Research On Essential Security Exception Clause In Bilateral Investment Treaties

Bilateral investment treaties (hereinafter BITs) have long been understood as extremely strong legalized instruments of investor protection, providing far-reaching guarantees for cross-border investment. Essential security exception clause (hereinafter ESE clause) is a very important clause of BITs, acting as a "safety valve" and a "risk allocation device" role. Before the economic crisis in Argentina in 2001, the clause did not attract too much attention to academics. After the economic crisis in Argentina in 2001, the International Center for Settlement of Investment Disputes (hereinafter ICSID) there had been some cases on ESE clause. In the interpretation of ESE clause, different ICSID tribunals had different approaches and finally made different conclusions, some even completely at odds, Which Highlights the difficulty to determine the interpretation and application of ESE clause. At the same time, it has also attracted more and more attention in the academic community. For the "safety valve" function of ESE clause, it's essential for a country to design ESE clause in negotiating their BITs.In addition to the introduction and conclusion, the article is divided into five major sections. Using empirical analysis, comparative analysis and literature research methods, the author analyzes the structure and the mode of review of ESE clause, and then makes some recommendations on China's practice of ESE clause.The first part is about an overview of ESE clause. This section briefly describes the concept, functions and contracting practices of ESE clause, and then distinguishes treaty-based ESE clauses from the exception clauses in customary international law in terms of their substantive content, their source of legal authority, and their scope of applicability. On this basis, the author analyzes the three constituent elements of ESE clause, namely: causation, scope of application, and the situation allowing the host country to breach contract.The second part is about the interpretation of ESE clause. At present, ICSID tribunals often fail to interpret ESE clause strictly under "the Vienna Convention on the Law of Treaties", but rather to take a short-cut interpretation approach, using the exception clauses in customary international law to explain ESE clause, which affects not only the arbitration of the cases, but also affects the legitimacy of the arbitration system. In this section, the author attempts to offer a adequate interpretive framework for the interpretation of ESE clause, and then examine the elements of ESE clause from the practice of various states, identify key components, with a view to cast new light on the interpretation of ESE clause.The third part is about the review of ESE clause: This section mainly discusses ICSID tribunals how to review ESE clause in practice. ESE clause is often with two types: non-self-judging character and self-judging character. Both of them are reviewed by ICSID tribunals, but the scope of the review is different. A non-self-judging clause needs to be accepted a comprehensive and substantive review by ICSID tribunals, while a self-judging clause only accepted a good faith review. Therefore, how to set ESE clause in BITs is essential for a country. Now, more and more countries would like to set self-judging ESE clause in their BITs, in order to strengthen its discretion, thereby weakening the review of ICSID tribunals for their actions.The fourth section is about a revisit of the Argentina cases. Revisiting the five Argentina cases and finding the similarities and differences of the awards can lead us to think more issues about ESE clause. These issues include: the legal application, the scope of the review and the question of compensation. Thinking about these issues will help us avoiding and controlling risks in our BITs'practice.The last part is about China's practice of ESE clause. This section first introduces the status of ESE clause in our BITs, and then analyzes the problems with it. At last, the author provides some recommendations on China's BITs practice of setting ESE clause.