States, as part of the Investor State Dispute Settlement -ISDS-, have tried to reduce the adjudicator’s discretion by incorporating new provisions or re-defining some core standards of treatment. States aim at strengthening their regulatory spaces appealing to the interaction between the international customary law obligations, such as fair and equitable treatment -FET- framed into minimum standard of treatment or the expropriation subject to the police power doctrine, and general exceptions clauses. However, cases as Eco Oro v. Colombia, Bear Creek v. Peru, and Copper v. Ecuador bring up questions around the strategy adopted by states.
It can be said that states at least try to set into treaties two levels of protection regarding their measures at stake in the dispute. One is based on international customary law (primary obligations) and the second one is based on general exceptions. The first ones bring more flexibility for states as the threshold of responsibility is higher. That means the burden of proof in charge of the investor demands more efforts. For instance, in the case of the fair and equitable treatment tied to minimum standard of treatment, the foreign investor should prove a breach of an obligation in terms of an opinio iuris and state practice whose standard matches to an egregious and shocking act, such as an arbitrary, grossly unfair or discriminatory conduct unacceptable under international customary law. In regards to expropriation, the police power doctrine allows states to take measures against the private interest without compensation based on the exercise of legitimate interests unless a discriminatory regulation or a bad faith measure had been carried out against the investor, or specific commitments had been given by the government to this latter.
Considering some drawbacks around the interpretation to primary or substantive obligations, states have entered into more sophisticated treaties, incorporating general exceptions. They are seen as the last resort states have to be excluded from the state liability and the payment of compensation as a consequence to protect legitimate interests. Nevertheless, recent awards suggest that some tribunals understand general exceptions like substantive standards’ extension. When tribunals frame general exceptions into international customary law, they are undercutting the purpose behind exceptions. In fact, while some tribunals are overlapping the meaning and role played by those provisions, they argue that there is no place to include another international general law exception in the analysis, or they cannot admit that general exceptions were drawn up to exclude the liability and compensation as long as the measure under scrutiny meets some conditions: a-the measure had not been adopted in an arbitrary or discriminatory form and b- it was framed into a policy objective set out by the general exception.
In Eco Oro v. Colombia (2021), a dispute related to the delimitation of the Páramo of Santurbán and the judicial prohibition to carry out mining activities in páramo areas. Surprisingly, the Majority included transparency and legal stability, and legitimate expectations as part of FET linked to minimum standard of treatment. Even though the tribunal found that the Eco Oro did not have any investment-backed legitimate expectations, what is true is that the Majority ruled that Colombia acted with arbitrariness and violated legitimate expectations of Eco Oro due to the unjustifiable delay in the delimitation of the páramo and the lack of a binding delimitation at the time the award was rendered. In terms of general exceptions, the Tribunal instead of analyzing the arbitrariness of the conduct argued that parties in the treaty did not agree that general exceptions preclude any compensation in favor of investor if applicable.
In Bear Creek v. Peru (2017), a mining project was banned after getting all permissions, the Tribunal ruled that Peru expropriated the company after revoking a mining license. Despite the Tribunal stablished that the measures were not arbitrary, it analyzed the content and scope of the provision under an outlook quite debatable. In fact, the tribunal put general exceptions and primary obligations at the same level. It argued that there was no reason to include another general international law exception, “consequently, it is unnecessary to get into a debate between parties over the jurisprudence related to any exception of police powers about measures addressed to investments.” Furthermore, the Tribunal based on the expropriation provision, concluded that the general exception did not preclude the compensation in favor of the investor.
A similar situation was registered in Copper v. Ecuador (2016). In this mining case, the local authorities revoked the mining license grounded on environment and public health reasons. Although the Tribunal determined that there was arbitrariness on the measures taken by Ecuador, it reached the same conclusions already explained above. It determined that the flexibilities related to the police powers doctrine were similar to general exceptions.
The timeline among Eco Oro, Bear Creek and Copper awards does not show an evolving approach in the interpretation of general exceptions. The inclusion of general exceptions is far from filling the expectations of states. Those provisions are not analyzed as a second safety net that states have to avoid a state liability and the payment of compensation. They were thought to strengthen or expand the regulatory flexibility pursued by sates in cases where tribunals consider that states are in breach of the substantive provisions as the consequence to protect legitime objectives.
If general exceptions and flexibilities tied to international customary law were on the same level, why would states be interested in including them into a treaty in different sections? Why do tribunals persist to make interpretations that are not consistent to the intention to state parties to the treaty? Can we say that these sorts of interpretations are justified due to the drafting? Should states set out that the application of a general exception prevents a state from the violation of the treaty as well as the compensation in favor of the investor? Perhaps an approach to those questions could be on what has been sustained by Alschner: “new treaties are interpreted like old ones through precedent.” It seems to be that there is a tension between tribunals and states to define who has the power to interpret the treaty at the expense of the coherence and consistency of the ISDS.