Exception Clauses in Mega-Regionals (International Investment Protection and Trade Agreements)

US Friendship, Commerce and Navigation Agreements that were negotiated as early as 1778, with the treaty of Amity and Commerce between the United States and France (Treaty of Amity and Commerce Between the United States of America and His Most Christian Majesty (signed 6 Feb 1778) 8 Stat. 12, T.S. No. 83), were among the first agreements dealing with international trade and investment-related issues. While the first FCN treaties that were negotiated did not focus extensively on investment matters, later FCN treaties did deal more explicitly with foreign investment. These “new” FCN treaties signed since 1946 were “responsive to the contemporary need for a code of private foreign investment; and their adaptability for use as a vehicle in the forwarding of an investment aim follows from their historical concern with establishment matters”, Walker Jr. (1958), p. 806. On an analysis of investment related provisions in US FCN treaties, see also Walker Jr. (1956). An example of an early convention of commerce that provides for an embryonic form of investment protection is the convention of commerce between the United States and Britain (Convention on Commerce Between His Majesty and the United States of America (signed at London, 3 July 1815). In: (1927) Department of External Affairs, Treaties and Agreements Affecting Canada in Force between His Majesty and the United States of America 1814–1925. F.A. Acland, King’s Printer, 9). Provisions protecting foreign investments in post-1946 FCN treaties can be found, for example, in the Treaty of Friendship, Commerce and Navigation between the United States of America and the Federal Republic of Germany (signed 29 Oct 1954, entered into force 14 July 1956) 7 US Treaties and Other International Agreements 1839, T.I.A.S. No. 3593, or in the Treaty of Friendship, Commerce and Navigation between the United States of America and the Kingdom of Denmark (signed 1 Oct 1951, entered into force 30 July 1961) 12 US Treaties and Other International Agreements 908, T.I.A.S. No. 4797.

In the World Trade Organisation (WTO) framework, three agreements contain general exception clauses: the General Agreement on Tariffs and Trade (GATT, Article XX), the General Agreement on Trade in Services (GATS, Article XXII) and the Agreement on Government Procurement (GPA, Article XXIII). In addition, the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) provides a general exception-type clause focusing on patents (Article 27.2). Other WTO agreements do not contain similar clauses but often borrow the general exception clause of other agreements such as the GATT. Article 3 of the Agreement on Trade-Related Investment Measures (TRIMS), for instance, provides that “[a]ll exceptions under GATT 1994 shall apply, as appropriate, to the provisions of this Agreement”.

There are currently close to 500 free trade agreements (FTAs) and some 3000 bilateral investment treaties (BITs) that have been signed. See http://​investmentpolicy​hub.​unctad.​org/​IIA, accessed 22 Sept 2016.

The scope of this study is not limited to the analysis of exception clauses in investment treaties or investment chapters of trade agreements. Rather, the present study aims to provide a general overview of exception clauses in mega-regional trade agreements, including the recently signed Comprehensive Economic and Trade Agreement (CETA).

The very first modern BIT was concluded between Germany and Pakistan in 1959, Pakistan and Federal Republic of Germany—Treaty for the Promotion and Protection of Investments (signed 25 Nov 1959). http://​www.​iisd.​org/​pdf/​2006/​investment_​pakistan_​germany.​pdf. Accessed 15 June 2016 (Pakistan–Germany BIT).

In 2013, a total of 57 new cases were brought by investors against host states (45 of them were brought by investors from developed countries), in comparison with the less than ten investor–state arbitration (ISA) proceedings undertaken in 1999. 42% of these cases (24 arbitrations) were brought against EU Member States. See United Nations Conference on Trade and Development (UNCTAD) (2014a), p. 2.

One of the first examples of a customs union was the Treaty of Rome 1957 and among free trade agreements the Canada−US Free Trade Agreement (CUFTA) 1988 followed by the North American Free Trade Agreement (NAFTA) 1994.

Canada–United States Free Trade Agreement (signed 2 Jan 1988). http://​www.​international.​gc.​ca/​trade-agreements-accords-commerciaux/​assets/​pdfs/​cusfta-e.​pdf. Accessed 6 Jan 2015.

The emphasis that is put on investment chapters both illustrates the importance of this domain of international trade law and explains why in recent years it became one of the most controversial topics in negotiations of trade agreements, as illustrated by the recently signed CETA and the TTIP and TPP that are currently being negotiated.

See in this regard UNCTAD (2014b), p. xxiii:

With the addition of 44 new treaties, the global IIA [(international investment agreement)] regime reached close to 3240 at the end of 2013 […]. The year brought an increasing dichotomy in investment treaty making. An increasing number of developing countries are disengaging from the regime in Africa, Asia and Latin America. At the same time, there is an “up-scaling” trend in treaty making.

See, e.g., Stiglitz and Arnott (2003), Stiglitz (2003), Stiglitz and Charlton (2006).

See generally Franck (2005), especially 1582 et seq. and Brower and Schill (2009).

This phenomenon has been described as the “revenge of the State” Alvarez (2010), p. 146.

Pursuant to Article 71 of the ICSID Convention, the Plurinational State of Bolivia notified its intention to withdraw from the ICSID Convention on 2 May 2007, which took effect on 3 November 2007. Similarly, Ecuador submitted the written notice of its withdrawal on 6 July 2009, which became effective on 7 January 2010. Ecuador is also engaged in a global process of withdrawal from several IIAs (“In 2008, Ecuador terminated nine BITs—with Cuba, the Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua, Paraguay, Romania and Uruguay. Other denounced BITs include those between El Salvador and Nicaragua, and the Netherlands and the Bolivarian Republic of Venezuela. In 2010, Ecuador’s Constitutional Court declared arbitration provisions of six more BITs (China, Finland [since then the Ecuador−Finland BIT has been terminated], Germany, the UK, Venezuela and United States) to be inconsistent with the country’s Constitution.”, UNCTAD (2010). Finally, the World Bank received the Bolivarian Republic of Venezuela’s written notice of denunciation of the ICSID Convention on 24 January 2012, which took effect on 25 July 2012. Venezuela thus became the third state to withdraw from the ICSID Convention.

South Africa is engaged in the process of terminating several bilateral investment treaties with European countries. For instance, it terminated its BIT with the Belgian−Luxembourg Economic Union, Germany, the Netherlands or Spain. See http://​investmentpolicy​hub.​unctad.​org/​IIA, accessed 20 Jan 2015 and International Institute for Sustainable Development (IISD) (2012).

See, e.g., Bland (2014) and, concerning India, see generally Ranjan (2014).

See in this regard Polanco Lazo (2014), pp. 172–173 (“The first negative reactions [to ISA] came after Canada and the USA became respondents in cases brought by investors under Chapter 11 of the North American Free Trade Agreement (NAFTA).”).

See Sect. 2.4.

See generally Nottage (2014).

The sensitivity of ISA was recently raised in South Korea in the context of the negotiations of the Australia−South Korea FTA. In this regard, ISA clauses “have been a political issue in South Korea, with opposition Democrat parliamentarians of the Centre−Left opposing them while other insist on them”, Callick (2012).

On a detailed analysis of these issues, see Sect. 3.2.

See Sect. 2.4.

See in this regard European Commission (2015a):

Besides the trade negotiations with individual ASEAN members, the EU cooperates closely with the ASEAN region as a whole. Cooperation is maintained through an EU−ASEAN Dialogue which includes discussions on trade and investment issues at ministerial and senior economic officials levels.

The EU and the ASEAN Secretariat conduct seminars on topics such as regional economic integration, liberalisation of services, technical barriers to trade and trade facilitation.

See also European Commission (2015b):

The EU and India are committed to further increase their trade flows in both goods and services as well as bilateral investment and access to public procurement through the Free Trade Agreement negotiations that were launched in 2007.

For example, the Regional Comprehensive Economic Partnership (RCEP) whose negotiations were launched on 20 November 2012 between the ten ASEAN Member States and its Free Trade Agreement Partners (Australia, China, India, Japan, the Republic of Korea and New Zealand) and that are planned to conclude by the end of 2015, see generally Regional Comprehensive Economic Partnership (RCEP) Joint Statement, The First Meeting of Trade Negotiating Committee. http://​www.​asean.​org/​news/​asean-statement-communiques/​item/​regional-comprehensive-economic-partnership-rcep-joint-statement-the-first-meeting-of-trade-negotiating-committee. Accessed 20 Jan 2015.

Canada provides for such a clause in its Model Foreign Investment Protection Agreement (FIPA, Agreement between Canada and ___________ for the Promotion and Protection of Investments (2004). http://​www.​italaw.​com/​documents/​Canadian2004-FIPA-model-en.​pdf. Accessed 22 Sept 2016) and often includes it in its BITs such as in Article 33 of the recent Canada−China BIT (Agreement Between the Government of Canada and the Government of the People’s Republic of China for the Promotion and Reciprocal Protection of Investments (signed 9 Sept 2012, entered into force 1 Oct 2014). http://​investmentpolicy​hub.​unctad.​org/. Accessed 22 Sept 2016). Other countries also started to include these clauses in their IIAs. See e.g. Article 5 of the Gabon−Turkey BIT (Agreement Between the Government of the Republic of Turkey and the Government of the Gabonese Republic Concerning the Reciprocal Promotion and Protection of Investments (signed 18 July 2012, not yet in force). http://​investmentpolicy​hub.​unctad.​org/. Accessed 22 Sept 2016).

Roughly 1000 BITs were concluded during this period between Member States of the EU and other states. See http://​investmentpolicy​hub.​unctad.​org/​IIA. Accessed 22 Sept 2016.

These agreements are usually roughly ten pages long. The Pakistan−Germany BIT, for example, is about eight pages long.

See, e.g., Article 1133 of the NAFTA:

Without prejudice to the appointment of other kinds of experts where authorized by the applicable arbitration rules, a Tribunal, at the request of a disputing party or, unless the disputing parties disapprove, on its own initiative, may appoint one or more experts to report to it in writing on any factual issue concerning environmental, health, safety or other scientific matters raised by a disputing party in a proceeding, subject to such terms and conditions as the disputing parties may agree.

In this regard it is noteworthy that the NAFTA provides an extensive indirect expropriation provision (Article 1110) together with notes of interpretation (NAFTA Free Trade Commission, North American Free Trade Agreement—Notes of Interpretation of Certain Chapter 11 Provisions (31 July 2001). http://​www.​international.​gc.​ca/. Accessed 5 Oct 2014) that clarify, among other, the meaning of NAFTA’s Minimum Standard of Treatment provision (Article 1105).

See NAFTA Free Trade Commission, North American Free Trade Agreement—Notes of Interpretation of Certain Chapter 11 Provisions (31 July 2001) http://​www.​international.​gc.​ca/. Accessed 5 Oct 2014.

In this regard, the ICSID Arbitration Rules were modified and became effective on 10 April 2006. The new Rules include improvements concerning the transparency of proceedings among which the possibility for tribunals to consider requests from third parties to file amicus briefs (Arbitration Rule 37); the opening of ICSID hearing to the public (Arbitration Rule 32); and the requirement for ICSID to “promptly” publish “excerpts of the legal reasoning” of every award (Arbitration Rule 48).

See Sect. 3.

See Articles 3(1)(e), 206 and 207 of the Treaty on the Functioning of the European Union (signed 13 Dec 2007, entered into force 21 Mar 1994) OJ 2008 C 115/47 (TFEU).

See Sect. 2.4.

Mann (2008), pp. 9–10.

See Newcombe (2008), p. 3.

See Report of the Special Representative of the Secretary-General on the Issue of Human Rights and Transnational Corporations and Other Business Enterprises, John Ruggie (7 Apr 2008), UN Doc. A/HRC/8/5. http://​daccess-dds-ny.​un.​org/​doc/​UNDOC/​GEN/​G08/​128/​61/​PDF/​G0812861.​pdf?​OpenElement/​. Accessed 5 Oct 2014:

Take the case of transnational corporations. Their legal rights have been expanded significantly over the past generation. This has encouraged investment and trade flows, but it has also created instances of imbalances between firms and States that may be detrimental to human rights. The more than 2500 bilateral investment treaties currently in effect are a case in point.

While providing legitimate protection to foreign investors, these treaties also permit those investors to take host States to binding international arbitration, including for alleged damages resulting from implementation of legislation to improve domestic social and environmental standards—even when the legislation applies uniformly to all businesses, foreign and domestic.

Article 8 of the ASEAN Trade in Goods Agreement. Such an exception can also be found, e.g., in Article 72(d) of the ANDEAN Pact; Article 27(2) of the Convention establishing the European Free Trade Association (EFTA); Article 4 of the Treaty of the Southern African Development Community (SADC); and Article 28.3 of Chapter 28 of the CETA.

Article 72 of the ANDEAN Pact. See also, e.g., Article 9 of the ASEAN Trade in Goods Agreement; Articles 4 and 5 of the Treaty of the SADC; Article XXI of the GATT; Article 28.7 of Chapter 28 (Taxation) of the CETA; and Article 39 of the Convention establishing the EFTA.

See in this regard, e.g., Articles 39 (in the field of agriculture), 145 (employment), 165 (education), 167 (culture) and 168 (public health) of the TFEU; Articles 2 (the reciprocity principle), 4 (equitable trade terms) and 6 (transition period for Paraguay and Uruguay) of MERCOSUR; Article 21 (areas of cooperation, including in the domains of natural resources and environment, social welfare or culture) of the Treaty of the SADC; and Articles 6 (mutual assistance), 13 (free movement of goods chapter) and 27 (investment chapter) (general exceptions in diverse areas of trade), 25 (exception for prudential measures in the context of investments) of the Convention establishing the EFTA.

See, e.g., Articles 4 and 5 of the Treaty of the SADC and the Preamble of CETA emphasizing the importance of protecting matters such as cultural diversity, environment or labour standards.

See Sect. 3.2.2 .

See Sect. 4 about the developments concerning CETA.

A similar provision can be found in Article 8 of the ASEAN Trade in Goods Agreement and Article XX of the GATT.

Article 10 of the ASEAN Trade in Goods Agreement.

See, e.g., Article 40 of the Convention establishing the EFTA and Article 28.3 (Chapter 28) of CETA; Title XX of the TFEU; and Article 146 of the Andean Subregional Integration Agreement.

See, e.g., Title IX of the TFEU and the Preamble of CETA.

See, e.g., Article 28.9 (Chapter 28) of CETA and Article 148 of the ANDEAN Pact.

See Articles 275–276 of the TFEU.

See, e.g., Chapter 3, Section C Article 3.7 of CETA: “The provisions of this Section [i.e. Anti-dumping and countervailing measures] shall not be subject to the Dispute Settlement provisions of this Agreement”.

See Sect. 4.

See, e.g., Ethyl Corporation v. The Government of Canada, UNCITRAL/NAFTA (24 June 1998). http://​www.​italaw.​com/​cases/​409. Accessed 25 Sept 2016; and S.D. Myers, Inc. v. Government of Canada, UNCITRAL/NAFTA (2000–2004). http://​www.​italaw.​com/​cases/​969. Accessed 25 Sept 2016.

Article 20(1) of the US Model BIT (2012) [footnote omitted]. A similar exception can be found, for example, in Article 25 of the Norway Model BIT (2007) and in Article 17 of the Canadian Model FIPA (2004).

Article 16 of the Canadian Model FIPA (2004). See also Article 28 of the Norway Model BIT (2007); Article 21 of the US Model BIT (2012); Article XII of the Armenia−Canada BIT (1997); and Article 14 of the Canada−China BIT (2012).

Article 18 of the US Model BIT (2012). See also Article 26 of the Norway Model BIT (2007); and Article 19 of the Jordan−Singapore BIT (2004).

The use of the term “necessary” makes of such a provision a “self-judging” clause that can cause certain disputes involving political questions (typically questions related to public policy) to be non-justiciable. This non-justiciability is often legitimized precisely by the increasing importance and power of international businesses and intends to protect host states against such corporations. Examples of such clauses can be found in US BITs and may provide, for example that:

[t]his Treaty shall not preclude a Party from applying measures which it considers necessary for the fulfilment of its obligations with respect to the maintenance or restoration of international peace or security, or the protection of its own essential security interests.

Article 14 of the US−Bahrain BIT (Treaty Between the Government of the United States of America and the Government of the State of Bahrain Concerning the Encouragement and Reciprocal Protection of Investment (signed 29 Sept 1999, entered into force 30 May 2001). http://​investmentpolicy​hub.​unctad.​org/. Accessed 5 Oct 2014 (emphasis added).

Such a provision might indeed “be read as an absolute bar to judicial arbitral review” Burke-White and von Staden (2007–2008), p. 376, consequently leading to the alleged “lack of judicially discoverable and manageable standards” (Piczak (1999–2000), p. 319) to assess what is necessary for the fulfilment of such public policies. The non-justiciability of exception clauses has also been explicitly provided for by some states in the context of specific agreements. See in this regard the case of the India−Singapore Comprehensive Economic Co-operation Agreement (India−Singapore CECA): Article 6.12(4) of the agreement refers to an exchange of letters (Exchange of Letters with Annexes (e)—Annex 5) providing that the security exception is non-justiciable. The non-justiciability of such exception clauses and the fact that they should be “exempt from review by international courts and tribunals” Burke-White and von Staden (2007–2008), p. 376 has been argued (ibid., 376) and would represent an important threat for investors that would, if the argument is embraced, be dependent on the discretionary understanding of the host state of what is “necessary” which, in the context of an investment dispute, would inevitably lead to the justification of the host state’s measure at the detriment of the investor.

It is noteworthy, however, that “international tribunals, […] as well as arbitral tribunals have never recognized the political nature of a question as a legal bar to the exercise of their jurisdiction” (ibid., 377). Moreover, even if an exception clause would appear to be self-judging, host states remain subject to the general obligation of carrying out their obligations in good faith and it is still up to a tribunal to take position on the question of good faith.

See Sect. 4.

Article 10 of the Canada Model FIPA (2004).

Article 24 of the Norway Model BIT (2007).

Article 33 of the Canada−China BIT (2012).

Article 5 of the Gabon−Turkey BIT (2012).

See, e.g., Article 10(6) of the Canadian Model FIPA (2004) (“The provisions of this Agreement shall not apply to investments in cultural industries.”) and Article VI(3) of the Armenia−Canada BIT (1997).

See, e.g., Article 27 of the Norwegian Model BIT (2007) or Article 1(6) of the France−Uganda BIT (2003):

Nothing in this agreement shall be construed to prevent any contracting party from taking any measure to regulate investment of foreign companies and the conditions of activities of these companies in the framework of policies designed to preserve and promote cultural and linguistic diversity.

On Australian policy with respect to ISA, see Nottage (2016) and on policies with respect to ISA from different countries and regions around the world see generally the papers published as part of the CIGI Investor–State Arbitration Series. https://​www.​cigionline.​org/​publications/​cigi-papers. Accessed 27 Sept 2016.

As far as the Australia−United States Free Trade Agreement of 2005 (AUSFTA) is at stake, the reason for the exclusion of ISA from the Agreement put forward by officials of both countries was the “fact that both countries have robust, developed legal systems for resolving disputes between foreign investors and government”, Australian Government—Department of Foreign Affairs and Trade, “Australia–United States Free Trade Agreement: Fact sheets Investment”. http://​dfat.​gov.​au/​trade/​agreements/​ausfta/​fact-sheets/​Pages/​investment.​aspx. Accessed 22 Sept 2016. Other commentators identified other reasons:

The US was keen to include its modified ISDSM [(investor−state dispute settlement mechanism)] in AUSFTA as well. However, the proposal faced opposition from Australia for two reasons. First, judging by the numerous NAFTA investment cases, if investor−State provisions were to be included in AUSFTA, there would be a strong possibility of numerous suits being initiated against the Australian government by American investors as well. In addition, these NAFTA investment cases had resulted in widespread public resistance to investor−State provisions.

Singh and Sharma (2013), pp. 97–98.

Australian Government (2011), p. 14. In its Trade Policy Statement released on 12 April 2011, the Australian Government also stated that:

In the past, Australian Governments have sought the inclusion of investor−state dispute resolution procedures in trade agreements with developing countries at the behest of Australian businesses. The Gillard Government will discontinue this practice. If Australian businesses are concerned about sovereign risk in Australian trading partner countries, they will need to make their own assessments about whether they want to commit to investing in those countries.

Free Trade Agreement between Australia and the Republic of Korea (signed 8 Apr 2014, entered into force 12 Dec 2014). http://​investmentpolicy​hub.​unctad.​org/​IIA/​country/​11/​treaty/​3433. Accessed 4 Feb 2015.

Agreement between Australia and Japan for an Economic Partnership (signed 8 July 2014, entered into force 15 Jan 2015). http://​investmentpolicy​hub.​unctad.​org/​IIA/​country/​105/​treaty/​3487. Accessed 4 Feb 2015.

See Articles 3(1)(e), 206 and 207 of the TFEU.

European Parliament Resolution of 6 April 2011 on the Future European International Investment Policy (2010/2203(INI)), OJ 2012/C 296 E/34.

See, e.g., Saluka Investments BV (The Netherlands) v. The Czech Republic, UNCITRAL, Partial Award (17 Mar 2006). http://​www.​italaw.​com/. Accessed 5 Oct 2014, para. 255

It is now established in international law that States are not liable to pay compensation to a foreign investor when, in the normal exercise of their regulatory powers, they adopt in a non-discriminatory manner bona fide regulations that are aimed at the general welfare.

and Methanex Corporation v. United States of America, NAFTA, Final Award of the Tribunal on Jurisdiction and Merits (3 Aug 2005), 44 ILM 1345 (2005), Part IV–Chapter D, para. 7

[A]s a matter of general international law, a non-discriminatory regulation for a public purpose, which is enacted in accordance with due process and, which affects, inter alias, a foreign investor or investment is not deemed expropriatory and compensable unless specific commitments had been given by the regulating government to the then putative foreign investor contemplating investment that the government would refrain from such regulation.

See Philip Morris Asia Limited v. The Commonwealth of Australia, UNCITRAL, PCA Case No. 2012-12, Award on Jurisdiction and Admissibility (17 Dec 2015). http://​www.​italaw.​com/. Accessed 25 Sept 2016.

Few official documents have been disclosed to this day. For an overview of the dispute see Bernasconu-Osterwalder and Hoffmann (2012).

European Commission, Communication from the Commission to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions, Towards a Comprehensive European International Investment Policy (7 July 2010) COM(2010)343 final.

European Commission, Communication from the Commission, Europe 2020: A Strategy for Smart, Sustainable and Inclusive Growth (3 Mar 2010) COM(2010) 2020.

Council of the European Union, Conclusions on a Comprehensive European International Investment Policy (25 Oct 2010). http://​www.​consilium.​europa.​eu/​uedocs/​cms_​data/​docs/​pressdata/​EN/​foraff/​117328.​pdf. Accessed 5 Oct 2014.

European Parliament Resolution of 6 April 2011 on the future European international investment policy (2010/2203/INI) 2012/C 296 E/05.

European Trade Union Confederation, ETUC Resolution on EU Investment Policy (adopted at the Executive Committee Meeting of 5–6 Mar 2013). https://​www.​etuc.​org/​documents/​etuc-resolution-eu-investment-policy. Accessed 5 Oct 2014.

Knottnerus (2011), p. 1.

Knottnerus (2011), p. 3.

Knottnerus (2011), p. 4.

See, e.g., Article 13(1) of the China−New Zealand FTA:

China may apply a special safeguard measure to agricultural goods specified in Table One of Annex 2, in accordance with this Article.

See also, e.g., Article 12.09 of the Panama−Taiwan Trade Agreement that provides exceptions that are specific to the chapter of the agreement dealing with financial services.

See, e.g., Chapter 17 of the China−New Zealand FTA; Chapter 20 of the Panama−Taiwan Free Trade Agreement; Chapter 16 of the Australia−Thailand Free Trade Agreement; and Chapter 28 of CETA.

See Article 28.3(1) of Chapter 28 of the CETA:

For the purposes of Article 30.8.5 (Termination, suspension or incorporation of other existing agreements), Chapters Two (National Treatment and Market Access for Goods), Five (Sanitary and Phytosanitary Measures), and Six (Customs and Trade Facilitation), the Protocol on rules of origin and origin procedures and Sections B (Establishment of investment) and C (Nondiscriminatory treatment) of Chapter Eight (Investment), Article XX of the GATT 1994 is incorporated into and made part of this Agreement. The Parties understand that the measures referred to in Article XX (b) of the GATT 1994 include environmental measures necessary to protect human, animal or plant life or health. The Parties understand that Article XX(g) of the GATT 1994 applies to measures for the conservation of living and nonliving exhaustible natural resources.

See, e.g., Article 200(2) of the China−New Zealand FTA:

The Parties understand that the measures referred to in Article XX(b) of GATT 1994 and Article XIV(b) of GATS, as incorporated into this Agreement, can include environmental measures necessary to protect human, animal or plant life or health […].

See also Article 28.3(1) (Chapter 28) of CETA:

[…] The Parties understand that the measures referred to in Article XX (b) of the GATT 1994 include environmental measures necessary to protect human, animal or plant life or health […].

See NAFTA Free Trade Commission, North American Free Trade Agreement—Notes of Interpretation of Certain Chapter 11 Provisions (31 July 2001). http://​www.​international.​gc.​ca/. Accessed 5 Oct 2014. In this regard, it is noteworthy that the Argentine Republic and Panama exchanged diplomatic notes with an “interpretative declaration” of the MFN clause provided in their investment treaty of 1996. The Tribunal in National Grid plc v. The Argentine Republic, UNCITRAL, Decision on Jurisdiction (20 June 2006) referred to it in para. 85.

See, e.g., Article 13.16(1) (Chapter 13 “Financial Services) of CETA, that provides that

This Agreement does not prevent a Party from adopting or maintaining reasonable measures for prudential reasons […].

Article 28.10 provides that

If a right or obligation in this Agreement duplicates one under the WTO Agreement, the Parties agree that a measure in conformity with a waiver decision adopted by the WTO pursuant to Article IX of the WTO Agreement is deemed to be also in conformity with the duplicated provision in this Agreement.

See also Article 202(1)(a) of the China−New Zealand FTA:

1. Where a Party is in serious balance of payments and external financial difficulties or under threat thereof, it may:

a. in the case of trade in goods, in accordance with GATT 1994 and the WTO Understanding on Balance-of-Payments Provisions of the General Agreement on Tariffs and Trade 1994, adopt restrictive import measures;

See NAFTA, Annex I “Reservations for Existing Measures and Liberalization Commitments”.

Article 18 of the US Model BIT (2012) and Article 14(1) of the Finland Model BIT (2001):

Nothing in this Agreement shall be construed as preventing a Contracting Party from taking any action necessary for the protection of its essential security interests in time of war or armed conflict, or other emergency in international relations.

Article 10 of the Canadian Model FIPA (2004).

Article 11 of the Canadian Model FIPA (2004).

Article 16(1) of the Japan−Korea BIT provides that

Notwithstanding any other provisions in this Agreement other than the provisions of Article 11, each Contracting Party may:

(a) take any measure which it considers necessary for the protection of its essential security interests;

(i) taken in time of war, or armed conflict, or other emergency in that Contracting Party or in international relations; or (ii) relating to the implementation of national policies or international agreements respecting the non-proliferation of weapons;

(b) take any measure in pursuance of its obligations under the United Nations Charter for the maintenance of international peace and security;

(c) take any measure necessary to protect human, animal or plant life or health; or

(d) take any measure necessary for the maintenance of public order. The public order exceptions may be invoked only where a genuine and sufficiently serious threat is posed to one of the fundamental interests of society.

See, e.g., Articles 12 (Investment and Environment) and 13 (Investment and Labor) of the US Model BIT (2012) or the more succinct Article 11 of the Norway Model BIT (2007) drafted as follows:

1. The Parties recognize that it is inappropriate to encourage investment by relaxing domestic health, safety or environmental measures or core labour standards. Accordingly, a Party should not waive or otherwise derogate from, or offer to waive or otherwise derogate from, such measures as an encouragement for the establishment, acquisition, expansion or retention of an investment of an investor.

2. If a Party considers that the other Party has offered such an encouragement, it may request consultations under Article [Joint Committee].

See also Article 11 of the Canadian Model FIPA (2004).

See also Annex III of the Canadian Model FIPA (2004).

Article 10(2)-(6) of the Canadian Model FIPA (2004).

Article 1(6) of the French Model BIT (2007) provides that

Nothing in this agreement shall be construed to prevent any contracting party from taking any measure to regulate investment of foreign companies and the conditions of activities of these companies in the framework of policies designed to preserve and promote cultural and linguistic diversity.

See also Article 13(5) of the Canadian Model FIPA (2004), according to which

The provisions of this Article [i.e. the provision on expropriation] shall not apply to the issuance of compulsory licenses granted in relation to intellectual property rights, or to the revocation, limitation or creation of intellectual property rights, to the extent that such issuance, revocation, limitation or creation is consistent with the WTO Agreement.

See Annexes I and II of the Canadian Model FIPA (2004).

Annex B.8 of the Canada−China BIT provides that

1. Canada reserves the right to adopt or maintain any measure that does not conform to the obligations in Articles 5, 6 or 7, provided that in the Schedule of Canada, including its headnote, in Annex II to the Free Trade Agreement between Canada and the Republic of Peru, as done at Lima on 29 May 2008, Canada reserved the right to adopt or maintain that measure in respect of investors or investments of investors of Peru. For greater certainty, this right is reserved even if the Canada−Peru Free Trade Agreement is no longer in force.

2. China reserves the right to adopt or maintain any measure that does not conform to the obligations in Articles 5, 6 or 7, provided that in Chapter 10 of the Free Trade Agreement between China and the Republic of Peru, as done at Beijing on 28 April 2008, China reserved the right to adopt or maintain that measure in respect of investors or investments of investors of Peru. For greater certainty, this right is reserved even if the China−Peru Free Trade Agreement is no longer in force.

Procedural exceptions provided in trade and investment agreements, being more limited and substantially similar, will be analysed together in a single section.

See also, e.g., Article 29(2) of the Canadian Model FIPA (2004):

2. Arbitrators shall:

(a) have expertise or experience in public international law, international trade or international investment rules, or the resolution of disputes arising under international trade or international investment agreements;

(b) be independent of, and not be affiliated with or take instructions from, either Party or disputing party; and

(c) comply with any Code of Conduct for Dispute Settlement as agreed by the Commission.

Article 8.36(1) (“Transparency of proceedings”) of Chapter 8 of the CETA. See also Article 8.37 (“Information sharing”) of the same Chapter. See also Article 29 of the US Model BIT (2012).

Article 8.32(1) (Chapter 8) provides that

The respondent may, no later than 30 days after the constitution of the division of the Tribunal, and in any event before its first session, file an objection that a claim is manifestly without legal merit.

Article 8.33(1) of Chapter 8 provides that

Without prejudice to the Tribunal’s authority to address other objections as a preliminary question or to a respondent’s right to raise any such objections at an appropriate time, the Tribunal shall address and decide as a preliminary question any objection by the respondent that, as a matter of law, a claim, or any part thereof, submitted pursuant to Article 8.23 is not a claim for which an award in favour of the claimant may be made under this Section, even if the facts alleged were assumed to be true.

Annex IV of the Model FIPA to which Article 47 is referring to provides that

1. A decision by Canada following a review under the Investment Canada Act, with respect to whether or not to permit an acquisition that is subject to review, shall not be subject to the dispute settlement provisions under Sections C or D of this Agreement

2. Issues relating to the administration or enforcement of Canada’s Competition Act, its regulations, policies and practices, or any successor legislation, policies and practices and any decision pursuant to the Competition Act made in any cases or patterns of cases by the Commissioner of Competition, Attorney General of Canada, the Competition Tribunal, the responsible Minister or the courts, shall not be subject to the dispute settlement provisions under Sections C or D of this Agreement.

Annex 8C of Chapter 8 provides that

A decision by Canada following a review under the Investment Canada Act, R.S.C. 1985, c. 28 (1st Supp.), regarding whether or not to permit an investment that is subject to review, is not subject to the dispute settlement provisions under Section F, or to Chapter Twenty-Nine (Dispute Settlement). For greater certainty, this exclusion is without prejudice to the right of a Party to have recourse to Chapter Twenty-Nine (Dispute Settlement) with respect to the consistency of a measure with a Party’s reservations, as set out in the Party’s Schedule to Annexes I, II or III, as appropriate.

See Article 31 of the US Model BIT (2012) for a similar provision.

Article 8.44(1) (Chapter 8) of CETA.

See, e.g., Singh and Sharma (2013), 99–101; McRae (2010), UNCTAD (2013).

Article 28(10) of the US Model BIT (2012) [emphasis added].

Article 8.28 (Chapter 8) of CETA. See also Section F (Chapter 8) of CETA and Section 4.h).

CETA, Article 28.3 (Chapter 28). The general exceptions clause provides that

1. For the purposes of Article 30.8.5 (Termination, suspension or incorporation of other existing agreements), Chapters Two (National Treatment and Market Access for Goods), Five (Sanitary and Phytosanitary Measures), and Six (Customs and Trade Facilitation), the Protocol on rules of origin and origin procedures and Sections B (Establishment of investment) and C (Nondiscriminatory treatment) of Chapter Eight (Investment), Article XX of the GATT 1994 is incorporated into and made part of this Agreement. The Parties understand that the measures referred to in Article XX (b) of the GATT 1994 include environmental measures necessary to protect human, animal or plant life or health. The Parties understand that Article XX(g) of the GATT 1994 applies to measures for the conservation of living and nonliving exhaustible natural resources.

2. For the purposes of Chapters Nine (Cross-Border Trade in Services), Ten (Temporary Entry and Stay of Natural Persons for Business Purposes), Twelve (Domestic Regulations), Thirteen (Financial Services), Fourteen (International Maritime Transport Services), Fifteen (Telecommunications), Sixteen (Electronic Commerce), and Sections B (Establishment of investments) and C (Nondiscriminatory treatment) of Chapter Eight (Investment), subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between the Parties where like conditions prevail, or a disguised restriction on trade in services, nothing in this Agreement shall be construed to prevent the adoption or enforcement by a Party of measures necessary:

(a) to protect public security or public morals or to maintain public order;

(b) to protect human, animal or plant life or health; or

(c) to secure compliance with laws or regulations which are not inconsistent with the provisions of this Agreement including those relating to:

(i) the prevention of deceptive and fraudulent practices or to deal with the effects of a default on contracts;

(ii) the protection of the privacy of individuals in relation to the processing and dissemination of personal data and the protection of confidentiality of individual records and accounts; or

(iii) safety.

Articles 28.4, 28.5 and Article 28.7 (Chapter 28) of CETA.

Article 28.6 (Chapter 28) of CETA.

Article 28.8 (Chapter 28) of CETA.

Article 28.9 (Chapter 28) of CETA.

It is also noteworthy that in the same way as what has been achieved in the context of NAFTA through notes of interpretations, the drafters of CETA, in numerous occasions, clarified the meaning of different provisions of this investment Chapter by making a recurrent usage of the terms “for greater certainty”. In this regard see, e.g., Articles 8.1 (Definition); 8.4 (Market Access); 8.6(2) (National Treatment) (“The treatment accorded by a Party under paragraph 1 means”); 8.7(2) to (4) (Most-Favoured Nation Treatment); 8.10 (Treatment of investors and of covered investments); and 8.12(6) (Expropriation).

In light of the extensive range of such provisions, providing an exhaustive list of such exception falls beyond the scope of this study.

Article 13.17(2) (Chapter 13) of CETA.

See, e.g., Article 8.4(2)(d) (Chapter 8) of CETA and the Agreement’s Preamble.

UNCTAD (1999), p. 15.

Such a provision limiting the notion of “treatment” is especially important in light of the debate surrounding the scope of application of the MFN principle. By excluding ISA from the scope of MFN, CETA thus deals with Van Harten’s concerns in this regard; see Van Harten (2012), p. 237 et seq.

Article 8.7(4) of CETA.

In this regard, the Chile−Malaysia BIT provides in Article 3 that:

The provision in this Treaty relating to treatment no less favourable than that accorded to investments of third States shall not be interpreted to oblige a Contracting Party to extend to investors of the other Contracting Party the benefits of any treatment, preference or privilege by virtue of:

(a) any customs union, free trade area, common market or monetary union, or any similar international convention or other forms of regional cooperation, present or future, of which any of the Contracting Parties might become a party; [...].

UNCTAD (1999), p. 22.

Article 8.7(3) of CETA.

See Section F (Chapter 8) of CETA. It is noteworthy that the EU has recently announced its intention to work on the creation of a multilateral investment court (See European Commission 2016).

See Sub-Section 4: Investment Tribunal System of Section 3 (Resolution of Investment Disputes) of the Free Trade Agreement between the European Union and the Socialist Republic of Vietnam (not yet entered into force). http://​investmentpolicy​hub.​unctad.​org/. Accessed 27 Sept 2016.

Proposal of the European Union for Investment Protection and Resolution of Investment Disputes (12 Nov 2015). http://​trade.​ec.​europa.​eu/​doclib/​docs/​2015/​november/​tradoc_​153955.​pdf. Accessed 27 Sept 2016.

See Lévesque (2016).

See generally the papers published as part of the CIGI Investor-State Arbitration Series. https://​www.​cigionline.​org/​publications/​cigi-papers. Accessed 27 Sept 2016.

See Pauwelyn (in this volume).

See Stoll (in this volume); Bourcieu (in this volume).

See Bourcieu (in this volume); Schill and Bray (in this volume); Cottier et al. (in this volume); Frey (in this volume); Krajewski (in this volume); Hoekman (in this volume); Lester and Manak (in this volume).

See, generally, PublicCitizen (2015).

See, e.g., Singh and Sharma (2013), pp. 95–97 and Anderson (2006), Aguilard Alvarez and Park (2003). See also Van Harten (2007, 2013).

See USTR (2015).

See Article 29.5 (Chapter 29) of the TPP.

See Section B (Chapter 9) of the TPP.

See Sect. 4.

Newcombe (2008), p. 2.

Andrew Newcombe (2008), p. 8 [emphasis added].

Andrew Newcombe (2008), p. 8.

See WTO, Canada—Import Restrictions on Ice Cream and Yoghurt, Panel Report (27 Sept 1989), L/6568 - 36S/68, para 59:

The Panel […] noted, as had previous panels, that exceptions were to be interpreted narrowly and considered that this argued against flexible interpretation of Article XI:2(c)(i) [footnotes omitted].

See also Tariffs Applied by Canada to Certain U.S.-Origin Agricultural Products, NAFTA, CDA-95-2008-01, Final Report (2 Dec 1996), para. 122 (“Exceptions to obligations to trade liberalization must perforce be viewed with caution.”) and Canfor Corporation v. United States of America and Terminal Forest Products Ltd. v. United States of America, UNCITRAL, Decision on Preliminary Question (6 June 2006). http://​www.​italaw.​com/​cases/​200. Accessed 27 Jan 2015, paras. 183 and 187.

DiMascio and Pauwelyn (2008), pp. 76 and 82–83.

Andrew Newcombe (2008), p. 11.

Yukos Universal Limited (Isle of Man) v. The Russian Federation, UNCITRAL, PCA Case No. AA 227, Final Award (18 July 2014), paras. 1377–1378:

1377. Respondent’s objection under Article 21 of the ECT was originally addressed by the Parties during the jurisdictional phase of the arbitration. In the Interim Awards, the Tribunal observed that some of the arguments raised by the Parties under Article 21 went to the heart of the merits of the dispute, in that they related to the background to and motivation behind Respondent’s tax assessments, enforcement measures and other conduct, and that the Tribunal would not rule on these issues in a vacuum. As a consequence, the Tribunal decided “to defer its definitive interpretation of Article 21, and its characterization of [Claimants’] claims for purposes of Article 21, to the next phase of the arbitration”.

1378. As a consequence, the Parties had a further opportunity to develop their positions under Article 21 of the ECT during the merits phase of the present proceedings. Claimants’ and Respondents’ arguments are now summarized in turn. [footnotes omitted].

Article 2 of the Consolidated Version of the Treaty on European Union provides that

The Union is founded on the values of respect for human dignity, freedom, democracy, equality, the rule of law and respect for human rights, including the rights of persons belonging to minorities. These values are common to the Member States in a society in which pluralism, non-discrimination, tolerance, justice, solidarity and equality between women and men prevail.

See also Article 3(5):

In its relations with the wider world, the Union shall uphold and promote its values and interests and contribute to the protection of its citizens. It shall contribute to peace, security, the sustainable development of the Earth, solidarity and mutual respect among peoples, free and fair trade, eradication of poverty and the protection of human rights, in particular the rights of the child, as well as to the strict observance and the development of international law, including respect for the principles of the United Nations Charter.

See, e.g., about positive obligations in the European Unfair Commercial Practices Directive, van Boom et al. (2014), p. 4.