Standards of Review for the Non-Precluded Measures Clause in Investment Treaties: Different Wording, Different Levels of Scrutiny

The non-precluded measures (‘NPM’) clause allows a state to restrict the exercise of the investor’s rights and protections provided for in international investment agreements (‘IIAs’) during emergencies. In light of the increase in investor-state disputes brought by foreign investors under investment treaties, treaty negotiators have included such a clause in recent IIAs to support the state’s position and mitigate the impact of these treaties on their regulatory powers. The nexus requirement is a key element to successfully invoke this clause in investment arbitrations and requests tribunals to adopt a standard of review. States determine the level of scrutiny and deference of the tribunal by employing different wording for this requirement, and consequently the tribunal must adopt an appropriate standard of review in each case. This article will discuss these different layers of the nexus requirement and their relevant standards of review. First, the authors describe the structure of the clause and aspects to be considered in the process of adopting an appropriate standard of review in investment arbitrations. They then analyze the standard of review for each category of the nexus requirement. The authors consider good faith, reasonableness and an abbreviated form of the proportionality test developed within WTO law as possible models for investment arbitration tribunals.