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Between War and Peace: Intermittent Armed Conflict and Investment Arbitration

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International Investment Law and the Law of Armed Conflict

Part of the book series: European Yearbook of International Economic Law ((Spec. Issue))

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Abstract

During periods of armed conflict, a State’s treaty commitments may be suspended or replaced by other international legal obligations, often relating to international humanitarian law, the laws of war or international human rights law. However, international investment agreements (IIAs) may be distinct in this respect. A State’s ability to derogate from its IIA obligations during periods of armed conflict is likely to be extremely limited or impossible; many IIAs explicitly provide protections to foreign investors in times of armed conflict or war. What is less clear is how the incidence of armed conflict within the territory of a State subject to an investment treaty dispute is to be resolved by an arbitral tribunal when the armed conflict is not—and possibly cannot be—clearly defined; or where there are cycles of war and peace within short periods of time and relating to the same general situation. We address this question in the context of the Libyan Civil War, considering the most relevant standards of protection included in IIAs concluded by Libya, as well as the most likely defences which Libya may invoke to preclude wrongfulness for possible breaches of its IIA obligations.

Special recognition and thanks to research assistants, Darin Clearwater and Vivek Bhatt of the University of Edinburgh and Ylli Dautaj of Penn State Law, for their invaluable assistance, insight, and research on the topics discussed in this chapter.

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Notes

  1. 1.

    Draft Articles on the Effects of Armed Conflicts on Treaties (2011 Draft Articles), UNGA Res. 66/99, UN Doc. A/RES/66/99 (2011).

  2. 2.

    Agdemir (2016).

  3. 3.

    UN Security Council Resolution 1970, adopted by the Security Council at its 6491st meeting, UN Doc S/RES/1970, 26 February 2011. This Resolution also referred the Libyan State response to the protests to the International Criminal Court.

  4. 4.

    For an in-depth analysis of NATO’s involvement in Libya, see Gaub (2013).

  5. 5.

    In the summer of 2016, the HoR voted against the recognition of the GNA and continued to maintain its government in Tobruk. See The War Report 2017 – Libya: A Short Guide on the Conflict, Geneva Academy (2017), p. 3, www.geneva-academy.ch/our-projects/publications/detail/238-the-war-report-2017-libya-a-short-guide-on-the-conflict.

  6. 6.

    The UN Panel of Experts on Libya from June 2017 highlights the “foreign support for both factions.” UN, Final Report of the Panel of Experts in accordance with para. 13 of Resolution 2278, UN Doc S/2017/466, 1 June 2017, www.un.org/ga/search/view_doc.asp?symbol=S/2017/466. See also the 2017 Human Rights Watch World Report that notes British Special Forces, French intelligence operations, and an American air campaign, among other types of foreign support. World Report: Libya, Human Rights Watch (2017), www.hrw.org/world-report/2017/country-chapters/libya.

  7. 7.

    See EU-Libya Relations, European Union (2017), https://eeas.europa.eu/sites/eeas/files/factsheet_eu-libya-relations.pdf; see also Fishman (2017).

  8. 8.

    Macron brings Libyan Rivals Together, Ruffles Feathers, Arab Weekly, 30 July 2017, https://thearabweekly.com/macron-brings-libyan-rivals-together-ruffles-feathers.

  9. 9.

    GDP Growth (Annual %), World Bank, http://data.worldbank.org.

  10. 10.

    In addition to the Turkish firms in Libya, there are a number of non-Turkish entities with projects in Libya: including entities from Austria (Strabag), Russia (Russian Railways), Cyprus (Olin Holdings), China (China Railway Construction Company), South Korea (Daewoo), Kuwait (Al-Kharafi), Brazil (Odebrecht), Greece (Consolidated Contractors), Egypt (El-Abd Construction), the United Arab Emirates (UAE) (DS Construction), UK (Magna Holding), the US (Hill International), and Italy (Impregilo).

  11. 11.

    Some of the major Turkish construction firms with large projects in Libya include: Güriş İnşaat, Rönesans İnşaat, Summa İnşaat, Cengiz İnşaat, Enka İnşaat, Tekfen İnşaat, Ustay İnşaat, TAV İnşaat, Ertak İnşaat, and Nurol İnşaat.

  12. 12.

    Müftüler-Baç (2016), p. 54.

  13. 13.

    Libya Evacuations by Country, Reuters, 27 February 2011, www.reuters.com/article/idUSLNE71Q00B20110228.

  14. 14.

    International Investment Agreements Navigator, UNCTAD, http://investmentpolicyhub.unctad.org/IIA.

  15. 15.

    Organization of the Islamic Conference Agreement on Promotion, Protection and Guarantee of Investments (1981).

  16. 16.

    League of Arab States Unified Agreement for the Investment of Arab Capital in the Arab States (1980).

  17. 17.

    Convention on the Settlement of Investment Disputes between States and Nationals of Other States, 17 UST 1270, TIAS 6090, 575 UNTS 159 (1965).

  18. 18.

    Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 330 UNTS 38; 21 UST 2517; 7 ILM 1046 (1968).

  19. 19.

    Mohamed Abdulmohsen Al-Kharafi & Sons Co. v Libya, Cairo Regional Centre for International Commercial Arbitration (CRCICA), Final Award (22 March 2013); Technically speaking, Libya’s first ITA case is Intersema v Libya, which was brought under the Switzerland-Libya BIT in the mid-2000s, see Intersema Bau A.G. v Libya, UNCITRAL, Award (24 August 2010). But see also two additional ITA cases that relate to disputes that pre-date the first Libyan Civil War, Olin Holdings v Libya, International Chamber of Commerce (ICC), Award (25 May 2018); Sorelec v Libya, UNCITRAL, Consent Award (1 May 2016).

  20. 20.

    The claim was filed in early 2015 and while the exact claims are unknown (case is confidential), it is safe to assume that Tekfen is alleging violations of standard BIT-type standards such as fair and equitable treatment, expropriation, and full protection and security. Tekfen İnşaat also has a related parallel claim arising out of a contract-based ICC arbitration clause. See Tekfen İnşaat I v Libya /Emphasis> (BIT and OIC Agreement claim), ICC (2016), pending; <Emphasis Type="Italic">Tekfen İnşaat II v Libya (contract claim), ICC (2016), pending.

  21. 21.

    Strabag SE v Libya, ICSID Case No. ARB(AF)15/1 (2015), pending.

  22. 22.

    See As Libya begins to see wave of investment treaty arbitrations, at least seven Turkish BIT claims are pursued at ICC, IA Reporter, 31 March 2017, www.iareporter.com; Libya disputes: more details emerge about constitution of arbitral tribunals hearing ad-hoc and ICC investment treaty claims, IA Reporter, 1 May 2017, www.iareporter.com; Libya investment treaty claims: another claim surfaces and another tribunal is finalized, IA Reporter, 29 June 2017, www.iareporter.com.

  23. 23.

    Nurol İnşaat II v Libya, ICC (2017), pending; Nurol İnşaat I v Libya, ICC (2017), discontinued; Ustay İnşaat v Libya, ICC (2017), pending; Tekfen İnşaat I v Libya, ICC (2016), pending; Güriş İnşaat v Libya, ICC (2016), pending; Cengiz İnşaat v Libya, ICC (2016), pending; Turkish Investor v Libya, ICC (2016), pending; Etrak v Libya, ICC (2015), pending; South Korean Investor v Libya, UNCITRAL (2016), pending; German Investor v Libya, ICC (2016), pending; DS Construction v Libya, ICC (2016), pending.

  24. 24.

    Interestingly, in May 2017, the Libyan Privatization and Investment Board organized an Investment Summit in Istanbul for the purposes of demonstrating Libya’s interest in attracting foreign investment, despite the fact that foreign investor suits continue to pile up. See www.libyainvestsummit.com.

  25. 25.

    International Committee of the Red Cross (ICRC), Geneva Convention Relative to the Protection of Civilian Persons in Time of War (Fourth Geneva Convention), 12 August 1949, 75 UNTS 287 (1949).

  26. 26.

    Common Article 3 Fourth Geneva Convention.

  27. 27.

    ICRC, Protocol Additional to the Geneva Conventions of 12 August 1949, and relating to the Protection of Victims of Non-International Armed Conflicts (Additional Protocol II), 8 June 1977, 1125 UNTS 609 (1977).

  28. 28.

    Additional Protocol II.

  29. 29.

    ICRC, Protocol Additional to the Geneva Conventions of 12 August 1949, and relating to the Article 1(2) of the Protection of Victims of Non-International Armed Conflicts (Protocol II).

  30. 30.

    UN, Vienna Convention on the Law of Treaties (VCLT), 23 May 1969, 1115 UNTS 331 (1969).

  31. 31.

    Article 2(a) of the 2011 Draft Articles.

  32. 32.

    Article 2(b) of the 2011 Draft Articles.

  33. 33.

    Articles 2(b), 3 of the 2011 Draft Articles; Article 2, Commentary, para. 4 of the 2011 Draft Articles.

  34. 34.

    Article 3 of the 2011 Draft Articles.

  35. 35.

    Article 4 of the 2011 Draft Articles.

  36. 36.

    Article XI of the US-Argentina BIT (1991). Another example can be found in the Finland-Tanzania BIT (2001), Article 15(2), which states: “Nothing in this Agreement shall be construed as preventing a Contracting Party from taking any action necessary for the protection of its essential security interests in time of war or armed conflict, or other emergency in international relations.”

  37. 37.

    Article 5 of the 2011 Draft Articles.

  38. 38.

    Article 5, Commentary, para. 3 of the 2011 Draft Articles.

  39. 39.

    2011 Draft Articles.

  40. 40.

    Article 6 of the 2011 Draft Articles.

  41. 41.

    Article 7 of the 2011 Draft Articles.

  42. 42.

    See e.g., Ostřansky (2015); Ackermann T (2016) The ILC Draft Articles on the Effects of Armed Conflicts on Treaties: Room for Termination or Suspension of Bilateral Investment Treaties? Working Paper, http://minervaextremelaw.haifa.ac.il/images/Ackermann_Armed_Conflicts_and_BITs_Minerva_Working_Paper.pdf.

  43. 43.

    In fact, the Commentary to Article 5 of the 2011 ILC Draft Articles states: “treaty mechanisms of peaceful settlement for the disputes arising in the context of private investments abroad […] may […] come within group (e) as ‘agreements concerning private rights.’” See Article 5 of the 2011 Draft Articles, Commentary.

  44. 44.

    Article 9 of the 2011 Draft Articles.

  45. 45.

    Article 10 of the 2011 Draft Articles.

  46. 46.

    Article 18 of the 2011 Draft Articles.

  47. 47.

    Article 16 of the 2011 Draft Articles.

  48. 48.

    See e.g., UN Security Council Resolution 1973, adopted by the Security Council at its 6498th meeting, UN Doc S/RES/1973, 17 March 2011, para. 4.

  49. 49.

    Schreuer (2011).

  50. 50.

    Many of the infrastructure and construction projects in Libya that are now subject to ITA claims had already been ongoing at the time of the first Libyan Civil War. Yet, the contracts between Libya (and its entities) and foreign investors were neither suspended nor terminated after the start of either the first of second Libyan Civil Wars. This has produced a backlog of unpaid progress payments for work already completed. Furthermore, with the contracts still operating, bank guarantees still require continued payment and renewal.

  51. 51.

    As could be expected, the first and second Libyan Civil Wars have resulted in physically damaged and requisitioned property at foreign investor’s construction project sites in Libya. In a number of cases, Libya might have failed to provide protection to foreign investors and their investments.

  52. 52.

    See e.g., Pantechniki SA Contractors & Engineers v The Republic of Albania, ICSID Case No. ARB/07/21, Award (30 July 2009), para. 81.

  53. 53.

    Article 5 of the Turkey-Libya BIT (2011) (Compensation for Losses).

  54. 54.

    Article 5(5) of the US Model BIT (2012).

  55. 55.

    Asian Agricultural Products Ltd v Republic of Sri Lanka, ICSID Case No. ARB/87/3, Final Award (27 June 1990); American Manufacturing & Trading, Inc. v Republic of Zaire, ICSID Case No. ARB/93/1, Award (21 February 1997); Pantechniki SA Contractors & Engineers v The Republic of Albania, ICSID Case No. ARB/07/21, Award (30 July 2009); Ampal-American Israel Corp. & Others v Arab Republic of Egypt, ICSID Case No. ARB/12/11, Decision on Jurisdiction and Liability (21 February 2017); Yosef Maiman & Others v Arab Republic of Egypt, PCA, UNCITRAL, Award (9 February 2017).

  56. 56.

    Article 25 of the Draft Articles on Responsibility of States for Internationally Wrongful Acts with Commentaries (2001 ILC Draft Articles on State Responsibility), UN GAOR 6th Comm., 56th Sess. (2001).

  57. 57.

    Article 25 of the 2001 ILC Draft Articles on State Responsibility.

  58. 58.

    LG&E Energy Corp., LG&E Capital Corp., and LG&E International, Inc. v Argentine Republic, ICSID Case No. ARB/02/1, Award (25 July 2007).

  59. 59.

    Notably the tribunal in CMS v Argentina arrived to such a conclusion. See CMS Gas Transmission Co. v Argentine Republic, ICSID Case No. ARB/01/8, Award (12 May 2005), paras 322, 323.

  60. 60.

    CMS Gas Transmission Co. v Argentine Republic, ICSID Case No. ARB/01/8, Award (12 May 2005), paras 322, 323.

  61. 61.

    CMS Gas Transmission Co. v Argentine Republic, ICSID Case No. ARB/01/8, Award (12 May 2005), para. 329. Enron Corp. and Ponderosa Assets, L.P. v Argentine Republic, ICSID Case No. ARB/01/3, Award (22 May 2007), para. 311.

  62. 62.

    Article 25 of the jurisprudence arising out of the Argentinian ITA cases involving the US-Argentina BIT (1991) dealt with the relationship between the Non-Precluded Measures clause (Article XI) in that treaty and the application of the customary international law defence of necessity as articulated in the 2001 ILC Draft Articles on State Responsibility. For an overview, see Burke-White and von Staden (2008).

  63. 63.

    Article 25, Commentary, para. 21 of the 2001 Draft Articles on State Responsibility.

  64. 64.

    Article 27 of the 2001 Draft Articles on State Responsibility.

  65. 65.

    Article 23, Commentary, para. 1 of the 2001 Draft Articles on State Responsibility.

  66. 66.

    Article 23, Commentary, para. 2 of the 2001 Draft Articles on State Responsibility.

  67. 67.

    Simon Hentrei and Ximena Soley, Force Majeure, The Max Planck Encyclopedia of Public International Law (2011), http://opil.ouplaw.com/view/10.1093/law:epil/9780199231690/law-9780199231690-e1042, para. 12.

  68. 68.

    Simon Hentrei and Ximena Soley, Force Majeure, The Max Planck Encyclopedia of Public International Law (2011), para. 13.

  69. 69.

    Simon Hentrei and Ximena Soley, Force Majeure, The Max Planck Encyclopedia of Public International Law (2011), paras 14–15.

  70. 70.

    Article 23, Commentary, para. 8 of the 2001 Draft Articles on State Responsibility.

  71. 71.

    Ampal-American Israel Corp. & Others v Arab Republic of Egypt,ICSID Case No. ARB/12/11, Decision on Jurisdiction and Liability (21 February 2017).

  72. 72.

    Article 23, Commentary, para. 8 of the 2001 Draft Articles on State Responsibility.

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Authors and Affiliations

  1. School of Law, University of Edinburgh, Edinburgh, UK

    Ana Maria Daza-Clark

  2. Liverpool Law School, Liverpool, UK

    Daniel Behn

  3. Pluricourts, University of Oslo, Oslo, Norway

    Daniel Behn

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  1. Ana Maria Daza-Clark
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Correspondence to Ana Maria Daza-Clark .

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  1. Law School, University of Zaragoza, Zaragoza, Spain

    Katia Fach Gómez

  2. Athens Public International Law Center, National and Kapodistrian University of Athens, Athens, Greece

    Anastasios Gourgourinis

  3. French National Centre for Scientific Research (CNRS)-CERSA, University Paris II Panthéon-Assas, Paris, France

    Catharine Titi

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Daza-Clark, A.M., Behn, D. (2019). Between War and Peace: Intermittent Armed Conflict and Investment Arbitration. In: Fach Gómez, K., Gourgourinis, A., Titi, C. (eds) International Investment Law and the Law of Armed Conflict. European Yearbook of International Economic Law(). Springer, Cham. https://doi.org/10.1007/978-3-030-10746-8_3

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