The main purpose of this article is to analyse the interpretation and application methods of ‘essential security interests’ which is argued as a legal basis for state exemption from treaty responsibility. by Argentina accused in ICSID investor-state disputes.
Most of multilateral agreements such as MAI negotiation draft, Nafta, Energy Charter, GATT, GATS, OECD Codes, grant explicitly state’s self-judging power and innumerate applicable areas such as war, armed conflict, international peace and security, etc. that are non-economic areas. On the other hand, essential security interests stipulated in BIT is not clear on state’s self-judging and open the applicable area judged by the treaty interpreting power.
The ad hoc arbitration cowts , CMS(2005), LG&E(2006), SEMPRA(2007), ENRON(2007), Continental Casualty(2008), made different interpretation and application on essential security interests stipulated in the same article 11 of the US-Argentine BIT. Furthermore, CMS annulment committee(2007), SEMPRA annulment committee(201O), ENRON annulment committee(2010), Continental Casualty annulment committee(201l), made partial or total annulment of arbitral awards, establishing commonly acceptable conclusions:
First, economic crisis could be included in the essential security interests.
Second, essential security interest clause is not self-judging, requmng explicit disposition for the state party to determine what is in its own essential security interests. This interpretation is contrary to the official arguments of the US government and Argentina, and ignited the recent rush of reviewing BIT, FTA provisions of essential security interests to include self-judging character and expand its applicable areas.
Third. there is no clear rule of interpretation to decide which economic crisis and/or economic actions could be applicable to essential security interests. The annulment committees showed common position about the necessity requirements of Article 25 of the Articles on State Responsibility, understanding that Article 25 is not applicable directly to determine essential security interests.
Fourth, the three-fold analysis adopted in LG&E arbitral court could be used as general applicable rule of interpretation. Consequently, the tribunal should apply the BIT as lex specialis complemented by necessity doctrine where necessary.
Fifth. the recent trends of annulment committees is to exercise de facto appeal function. This trend explain easily that appeal mechanism is necessary to substitute actual annulment system.
Finally, most of the BITs that Korea celebrated have no essential security interest provision, requiring include adequate essential security interest clause that reflects the recent trends of investment arbitral tribunals.