Necessity 20 Years On: The Limits of Article 25 ARSIWA

Abstract

Investment tribunals have fleshed out the requirements of the defence of necessity in Article 25 of the Articles on State Responsibility. This article considers the impact of necessity in international investment law and in general international law. The decided cases of the early 21st century have revealed three difficulties in Article 25 and in the defence of necessity. First, rather than assessing necessity from the vantage point of the State invoking necessity, they assess it ex post with hindsight bias. Second, the standard of proof required to demonstrate the existence of a grave and imminent peril is infeasible for many situations of risk and uncertainty. Third, the ‘only way’ criterion is not only unduly strict and virtually impossible to prove, but is wholly unrealistic for macro-level crises, such as pandemics or financial crises. To account for these difficulties, tribunals should avoid hindsight bias, especially with respect to ‘grave and imminent peril’ and the ‘only way’ criterion. The defence of necessity is a blunt instrument and has not afforded States a significant ‘safety valve’. As a result, States have begun to reconsider the substantive standards in investment treaties and to include internal exceptions in their investment treaties.

Keywords: Necessity, circumstances precluding wrongfulness, state responsibility, financial crises, uncertainty, risk, hindsight bias

JEL Classification: D81, F34, K32, K33