Master’s thesisZoé N. Baize email@example.com Student Number: 13451715
Word Count: 12 935
Reforming the International Investment Regime to accommodate Sustainable Development in Africa
A comparative study of the General Exceptions provisions codified in Article 14 of the Pan-African Investment Code and Article XX of the GATT
LLM Thesis in International and European Law Track: International Trade and Investment Law
Supervisor: N. Lavranos
1st of July 2022
The international investment regime has experienced a backlash in the past decade because of its inability to accommodate sustainable development goals. This incompatibility has expressed itself through the neglect of the regulatory space of states in favor of investors’ interests in the context of investor state dispute settlement. When international investment agreements are used by investors to hinder the implementation of regulations promoting the health and life of humans, animals and plants; a flagrant disconnection between the 2015 United Nations Sustainable Development Goals and the promotion of foreign investment exists.
This piece provides an overview of the investment agreement innovations undertaken on the African continent. A study of the ''police powers'' doctrine and its application in investment arbitration to promote the recognition of sustainable development goals within the international investment law regime is provided. Subsequently, a comparative analysis between Article 14 of the PAIC and XX of the GATT is conducted to uncover whether Article 14 of the PAIC has the potential to protect the police powers of African states. Through the results of the comparative analysis, it is argued that in its current state the Pan African Investment Code does not have the power to launch sustainable development accommodating reforms in Africa. On the basis of arbitral jurisprudence from the international investment and trade regime, the need for specific interpretational guidelines to secure the end of the competition between sustainable development and international investment agreements commitments is highlighted.
This thesis concludes that only a legally binding implementation of the Article XX-like provision found in Article 14 of the Draft PAIC used under the AfCFTA mechanisms has the potential to shift the status quo when it comes to the protection of the regulatory space of African states.
Finally, this paper offers a list of recommendations for the African Union members and working committees. These recommendations are drawn from the results of its research and the consequences of the Achmea ruling in the European Union to help facilitate reforms of the International Investment Regime and accommodate Sustainable Development in Africa.
Keywords:International Investment Agreements, Sustainable Development, Police Powers Doctrine, African Union, Pan-African Investment Code, GATT, General Exceptions provisions.
Table of contents
Table of Abbreviation………..……..4
Chapter I: Current landscape of IIA reforms in Africa………...…………...7
I.1 IIAs reforms being undertaken in Africa ...8
I.2 Key characteristics of the Africanization of Investment Law ………...10
A. Requirements for investment protection ………..……….11
B. Obligations for investors ………...12
C. Limiting substantive legal protection .………...13
D. Protecting the regulatory spaces of states ……….14
I.3 A look at the International Trade regime ……….……….15
Chapter II: Comparing Article 14 of the PAIC & Article XX of the GATT……….……….………..19
II.1 Jurisprudence of police powers in International Investment Arbitration ……..……….…….20
A. Police Power v. Regulatory takings ………..20
B. Jurisprudence of Police powers in Investment Law ………...………..22
II. 2 A comparative study of Article 14 of the PAIC and Article XX of the GATT ………….….24
A. General Exceptions in the Draft PAIC & the GATT……….…...24
B. Article XX & Proportionality Test.………..…….26
II.3 The capacity of Article XX to protect the regulatory space of States……….………….29
Chapter III: An Evaluation the PAIC and its Article 14………..………..…..33
III.1 Can Article 14 protect the regulatory space of states? ….………..…………33
III.2 The legal hurdles of a potential application of the PAIC ……….………..35
III.3 Paths for the PAIC to reform the African Investment Regime...39
Appendix 1 (Table 1)………...………...………….48
Table of Abbreviations
AB Appellate Body (WTO Dispute Settlement)
AfCFTA African Continent Free Trade Area
AU African Union
BIT Bilateral Investment Treaty
CJEU Court of Justice of the European Union
COMESA Common Market of Eastern and Southern
COMESA CCIA COMESA Common Investment Area
ECOWAS Economic Community Of West African
ECOWAS-SA ECOWAS Supplementary Act
ECOWIC ECOWAS Common Investment Code
EU European Union
FET Fair and Equitable Treatment
GATT General Agreement on Tariffs & Trade
HR Human Rights
ICSID International Center for Settlement of
IF Investment Facilitation
IIA International Investment Agreement
IIL International Investment Law
ISDS Investor-State Dispute Settlement
MFN Most Favored Nation
NAFTA North American Free Trade Agreement
PAIC Pan-African Investment Code
PMI Philip Morris International
REC Regional Economic Community
SADC Southern African Development Community
SADC FIP SADC Protocol Finance & Investment
TFEU Treaty on the Functioning of the European
UNCITRAL United Nations Commission on International
VCLT Vienna Convention on the Law of Treaties
WTO World Trade Organization
Since the start of the 21st century, the international investment regime, while in full bloom, has been suffering from a legitimacy crisis.1 Added to those internal issues, cases brought to Investor-State Dispute Settlement (ISDS) have increasingly emphasized the incompatibility of the current international investment regime with the promotion of sustainable development and the regulatory space of states, emphasizing the need for reform.2In this global struggle for more policy leniency, African states have not been spared from the regulatory constraints emerging from their engagement in International Investment Agreements (IIAs).3
To remediate the systemic issues caused by the lack of balance in international investment rules, African regionalism has risen to the challenge of reforming investment codes on the continent.
This phenomenon is referred to as the “Africanization” of Investment Law.4The call for a reform of the current investment regime, together with region-specific development needs has led African states to work together through a web of initiatives aimed at regulating investment on the continent. This multi-layered system of intra-African investment regulation works at four different levels: national, bilateral, regional and finally the continental level.5 At each level, a focus on the quality rather than the quantity of the foreign investments can be witnessed. This is achieved through the inclusion of sustainable development goals and standards as the main objective of these new investment agreements ensuring balance between state and investor obligations.6
The Africanization of investment law has attempted to turn the African continent into a leading
“rule-maker” region in terms of IIAs reforms as highlighted by Mbengue.7 Recent studies like the one conducted by Laryea & Fabusuyi emphasize that despite the efforts, there are major
6ET Laryea and OO Fabusuyi, ‘Africanisation of international investment law for sustainable development:
challenges’ (2021) 20 JITLP 42.
5Ibid (n 1).
4MM Mbengue, ‘Africa’s Voice in the Formation, Shaping and Redesign of International Investment Law’, (2009) 34 FILJ 455.
3J Brickhill and others, ‘Two’s Company, Three’s A Crowd: Public Interest Intervention in Investor-State Arbitration’ (2011) 27 SAJHR 152, 155-156.
2OHCHR, ‘Report On the Work of the Working Group III on Investor-State Dispute Settlement Reform’ (7 March 2019) OL ARM 1/2019.
1CN Brower and SW Schill, ‘Is Arbitration a Threat or a Boon to the Legitimacy of International Investment Law?’
(2009) 9 CJIL 473.
setbacks to the Africanization of International Investment Law (IIL).8 Such setbacks include overlapping clauses and inconsistencies between the investment instruments adopted by the various Regional Economic Communities.9 Indeed, governance and jurisdictional gaps along with a lack of practical enforcement have been reducing the potential of the Africanization of IIL to effectively reconstruct the international investment regime.
In view of these governance and jurisdictional gaps, this thesis will analyze whether the Draft Pan-African Investment Code (PAIC) [not enforced] has the potential to successfully protect the regulatory power of host states within the international investment regime on the African continent. More specifically, it will research the protection of regulatory autonomy under the police powers doctrine for the enforcement of measures encouraging sustainable development.
As such, the research question of this thesis will be “To what extent does the general exceptions clause contained in Article 14 of the PAIC have the potential to protect the police powers of African states when promoting sustainable development?”.
This thesis will conduct a comparative analysis of Article 14 of PAIC and Article XX of the GATT by relying on investment arbitration jurisprudence and the World Trade Organization (WTO) dispute database available on the WTO official website. It will draw conclusions from the existing jurisprudence and the analyses of scholars studying the international trade and investment regimes. This will be done to evaluate whether the PAIC and its general exceptions provision can safeguard the policy space of host states under international investment law and issue recommendations for African Union IIAs drafters.
9Ibid (n 6).
8Ibid (n 6); T Ngobeni ‘The Relevance of the Draft Pan African Investment Code (PAIC) in Light of the Formation of the African Continental Free Trade Area’ ( Afronomics Law, January 15, 2019)
<www.afronomicslaw.org/2019/01/11/the-relevance-of-the-draft-pan-african-investment-code-paic-in-light-of-the-fo rmation-of-the-african-continental-free-trade-area> accessed 12 March 2022.
Chapter I: Current landscape of IIA reforms in Africa
A large portion of the backlash against the international investment regime has arisen from IIA interpretation in the context of dispute settlement.10 Indeed, the dispute settlement clauses found in most Bilateral Investment Treaties (BITs) and other IIAs provide for the consent of the state to be brought to arbitration to settle disputes. Such consent to arbitration clauses can range from generic “all disputes” provisions to only covering claims alleging violations of IIAs or solely specific obligations like assessing quantum value of compensation for expropriation.11
Once having provided consent through these clauses, many states find themselves inconsistently constrained in their ability to determine domestic policy depending on the arbitrator's interpretation. A notorious illustration of such a situation is the “Spanish renewables saga” where the tribunals all provided a different analysis of what “reasonableness” meant.12 Another issue with traditional IIAs is that they usually provide consent to commence arbitration on the basis of breach of obligation from the state, rarely do they provide a clear outline of the duties of investors and their investment.
With the aim of painting an accurate depiction of the current landscape of IIA reforms in Africa and further portray the disconnection between international investment and the sustainable development goals that are pursued on the continent, this chapter will answer the questions:
What are the current reforms and innovations of the international investment regime in Africa?
12M Schmidl ‘The Renewable Energy Saga from Charanne v. Spain to The PV Investors v. Spain’ (Kluwer Arbitration Blog, 1 February 2021)
11J Sicard-Mirabal and Y Derains, Introduction to Investor-State Arbitration (Kluwer 2018) 75-83.
10Ibid (n 1).
I.1 IIAs reforms being undertaken in Africa
The past decade has witnessed an impulse from African states to restructure their IIAs to promote sustainable development and protect their regulatory power.13 From this shift in the African Investment paradigm has risen many initiatives with distinctive features which break away from the traditional IIA models. This section of the thesis will aim to provide an overview of these initiatives and showcase how they differ from traditional IIAs.
Like Laryea and Fabusuyi14, Zagel explored the African regional investment instruments that are currently pushing forward a new status quo for International Investment Law on the continent.15 These innovative instruments take various forms. Some are BITs like the 2016 Nigeria-Morocco BIT.16 Others are Multilateral Investment Instruments such as the 2006 Southern African Development Community (SADC Protocol) on Finance and Investment17, the 2007 Common Market of Eastern and Southern Africa (COMESA) Investment Agreement18, the 2008 Economic Community Of West African State Supplementary Act on Foreign Investments (ECOWAS-SA)19 and finally the 2016 Draft Pan-African Investment Code (PAIC)20.
The 2006 SADC Protocol on Finance and Investment is a protocol that was initiated by the SADC, one of the official African Regional Economic Communities (RECs). The SADC is made up of sixteen state parties.21 In Article 3 of the Protocol on Finance and Investment, the state members of the SADC committed to harmonize their investment regimes and together work towards a pro-investment climate as outlined in the first annex of the Protocol. It is important to
21Ibid (n 17).
20AU Draft Pan African Investment Code (drafted December 2016).
19ECOWAS Supplementary Act on Foreign Investments (signed 19 December 2008, entered into force 19 January 2009) A/SA.3/12/08.
18COMESA Investment Agreement (signed 23 May 2007).
17SADC Protocol on Finance and Investment (adopted 18 August 2006, entered into force 16 April 2010).
16Morocco-Nigeria Bilateral Investment Treaty (signed 3 December 2016).
15Ibid (n 13).
14Ibid (n 6).
13Gudrun Zagel, ‘International Investment Agreements and Sustainable Development’ ( Afronomics Law, 31 October 2019)
<www.afronomicslaw.org/2019/10/31/international-investment-agreements-iias-and-sustainable-development-are-th e-african-reform-approaches-a-possible-way-out-of-the-global-iia-crisis> accessed 14 March 2022.
outline that in 2016, the SADC decided to replace the 2006 Annex 1 with a new one22; these changes will be explored in the next section of this chapter (I.2).
A year after the adoption of the SADC Protocol on Finance and Investment, the 2007 COMESA Common Investment Agreement (CCIA) was created by the state parties of that African REC made of nineteen countries. The goal behind this investment agreement is similar to the SADC Protocol, which was to coordinate the investment policies of the members of the community.23A revised version of the CCIA was submitted to the COMESA Committee on Legal Affairs. This updated instrument further emphasizes the role of sustainable development in the structuring of IIL for the COMESA member states by enforcing investor obligations.24
In 2008, the ECOWAS, another African REC, produced a new investment instrument called the Supplementary Act on Foreign Investments. This REC is composed of fifteen states.25A notable feature of this IIA is its substantive chapter on Investor obligations which much like the SADC Protocol on Finance and Investment and the COMESA CCIA aimed at homogenizing the rules conditioning foreign investment while guaranteeing an environment promoting such investments in the region.26 In 2018, the ECOWAS introduced its Common Investment Code (ECOWIC) which put sustainable development at the heart of its efforts to codify investment (not enforced yet).27
At the end of 2016, Morocco and Nigeria published a new BIT. This BIT is the direct heir of the Joint Initiative on the Morocco–Nigeria Gas Regional Pipeline and their initiative to increase their fertilizer production.28This BIT represents a new model of BIT which is largely influenced by the research output from the United Nations Conference on Trade and Development (UNCTAD) and ECOWAS set-up.29The main innovation brought by this BIT model is in terms
29N Zugliani, ‘Human Rights in International Investment Law: The 2016 Morocco–Nigeria Bilateral Investment
28T Kendra and others, ‘The Morocco-Nigeria BIT: a new breed of investment treaty?’ (Practical Law Arbitration, 16 November 2017) <arbitrationblog.practicallaw.com/the-morocco-nigeria-bit-a-new-breed-of-investment-treaty/>
accessed on 14 March 2022.
27ECOWAS Common Investment Code (adopted in July 2018).
26Ibid (n 19).
25Ibid (n 19).
24Ibid (n 4).
23Investment Agreement for the COMESA Common Investment Area (signed 23 May 2007).
22Agreement Amending Annex 1 of the Protocol on Finance and Investment (adopted 24 August 2017).
of Human Rights (HR), as it boasts the most comprehensive inclusion of HR. Yet, it is important to note that it is not enforced as it has not been ratified by Nigeria.30
Another multilateral investment agreement has largely inspired the Morocco-Nigeria BIT: the Draft PAIC of the African Union.31 The African Union (AU) is a continental organization composed of 55 Member States. All the internationally recognized states in Africa are part of the AU.32 A key feature of the Draft PAIC is that it is so far the only continental impulse to codify and coordinate the conditions of foreign investment in Africa and thus the paramount of the Africanization of IIL.33 Yet, it is important to note that it is not enforced and remains a non-binding draft. This is why this paper will uncover whether the PAIC, as the sole continental investment instrument in Africa, could potentially be implemented and fill the existing governance gaps and overlaps between the various African RECs.
I.2 Key characteristics of the Africanization of Investment Law
After contextualizing the Africanization of International Investment Law, this section of the first chapter will highlight what are the important features of its IIAs. This will be done to demonstrate that Article 14 of the Pan-African Investment Code can be characterized as a quintessential example of the Africanization of IIL.
The Africanization of IIL is an African answer to a backlash that the international investment regime has been facing globally. Such issues include the protection of the interests of investors to the detriment of public interests or of the regulatory power of states.34 As demonstrated by Pasipanodya & Garcia Olmedo, to remediate such issues African states have been reforming their investment instruments by including clauses redefining the requirement for investment
34M Sornarajah, Resistance and Change in the International Law on Foreign Investment (Cambridge University Press 2015) 172.
33Ibid (n 6).
32Ibid (n 20).
31Ibid (n 29).
30K Mahmutaj ‘Will the Morocco-Nigeria Bilateral Investment Treaty Transform Sustainable Development into Hard Law?’ (Blog of the European Journal of International Law, 27 January 2022)
<www.ejiltalk.org/will-the-morocco-nigeria-bilateral-investment-treaty-transform-sustainable-development-into-har d-law/> accessed on 17 March 2022.
protection, explicitly protecting the regulatory spaces of states, limiting substantive legal protection, outlining obligations for investors, and finally clauses that put sustainable development as the aim of IIAs.35
A) Requirements for investment protection
In this subsection, the requirements for investment protection introduced by the new generation of African IIAs will be explored. Most of these IIAs outline the requirements for protection through their definition of what a protected investment is under the legal instrument. In the context of the SADC Finance and Investment Protocol Annex 1, the member states have decided to exclude speculative short-term portfolio investments from protection under Article 1(1)(2).36 This highlights the will of SADC member states to exclusively protect investments that have the potential to stimulate development on the territory of host states. Similarly, Article 1 of the ECOWAS Supplementary Act excludes portfolio investments from its protection but also requires investments to have “significant physical presence in the host State” and to be conducted with respect of its domestic laws to qualify as protected investments.37
On the other hand, the 2016 Morocco-Nigeria BIT goes a step further by defining protected investment as “an enterprise established [...] which contributes to sustainable development”.38 This mention of sustainable development as a requirement for protection of investments under the Morocco-Nigeria BIT emphasizes the commitment to force IIL to accommodate sustainable development goals on the African continent. The Draft PAIC comes as a merger of all the initiatives to limit the protection of investment in Africa. It does so by declaring the protection of investments that cultivate sustainable development on the continent as its main objective in its Article 1.39 Additionally, by excluding portfolio investment and investment that do not
38Ibid (n 16).
37Ibid (n 19).
36Ibid (n 17).
35T Pasipanodya and J Garcia Olmedo, ‘21st century investment protection: Africa’s innovations in investment law reform’ (International Bar Association, 24 November 2021)
<www.ibanet.org/africas-innovations-in-investment-law-reform#_edn2> accessed on 18 March 2022.
significantly contribute to economic development as outlined in Article 4(4), the PAIC follows the path of the SADC FIP and the ECOWAS-SA.40
B) Obligations for investors
Another remarkable feature of the Africanization of investment agreement is the inclusion of obligations for investors which introduce more balance to the legal instruments with the aim of addressing their legitimacy issues. According to De Brabandere, the adoption of investor obligations provisions demonstrate how the Africanization of IIL is embedded in the global efforts to transform IIAs into “broader regulatory instruments”.41One can observe that the Annex 1 SADC Protocol on Finance and Investment includes provisions outlining traditional host state obligations as well as a list of investor obligations. Article 10 of Annex 1 requires the corporate responsibility of investors.42 Corporate responsibility is defined as following the administrative guidelines, policies, laws, regulations of the Host state.
Similarly, Mbengue describes how other IIAs such as the ECOWAS Supplementary Act, the Morocco-Nigeria BIT and the new CCIA also have introduced detailed provisions on investor obligations.43 Such obligations take a step further than the SADC Protocol as they range from environmental matters to social and human rights standards but also clear anti-corruption guidelines. In the Morocco-Nigeria BIT, investor obligations are referred to as Post-Establishment Obligations under Article 18. In the ECOWAS SA, these investor obligations contained in Articles 11 to 18. These IIAs allow an enforcement of investor obligations conducted through the jurisdiction of domestic courts of both the host and home state.44
44Ibid (n 16) art 20; Ibid (n 19) art 17.
43Ibid (n 4).
42Ibid (n 17).
41E De Brabandere, ‘(Re)Calibration, Standard-Setting and the Shaping of Investment Law and Arbitration’ (2018) 59 BCLR 2607, 2629-2630.
40Ibid (n 33).
The description provided by Mbengue and Schacherer of investor obligations under the PAIC suggests it comes as a mix of the three examples previously cited in this subsection.45Investor obligation is codified as the fourth chapter of the PAIC which features 6 articles (Articles 19 to 24). That chapter on investors’ obligations covers issues of corporate governance, socio-political matters including corporate social responsibilities like the SADC IIA. It also features anti-corruption measures, like Article 21 on bribery which resembles the ECOWAS SA and obligations related to the human rights and exploitation of natural resources which the Morocco-Nigeria BIT also has. Overall, by analyzing the substance of the fourth chapter of the PAIC, one can fully gauge how it comes as the continental heir of the regional work that has been conducted since the late 2000s to reform IIL in Africa.
C) Limiting substantive legal protection
In this section, the new substantive limits on investment protection introduced by the new generation of African IIAs will be explored. Mbengue has extensively written about the phenomena of Africanization.46In his 2019 article on Africa’s voice in the reshaping of IIL, he outlined the key changes in substantive legal protection of investments conducted on the continent.47 First, he highlights the trend to limit or remove Fair and Equitable Treatment (FET) provisions that can be witnessed in the ECOWIC, the updated version of CCIA but also in the revised version of Annex I of the SADC Protocol on Finance and Investment.48 While the new CCIA limits FET obligations to fair administrative and judicial treatment, the ECOWIC and the new Annex I have opted for a removal of FET provisions. As outlined by De Brabandere, recalibrating and stepping away from FET standards has been a trend in the global efforts to reform IIAs, it is therefore not surprising that a similar trend can be witnessed in Africa.49
These limitations and omissions of FET in the new generation of African IIAs suggests their controversy. As stated by Larya, the scope and application FET provisions is debated as
“legitimate expectations”, which became one of its components as illustrated in the TECMED v
48Ibid (n 45).
47Ibid (n 4).
46Ibid (n 4); Ibid (n 45).
45MM Mbengue and S Schacherer, ‘The ‘Africanization’ of International Investment Law’ (2017) 18 JWIT 414.
Mexico50 case, are difficult to conciliate depending on the level of the development of the host state.51 In the context of the Africanization of IIL, it is therefore understandable that communities of states with varying degrees of development would wish to restrict or circumvent the doctrine of legitimate expectations of investors all together which could prevent their ability to enforce new measures.
While FET has been known as a tool to prevent abuses of power, authors like Klager share the understanding of African states of the potential of FET provision to constrain the regulatory power of host states.52This conception of FET as a potential threat to the regulatory space of host states has led to omit FET provisions from in the Draft PAIC.53Additionally, the PAIC precludes the importation of substantive obligations and dispute resolution clauses from other IIAs through MFN and restricts compensable claims.54
D) Protecting the regulatory spaces of states
After reviewing the different approaches African IIAs have been employing to limit investment protection to foreign investments generating desirable for long-term economic and sustainable development, this section will explore how they have been structured to protect the regulatory power of host states. In the SADC FIP, the regulatory space of the host state is secured through its Article 14, titled “Right to Regulate”.55 This article guarantees that nothing in the IIA can prevent the enforcement of measures which force investments to respect “any health, safety or environmental concerns” required by the host state. Similarly, the Morocco-Nigeria BIT also includes a right to regulate for host states in its Article 23, through which states have the ability to ensure the application of their measures protecting economic, social and sustainable development policy objectives without being constrained by its obligations under the BIT.56
56Ibid (n 16) art 23.
55Ibid (n 17).
54Ibid (n 45).
53Ibid (n 45).
52R Klager ‘Fair and equitable treatment and sustainable development’ in MC Segger and others (eds), Sustainable Development in World Investment Law (Kluwer 2010).
51E Laryea, ‘Legitimate expectations in investment treaty law’ in J Chaisse and others (eds), Handbook of International Investment Law and Policy (Springer 2021).
50Técnicas Medioambientales S.A. v. The United Mexican States, ICSID Case No. ARB (AF)/00/2, Award, 29 May 2003 <www.italaw.com/sites/default/files/case-documents/ita0854.pdf> accessed on 18 March 2022.
Another form of regulatory space protection was used in Article 22 of the COMESA Investment Agreement (CCIA): General Exceptions.57The General Exceptions of that investment agreement protect the right of member states to regulate and provides the possibility to adopt any measure dictated by a host state if it is approved by the CCIA committee.58The structure of the General Exceptions in the CCIA strongly resembles the one of Article XX of the GATT Agreement.59
The use of Article XX as a model for IIAs is interesting as this article is known as the GATT article that protects the regulatory power of the host state with the international trade regime.60 The adoption of clauses modeled on Article XX of the GATT to increase the policy space of host states has been a trend in IIAs throughout the 2010s.61It is therefore not a surprise that the Draft PAIC also displays a General Exception clause in its Article 14.62Yet, added to the protection of human, plant, animal health and life, Article 14 also safeguards national and international security and peace interests. This inclusion of General Exception provisions in the PAIC suggests a potential intertwining of international investment and international trade regimes which this thesis will use as a basis for its evaluation of the potential of Article 14 to protect sustainable development needs in Africa.
I.3 A look at the International Trade regime
In the previous section of this thesis, the defining features of the new generation of African IIAs have been explored. It was concluded that the Pan-African Investment Code Draft could be qualified as the quintessential example of the Africanization of IIL. A key feature of the PAIC is its Article 14 which is a general exception clause modeled on Article XX of the GATT.
61A Keene, ‘The Incorporation and Interpretation of WTO-Style Environmental Exceptions in International Investment Agreements’ (2017) 18 JWIT 62.
60S Zleptnig, Non-Economic Objectives in WTO Law (Brill 2009) 93.
59General Agreement on Tariffs and Trade, 1994 (GATT Agreement)
<www.wto.org/english/docs_e/legal_e/gatt47_01_e.htm> accessed on 18 March 2022.
58Ibid (n 23).
57Ibid (n 23) art 22.
The GATT is the founding multilateral legal agreement of the WTO which aims at reducing trade barriers and facilitating international trade.63 The first GATT entered in force in 1947. Between 1947 and 1994, the document gradually evolved in its commitments (referred to as Schedules) and its number of members.64 The current version of the GATT dates from the end of the 1986-1994 Uruguay Round which allowed the transition from the GATT to the multilateral trading system that the world currently knows. The transition to the WTO allowed the creation of a permanent framework of promotion and regulation of international trade rather than rounds of working agreement. Additionally, structural issues with the GATT led to the rise of disputes and the blockages of dispute resolutions which the WTO Dispute Settlement mechanism aimed at fixing.
The GATT Agreement was selected for this comparative research. In the previous section of this paper, a comparison between Article 14 of the PAIC and Article XX of the GATT was made.
These two articles serve the same purpose in their respective treaties, which is to list a number of clear exceptions to ensure policy leniency for host state obligations under the Agreement. This purpose can be summarized through the principle understood as the Police Powers doctrine.
According to Titi, police powers refers to the sovereign power of host states when it comes to the enforcement of public policy which range from public order and morals to the protection of public health and the environment.65 The study of Articles 14 and XX through the lens of the police powers doctrine is relevant to this thesis as it comes as the legal operationalization of the protection of the regulatory space of host states in the context of international investment and international trade law.
To guarantee the respect of the GATT Schedules and the functioning of dispute settlement in the international trade regime, the WTO introduced the Dispute Settlement Understanding (DSU).66 The DSU provides an outline of the procedures and rules of the settlement of disputes brought to the WTO by its state parties. As such, the WTO cases that will be used throughout this research were subject to the procedures of the DSU. Within the context of this paper, the disputes
66Understanding on rules and procedures governing the settlement of disputes, Annex 2 of the WTO Agreement, 1994 (DSU) <www.wto.org/english/tratop_e/dispu_e/dsu_e.htm> accessed on 25 March 2022.
65C Titi, ‘Police Powers Doctrine and Investments Law’ in A Gattini and others (eds), General Principles of Law and International Investment Arbitration (Brill 2018).
64Who we are (World Trade Organization) <www.wto.org/english/thewto_e/whatis_e/who_we_are_e.htm> accessed on 25 March 2022.
63Ibid (n 59).
concerned were disputes arising out of disagreements regarding the rights and obligations of states under the WTO agreement (as prescribed in Article 1(1) of the DSU).
In the event of a dispute between two WTO members, one state will bring forward a claim that another state is breaching its commitments or the agreement of the WTO.67 When such a claim occurs, the respondent is allowed to argue that the measure accused of violating WTO law is subject to specific instances that warrant exemption from GATT rules.68 The list of specific instances requiring exemption is provided in Article XX of the GATT, titled General Exceptions.69 The structure of Article XX is divided in two parts. The first is called the
“chapeau” which ultimately ensures that General Exceptions cannot be used to defend measures that are arbitrary or discriminatory. The second part provides a list of the possible instances allowing the use of General Exceptions.
When studying general exceptions, it is relevant to keep in mind the argument of Henckels that rule-exceptions frameworks are a common legal feature.70 Despite their commonality, Henckels accurately reminds her audience that exception provisions still remain difficult to interpret within the international trade and investment regimes. In her article, the author argues that normative and practical interpretations of Article XX of the GATT allow the understanding of general exceptions as a permission for states to use their regulatory power.71 A practical reading of Article XX emphasizes the ability its provisions provide for states to consider “regulatory purpose at the point of obligation”.72
There are ten admitted general exceptions in Article XX of GATT.73 They include measures necessary to protect public morals (a), human, animal & plant health and life (b), measures linked to the importation of gold or silver (c) and measures securing compliance with laws that are consistent with the WTO agreement. Measures associated with products from prison labor (e), the protection of national treasures (f) and the conservation of exhaustible natural resources
72Ibid (n 70).
71Ibid (n 70).
70C Henckels, ‘Permission to Act: The Legal Character of General and Security Exceptions in International Trade and Investment Law’ (2020) 69 ICLQ 557.
69Ibid (n 59) Art. XX.
68Ibid (n 66).
67Ibid (n 64).
are also included in Article XX. Finally, GATT General Exceptions also include measures allowing the application of intergovernmental commodity agreement obligations (h) along with measures limiting exports of domestic products within the content of a governmental stabilization plan (i) and those allowing the supply of products in short supply (j).
As highlighted by Zleptnig, Article XX of the GATT can be analyzed through both a pragmatic and a value-based lens.74 A pragmatic lens will emphasize the role of General Exceptions as a tool allowing the functioning and stability of the multilateral trading system.75 Indeed, it seems unlikely that sovereign states would give up their power to regulate non-economic matters for the benefit of international trade. As such, general exceptions provide enough of a safeguard for the regulatory power of states to encourage them to commit to the WTO Agreement and schedules.
On the other hand, a value-based approach underlines the importance of the pursuit of non-economic policy for states even within the context of the international trade regime.76 This approach suggests that the multilateral trading system recognizes the need to prioritize the non-economic goals by protecting the regulatory space of states under the specific circumstances outlined in Article XX of the GATT.
To conclude the review of Article XX provided in this section, arguments submitted by A. Keene will be reviewed. As pointed out by the author in her article on the incorporation of provisions modeled on Article XX of the GATT in IIAs, she demonstrates how the dominant discourse within academia dismisses the relevance of general exceptions in the international investment Regime.77 Such dismissal can be illustrated in conclusions proposed by Mark Wu that General Exceptions in IIAs are an “anomaly”.78 Yet, the study conducted by Keene demonstrates that more than half of Article XX modeled provisions added to treaties between 2010-2015 were added to IIAs.79
79Ibid (n 61).
78Mark Wu, ‘The Scope and Limits of Trade’s Influence in Shaping the Evolving International Investment Regime’
in Z Douglas and others (eds), The Foundations of International Investment Law (Oxford University Press 2014) 169, 208.
77Ibid (n 61).
76Ibid (n 60).
75Ibid (n 60) 99.
74Ibid (n 60).
In her concluding remarks, the author encourages further analyses on the subject to focus on individual treaty interpretation as there still is no established jurisprudence on the interpretation of general exceptions in IIAs.80 This is a suggestion that will be the basis of the comparative research of this thesis. As such, the Article 14 of the PAIC and Article XX of the GATT will be compared without the assumption that the former will be interpreted in the exact same manner as the latter. Throughout this thesis, interpretations and conclusions will be drawn from WTO case law with nuance, for the purpose of generating knowledge on how Article XX-like provisions have the potential to safeguard the regulatory space of host states within the International Investment Regime.
Chapter II: Comparing Article 14 of the PAIC and Article XX of the GATT
The doctrine of police powers is generally used by respondent states to invoke the exercise of its sovereign right to enforce a measure.81Article XX of the GATT serves a similar purpose within the international trade regime. By allowing states to claim a right to be exempted from their international obligations, both the doctrine of police powers and Article XX play an important role in the defense of responding states in cases involving regulatory policies accused of being in violation of an international treaty.82 Ultimately, general exceptions provisions appear as a treaty-making tool confirming the validity of the principle embodied in the police powers doctrine. Keene highlights that questions of the relevance of general exceptions within the realm of IIL are still dismissed and understudied by many international investment law scholars.83
This thesis will first provide a short overview of the jurisprudential track of the police powers doctrine in international investment arbitration and review the various tests associated with this doctrine. This will be done to explore how the police power doctrine and some forms of general exceptions have already been applied in investment arbitration and introduce the comparative analysis part of this thesis. As such, the second chapter of the thesis will answer the question:
82Saluka Investments BV v Czech Republic, UNCITRAL, Partial Award, 17 March 2006, para 262; V Heiskanen,
‘The Doctrine of Indirect Expropriation in Light of the Practice of the Iran-United States Claims Tribunal’ (2007) 8 JWIT 215, 218.
81Ibid (n 65).
80Ibid (n 61).
What are the similarities and differences between General Exception clauses in the PAIC and Article XX of the GATT?
II.1 Jurisprudence of police powers in International Investment Arbitration
In this section of the second chapter of this thesis, the jurisprudential track of the police power doctrine in the context of disputes handled by the International Center for Settlement of Investment Disputes (ICSID) and Non-ICSID arbitration (especially United Nations Commission on International Trade Law (UNCITRAL) arbitrations) will be explored to provide a basis for a comparative analysis between international investment and trade regimes.
A) Police Power v. Regulatory takings
Before exploring the police power doctrine case law, this section will explicitly differentiate the notion of police powers from regulatory takings. This will be done through the analysis of the Philip Morris (PMI) v. Uruguay and the Chemtura cases.84In both cases, the responding states had to bear the burden of proof in demonstrating that their reform was a public policy aiming at protecting public health and the environment or fulfilling the international obligations of the state and thus not a regulatory taking.85 As such, one can define a regulatory taking as a legislative change in the domestic law of the host state which leads to the indirect expropriation of an investment or the rights of investor on the territory of the host state.
Regulatory takings represent an indirect form of expropriation which requires the host state to compensate the investor for its loss. On the contrary, reforms and regulations introduced with a public policy goal like sustainable development, the protection of public morals or public health do not give rise to a right to compensation for investors and their investment.86 The main
86P Acconci, ‘Sustainable Development and Investment: Trends in Law-Making and Arbitration’ in A Gattini and others (eds), General Principles of Law and International Investment Arbitration (Brill 2018).
85Ibid (n 65).
84Chemtura Corporation v. Government of Canada, UNCITRAL, Award, 2 August 2010, para 266; Philip Morris Brands Sàrl, Philip Morris Products S.A. and Abal Hermanos S.A. v. Oriental Republic of Uruguay, ICSID Case No. ARB/10/7, Award, 8 July 2016, para 307.
difference between regulatory takings and measures under the police power doctrine is that regulatory takings are arbitrary and unnecessary as outlined by the PMI v. Uruguay Tribunal.87
The Chemtura v. Canada case was a dispute brought to arbitration under the North American Free Trade Agreement (NAFTA), as such it used the UNCITRAL Arbitration rules.88The fact pattern of this case can be summarized as a dispute arising out of a claim by Chemtura that Canada was in violation of its obligations under the NAFTA Agreement because of its ban of the use of “lindane” as a pesticide.89 Chemtura alleged that it was being expropriated of its investment because of the ban of lindane and that Canada failed to ensure a minimum standard of treatment for the investment of Chemtura. Similarly, the fact pattern of PMI v. Uruguay case can be condensed as a claim brought by PMI against the state of Uruguay as an ICSID Arbitration.
PMI argued that the anti-tobacco 2008 Single Presentation Requirement regulation and the
“80/80 regulation” introduced by Uruguay represented breaches of the Switzerland-Uruguay BIT.
In both of these cases, the arbitral tribunal found that the regulations of the responding states, respectively Canada and Uruguay, were prime examples of rightful applications of the police powers of a state.90Indeed, the Chemtura tribunal highlighted that Canada, by banning the use of lindane as a pesticide, was honoring its obligations under the Aarhus Protocol and the Convention on Long-range Transboundary Air Pollution.91 This demonstrates that under UNCITRAL arbitration rules, tribunals recognize that the application of new regulations are justified exercise of state police powers when they allow the fulfillment of an international obligation of the state and serve public health purposes. Similarly, the ICSID PMI v. Uruguay tribunal differentiated the exercise of police powers by host states from regulatory takings by requiring proof that the nature of the Uruguayan regulation was neither arbitrary nor unnecessary and showcase that it was an effective tool to protect the public interest it targets.92
91Ibid (n 89) para 131.
90Ibid (n 84) PMI v. Uruguay para 287.
89UNCITRAL, Award, 2 August 2010, para 266
<www.italaw.com/sites/default/files/case-documents/ita0149_0.pdf> accessed on 15 April 2022.
88North American Free Trade Agreement (Government of Canada, United Mexican States, United States of America) (entered into force 1 January 1994).
87ICSID Case No. ARB/10/7, Award, 8 July 2016, para 307
<www.italaw.com/sites/default/files/case-documents/italaw7417.pdf> accessed on 15 April 2022; Ibid (n 86).
B) Police Power Doctrine in Investment Arbitration
This section will explore the origin of the concept of state police powers in the jurisprudence of investment arbitration. To do so, the analysis of the police power case law will be based on the arguments submitted by Baltag.93 Throughout her article, Baltag aims at demonstrating that the exercise of police powers can be recognized by arbitral tribunals in the context of regulations adopted by host States leading to a loss of investment.94 Yet, she also highlights how some challenges and limitations with the application of this doctrine in investment arbitration have to be tackled and discussed.
Baltag pinpoints the 1987 SEDCO v. NIOC case from the Iran-US Claims Tribunal as one of the first investment arbitration citing the police power doctrine as a principle of international law.95 Since then, investment arbitrations have used the police power doctrine to justify state actions on the basis of BIT and other IIA clauses or customary international law96as codified in Article 31 (3) (C) of the Vienna Convention on the Law of Treaties (VCLT) in the absence of treaty protection.97 While she proves the widespread application of the concept, the author also emphasizes the existing issues linked to the exercise and justification of police power.98Baltag identifies the lack of guidance in legal instruments for tribunals when it comes to outlining how to test whether a reform amounts to a regulatory taking or a lawful exercise of police powers.99
To provide some insight in how arbitral tribunals have tried to remedy this lack of guidance, Baltag lists various ICSID and UNCITRAL awards which form the basis of the police power
99Ibid (n 93) 396.
98Ibid (n 93) 396.
97Vienna Convention on the Law of Treaties (opened for signature 23 May 1969, entered into force 27 January 1980).
96In Marfin Investment Group v. Republic of Cyprus, ICSID Case No. ARB/13/27, Award, 26 July 2018, para 827-828, the tribunal held that police power could be claimed on the basis of customary international law.
95Ibid (n 93) 394.
94Ibid (n 93).
93Crina Baltag, ‘Investment Arbitration and Police powers: Emerging Issues’ in L Mistelis and N Lavranos (eds), European Investment Law and Arbitration Review Online (Brill 2021).
jurisprudence.100 For example, the 2000 S.D. Myers, Inc. v. The Government of Canada case (which used UNCITRAL arbitration rules) highlights that the right of states to regulate for public interest purposes is recognized by arbitral tribunals when the regulation satisfies specific criterias.101 Overall, Baltag lists four main criteria compiled from both UNCITRAL and ICSID cases as the recognized standard for police power in investment arbitration: good faith, public purpose102, proportionality103and non-discriminatory104.
Another challenge of the application of the police power doctrine in investment arbitration mentioned by Baltag is the issue of attributing on who falls the burden of proving that the measure is not a regulatory taking. To solve this conundrum it is helpful to look at the conclusions reached by the tribunal in the Les Laboratoires Servier v. Poland case.105During the proceedings of the case, the claimant suggested that the burden of proof should be borne by Poland on the basis of a logic similar to the concept of affirmative defense.106
The logic of affirmative defense entails that the defendant is the one that has to prove through supporting evidence that they do not bear criminal liability for the act they have committed or have been accused of committing.107 On the other hand, Poland claimed that the only burden of the respondent when invoking police powers, was to demonstrate a “reasonable connection between its actions and a legitimate policy objective”.108 To balance out the propositions of both disputing parties, the Tribunal settled on requiring prima facie justifications from the state for its regulation while it required the claimant to demonstrate how the regulation differed from a lawful application of police powers.109
108Ibid (n 105) para 580.
107Definition of Affirmative Defense (Faculty of Law Cornell University)
<www.law.cornell.edu/wex/affirmative_defense> accessed on 17 April 2022.
106Ibid (n 105) para 579.
105Les Laboratoires Servier, saa, Biofarma, sas, Arts et Techniques du Progres sas v. Republic of Poland, UNCITRAL, Award, 14 February 2012, para 569, <www.italaw.com/cases/1179> accessed on 17 April 2022.
104Ibid (n 93) 396.
103In ADC Affiliate Limited and ADC & ADMC Management Limited v. Republic of Hungary, ICSID Case No.
ARB/03/16, Award, 2 October 2006, para 432, the tribunal declared that police power are “not unlimited and must have its boundaries”, requiring proportionality.
102Ibid (n 101).
101UNCITRAL, Partial Award, 13 November 2000,
para 282 <www.italaw.com/sites/default/files/case-documents/ita0747.pdf> accessed on 17 April 2022.
100Ibid (n 93) 397.
II. 2 A comparative study of Article 14 of the PAIC and Article XX of the GATT
In this section of Chapter 2, this paper will now dive into a comparative analysis of Article 14 of the PAIC and Article XX of the GATT. This will be conducted to expose how the legal protection of police powers can be achieved in the international investment regime and in the international trade regime. Throughout this comparative analysis, it will be important to remember that the PAIC is still in its draft phase and as such is not enforced yet.
This analysis aims at evaluating the potential of the initiative of the PAIC with a comparable legal instrument. Unfortunately, no legal instrument of a similar nature is currently enforced in the international investment regime which is why this paper has to rely on the GATT, which has an extensive jurisprudence of settling disputes relating to the exercise of police powers in the context of international trade. Following the advice of Keene, conclusions that will be drawn from this comparative analysis will be interpreted with nuance and without the assumption that the Article 14 of the PAIC would be interpreted by Arbitral Tribunals in the exact same manner as Article XX.110
A) General Exceptions in the PAIC & the GATT
In the last section of Chapter I of this thesis (I.3), it was highlighted that while this form of provision was a widespread legal feature in international treaties, large amounts of case law emphasizes how a lack of consensus over their interpretation remains.111 A review of an article by Henckels exposed that the purpose of general exceptions was to provide legal permissions and flexibility for states to exercise their police powers.112
112Ibid (n 70) 557.
111Ibid (n 70).
110Ibid (n 61).
The General Exceptions provision of Article XX is structured in two parts, first the chapeau which works as the requirements which limit the use of the general exceptions and second the list of possible exceptions.113 In terms of practice, the interpretation of this provision has been outlined by the Appellate Body (AB) in the 1998 US-Shrimp case. The AB indicated that to decide whether a state measure could be defended under Article XX, it first has to be tested on whether or not it fits in one of the exceptions listed in Article XX.114 After looking at the nature/design of the measure, then the test of the chapeau is conducted on the measure.115 This decision of the AB in the US-Shrimp case has become the standard interpretation sequence for Article XX in the international trade regime.
Article 14 of the PAIC is structured in three sections. It is substantially shorter and less detailed than the general exceptions clause of the GATT as the rules of the multilateral trading system are more detailed than investment treaty clauses. In the PAIC, the first paragraph of the general exceptions clause mixes elements of the chapeau with elements of the list of exceptions that can be found in Article XX.116Such elements include the list of exceptions which are “the protection of human, animal or plant life or health, or to the maintenance of international peace and security, or to the protection of its national security interests”.117Another key part of Article 14 is its chapeau which outline the “requirement that these measures are not applied [as] means of arbitrary or unjustifiable discrimination between investors in like circumstances or a disguised restriction on investment flows”.118
The second section of Article 14 is drafted as a protection of the right of states to regulate and protect life and health.119 Ultimately, its purpose is to guarantee that the pursuit of foreign investment cannot compromise lawful applications of the police powers of states. This higher level of protection of police powers is not found in Article XX of the GATT. The third section of Article 14 provides the possibility for other states to request information from the state issuing
118Ibid (n 113).
117Ibid (n 20).
116Ibid (n 20); Ibid (n 59).
115Ibid (n 113).
114US: Import Prohibition of Certain Shrimp and Shrimp Products – Report of the Appellate Body (12 October 1998) WT/DS58/AB/RW.
113Ibid (n 69).
the new regulations over the reasons motivating the reform and indicates a clear timeframe for the regulating state to share that information.
In the context of the international investment regime, the lack of jurisprudence when it comes to general exceptions defenses will lead this paper to focus on the techniques used by ISDS to decide whether a regulation forms an exercise of police powers. The technique to rule whether a reform amounts to a regulatory taking or not is common to ICSID and UNCITRAL arbitration.120 Using the presentation provided by Baltag121, it is possible to appreciate that it is a technique similar to the one outlined by the AB in the US-Shrimp case.122
The test used in ISDS combines the requirement for public interest purposes outlined in the S.D.
Myers v. Government of Canada case123 and criteria recognized as the defining standard for lawful exercise of police power. Such standards include the use of good faith, public purpose124, proportionality125 and non-discrimination126. All in all, it resembles interpretation of Article XX, since it looks at the purpose of the measure and whether it fits the public purpose of general exceptions and tests the measure against criteria of good faith, proportionality and non-discrimination. Like the second part of the first section of Article 14 and the chapeau of Article XX, this standard aims at preventing abuses through arbitrariness and limiting police powers.
B) Article XX & Proportionality Test
This subsection will aim at comparing the proportionality test that is performed in investment arbitration on the basis of the Tecmed v. Mexico award and the tests related to Article XX and its the chapeau.127 This analytical comparison will be performed to understand the similarities and differences between the interpretation of general exceptions in dispute settlement in the
127Ibid (n 50).
126Ibid (n 93) 396.
125Ibid (n 103).
124Ibid (n 101).
123Ibid (n 101).
122Ibid (n 114).
121Ibid (n 93).
120Ibid (n 93).
international investment and trade regimes. By highlighting the common features and differences in interpretation, this analysis will generate knowledge on the potential effects of Article 14 of the PAIC on ISDS if it were to be enforced.
The proportionality test just like the chapeau of Article XX aims at evaluating the level to which the measure, which breaches the obligations of the state under international law, serves and guarantees a protection of the public purpose it targets. According to the 2003 TECMED v.
Mexico award, a proportionality test is required to assess whether there is enough correlation between the public policy objective and regulation issued to achieve it.128This is done in order to filter out arbitrary and discriminatory measures which use public policy as an pretext. Both the proportionality test and the chapeau of Article XX as interpreted by the AB in the US-Shrimp ruling provide a test to differentiate between regulation which are effective means to protect public interest and arbitrary and discriminatory ones.
In his article ‘The Boundaries of Regulatory Expropriation in International Law’, Newcombe defines the TECMED award as “unique” as it relies on the concept of proportionality as defined by the European Court of Human Rights jurisprudence of the Protocol No. 1 of the Convention for the Protection of Human Rights and Fundamental Freedoms.129 He also outlines three clear steps provided in the award to assess the proportionality of a measure. The first assessing factor looks at the goals and the reasonableness of the measure, the second evaluates the level of economic rights deprivation suffered by the investor and the third takes into consideration the legitimate expectations of the investor.130 Overall, the emphasis on the interpretation sequence of the proportionality test in the TECMEC award provided by Newcombe highlights how both the international investment and trade regime consider the existence of a public purpose not enough to justify the exercise of police powers by host states.
Just like in the TECMED tribunal, in the 2000 Korea-Beef case, the AB of the WTO also emphasized how the existence of a public purpose is not enough to justify the exercise of police
130Ibid (n 129) and H Mountfield, ‘Regulatory Expropriations in Europe: The Approach of the European Court of
129AP Newcombe, ‘The Boundaries of Regulatory Expropriation in International Law’ (2005) 20 IRFILJ 1.
128Ibid (n 50) para 98.
powers by host states.131 Indeed, the AB advanced that in the context of Article XX(d) the responding state had to demonstrate the necessity of its measure, in this case the “dual retail system”. The concept of necessity in this context is “not limited to that which is “indispensable”
or ‘of absolute necessity’ or ‘inevitable’ ”.132 The AB introduced what they referred to as a
“range of degrees of necessity” which has “essential to” at one end of the spectrum and “makes a contribution to” at the opposite end.133 All in all, like the three factors introduced by the TECMED award, the conclusion drawn from the Korea-Beef case point to the existence three aspects to evaluate a measure: the importance of the goal of the measure, the extent to which the measure is restrictive of international trade and the extent to which the measure contributes to goal it targets (proportionality).
Another interesting point to compare between the investment and trade regimes is the burden of proof when it comes to assessing a state measure is arbitrary and discriminatory or not. As highlighted previously, the Laboratoires Servier v. Poland case134provided an interesting splitting of the burden of proof between the respondent who had to provide prima facie justifications for its measure and the claimant who had to provide proof of the arbitrary or discriminatory nature of the measure.135 In the EC - Seals case136, the AB also provided an outline of the burden of proof sequence. They declared that the respondent first bears the burden of showing that the measure is justified under one of the paragraphs of Article XX and thus necessary, then the claimant has to provide that reasonable alternative which the respondent will have the burden of proving that there are no reasonable alternatives available. The sequence provided in the EC - Seals case resembles the attempt to strike a balance of burden between claimant and respondent that was achieved in the Les Laboratoires Servier v. Poland Case.
Despite these similarities between the international investment and trade regime, an argument advanced by Lydgate shows a change in the interpretation of the chapeau of Article XX by the AB which has recently been putting an emphasis on the consistency and rationality of regulation
136European Communities: Measures Prohibiting the Importation and Marketing of Seal Products – Report of the Appellate Body (18 June 2014) WT/DS400/AB/R and WT/DS401/AB/R.
135Ibid (n 105) paras 582-585.
134Ibid (n 105).
133Ibid (n 131).
132Ibid (n 131).
131Korea: Measures Affecting Imports of Fresh, Chilled and Frozen Beef – Report of the Appellate Body (10 January 2001) WT/DS161/AB/R and WT/DS169/AB/R .