Necessity in the Time of Pandemics
May 12, 2020 by Digital Editor
By: Nicholas J. Diamond*
The novel coronavirus (“COVID-19”) pandemic continues to strain global economies and the public health infrastructure alike. States have adopted various emergency measures to respond to this significant threat. History suggests that such measures may trigger investor-state disputes in the future. Indeed, the possibility of subsequent investor-state disputes has been suggested and at least one state has already been warned of potential investment treaty arbitration over its emergency measures.
The landscape for state defenses in such potential disputes remains varied and complex. Among the many defenses that a state may pursue, this post focuses on the plea of necessity under the Articles on Responsibility of States for Internationally Wrongful Acts (“ARS”), and analyzes its content and relevance. It reaches two conclusions. First, a state would likely face notable challenges in raising the plea of necessity in the context of the pandemic. Second, as the prior case law addressing the plea of necessity demonstrates, how tribunals have weighed and balanced different prongs of the plea, as well as how the plea relates to lex specialis, have varied, which may result in inconsistent holdings in future disputes.
Article 25 of ARS
The plea of necessity under Article 25 of ARS is intended as a justification for an otherwise illegal act, which is to say it has the effect of rendering a state’s conduct not wrongful. The plea has four prongs, which are discussed in turn, making note of how a tribunal may consider each, were they to be raised by a state in the context of the pandemic.
Under Article 25(1)(a), the state’s act must “safeguard an essential interest against a grave and imminent peril”. The ILC does not define “essential interest”. The lack of objectivity here doubtless preferences state decision-making. Although, as the ICJ confirmed in Gabčíkovo, the state is not the “sole judge” of whether the requirements under Article 25 have been met. The case law reflects varied thresholds for what constitutes an essential interest. In a few cases, such as Sempra, the tribunal set a high threshold, weighing whether the situation giving rise to the challenged measures “compromised the very existence of the state and its independence”. In other cases, such as LG&E, the tribunal set a lower threshold, rejecting the need for imperiling the very existence of the state in favor of “any danger seriously comprising its internal or external situation”. Indeed, this lower threshold is the more common approach and has been adopted in several cases, as well as is reflected in both the ILC’s commentaries and Ago’s report to the ILC.
Given that the lower threshold has been the more common approach, state emergency measures adopted in response to the pandemic would, ceteris paribus, satisfy this prong. The pandemic has affected both entire state economies—and, indeed, the global economy—and public health. States could reasonably argue that the cumulative effects of the pandemic imperiled an essential interest, relying on metrics like the contraction of its economy during the pandemic and the consistently rising deaths attributable to COVID-19. In this sense, there can be little doubt that the circumstances rise to the level of a grave and imminent peril, not least because the cumulative economic and public health effects continue to compound by the day and at present show no signs of abating.
It is an open question whether the pandemic could satisfy the higher threshold adopted by a minority of tribunals. The pandemic would need to imperil the very existence of the state qua state—that is, it would cease to be a legal subject in the international community. In both Sempra and Enron, the tribunal held that significant economic hardship did not imperil the very existence of a state qua state because matters of public order and political stabilization could and were addressed without imperiling the independence of Argentina. In this sense, the tribunal seemed to subordinate economic threats to political ones, perhaps due to the narrow reading of this prong. At least at present, a state would find it difficult to sustain its argument under such a reading, absent evidence that the pandemic imperiled political order and its very statehood.
The Only Way
Under Article 25(1)(a), the states’ act must be the “only way” to protect an essential interest. As clarified by the ILC’s commentaries, this prong sets a high threshold, where the mere availability of other means, irrespective of cost or convenience, would preclude the plea. The jurisprudence of the ICJ in Gabčíkovo and Wall likewise adopted this high threshold. In the context of the Argentine economic crisis in approximately 2001 to 2003, several tribunals applied just such a high threshold, underscoring that the availability of other emergency economic measures, regardless of their potential effectiveness, precluded Argentina’s plea. In rare instances, such as LG&E and the annulment committee in Enron, a more permissive standard was applied, but these remain mere exceptions to an otherwise dominant trend.
The high threshold typically adopted by tribunals would likely prove problematic for states in the context of the pandemic. States arguably have countless courses of action available to address the impacts of the pandemic within their territories, especially if, as in the case law, tribunals do not consider cost or convenience in weighing this prong. Moreover, given the significant threat posed by the pandemic on both economic and public health fronts, states have been and may continue to be more likely to adopt far-reaching emergency measures in an effort to comprehensively address the threats. As tribunals weigh such measures, likely under a proportionality analysis framework, it may be difficult for a state to sustain an argument that other, less burdensome measures could not have first been adopted.
Under Article 25(1)(b), the state’s act must “not seriously impair an essential interest of the state . . . towards which the obligation exists, or of the international community as a whole”. Tribunals have generally given this prong cursory mention, accepting that the state has a significant interest in the well-being of its citizens. However, in a few cases, such as Impregilo, the tribunal weighed whether the claimant’s interests should be taken into account under this prong. It concluded that the interests of “a small number” of investors of a state did not qualify as an essential interest of that state.
States would be likely to fare well under this prong. Indeed, the importance of the state’s interests in the well-being of its citizens would likely significantly outweigh the interests of an investor or the investor’s home state. However, as Paddeu and Jephcott aptly note, the presence of human rights obligations may impact how a tribunal balances these considerations. Where emergency measures burden human rights relating to assembly, non-discrimination, expression, or participation, tribunals may weigh, inter alia: the duration of the measures (e.g., time-bound quarantine periods); whether the measures are motivated by legitimate public health goals, rather than as a pretext for discrimination; or whether the measures are inherently overbroad (e.g., a blanket prohibition on assembly in a large geographic area).
Under Article 25(2)(b), the plea would be precluded if “[t]he state has contributed to the situation of necessity”. As Sloane rightly points out, a state is likely to have contributed to the situation in at least some way, which suggests that this prong should be read permissively. Nonetheless, tribunals have inconsistently applied this prong. In Impregilo, the tribunal construed it to include conduct that was not intended or planned, but merely resulted from state conduct. In Urbaser, the tribunal required at least some degree of fault such that the state must have known that the emergency would be the outcome of its measures. In National Grid, the tribunal acknowledged the role of external factors, but nonetheless concluded that policies under the control of the state “created a fertile ground for the crisis to develop”. In Enron, the tribunal identified the compounding effect of policies stretching back a decade as relevant, although the annulment committee held that the tribunal had insufficiently addressed the issues.
Altogether, tribunals have construed the meaning of this prong inconsistently, imposing standards of intention or fault, and even looking well back in time to other purportedly relevant state acts or omissions. As such, noncontribution may represent a significant risk to the viability of the plea in the context of the pandemic. Based on such inconsistent case law, tribunals have a seemingly endless spectrum of state acts suggesting contribution to consider. Broadly, because the risks of epidemics and pandemics are readily known, tribunals may find that state have been “on notice” such that willfully ignoring preparedness efforts (e.g., inadequate public health funding or stockpiling of essential medical countermeasures) in the preceding years may preclude the plea.
Specifically, states have obligations under the International Health Regulations (“IHR”), a treaty between 196 states under the auspices of the World Health Organization (“WHO”), including, inter alia, surveillance (Article 5), notification (Article 6), consultation (Article 8) and public health response infrastructure (Article 13). The extent to which obligations under the IHR have not been satisfied both before and during the pandemic may factor into how a tribunal analyzes noncontribution. Moreover, because the WHO declared COVID-19 a public health emergency of international concern under the IHR, the extent to which states ignored or deviated from the WHO’s temporary recommendations made pursuant to Article 15 may factor into a tribunal’s analysis. Although a state may be able to successfully argue that its regulatory judgment affords some measure of deference, due to the fact that COVID-19 has not impacted every state uniformly, wide departures from the scope of WHO recommendations or, more problematic still, flouting recommendations altogether, may preclude the plea.
The future of investor-state disputes relating to state emergency measures in response to the pandemic remains uncertain. While other defense strategies for states would doubtless apply in future disputes, for the plea of necessity, states would face notable challenges, not least with regard to whether the challenged measures were the only way for the state to address the threats and the extent to which the state may have contributed to the emergency. While much of the litigation risk for states is arguably already established, states may be able to guard against future risks by appropriately tailoring the duration and scope of their measures as the pandemic evolves, especially as the threat subsides in the future, to ensure that existing or new measures are not overbroad. Moreover, there are specific actionable steps that states can take following the pandemic for preparedness purposes, such as those relating to their obligations under the IHR, which would not only reduce future litigation risk but, more importantly, protect and promote public health.
Relatedly, and specific to the plea of necessity, the relationship between Article 25 and lex specialis remains problematic. Article 55 of ARS provides that the Articles do not apply where a special rule of international law also applies. The ILC underscores that the lex specialis must not merely cover the same subject matter, but that there be an inconsistency present or an intention that one provision is to exclude the other. This contemplates BITs where, as in much of the case law following the Argentine economic crisis, general exceptions provisions, also called non-precluded measures provisions, might preclude the application of Article 25. Indeed, in the case law following the Argentine economic crisis, significant variability persisted across awards regarding the relationship between Article 25 of ARS and Article XI of the US-Argentina BIT, resulting in several annulments. Because general exceptions provisions remain common in BITs, and states would likely seek to rely on them as part of a defense strategy, tribunals would have to appropriately parse their relationship to Article 25 of ARS.
*Nicholas J. Diamond, JD, LLM, MBe is an Adjunct Professor of Law at Georgetown Law, a doctoral candidate in public international law at Leiden Law, and an advisor based in Washington, DC. He teaches, writes, and advises on issues at the intersection of economic interests, human rights, and the law.