E. Respondent cannot rely on the essential security defense (Art. 9 of the BIT)
as the allegation of leak of information was not substantiated to any
extent
1. Essential security exception, as a subgroup of general exceptions is used increasingly
among treaties and serves as a way for a state to protect its own essential security issues.1
E.1.Although Art. 9 of the BIT is self-judging, it does not exclude any kind of scrutiny
2. From the formulation of Art. 9 of the BIT, we can establish that this is a self-judging type
of exception clause. Wording of Art. 9 uses the same language and exactly same
formulation as 2005 USA-Uruguay BIT2
which stipulates that:
„Nothing in this Treaty shall be construed:
1. to require a Party to furnish or allow access to any information the disclosure of which it
determines to be contrary to its essential security interests; or
2. to preclude a Party from applying measures that it considers necessary for the fulfillment
of its obligations with respect to the maintenance or restoration of international peace or
security, or the protection of its own essential security interests.”
3. In type of language used, it also resembles to an Art. XXI of GATT, specifically Art. XXIb
which states:
„Nothing in this Agreement shall be construed:
(a) to require any contracting party to furnish any information the disclosure of which it
considers contrary to its essential security interests [...]”
4. The crucial identification sign of self-judging clause is a use of wording "it considers"3
or
"it determines" or "the ... State considers"4
relating to the phrase "necessary for the
protection of its essential security interests".
1
Newcombe, Paradell, pp. 488-99
2
US-Uruguay BIT, Art. 18
3
Compare to Canada Model BIT, Art. 10; US Model BIT Treaty , Art. 18
4
Compare to Mutual Assistence Convention, Art. 2(c)
5. The discourse whether the self-judging clause is a valid legal instrument can be traced back
to 1959 to the Norwegian Loans Case in which Judge Hersch Lauterpacht considered that a
self-judging exception to a declaration under Art. 36(2) ICJ Statute (the so-called Optional
Declaration) was in his words:
“invalid as lacking in an essential condition of validity of a legal instrument. This is so for
the reason that it leaves to the party making the Declaration the right to determine the extent
and the very existence of its obligation. [...] It is not a legal instrument. It is a declaration of
a political principle and purpose.”5
6. But since the consent is the fundamental basis for the binding nature of international law,
we can hardly view self-judging clauses as invalid, and this BIT, both parties displayed
consent with the wording of treaty.
7. It could be argued that an interpretation of Art. 9 having regard only to the ordinary
meaning of the phrase “it considers” would seem to reserve to the State invoking the
exception the whole discretion to decide whether the criteria of it are met. However, when
taking into account the object and purpose of the BIT it is obvious that any interpretation
of this exception must also take into account the effect that an exception such as Art. 9 has
on investor and his rights guaranteed by the BIT.
E.1.i. Self-judging clauses are reviewable by the principle of good faith
8. Also Art. 31(1) of the VCLT, stipulates that all treaties are to be interpreted in good faith
and in accordance with the ordinary meaning to be given to the terms of the treaty in their
context and in light of its object and purpose. VCLT also stipulates that, "every treaty in
force is binding upon the parties to it and must be performed by them in good faith"6
9. Therefore even the self-judging clause is reviewable under the principle of good faith. To
date there is no case that stood before ICSID regarding the self-judging clauses. Claimant
argues, that CMS Annulment decision, nor Sempra Annulment cannot be applied here, as
they reflect the entirely different essential security clause, which lacks the “it considers”
language, although the responding State made submissions regarding self-judging nature of
the Art. XI of the US-Argentine BIT.7
At the same time, we can infer from the cases
5
Lauterpacht in Norwegian Loans case, pp. 44, 48.
6
VCLT, Art. 26
7
CMS Annulment, § 112
concerning Argentine crisis, that self-judging clauses are at least reviewable by the good
faith test.8
There is a wide consent that a self-judging clause itself is not a bar to a
jurisdiction, rather it limits the standard of review.9
10. Among commentators several types of standard by the principle of good faith exist.
Hahn considers that the principle of good faith “requires parties who are in a special legal
relationship to refrain from dishonesty, unfairness and conduct that takes undue
advantage of another”.10
He considers the principle to be closely related to the principle of
abuse of rights, which provides that the exercise of a right for the sole purpose of evading
an obligation or of causing injury is unlawful.
11. Schloemann and Ohlehoff take the view that:
“A requirement of a minimum degree of proportionality between the threatened individual
security interest and the impact of the measure taken on the common interest in the
functioning of the multilateral system can be deduced from both the term ‘essential’ and,
more generally, the function of Art. XXI in the WTO system as a remedy for serious hardships
emanating from outside the WTO’s immediate regulatory realm.”11
12. In realm of ICJ, similar test as that of Hahn is being proposed in a separate declaration
in Djibouti vs France12
The majority judgment found that the appropriate standard of
review to apply to self-judging clauses was that of good faith.13
In his declaration, Judge
Keith found the appropriate standard of review to be based on the related concepts of good
faith, abuse of rights and misuse of power. Claimant also points out that in GabčíkovoNagymaros
Project was opined that the good faith obligation in Art. 26 of the VCLT
"obliges the parties [to a treaty] to apply it in a reasonable way and in such a manner that
its purpose can be realized.”14
8
CMS Annulment, §§ 122-3, Sempra Annulment, § 168-70. LG&E, § 214; Enron, § 339
9
See Hahn: GATT´s Security Exception; Schloemann, Ohlhoff: Constitutionalization and WTO; Akande,
Williams: International Adjudication on National Security, pp. 399-402; Reiterer: National Security Exception,
pp. 201-202; WTO Cuban Liberty Act case; Territorial and Maritime Dispute
10
Hahn: GATT´s Security Exception, p. 558
11
Schloemann, Ohlhoff: Constitutionalization and WTO, p. 424
12
Judge Keith in Djibouti v. France
13
See Djibouti v. France, § 205
14
Gabčíkovo-Nagymaros Project, § 142
E.1.ii. The interpretation arguing for impossibility of review is against the object and
purpose of the BIT
13. Claimant believes that the self-judging clause itself is an object of cognizance of
Tribunal. The interpretation of self-judging clause that it cannot be reviewed would create
a legal mechanism of extreme uncertainty between parties and potential investors,
therefore defeating the purpose and object of treaty regime. This can be compared to a
vehicle which breaks are so big, that they impede the movement of such vehicle, or a ship
which lifeboats that are so heavy, that they make the ship sink to the ocean floor.
14. Opulentia-Beristan BIT does contain a self-judging language, but it does not contain
an additional formulation use for example in India-Singapore CECA which provides that
any such security measure taken on the discretion on Party is non-justiciable.15
Therefore
even if this provision of treaty is self-judging, the Party invoking the Art. 9 must still act in
good faith and this good faith is subject to cognizance of tribunal.
15. In LG&E, suggested that good faith review would not differ significantly from the
substantive review undertaken by the Tribunal in the context of the non-self judging clause
in Art. XI of the United States-Argentine BIT.16
16. Self-judging clause is not a sort of escape tunnel, opt-out, exit-valve or break. It exist
so that a Party to a treaty have an option to not to fulfil its obligations that would
(potentially) harm its essential interests, in our case the protection of its own essential
security interests.
17. It does not make sense to believe that under wide interpretation this clause would not
frustrate the object and purpose of investment treaty, which is to “establish favourable
conditions for improved economic co-operation between the two countries, and especially
for investment by nationals of one Contracting Party in the territory of the other
Contracting Party; and acknowledging that offering encouragement and mutual protection
to such investments based on international agreements will contribute towards stimulating
business ventures that will foster the prosperity of both Contracting Parties.17
18. Wide and extended interpretation of self-judging clause will have detrimental effects
on motivation of state to fulfil its duties under any BIT. Exceptions to investment treaty
15
see India-Singapore CECA, Annex 5
16
LG&E, § 214
17
The BIT, Preamble
obligations shall be interpreted narrowly and this is consistent with their object and
purpose. This opinion was upheld by tribunals in Canfor Corporation et al. case, referring
to the GATT,18
and especially in Enron case, where was taught, that “any interpretation
resulting in an escape route from the obligations defined cannot be easily reconciled with
that object and purpose. Accordingly, a restrictive interpretation of any such alternative is
mandatory.”19
E.1.iii. The actual facts cannot justify an actual existence of a threat to essential security
19. In our case, we can hardly consider a newspaper interview with Beristian
governmental official to be a fully-potent stimuli capable of launching invocation of
essential security treaty exception.
20. Claimant agrees the state has the discretion to determine the measures to be taken to
combat or alleviate the conditions endangering its own essential security. However this
discretion is subject to some limitations. Firstly and most importantly the State must act in
good faith.20
21. In this case, Claimant holds belief that the act of invoking Art. 9 of the BIT was
unjustified and Respondent acted in bad faith and commit abuse of rights chiefly because
of these reasons:
• Leak of information was not substantiated to any extent, no ther evidence beside the
newspaper article, and moreover the source for this information was that of Beristian
origin. This puts the whole authority and verity of such information into question.
• Involvement of the CWF21
rather than police forces in the process of the expropriation and
the clearing of the premises of the Sat-Connect project which was based on executive
order which cannot be appealed, raises suspicion that Respondent did so to evade a due
process of law. Also, there is question whether the sole removal of personal was adequate
measure to counter alleged threat to essential security. By compelling the buy-out (via
controlling share in Beritech) Respondent seems to let its economic motives trump the
essential security of Beristan.
18
Canfor Corporation et al. case, § 187.
19
Enron Award, § 331
20
VCLT, Art. 26
21
Annex 2, Uncontested facts, § 11
• Last but not least, suitability of the system for the military purposes is still doubtful.22
The
system shall be used mainly for civilian purposes23
and no particular portion is designed to
be used exclusively for army.24
Therefore it is difficult to reasonably infer any threat to
national security, even if the alleged leak had taken place. Notwithstanding the existnce of
the confidentiality clause in the JV Agreement. This clause has an economic rationale,
common to regular commercial contracts, it has not a national security purpose. not Also
Respondent didn't even try to carry out investigation into matter and abide with and acted
on the sole newspaper Art..
22
Responses to Requests for Clarifications, 1st
, Resp. No. 178
23
Ibid.
24
Responses to Requests for Clarifications, 1st
, Resp. No. 121