Performance Requirements: Is there a Real Reason for their Prohibition?

Abstract

Recent international economic agreements between the EU and other non-EU states have included prohibitions on performance requirements (PRs). Although the provisions prohibiting such requirements typically specify the types of prohibited practices, the essence of PRs, and the reasons for their prohibition remain unclear. The recent concept of PRs has crept into the international legal framework seemingly without a firm theoretical foundation and without any roots in customary international law. It had initially been used in bilateral treaties as the broad term for designating certain policy tools which States were prepared to relinquish so as to promote a better investment regime. Noting the lack of a generally recognised definition of PRs, this article provides an overview of scholars’ opinions and adjudicators’ reasoning on this subject, highlighting certain significant differences in approach. Guided by various examples from arbitral practice and national legislation of selected countries, this article seeks to distil the inherent features of PRs and to rationalise the internationally-prevailing views on this subject. In summary, the article gives an assessment of the prohibition of PRs and considers the reasons for which States may seek to eliminate these types of measures.