Force Majeure and Investment Arbitration

Abstract

Abstract This article addresses force majeure in international investment arbitration as it interacts with relevant domestic, commercial and international laws. As a classic excuse for non-performance of obligations in most domestic legal systems and a ‘general principle of law’, force majeure is also widely accepted in public international law as a ground for precluding wrongfulness of the acts of State under the Articles on Responsibility of States for Internationally Wrongful Acts (ARSIWA). In investment arbitration practice, force majeure has been invoked to justify non-performance of contractual obligations or treaty obligations. For the former, the contractual force majeure clause is crucial, while for the latter, investment treaty tribunals tended to refer to ARSIWA Article 23 on force majeure. The case law has demonstrated that the conditions for the invocation of force majeure as a circumstance precluding wrongfulness under the ARSIWA are much narrower and stricter than the conditions set for invoking force majeure in the context of contract or commercial law. The article argues that the different standards applied by treaty and contract arbitration tribunals are rooted in the distinct systems of applicable law, which traditionally did not cause many problems or attract much attention. With the increasingly blurred boundaries between domestic and international, private and public laws, the legitimacy and sustainability of such conventional distinction might demand reconsideration. It suggests to explore a more consistent interpretation and application of force majeure claims under the two legal systems, and one way forward is to allow more flexibility in the interpretation and application of ARSIWA so that the international rules on force majeure could be better aligned with force majeure under commercial law.