Protection of Investments in War-Torn States: A Practitioner’s Perspective on War Clauses in Bilateral Investment Treaties

This chapter examines clauses in investment treaties that enable foreign investors to bring claims against States for compensation when investments have suffered damage due to acts of war or civil unrest. The authors examine these so-called war clauses through the prism of the bilateral investment treaties of three States with histories of armed conflict: Libya, Syria and Yemen. They find that war clauses display a striking diversity in the degree and type of protection offered. The authors also analyse the limited number of arbitral awards in which tribunals have interpreted and applied war clauses. They find that when tribunals do apply war clauses, there is a high risk that the arbitrators misapply such clauses or conflate them with other substantive standards. The authors argue that war clauses should not be seen as replacing other investment protection standards in the context of war or civil unrest. They are distinct standards that provide investors with additional protection where host States claim that they were unable to protect investments due to the exigencies of war or military necessity. War clauses also are relatively robust standards, as they are less vulnerable than other investment protection standards to defences based on a State’s alleged inability to provide protection, essential security clauses, a state of necessity or other circumstances precluding wrongfulness under the customary international law on State responsibility. Relatively common but often overlooked, war clauses are likely to take a more prominent place in investor-State arbitration in the coming years given the unfortunate number of armed conflicts that affect States parties to bilateral investment treaties today.