General Exception Clauses in International Investment Agreements Concluded by Japan

Author Name MORI Tadashi  (University of Tokyo) /KOTERA Akira  (Faculty Fellow, RIETI)
Creation Date/NO. January 2014 14-J-007
Research Project Pressing Problems of International Investment Law
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A "general exception clause" can be found in some International Investment Agreements (IIAs), including those concluded by Japan. However, there is no prevailing definition of the concept. Consequently, this paper first clarifies the concept before examining it from the perspective of the balance between the protection of investors and the regulatory power of the host state. The paper reaches a number of conclusions. First, while a general exception clause is defined in one Organisation for Economic Co-operation and Development (OECD) research paper as providing general exceptions from IIA obligations, general exception clauses in IIAs concluded by Japan are different because they are very closely modeled on, or incorporate, mutatis mutandis, the general exception provisions in Article XX of the General Agreement on Tariffs and Trade (GATT), and/or Article XIV of the General Agreement on Trade in Services (GATS) (General Exceptions modeled on GATT/GATS). Second, a general exception clause modeled on GATT/GATS can justify the violation of the obligation of fair and equitable treatment (FET) only when FET is greater than the minimum standard of the treatment of foreigners granted by the customary international law. In other words, such a clause cannot justify the violation of FET when it means the minimum standard of treatment. Third, it is submitted that the Japanese government needs to reconsider the definition of the general exception clauses that it provides in any future IIAs. It seems difficult to find persuasive grounds for defining it according to the GATT/GATS model. Japan also needs to reexamine the scope of the exceptions of the general exception clause, which do not have to be limited by those listed on GATT/GATS. Moreover, even if it retains the current definition of general exception clauses, Japan should take into account the interrelationship between general exception clauses modeled on GATT/GATS and substantial obligation clauses such as FET.