Potential Claims and Defences in International Investment Arbitration due to the Covid-19 Pandemic
Baver Mazlum MertStates have taken many measures to protect human health and the economy against the Covid-19 virus, which has been declared as a pandemic by the World Health Organization. The measures that have been taken have caused foreign investors to suffer losses in many sectors. It is likely that foreign investors who suffered damages will refer their claims to an international investment arbitration. The measures taken should be evaluated in light of some of the basic principles in international investment arbitration. First of all, if the measures taken by the host states due to the Covid-19 pandemic are against the legitimate expectations of the investors, they will be in violation of the fair and equitable treatment standard. Also, the responsibilities of the states may arise due to the acceptance of heavy and continuous interventions in the management of foreign investments as indirect expropriation. In addition, due to full protection and security standards, states have to provide a suitable business environment for foreign investors. Moreover, the measures taken due to the Covid-19 outbreak may be against the most favoured nation clauses. Lastly, if the host state does not provide support to foreign investors while providing support to its own investors in the same market, it may violate the national treatment standard. On the other hand, there are some conditions that can enable states to avoid responsibility for the measures they have taken due to the Covid-19 outbreak. In this context, states can benefit from the doctrine of necessity, force majeure, the police powers doctrine and treaty exceptions.
Covid-19 Salgını Sebebiyle Milletlerarası Yatırım Tahkimine Konu Olabilecek İddia ve Savunmalar
Baver Mazlum MertDünya Sağlık Örgütü tarafından pandemi olarak ilan edilen Covid-19 virüsüne karşı ev sahibi devletler insan sağlığını ve ekonomiyi korumak için birçok tedbir almıştır. Bu tedbirler başta havacılık, turizm ve enerji sektörleri olmak üzere birçok sektörden yabancı yatırımcının zarara etmesine sebebiyet vermiştir. Zarara uğrayan yabancı yatırımcıların ev sahibi devletler aleyhine milletlerarası yatırım tahkimine başvurmaları muhtemeldir. Bu noktada alınan tedbirlerin milletlerarası yatırım tahkiminde yer alan bazı temel ilkeler ışığında değerlendirilmesi gerekir. Öncelikle Covid-19 salgını sebebiyle ev sahibi devletlerin almış oldukları önlemler yatırımcıların “haklı beklentilerinin” aleyhine olduğu takdirde adil ve eşit davranma yükümlülüğüne aykırılık söz konusu olur. Yine yabancı yatırımların yönetimine yapılan ağır ve sürekli nitelikteki müdahalelerin dolaylı kamulaştırma olarak kabul edilmesi söz konusu olabilir. Ayrıca bazı yatırım anlaşmalarında devletler, yatırıma tam koruma ve güvenlik sağlayacaklarını belirtmişlerdir. Böyle bir taahhüdün olduğu anlaşmalar sebebiyle ev sahibi devletler yabancı yatırımcıya uygun bir iş ortamı sağlamak zorundadırlar. Yine en çok gözetilen ulus kaydının olduğu yatırım anlaşmalarına taraf devletlerin mensupları, Covid-19 salgını sebebiyle alınan tedbirlerde üçüncü bir ülkeye mensup yabancı yatırımcıdan daha dezavantajlı koşullara sahip olmaması gerekir. Ayrıca ev sahibi devletin aynı pazar içerisinde bulunan kendi yatırımcılarına destek sağlarken yabancı yatırımcıya sağlamaması durumunda ulusal muamele standardına aykırılık oluşabilir. Diğer yandan devletlerin Covid-19 salgını nedeniyle almış oldukları tedbirlerden dolayı sorumluluktan kurtulmalarını sağlayabilecek bazı savunmalar söz konusudur. Bu kapsamda zorunluluk hali, mücbir sebep, polis kudreti doktrini ve anlaşmalarda yer alan istisna hükümleri devletlerin yararlanabilecekleri bazı savunmaları oluşturmaktadır.
The Covid-19 outbreak, which was declared by the World Health Organization as a pandemic, has affected every country in the world. Governments wanted to reduce the impact of the pandemic in order to ensure public health and fulfil their political and economic goals. For this reason, they took measures such as travel bans, curfews, export and import prohibitions, and various interventions. Foreign investors are likely to suffer losses because of these measures, and as a result, they may file lawsuits against governments in international investment arbitration centres. The issues to be considered in these centres may differ according to the subject of the dispute and the provisions contained in any investment agreements entered into. Examples of specific issues that are usually considered investment arbitration cases are fair and equitable treatment, indirect expropriation, full protection and security, most favoured nation and national treatment. The measures taken by states, as a result of the Covid-19 outbreak, were evaluated in accordance with these above-mentioned principles.
There is no exact description of the “fair and equitable treatment” standard. However, when evaluating whether there was a breach of this standard in investment arbitration cases, the “legitimate expectation of the investor” plays a crucial role. For this reason, legislative changes that affect investors negatively may violate the fair and equitable treatment standard.
In the fight against the Covid-19 pandemic, some states have even intervened in the property rights of private legal persons. For example, some governments require companies to produce masks, ventilators, and medicines. In addition, some states intervene by requiring them to provide private hospitals, dormitories and hotels. In such cases, even if the ownership of the investment does not directly pass to the state, it may be possible that the benefits gained from the investment will be transferred to the state. For this reason, foreign investors can claim “indirect expropriation.”
Some investment agreements contain commitments by host states to provide “full protection and security” for the investment. In doing so, a safe business environment must be provided for the investor. For this reason, states should not take a passive attitude towards the Covid-19 outbreak. In other words, states should take the necessary measures and protect the investment physically and legally.
Due to the Covid-19 outbreak, it is possible for states to provide support to their own national investors or some foreign investors. In agreements that have a national standard of treatment, states should not provide more disadvantageous conditions to foreign investors in the same market than their own citizens. In agreements with the most favoured nation standard, the state should not provide the foreign investor with less advantageous conditions than another foreign investor. Additionally, the host state should not provide more disadvantageous conditions with respect to restrictions on imports and exports and tax increases. Host states should also not provide more disadvantageous conditions to investors of another state because the most favoured nation standard applies.
Although the measures taken by the host states above can be seen as unlawful, there are some cases where states can escape responsibility by using certain defences in international investment arbitration. In this article, there are five defences that states can use to escape liability for implementing these measures taken because of Covid-19. These are necessity, force majeure, distress, the police powers doctrine, and treaty exceptions.
In addition, it is possible for states to escape liability, on the grounds of the “doctrine of necessity”, because the pandemic is a serious and fundamental danger to humankind. However, it should be noted that in order for them to benefit from this doctrine, the host state must demonstrate that they had no alternative but to take the measure in question.
Another defence that states may wish to invoke is that of “force majeure”. However, in order for the state to benefit from this defence, it must demonstrate that the state cannot fulfil its obligations due to impossibility.
Since the measures implemented against the Covid-19 pandemic have the aim of protecting human life, the possibility of states benefiting from the “doctrine of distress” may be conceivable. However, distress refers to the act of the person working on behalf of the state to save human life in cases that are more instantaneous and the Covid-19 outbreak has been going on for about a year. Therefore, they may not be able to use this doctrine.
It should also be noted, that a host state should not have contributed to the situation in which the states were obliged to take precautions in order to use the defences arising from international customary law such as the doctrine of necessity, force majeure, and distress. For this reason, states must have taken “necessary” measures against the spread of the Covid-19 pandemic.
“The doctrine of police powers” is a doctrine that ensures that states are not responsible for the regulations they have made when considering public welfare. It is inevitable that states, who wish to protect their countries from the Covid-19 pandemic, will make various regulations. For this reason, it may be possible for states to escape responsibility through “the doctrine of police powers”. However, states must have acted in accordance with “the principle of reasonability” when creating these regulations.
Finally, some investment agreements contain “treaty exceptions” that can enable states to avoid liability. These provisions allow host states to opt-out of the investment agreement, especially in matters such as public health, public order and human life. In order to use “treaty exceptions”, urgency and necessity conditions are generally sought. States may decide what is necessary and what is urgent for their country. However, arbitration courts may refuse to accept the host state’s defence for abuse of this right by the state for unreasonable measures.
