Legal Frameworks for the Protection of Foreign Investment in Times of Armed Conflict

This chapter presents three legal frameworks which provide foreign investors protections against effects of armed conflict: the law of state responsibility for injuries to foreigners under customary international law, international humanitarian law, and international human rights law. Particularly influential were the customary rules on the treatment of aliens, shaped by the disagreements between developed and developing countries, and clarified through the case law of mixed claims commissions and arbitrations of the late nineteenth and early twentieth century. The chapter explains how the rules on protection of property in times of armed conflict have evolved, how they have been interpreted across different legal regimes, and discusses similarities and differences, thus setting the scene for the examination of investment treaty law in the subsequent chapters.

Conclusion

This chapter concludes the book. Drawing on the findings of the preceding chapters, it proposes the analytical framework for the appraisal of investment treaty protections in times of armed conflict. Specifically, it argues that how the competing objectives will be balanced at different stages of investment treaty claims depends on the combination of the paradigm dominating a particular treaty (investment v security), and the type and conditions of a conflict giving rise to the investment claim. It summarizes how the paradigms have shifted through the evolution of the investment protection rules and ultimately advocates a paradigm that combines both investment and security approaches.

Host State’s Defences against Conflict-Related Investment Claims

This chapter explores the defence tools that a host state can use against conflict-related investment claims. The first part analyses security exceptions which have been introduced to investment protection law after the Second World War. While it is widely believed that such exceptions provide for the most persuasive safeguard of the state’s security interests, it is argued that their effectiveness will depend on the wording of the provision, determining their scope, the degree of autonomy given to a state in responding to a security threat, and their relationship with other treaty provisions. The chapter addresses these aspects. The second part focuses on the defences in the general law of state responsibility (necessity, force majeure, and countermeasures), explaining why their potential as a defence is limited.

The Effects of Armed Conflicts on Investment Treaties

This chapter explores whether the outbreak of armed conflict could result in the termination or suspension of investment treaties. It critically inspects the International Law Commission’s codification project on the effects of armed conflicts on treaties, and argues that certain types of conflicts could result in the suspension of certain investment treaty provisions when warranted by security concerns. In addition, it considers the doctrines of supervening impossibility to perform and fundamental change of circumstances, and argues that the former, in particular, could justify the suspension of an investment treaty provision. However, such disruptions to treaty operation are limited to the most severe armed conflicts of the highest magnitude.

Investment Treaty Claims and Post-Conflict Justice

This chapter focuses on the post-conflict period and critically assesses how investment treaty claims can interfere with the transition to peace. It questions the role of investment treaties as a facilitator of peace as well as the position that investor−state arbitration is an optimal structure for remedying conflict-related losses. Based on the assumption that large compensation awards may adversely affect the host state’s post-conflict transition, it examines different methods for adjusting post-conflict compensation modalities in light of the transitional circumstances. It further compares investor−state arbitration to other regimes for remedying conflict-related losses, and argues that in some cases, the re-emergence of state control in a dispute resolution process could be justified.

The Interplay of Investment Law and International Humanitarian Law

This chapter examines the interplay of investment law and international humanitarian law. It rebuts the popular doctrinal views that the interaction between the two legal regimes is likely to give rise to normative conflicts, with international humanitarian law displacing investment law. By analysing AAPL v Sri Lanka award, it demonstrates how the norms in the respective regimes co-exist and complement each other. In particular, it shows how the duty to exercise due diligence in targeting operations (including the use of precautions and the principle of proportionality) overlaps in different legal frameworks. It thereby highlights the potential of investment tribunals to contribute to more humane conduct in hostilities. It concludes with a systemic overview of methods for minimising normative tensions between different normative systems.

Investment Treaty Protections against Conflict-Related Injuries

This chapter analyses the investment treaty provisions most likely to be invoked by investors to redress conflict-related losses, notably the full protection and security provision (FPS) and the armed conflict clause. First, it examines the scope of the FPS standard, focusing on ‘police powers’ and ‘due diligence’ as two concepts that help demarcate the obligation under the provision. Second, it considers different types of armed conflict clauses and addresses the jurisprudential inconsistencies, in particular with regard to their relationship with FPS. Finally, the chapter looks into other treaty provisions (expropriation and fair and equitable treatment), arguing that investors’ expectations as to their protections will be likely assessed in light of the conflict crisis.

Introduction

This chapter sets out the central objective of this book: to provide a comprehensive examination of how effective and appropriate the investment treaty framework is in protecting foreign investment in times of armed conflict. It identifies the principal concerns that frame the analysis of the book and justify the need for the present study. It then outlines the scope of the enquiry, focusing on the concept of armed conflict. It identifies different approaches to conceptualizing armed conflict and proposes a typology to enhance the understanding of the main argument. The chapter concludes by presenting the research methodology and structure of the rest of the book.