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Mr. Antolín Fernández Antuña

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Necessity as a Defence

I. Definition and overview of the necessity defence

1.

The doctrine of necessity is a well-grounded concept in customary international law and has been codified into Article 25 of the International Law Commission (ILC)’s Draft Articles on State Responsibility (ILC Articles).1 States have also integrated essential security exception clauses in their investment agreements.2

2.

Necessity is invoked by respondent States primarily in times of crisis, as an excuse for the breach of an international law obligation, as part of litigation or arbitration proceedings.3 As the defence of force majeure, if successfully asserted by the State, necessity may lead to precluding the State’s otherwise wrongful conduct.4

II. Distinguishing necessity from force majeure

3.

It is worth noting that the same underlying events could give rise to both the defence of necessity and force majeure. In some pending investor-State proceedings, including as part of claims brought against the State of Libya, both defences are being pleaded alternatively by respondent States. It bears noting that while force majeure relates to involuntary or coerced conduct,5 necessity usually involves a voluntary act on the part of the State.6

III. Burden of proof

IV. Requirements for a valid necessity defence

5.

The acts covered by the doctrine of necessity must be of an exceptional nature in order for this defence to be successful.8

6.

In assessing a necessity defence, tribunals must examine whether the circumstances meet the requirements laid down by the applicable investment agreement and/or customary international law.9 However, the relationship between the two remains debated. 

A. Treaty practice

8.

Unless explicitly provided otherwise, tribunals have held that essential security clauses are not self-judging.13 See also Public interest, Section IV.A.

9.

Furthermore, some international treaties provide for national or most favoured nation treatment for the compensation of losses suffered in the context of national emergencies,14 which should not be equated with provisions excusing the State from respecting its obligations during a period of necessity.15

B. Customary international law

10.

The customary requirements for necessity as defined in Article 25 of the ILC Articles are as follows:

  1. the State’s act is to safeguard an essential interest against a peril;16
  2. the peril shall be grave and imminent;17
  3. the course of action followed shall be the only way available;18 and
  4. no other essential interest shall be seriously impaired as a result of the breach.19

C. Relationship between national security clauses and customary international law

12.

Some tribunals have stressed the difference between essential security provisions contained in investment agreements and the customary requirements for necessity,21 holding that the latter is a secondary source, applicable as an interpretive tool or in the absence of a specific provision.22 Others have concluded differently, applying both sources equally.23

V. The exceptions to the necessity defence

14.

Under Article 25 of the ILC Articles, there are two exceptions where the defence of necessity may not be invoked:

  1. where the State has renounced the defences so as to exclude the possibility of invoking necessity,25 or
  2. where the State has (substantially) contributed to the situation of necessity.26 Tribunals assessing pleas for necessity under essential security clauses have also applied this exception.27
15.

Contribution to necessity can be the result of well-intended but ill-conceived policies.28

VI. Necessity in the context of military, economic, environmental and health crises

16.

Necessity has been invoked in cases of military29 and environmental crisis.30 It has also recently been considered by tribunals deciding on claims deriving from the Arab Spring events of 2011.31 Historically, necessity has been invoked in times of economic crisis, and most significantly in the Argentina crises cases.32

17.

In light of the current pandemic situation, it is also reasonable to wonder whether Covid-19 would constitute a basis for a necessity defence.33 See further Investment arbitration and pandemic.

A. Situations in which necessity was upheld

19.

Necessity was invoked successfully in the Continental Casualty and LG&E cases. In these cases, the tribunal found that necessity was only justified when measures are essential for safeguarding essential public interests, and in light of the aggregate of devastating economic, political and social conditions, that requirement was satisfied.35

20.

Both decisions were rendered under the US-Argentina Bilateral Investment Treaty. Although both tribunals upheld necessity,36 it is worth noting that in Continental Casualty, the tribunal made a distinction between its reasoning under the BIT and the customary international law notion of necessity (see further Section IV.C above).

B. Situations in which necessity was denied

21.

These decisions contradict many other decisions made on comparatively identical grounds, proving that pleas for necessity may not always be accepted in the context of financial crises37 depending on circumstances such as the absence of evidence38 and the State’s contribution to the state of necessity.39

22.

In CMS v. Argentina for example, the tribunal decided that the same bond default crisis invoked in Continental Casualty and LG&E did not give rise to a state of necessity given that it “did not result in total economic and social collapse.”40 In the Sempra and Enron cases, the tribunals rejected the defence of necessity as it was not one that compromised the very existence of the State and its independence.41

VII. Consequences of invoking the necessity defence

23.

It is essential to consider the wording of Article 27 of the ILC Articles in relation to compensation, indicating that “the invocation of a circumstance precluding wrongfulness in accordance with this chapter is without prejudice to: (a) compliance with the obligation in question, if and to the extent that the circumstance precluding wrongfulness no longer exists; (b) the question of compensation for any material loss caused by the act in question”.

Bibliography

Agius, M., The Invocation of Necessity in International Law, Netherlands International Law Review, 2009, pp. 95-135.

Al-Rashid, M., Bardyn, U. and Golendukhin, L., Investment Claims Amid Civil Unrest: Questions of Attribution and Responsibility, Bahrain Chamber for Dispute Resolution International Arbitration Review, pp. 182-218.

L. Bento, L. and Chen, J., Investment Treaty Claims in Pandemic Times: Potential Claims and Defenses, Kluwer Arbitration Blog, 2020.

Boed, R., State of Necessity as a Justification for Internationally Wrongful Conduct, Yale Human Rights and Development Law Journal, 2000, pp. 1-44.

Burke-White, W.W. and von Staden, A., Investment Protection in Extraordinary Times: The Interpretation and Application of Non-Precluded Measures Provisions in Bilateral Investment Treaties, Virginia Journal of International Law, 2008, pp. 307-356.

Dellinger, M.F., Rethinking Force Majeure in Public International Law, Pace Law Review, 2017, pp. 455-506.

Ismailov, O., Necessity Revisited: Interpreting the Non-Precluded Measures Clause of the U.S.-Argentina BIT under Systemic Integration Approach, Transnational Dispute Management, 2016.

Jones, D., Investor-State Arbitration in Times of Crisis, National Law School of India Review, 2013, pp. 34-37.

Kasenetz, E.D., Desperate Times Call for Desperate Measures: the Aftermath of Argentina’s State of Necessity and the Current Fight in the ICSID, The George Washington International Law Review, 2010, p. 709.

Martinez, A., Invoking States Defenses in Investment Treaty Arbitration, in Waibel, M., Kaushal, A., Chung, K., Balchin, C. (eds.), The Backlash against Investment Arbitration: Perceptions and Reality, 2010, pp. 315-337.

Newcombe, A. and Paradell, L., Law and Practice of Investment Treaties: Standards of Treatment, 2009, p. 314.

Paddeu, F.I., A Genealogy of Force Majeure in International Law, British Yearbook International Law, 2012, p. 381.

Schreuer, C., The Protection of Investments in Armed Conflicts, in Baetens, F. (ed.), Investment Law within International Law: Integrationist Perspectives, 2011, pp. 3-20.

Mansour, A.B., Menard, M., Thouvenin, J., Lesaffre, H., Szurek, S. and Heathcote, S., Circumstances Precluding Wrongfulness in the ILC Articles on State Responsibility, in Crawford, J., Pellet, A. and Olleson S., The Law of International Responsibility, 2010, p. 475.

Zrilič, J., Armed Conflict as Force Majeure in International Investment Law, Manchester Journal of International Economic Law, 2019.

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