Protecting National Security in International Investment Arbitration and the World Trade Organization Dispute Settlement Body: Features, Similarities, and Differences of Legal Approaches

INTRODUCTION. The protection of national security, as an expression of sovereignty, is acquiring growing significance in the field of international investment law. This is attributable to the fact that host States are increasingly invoking national security considerations both to justify the application of the police powers doctrine and to rely on the corresponding treaty-based national security exceptions. In doing so, they seek to exclude or minimise their international legal responsibility. This trend is particularly pronounced in investment disputes, where investors contend that restrictive measures ("sanctions") adopted against them violate the investment protection standards set forth in the investment agreement concluded between the State imposing the "sanctions" and the investor's home State. Furthermore, the issue of national security protection has an interdisciplinary character and is not confined to international investment law. Questions concerning the limits of State discretion when introducing restrictive measures, the content of the good faith requirement, and the reasonableness of invoking the national security exception have been progressively developed in the practice of the World Trade Organization (WTO) over the past seven years. Within this framework, a distinct approach to assessing measures justified by the need to protect national security has emerged.

MATERIALS AND METHODS. The aim of this study is to conduct a comparative analysis of the instruments for protecting national security interests in international investment arbitration and the WTO Dispute Settlement Body (WTO DSB). As the criteria for such analysis, the author has selected the following: the degree of State discretion in defining national security interests; the threshold of threat required for a lawful invocation of the instrument; the possibility of recourse to customary international law in its interpretation; and the requisite degree of connection between the contested measure and the protection of national security. The primary focus is placed on such instruments as the essential security interest exceptions in the practice of the WTO DSB and international investment tribunals, as well as the police powers doctrine as a potential justification for unilateral regulatory measures adopted by the host State. The methodological framework includes an analysis of the provisions of international investment agreements and WTO agreements, as well as an examination of the practice of investment arbitral tribunals, the WTO DSB and the European Court of Human Rights.

RESEARCH RESULTS. The presented analysis demonstrates that, in the practice of both international investment tribunals and the WTO Dispute Settlement Body (DSB), an approach has been established according to which a State’s invocation of the need to protect national security does not exempt the contested measures from objective review by adjudicative bodies. Such an approach serves as a safeguard against the abuse of this right. Recent practice particularly emphasises that the protection of national security is not a universal justification; consequently, measures must be applied in an individualised manner and in good faith. At the same time, alongside common trends, and on the basis of the identified comparative criteria, a number of differences are observed between the approaches of the WTO DSB and international investment arbitral tribunals.

DISCUSSION AND CONCLUSIONS. First, in international investment law, unlike WTO law, the selfjudging nature of a State’s invocation of the need to protect national security depends exclusively on the wording of the particular treaty, and the State's discretionary powers are limited by the requirements of non-discrimination and proportionality. Second, the threshold of threat required for a lawful invocation of the need to protect national security also varies: in the WTO, it is determined by the objective criterion of an “emergency”, whereas in investment arbitration it depends to a greater extent on the wording of the agreement, which may result in a lower threshold for the admissibility of State measures, particularly in the context of the application of the police powers doctrine. Third, a difference is observed in the determination of the content of the “necessity” standard of the contested measure for the protection of national security and the role of customary international law in that process. Investment arbitral tribunals interpret the “necessity” criterion inconsistently: while some adhere to the strict requirement of the “only possible solution” imported from customary international law, others interpret the term solely on the basis of the wording of the specific agreements. In the practice of the WTO DSB, the interpretation of necessity in the context of the national security exception is based entirely on the wording of the applicable WTO agreements, which is largely attributable to the more limited role of customary international law compared to investment arbitration. Finally, although both international investment law and WTO law require a direct link between the challenged measure and the necessity of protecting national security (a requirement particularly evident in the context of the police powers doctrine), the understanding of this link differs. Where investment tribunals interpret security exceptions by reference to customary international law, they insist that the challenged measure be the sole possible means of protecting national security interests. The identified differences in approaches create a risk of investors abusing the right to choose jurisdiction (forum shopping), as well as a risk of parallel proceedings.

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