 12 April 2007

PSEG Global et al. v. Republic of Turkey, ICSID Case No.ARB/02/5, Award, 19

January 2007.

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ANNEX B: The Norway Model BIT

PREMABLE OF THE NORWEGIAN MODEL

The Kingdom of Norway and the................................., hereinafter referred to as the

"Parties";

Desiring to develop the economic cooperation between the Parties;

Desiring to encourage, create and maintain stable, equitable, favourable and

transparent conditions for investors of one Party and their investments in the territory

of the other Party on the basis of equality and mutual benefit;

Desiring to achieve these objectives in a manner consistent with the protection of

health, safety, and the environment, and the promotion of internationally recognized

labour rights;

Desiring to contribute to a stable framework for investment in order to maximize

effective and sustainable utilization of economic resources and improve living

standards;

Conscious that the promotion and reciprocal protection of investments in accordance

with this Agreement will stimulate the business initiative;

15

Emphasising the importance of corporate social responsibility;

Recognising that the development of economic and business ties can promote respect

for internationally recognised labour rights;

Reaffirming their commitment to democracy, the rule of law, human rights and

fundamental freedoms in accordance with their obligations under international law,

including the principles set out in the United Nations Charter and the Universal

Declaration of Human Rights;

Recognising that the promotion of sustainable investments is critical for the further

development of national and global economies as well as for the pursuit of national

and global objectives for sustainable development, and understanding that the

promotion of such investments requires cooperative efforts of investors, host

governments and home governments;

Recognising that the provisions of this agreement and provisions of international

agreements relating to the environment shall be interpreted in a mutually supportive

manner;

Determined to prevent and combat corruption, including bribery, in international trade

and investment;

Recognising the basic principles of transparency, accountability and legitimacy for all

participants in foreign investment processes;

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Have agreed as follows:

ARTICLE [6]

EXPROPRIATION

1. A Party shall not expropriate or nationalise an investment of an investor of the

other Party except in the public interest and subject to the conditions provided

for by law and by the general principles of international law.

2. The preceding provision shall not, however, in any way impair the right of a

Party to enforce such laws as it deems necessary to control the use of property

in accordance with the general interest or to secure the payment of taxes or

other contributions or penalties.

17

ANNEX C: COMESA CCIA

ARTICLE 20

Expropriation

1. Member States shall not nationalize or expropriate investments in their

territory or adopt any other measures tantamount to expropriation of

investments except:

(a) in the public interest;

(a) on a non-discriminatory basis;

(b) in accordance with due process of law; and

(c) on payment of prompt adequate compensation.

2. Appropriate compensation shall normally be equivalent to the fair

market value of the expropriated investment immediately before the

expropriation took place (“date of expropriation”), and shall not reflect any

change in value occurring because the intended expropriation had become

known earlier. Compensation may be adjusted to reflect the aggravating

conduct by a COMESA investor or such conduct that does not seek to

mitigate damages.

3. If payment is made in a currency of the host or home state,

compensation shall include interest at a commercially reasonable rate for that

currency from the date of expropriation until the date of actual payment.

4. If a Member State elects to pay in a currency other than a host or home

state currency, the amount paid on the date of payment, if converted into a

host or home state currency at the market rate of exchange prevailing on that

18

date, shall be no less than if the amount of compensation owed on the date of

expropriation had been converted into that host or home state currency at the

market rate of exchange prevailing on that date, and interest had accrued at a

commercially reasonable rate for that host or home state currency from the

date of expropriation until the date of payment.

5. On payment, compensation shall be freely transferable. Awards that

are significantly burdensome on a host state may be paid yearly over a period

agreed by the Parties, subject to interest at the rate established by agreement

of the disputants or by a tribunal.

6 This Article shall not apply to the issuance of compulsory licences

granted in relation to intellectual property rights, or to the revocation, limitation

or creation of intellectual property rights, to the extent that such issuance,

revocation, limitation or creation is consistent with applicable international

agreements on intellectual property.

7. A measure of general application shall not be considered an

expropriation of a debt security or loan covered by this Agreement solely on

the ground that the measure imposes costs on the debtor that cause it to

default on the debt.

8. Consistent with the right of states to regulate and the customary

international law principles on police powers, bona fide regulatory measures

taken by a Member State that are designed and applied to protect or enhance

legitimate public welfare objectives, such as public health, safety and the

environment shall not constitute an indirect expropriation under this Article.

9. The investor affected by the expropriation shall have a right under the

law of the Member State making the expropriation, to a review by a juridical or

19

other independent authority of that Member State, of his/its case and the

valuation of his/its investment in accordance with the principles set out in

paragraphs (1) to (8) of this Article. The Member State making the

expropriation shall ensure that such a review is carried out promptly.

ARTICLE 22

General Exceptions

1. Subject to the requirement that such measures are not applied in a

manner which would constitute a means of arbitrary or unjustifiable

discrimination between investors where like conditions prevail, or a disguised

restriction on investment flows, nothing in this Agreement shall be construed

to prevent the adoption or enforcement by any Member State of measures:

(a) designed and applied to protect national security and public morals;

(b) designed and applied to protect human, animal or plant life or health;

(c) designed and applied to protect the environment; or

(d) any other measures as may from time to time be determined by a

Member State, subject to approval by the CCIA Committee.

2. Nothing in this Agreement shall be construed to prevent a Member

State from adopting, maintaining or enforcing any measure that it considers

appropriate to ensure that investment activity in its territory is undertaken in a

manner sensitive to the principles outlined in sub-paragraphs 1(a) to (c)

above.

3. Nothing in this Agreement shall be construed to:

(a) preclude a Member State from applying measures that it considers

20

necessary for the fulfillment of its obligations under the United Nations

Charter with respect to the maintenance or restoration of international

peace or security, or the protection of its own essential security

interests; or

(b) require a Member State to furnish or allow access to any information

the disclosure of which it determines to be contrary to its essential

security interests.

ARTICLE 24

Emergency Safeguard Measures

1. If, as a result of opening up of economic activities in accordance with

this Agreement, a Member State suffers or is threatened with any serious

injury, the Member State may take emergency safeguard measures to the

extent and for such period as may be necessary to prevent or to remedy such

injury. The measures taken shall be provisional and without discrimination.

2. Where emergency safeguard measures are taken pursuant to this

Article, notice of such measures shall be given to the CCIA Committee within

14 days from the date they are taken. The notice shall include justification of

such action supported by evidence gathered from an investigation.

3. The CCIA Committee shall determine what constitutes serious injury

and threat of serious injury and the procedures of instituting emergency

safeguard measures pursuant to this Article.

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ARTICLE 25

Measures to Safeguard Balance of Payments

1. In the event of serious balance of payment and external financial

difficulties or threat thereof, a Member State may adopt or maintain

restrictions on investments on which it has undertaken commitments provided

for in Articles 15, 17, 19 and 20, including on payments or transfers for

transactions related to such commitments.

2. Where measures to safeguard balance of payments are taken pursuant

to this Article, notice of such measures shall be given to the CCIA Committee

within 14 days from the date such measures are taken.

3. The measures referred to in paragraph 1:

(a) shall not discriminate among Member States;

(b) shall be consistent with Article VIII of the Agreement of the International

Monetary Fund;

(c) shall avoid unnecessary damage to the commercial, economic and

financial interests of any other Member State;

(d) shall not exceed those necessary to deal with the circumstances

described in paragraph 1; and

(e) shall be temporary and be phased out progressively as the situation

specified in paragraph 1 improves.

4. A Member State adopting the balance of payment measures shall

commence consultations with Member States through the CCIA Committee

within 90 days from the date of notification in order to review the balance of

payment measures adopted by it.

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5. The CCIA Committee shall determine the rules applicable to the

procedures under this Article.

23

References

Investment Agreements and the Regulatory State: Can Exceptions Clauses

Create a Safe Haven for Governments?” written by Howard Mann Issues in

International Investment Law Background Papers for the Developing Country

Investment Negotiators‟ Forum Singapore, October 1-2, 2007

Latest developments in investor-State dispute Settlement

IIA MONITOR No. 1 (2008)

International investment agreements

UNCTAD/WEB/ITE/IIA/2008/3

UNITED NATIONS CONFERENCE ON TRADE AND DEVELOPMENT, Geneva

Investment Treaty News

15 October 2007

Published by IISD

www.investmenttreatynews.com

Investment Treaty News

01 February 2007

Published by IISD

www.investmenttreatynews.com