Bilateral Investment Treaties and Civil Strife: The AAPL/Sri Lanka Arbitration

Abstract

The publication of the arbitral award in the Asian Agricultural Products Ltd. (AAPL) v. Republic of Sri Lanka case serves as a forceful reminder that long after individual confrontations in the Sri Lankan civil war are removed from the headlines, the personal, legal and financial consequences of mat country's tragedy shall continue to bedevil the society. In this case, AAPL, formerly a foreign investor in Sri Lanka, claimed damages against the Government for destruction of property arising out of military operations undertaken by official security forces. The Tribunal, by a majority, found in favour of the claimant, but did so only after a fairly lengthy review both of canons of treaty interpretation in international law and of principles of State responsibility for actions undertaken during civil unrest More specifically, because the proceedings were instituted under the United Kingdom/Sri Lanka Bilateral Investment Treaty of 1980, the primary focus of the Tribunal's attention concerned the applicability of particular provisions of mat treaty to circumstances of military and paramilitary activity; at the same time, the military background to the case also prompted the Tribunal to give broad consideration to the standard of diligence owed by government forces to foreign investors under general international law.