Sanction as Lawful Countermeasures in International Investment Law: A Primer

Abstract

This paper examines the legal permissibility of a state using the doctrine of countermeasures as a defence against liability for destruction of foreign investor assets through the imposition of sanctions. Part I briefly surveys the origins and history of countermeasures, particularly in light of Articles for the Responsibility of States for Internationally Wrongful Acts (ARSIWA), before outlining their substantive and procedural requirements in current doctrine. Then, Part II examines several recurring questions within the doctrine of countermeasures. It explores whether third-party countermeasures are permissible within the context of erga omnes obligations, where all states have a shared interest in enforcement. It then addresses the unsettled issue of whether countermeasures may be raised as a defence against claims by private investors brought under bilateral investment treaties. Here, arbitral decisions, such as ADM v. Mexico, Corn Products v. Mexico, and Cargill v. Mexico, which were decided in the context of the North American Free Trade Agreement (NAFTA), illustrate a sharp divergence in opinion over whether investor rights are derivative of states, or independent in nature. Finally, consideration is given to the relationship between lex specialis and lex generalis, assessing whether and when specific treaty provisions can displace Customary International Law (CIL) on countermeasures. This paper aims to introduce, in brief, the ongoing tension between state sovereignty, collective enforcement of international norms, and investor protections, while underscoring the lack of consensus on the permissibility of unilateral third-party countermeasures.