Economic 'Necessity' in International Law

36 Pages Posted: 3 Mar 2015 Last revised: 17 Apr 2015

See all articles by Alan Sykes

Alan Sykes

Stanford University - Law School

Date Written: March 2, 2015


Recent investment litigation against Argentina focuses attention on the necessity defense in customary international law and related provisions in investment treaties. This paper considers, from an economic standpoint, the question of when exigent economic circumstances might create conditions of “necessity” that justify deviation from international obligations. Although economic circumstances may arise in which the performance of certain international obligations might impose costs that exceed the benefits, it can be difficult to observe and verify those circumstances reliably. It can also be difficult to assess whether conditions of economic necessity result from excessive moral hazard, and whether deviation from international obligations is the best policy instrument in response to conditions of necessity. A possible solution to these problems is an appropriate compensation requirement.

Keywords: international investment law, optimal contracting, necessity, Argentina

JEL Classification: F21, F23, K29, K33

Suggested Citation

Sykes, Alan, Economic 'Necessity' in International Law (March 2, 2015). NYU Law and Economics Research Paper No. 15-04, Available at SSRN: or

Alan Sykes (Contact Author)

Stanford University - Law School ( email )

559 Nathan Abbott Way
Stanford, CA 94305-8610
United States

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