State of Necessity and Peremptory Norms in International Investment Law

Abstract

It is usually assumed that peremptory norms have only a “limiting effect” with respect to the State of Necessity defence (“Necessity”), as characterized by article 25 of the International Law Commission’s Articles on State Responsibility (“ILC’s Articles”). Indeed, Necessity cannot be invoked to justify a violation of a peremptory norm of international law. This article contends that this assumption reflects an incomplete understanding of the impact of peremptory norms on the development of public international law. Specifically, we argue that peremptory norms have not only a limiting effect, but also what we call an “excusing effect,” when the essential interests invoked by a State in support of Necessity are enshrined in peremptory norms. This excusing effect has three main consequences, which we explore in more detail in what follows. First, States’ ability to contractually set aside the public international law defence of Necessity in a bilateral investment treaty (“BIT”) is considerably restricted. Second, the conditions that a State must meet to avail itself of Necessity must be adjusted to take into account the nature of the interests at stake. Third, the preceding two consequences together suggest the existence of a specific form of Necessity. These consequences are explored in light of the recent decisions rendered in two ICSID cases.

Keywords: Necessity, Foreign Investment, CMS v. Argentina, LG&E v. Argentina, Peremptory Norms, primary norms, secondary norms