Due to the Covid-19 crisis, the governments of all States have been forced to implement extraordinary legislative measures, with very different scope and effect on foreign investments.
Many of these measures may breach the provisions contained in certain bilateral investment treaties (BITs). This article will analyse some of these measures, as well as the possibilities for investors to trigger protection of their investments and the possible States defences.
Measures adopted by States
States have implemented legislative measures of very diverse nature and typology, through widely different procedures. Consequently, the sectors most affected by conflicts regarding foreign investment will be very different in each country.
Nonetheless, we can highlight, among others, the following measures:
- Establishment of significant limitations on commercial operations and on the productive sector, agreeing to stoppage of non-essential businesses (adopted by the majority of States).
- Protection of industrial property in the health and pharmaceutical or related sectors, by establishing compulsory licences (Germany, Canada or Israel).
- Related to the compulsory production of sanitary material (United States).
- Temporary nationalization of private hospitals and seizure of medical and/or related material (Spain, Italy and Ireland).
- Prohibition or indirect obstruction of the distribution of dividends (United Kingdom).
- Restrictions on the export of medicines and food (Russia, India or Ecuador).
- Suspension of fee collection by private operators, e.g. of motorways or tolls (Peru).
- Protection of the domestic economy from foreign investment in purchases of risky assets (Australia).
Possible principles that may be invoked by investors
Once a dispute over a foreign investment occurs as a result of some measure implemented by a State, specifically the BIT and its provisions should be analysed first, as they should prevail in any case.
In particular, possible exclusions from the BIT and whether there are provisions for non-precluded measures, allowing for exceptional measures to be taken in extraordinary circumstances to protect an essential interest of the State, or whether the invocation of exceptional circumstances for non-compliance with the treaty is expressly excluded, should be analysed.
In addition, other issues will need to be appraised, such as:
- if the process for implementing the measure has been transparent,
- if there has been a properly and non-discrimination process,
- if the measure was necessary or there were no other less invasive ways,
- if there was some kind of compensation, etc.
It will even be of major relevance if the state has contributed to the creation of the crisis.
Furthermore, it will also be necessary to attend to consuetudinary law and invoke principles such as standards of full protection and security, the prohibition of direct or indirect expropriation, fair and equitable treatment or the most favoured nation clause.