“We can't lower our guard. We are still far from half-time.”

- Erna Solberg, Norway’s Prime Minister.

International Investment treaty arbitration is a particular form of interstate arbitration involving the state on one side and a foreign investor on the other. The rights and obligations that are to be respected is enriched in the investment treaties and any dispute relating the same shall be resolved in light of investment treaty be it a bilateral investment treaty or a multilateral investment treaty. These international investment treaties mandate the host state to restrain themselves from carrying out any policy measures which shall infringe the obligations. However, in view of the novel COVID 19 Coronavirus pandemic the Host states have taken precautionary measures to suppress the infection and spreading of the virus which are not in consonance with the treaty obligations. This paper focuses on the same in detail and shall address the question “will states be liable to compensate the foreign investor for the measures taken in view of the COVID-19 pandemic?”


International investment treaties/agreements are enforced by nations across the globe with the prospect of economic and social development. There isn’t any jacket line definition to define Investment treaty arbitration however international investment treaties/agreements are nothing but set of rules and regulations which govern and protect the foreign direct investments. Owing to the increase in effective foreign direct investment policies across the world various international investment treaties has entered between different nations depending on the nature of investment and the interest that they hold in the investment which has caused a rapid increase in international investment arbitration internationally. These investment treaties impose legal obligations on the parties and where there is obligation, there is duty vested on the parties to not to breach the same. However, in case of any violation, the parties can opt for a dispute resolution mechanism to resolve the dispute or breach of duty amicably in light of the investment treaties. The common/preferred form of dispute resolution in investment treaty dispute is arbitration.

International investment arbitration is specialized form of dispute resolution relating to investor-state disputes in the realms of international commercial arbitration which takes place as per the rules ICSID arbitration, UNCITRAL rules or the ICC rules. International Investment arbitration is a system of inter-state arbitration and involves the interplay of various laws including public international law, treaty law, international investment laws relating to foreign direct investments and the rules of commercial arbitration.


The applicable law in these disputes is primarily public international law as it is dispute between a Host-state (Investee) and foreign investor (1). These treaties/agreements are interpreted by the arbitral tribunals in light of Vienna convention on law of treaties. The investment treaties mandate the Host state to follow the obligations which is enshrined in the investment treaty via various clauses. These obligations also form as base for claims when the dispute is taken to the arbitral tribunals in case of any breach or violation. The clauses are as follows:

  1. Applicability clause
  2. Fair and equitable treatment clause
  3. National treatment clause
  4. Most favoured nation clause
  5. Expropriation clause
  6. Umbrella clause

Arbitral Tribunals in various cases, such as Mobil Corporation, Venezuela Holdings BV and ors v Bolivarian Republic of Venezuela (2), Empresas Lucchetti, SA and Lucchetti Peru, SA v Republic of Peru (3), Bernardus Henricus Funnekotter and ors v Republic of Zimbabwe (4), and Phoenix Action Ltd v The Czech Republic (5) have way and again reinstated that these obligations cannot be violated nor breached by the Host state. A legitimate expectation is created in light of these clauses in the actions carried out by the investors relating to investment (6).

If the tribunal finds that the host states have taken any measure or introduced any policy in the land where the investor has invested is in violation with any or all of the said clause and legitimate expectation then the Host state has to compensate as a measure of repatriation (7).


At this point of time, the whole world is combatting against the Novel COVID-19 Coronavirus pandemic and various governmental organs around the global have taken various measures in light of the International Health Regulations (2005) (8) and WHO COVID-19 pandemic guidelines (9) to curb in spread of the virus. The governmental measures involve nationwide lockdowns, restriction on travel and inter-state trade both domestically and internationally. This has not only destroyed trade and commerce between the states but also has affected the economy of various developing and under-developing nations. Most of the measures taken by the government of the states are in violation of the clauses in the investment treaties and has drastically violated the legitimate expectation of the investors who have invested in the Host states, where the measures in view of COVID-19 have been taken. Since the obligations are considered paramount in investment treaties entered between the parties and no derogation whatsoever is accepted (10) in jurisprudence of investment arbitration, will the Host state compensate the investors for the violations due to the measures taken in view of the COVID-19 pandemic?


The states under international law are under responsibility to respect the legal obligations that are presented to them either by the general principles of international law or by treaty obligations. When deep analysis is given in the realms of Investment treaty, the Host state on one hand has the obligation to protect the citizens against the Novel COVID-19 coronavirus pandemic and should take adequate measures for the same. On the other hand, by doing so it shall violate the some or all of the clauses of the investment treaty. A complex web of legal issue arises here and which can only be negated by using the principles of international law.


According to the general principles of international law as well as the customary international law principles the states will not be in the position to pay compensation for the infringement of the investment treaty due to COVID-19 measures. The same can be justified by the following:

  • By invoking the exceptions clause under the treaty.
  • By invoking countermeasures under international law.

The above said will protect the Host state for the measures taken in light of COVID 19.

I. General exceptions in the investment treaty:

The investment treaties, be it Bilateral Investment treaty (BIT) or the multilateral investment treaty (MIT) shall contain a specific clause which shall set out certain principles as exceptions with regard to any measures that will be taken by the host states. An extract from the 2007 Canada-Peru BIT is as follows:

Subject to the requirement that such measures are not applied in a manner that would constitute arbitrary or unjustifiable discrimination between investments or between investors, or a disguised restriction on international trade or investment, nothing in this Agreement shall be construed to prevent a Party from adopting or enforcing measures necessary:

“Article 10 General Exceptions”

  • to protect human, animal, or plant life or health;
  • to ensure compliance with laws and regulations that are not inconsistent with the provisions of this Agreement; or
  • for the conservation of living or non-living exhaustible natural resources.

Thus, the measures taken by the host state can be justified by invoking the general exceptions clause which is provided in the BITs as well as MITs (11). Also, in the case Pope & Talbot v. Canada, the arbitral tribunal held that there must be a reasonable nexus between the measure taken the consequence (12) to consider a measure not a violation of investment treaty. A similar view was taken in the case of GAMI Investments, Inc. v. Mexico (13), where the arbitral tribunals observed that “plausibly connected with a legitimate goal of policy and applied neither in a discriminatory manner nor as a disguised barrier to equal opportunity”. In view of this jurisprudence in investment arbitrations, the states will not be liable to pay compensation.

II. Countermeasures under international law:

Customary international law provides certain exceptions which are not set out in the treaty, but have been codified in Articles on State Responsibility [ARSIWA] (14). These are considered to be countermeasures under General principles international law as well as under the customary international law principles provided as per Art. 22 of the ARSIWA (15). In Gabcíkovo Nagymaros Project case (16), ICJ clearly accepted that countermeasures might justify otherwise unlawful conduct “taken in response to a previous international wrongful act of another State and directed against that State.” This principle evolved in the in this case is a profound jurisprudence of international law and shall be applied in the case of COVID-19 measures as well. The ARISWA also lays down three other measures which is vital in the light of COVID-19 measures which are following:


Furthermore, arbitral tribunal in the Impregilo S.p.A. v. Argentine Republic has observed the same (20). Thus, under these grounds the measures taken by the states are justified and will not be liable to pay compensation in any form.

As an avid researcher of international law and international commercial arbitration the above-mentioned stands as a justification for the measures taken in view of COVID-19 pandemic and is lawful in the eyes of international law as well as per the rules of international commercial arbitration.

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  • Borzu Sabahi, Noah Rubins, Don Wallace, Jr, Investor-State Arbitration (2nd Edition), ISBN: 9780198755760 Oxford publication.
  • Mobil Corporation, Venezuela Holdings BV and ors v Bolivarian Republic of Venezuela Decision on Jurisdiction, ICSID Case No. ARB/07/27.
  • Empresas Lucchetti, SA and Lucchetti Peru, SA v Republic of Peru Award, ICSID Case No. ARB/03/4, IIC 88 (2005), at [53]
  • Bernardus Henricus Funnekotter and ors v Republic of Zimbabwe Award, ICSID Case No. ARB/05/6, IIC 370 (2009).
  • Phoenix Action Ltd v The Czech Republic Award, ICSID Case No. ARB/06/5, IIC 367 (2009), at [68].
  • Philip Morris Brands Sàrl et al. v. Oriental Republic of Uruguay, ICSID Case No. ARB/10/7, Award, at [422].
  • Yukos Universal Limited (Isle of Man) v. The Russian Federation, UNCITRAL, PCA Case No. 2005-04/AA227.
  • www.who.int/ihr/publications.
  • www.who.int/emergencies.
  • Joseph Charles Lemire v Ukraine, Decision on Jurisdiction and Liability ICSID Case No. ARB/06/18, IIC 424 (2010).
  • See also Jordan-Singapore (2004). China-New Zealand 2008, India-Singapore CECA (2005)
  • Pope & Talbot v. Canada Award, 10 April 2001 at paras. 78 and 79.
  • GAMI Investments, Inc. v. Mexico Final Award, 15 November 2004 at para. 114
  • legal.un.org/ilc/texts.
  • Art.22 The wrongfulness of an act of a State not in conformity with an international obligation towards another State is precluded if and to the extent that the act constitutes a countermeasure.
  • Gabcikovo-Nagumaros Project (Hung. v. Slovk.), 1997 I.C.J. 3
  • Article 23 ARSIWA.
  • Article 24 ARSIWA
  • Article 25 ARSIWA.
  • Impregilo S.p.A. v. Argentine Republic (ICSID Case No. ARB/07/17).