Protection of Foreign Investments Against the Effects of Hostilities: A Framework for Assessing Compliance with Full Protection and Security

In recent years there has been an increase in the number of investor-State arbitrations involving war-torn States. Among other issues, the investors in these claims seek redress for the State’s alleged failure to protect against the destruction of property by third parties as required under the “full protection and security” standard. Although this standard appears in most investment instruments, its content and scope is mostly controversial, while its operation against the particular backdrop of armed conflicts and international humanitarian law, is completely neglected. This chapter addresses both points of controversy. It is argued that, “full protection and security” imposes a relative due diligence obligation that accounts for the particular circumstances of the host State in the assessment of compliance with the obligation. The law of armed conflict, in turn, also imposes a relative due diligence obligation to take “feasible” precautions in favour of foreign investments against the effects of attacks. Assessment of compliance with this international humanitarian law obligation turns on an available means analysis. Both assessments of the applicable due diligence standards may however result in contradictory results. To ascertain whether a State failed to protect an investment against attacks, it is important to consider the relationship between investment law and the law of armed conflict, since in practical terms of State responsibility, only the rule that prevails in a norm conflict may be breached and engage the State’s international responsibility.