On the Necessity of Necessity Measures: A Response to Alan O. Sykes

AJIL Unbound, Volume 109, p. 181-186 (Symposium on Alan O. Sykes, “Economic ‘Necessity’ in International Law”, 23 December 2015

U. of St.Gallen Law & Economics Working Paper No. 2015-10

7 Pages Posted: 28 Dec 2015

See all articles by Anne van Aaken

Anne van Aaken

University of Hamburg, Law School; Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Research on Collective Goods

Date Written: December 27, 2015

Abstract

This comment on Alan Skyes Article "Economic ‘Necessity in International Law" on AJIL UNBOUND discusses the application of necessity clauses from an economic perspective especially in light of the incentives of investors, who are the third party beneficiaries of the investment treaty/contract. It highlights the lack of expertise of arbitrators who are not well-positioned to make complex economic determinations and thus argues for a middle ground between full deference and strict scrutiny. It is submitted that a tribunal should apply a good faith standard or outsource the decision on economic measures to an expert body. Most importantly, there is reason to doubt the optimality of an across-the-board rule as is used currently, as opposed to a contextualized approach. The comment calls for differentiation based on the behavior of the investor and the further circumstances of the host state in order to avoid risks of moral hazard and spells out the relevant criteria for doing so.

Keywords: necessity clause, investment, behavioral economics, moral hazard, arbitrators, international law

Suggested Citation

van Aaken, Anne, On the Necessity of Necessity Measures: A Response to Alan O. Sykes (December 27, 2015). AJIL Unbound, Volume 109, p. 181-186 (Symposium on Alan O. Sykes, “Economic ‘Necessity’ in International Law”, 23 December 2015; U. of St.Gallen Law & Economics Working Paper No. 2015-10. Available at SSRN: https://ssrn.com/abstract=2708583

Anne Van Aaken (Contact Author)

University of Hamburg, Law School ( email )

Johnsallee 35
Hamburg, 20148
Germany

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Research on Collective Goods ( email )

Kurt-Schumacher-Str. 10
D-53113 Bonn, 53113
Germany

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