Variations on a Theme: Comparing the Concept of "Necessity" in International Investment Law and WTO Law

By Mitchell, Andrew D.; Henckels, Caroline | Chicago Journal of International Law, Summer 2013 | Go to article overview

Variations on a Theme: Comparing the Concept of "Necessity" in International Investment Law and WTO Law


Mitchell, Andrew D., Henckels, Caroline, Chicago Journal of International Law


Abstract

The concept of "necessity" is used in many legal systems to delimit permissible from prohibited measures where such measures negatively affect the regime's primary values, such as human rights, liberalised trade, and protection of foreign investment. International investment tribunals have adopted a variety of approaches to the question of whether a measure is "necessary" to achieve its objective in relation to a number of provisions of investment treaties, including non-precluded measures clauses and fair and equitable treatment. Yet their approaches to this form of analysis are inconsistent and generally not analytically robust. By comparison, WTO tribunals have developed relatively sophisticated methods for analysing a measure's necessity to achieve its objective in the context of general exceptions, sanitary and phytosanitary measures and technical regulations. The WTO approach generally takes into account a number of factors, including the importance of a measure's objective, a measure's effectiveness at achieving that objective, and the availability of alternative measures. Importantly, WTO tribunals generally undertake this analysis with a degree of deference, in recognition of the right of governments to set their own policy priorities. Investment tribunals could usefully employ aspects of the WTO approach to necessity in the context of non-precluded measures, fair and equitable treatment, non-discrimination, and non-expropriation. Such an approach would go some way toward the development of a consistent, coherent body of cases in relation to the concept of necessity in international investment law, providinggreater certaintyfor both host states and investors.

Table of Contents

I. Introduction...........................95

Π. Necessity Analysis in Context...........................................97

A. Overview.............................................................................97

B. Necessity Testing in Treaty-Based Regimes......................98

C. The Nexus Requirement........................................................101

ΠΙ. The Use of Necessity Analysis in International Investment Law.......103

A. Overview.............................................103

B. Non-precluded Measures: From Strict to Flexible Necessity Analysis........105

1. Overview........................................105

2. Background to the Argentine claims................................107

3. Early cases on Article XI.....................................110

4. A more deferential approach to necessity: LG&E and Continental ..............12

C. Fair and Equitable Treatment: An Inconsistent Approach to Necessity..............117

D. Indirect Expropriation: No Clear Trend of Necessity Analysis......................122

E. National Treatment......................................124

IV. The Use of Necessity Analysis in WTO Case Law.............................126

A. The General Exceptions in GATT Article XX and GATS Article XIV.............126

1. Overview.....................................126

2. Suitability...................................127

3. Least restrictive alternative measure.............................132

4. The relevance of the chapeau to necessity analysis..........................136

B. The Security Exceptions in the GATT and GATS................................137

C. Necessity in Other WTO Agreements........................................138

1. The SPS agreement........................................138

2. The TBT agreement.......................................141

V. The Utility of the WTO Approach to International Investment Law....................145

A. Importance of Objective..................................145

B. Contribution to Objective..............................................151

C. Whether an Alternative Measure is Reasonably Available. …

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