International investment treaties accord foreign investors and their investments protection from unlawful encroachments by state authorities as well as violence by third parties. From the perspective of investors, this protection becomes especially relevant in times of armed conflict. For states, however, such times make the provision of this protection especially difficult. Arbitral proceedings in the aftermath of the so-called Arab Spring have laid bare unresolved issues and posed new challenges arising from the factual and legal implications of armed conflict. At the same time, international investment law is deeply rooted in issues of war and peace. Not only the first arbitration based on a modern bilateral investment treaty but also the historical precursors of international arbitration have touched upon armed violence and the treatment of aliens. This Introduction presents the themes of the book and provides an initial overview of the relevant legal framework and employed methodology.

Chapter 7 takes the analysis beyond the conduct of hostilities and issues related to physical damage to foreign investments. It addresses the rules on expropriation universally included in investment treaties and analyses them against the backdrop of armed conflict. The chapter shows that the protection from expropriation in times of armed conflict principally follows the same general parameters as in times of peace: investment treaties offer protection from abusive property seizures often observed during armed conflict as well as unreasonable or discriminatory restrictions on the use of property and businesses. When it comes to indirect expropriation, the chapter suggests to follow a mitigated version of the so-called police powers doctrine. While the debate on the delineation between expropriatory measures and non-compensable regulations is not new, the context of armed conflict provides new insights based on domestic and international case law on war-time property restrictions. Armed conflict and the interests involved, the chapter argues, broaden the scope of police powers and increase the state’s leeway in restricting the free enjoyment of property.

Chapter 8 concludes the analysis of the most important substantive investment treaty clauses by examining the fair and equitable treatment standard. It argues that armed conflict does not put into question certain guarantees of fair decision-making and adjudication, whereas it proposes a balanced relativisation of the protection of investor expectations in the context of armed conflict. The determination of whether treatment is fair and equitable can only be made in the light of the individual circumstances of conflict. When balancing the interests of investors in a stable regulatory framework against the state’s regulatory interests, the urgency and severity of these public interests in armed conflict should be accorded particular weight. Under the proposed reading, the fair and equitable treatment standard is flexible enough to consider the circumstances of an armed conflict in a balanced and nuanced way. Well aware of existing controversies and opposing lines of jurisprudence, the chapter suggests ways to embrace the standard’s flexible nature and counteract tendencies in arbitral practice that arguably overemphasise investor interests.

International investment treaties accord foreign investors and their investments protection from unlawful encroachments by state authorities as well as violence by third parties. From the perspective of investors, this protection becomes especially relevant in times of armed conflict. For states, however, such times make the provision of this protection especially difficult. Arbitral proceedings in the aftermath of the so-called Arab Spring have laid bare unresolved issues and posed new challenges arising from the factual and legal implications of armed conflict. At the same time, international investment law is deeply rooted in issues of war and peace. Not only the first arbitration based on a modern bilateral investment treaty but also the historical precursors of international arbitration have touched upon armed violence and the treatment of aliens. This Introduction presents the themes of the book and provides an initial overview of the relevant legal framework and employed methodology.

The general continuity of investment treaties stands in contrast to traditional rules, according to which the outbreak of war abrogated treaties between belligerents. Even today, it remains a common narrative that specialised customary rules exist on the (dis-)continuity of treaties at the outbreak of armed conflict. Chapter 2 critically scrutinises and ultimately rejects this doctrine of the effects of armed conflicts on treaties. While investment treaties also continue to operate under the International Law Commission’s ‘Draft Articles on the Effects of Armed Conflicts on Treaties’, remaining uncertainties as to the state of the law render a comprehensive examination necessary. The chapter argues that the Draft Articles and the doctrine they incorporate suffer from severe shortcomings. The better approach towards the effects of armed conflicts on treaties and more appropriate reading of contemporary international law, the chapter submits, is to discontinue the traditional invocation of specialised customary rules and reorient the debate exclusively toward general treaty law and the Vienna Convention on the Law of Treaties.

Chapter 9 examines security exceptions known to many investment treaties. These clauses are designed to expand the host state's room to adopt certain measures in the pursuit of security interests without having to compensate foreign investors. While seeking to enhance legal security, security exceptions remain ambiguous and controversial in many respects. The chapter conducts a comprehensive study of relevant case law, not only of recent investor-state arbitrations but also of the World Trade Organization’s dispute settlement body. On this basis, it offers guidance on the interpretation of elements common to security exceptions as well as on the level of review to be conducted by investment tribunals. The chapter delineates the limits of state discretion and proposes that international humanitarian law should have an impact on the application of security exceptions in the context of military operations. In evaluating drafting options, the chapter further assesses the merits of including a security exception in investment treaties and makes suggestions as to their wording and function.

Chapter 4 explains the relevant rules of armed conflict that provide for the protection against the effects of hostilities. To the extent that humanitarian law protects civilians and civilian objects, it also protects foreign investors and their investments, as far as natural persons and tangible assets are concerned. The chapter shows how the law of armed conflict balances military and humanitarian concerns and illuminates the operation of the principles of distinction, proportionality, and precaution. In analysing the limitations of this protection, the chapter further identifies circumstances in which harm to foreign investors and their investments may be lawful under international humanitarian law. In particular, the chapter shows how foreign investments can easily become military targets and under which circumstances inflicted damage can be an acceptable side effect of military operations. The chapter thus forms the basis for the subsequent examination of international humanitarian law’s impact on individual investment treaty standards.

Chapter 3 addresses the potential for norm conflict arising from the parallel application of investment treaties and international humanitarian law. It argues that such conflict must be avoided through treaty interpretation. Drawing from their interaction with human rights law, the rules of armed conflict should inform the meaning of investment treaty clauses through ‘systemic integration’. The chapter shows that investment tribunals possess the authority and duty to conduct such a subordinate examination under humanitarian law as part of the interpretive exercise. Although standards of protection may, as a result, be lower than in peacetime, the chapter argues that giving effect to humanitarian rules through investment law ensures the normative appeal of investment treaties. It allows taking into account military concerns and rejects special treatment of foreign investors compared to ‘ordinary’ civilians. At the same time, the chapter highlights, investment treaties give investors a unique opportunity to enforce international rules during armed conflict and secure compensation for unlawful conduct in hostilities.

Chapter 5 commences the book’s analysis of the operation of the most important investment treaty standards in armed conflict. It focuses on so-called war or armed conflict clauses. These provisions, present in many investment agreements, establish state obligations vis-à-vis investors who have suffered losses during armed conflict and other emergencies. Considering recent arbitral practice in the context of the so-called Arab Spring, the chapter gives guidance on how to understand these understudied clauses, their specific elements as well as their systematic function. While ‘basic’ armed conflict clauses establish a duty of non-discrimination in case the host state compensates other investors for losses suffered, ‘extended’ clauses give a standalone right to claim compensation for certain losses. These clauses convey such a right, among others, in case of requisitioning or unnecessary destruction at the hands of the state’s authorities or armed forces. The chapter shows how the general rules of attribution as well as the rules of international humanitarian law should crucially inform the application of these extended armed conflict clauses.