National Security in International Trade Agreements

Abstract

The need to combine free trade and FDI with the protection of national essential security interests and policies has led to the incorporation of ‘non-precluded measures provisions’ in IIAs (whether BITs or FTAs) that include FDI provisions. These kinds of provisions are not new. National interest exceptions have long been found in international agreements and treaties on international trade. They have played a significant role in international trade and now have a growing impact in the field of international investments. The absence of a common universal legal framework for FDI and the enormous fragmentation of the international investment legal system, plus the non-existence of an explicit national security exception in customary international law, gives these sorts of exceptions an important role to play in relation to FDI. These special rules have been drafted in order to limit or derogate from obligations that arise under specific treaty in which they are embodied on grounds of national security. These rules recognise the right of states to ‘self-defence’, although there is much debate about the exact terms on which this defence may be actually implemented. Trade and investment are increasingly linked to security and national security. These sorts of provisions are currently gaining in importance and are increasingly applicable to FDI ex post , as a general rule, as well as ex ante in a limited number of agreements. Many of these sorts of clauses in IIAs replicate – or are based on – provisions found in the WTO treaties. The interpretation of these provision by WTO Panels and case law is extrapolated to FDI. There is support for a broadening of the scope and goals of these non-precluded clauses and for an objectification of criteria and standards on which they are based and interpreted, as well as for an adaptation of the clause to the various kinds of threats that trade and investment may generate nowadays. There are concerns about the ability of national security clauses in their current form in the WTO system and many IIAs to cope with modern-day security challenges and the need for the state to have enough power to safeguard public policy. ARTICLE XXI GATT AS THE MODEL FOR NATIONAL SECURITY PROVISIONS Article XXI GATT constitutes the model for the national security provisions. It is reproduced in GATS and in many BITs and FTAs.