Force Majeure and Investment Arbitration

ICSID Review, Vol. 37, No. 1-2 (2022), pp.
138–159
doi: https://doi.org/10.1093/icsidreview/siac014
Published Advance Access 26 May 2022 WINTER/SPRING 2022
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20TH ANNIVERSARY OF ARSIWA
Force Majeure and Investment Arbitration
Lu Wang1 and Wenhua Shan2
Abstract—This article addresses force majeure in international investment arbitration as

it interacts with relevant domestic, commercial and international laws. As a classic excuse
for non-performance of obligations in most domestic legal systems and a ‘general prin-
ciple of law’, force majeure is also widely accepted in public international law as a ground
for precluding wrongfulness of the acts of State under the Articles on Responsibility of
States for Internationally Wrongful Acts (ARSIWA). In investment arbitration practice,
force majeure has been invoked to justify non-performance of contractual obligations or
treaty obligations. For the former, the contractual force majeure clause is crucial, while
for the latter, investment treaty tribunals tended to refer to ARSIWA Article 23 on force
majeure. The case law has demonstrated that the conditions for the invocation of force
majeure as a circumstance precluding wrongfulness under the ARSIWA are much nar-
rower and stricter than the conditions set for invoking force majeure in the context of
contract or commercial law. The article argues that the different standards applied by
treaty and contract arbitration tribunals are rooted in the distinct systems of applicable
law, which traditionally did not cause many problems or attract much attention. With the
increasingly blurred boundaries between domestic and international, private and public
laws, the legitimacy and sustainability of such conventional distinction might demand
reconsideration. It suggests to explore a more consistent interpretation and application
of force majeure claims under the two legal systems, and one way forward is to allow more
flexibility in the interpretation and application of ARSIWA so that the international rules
on force majeure could be better aligned with force majeure under commercial law.
I. INTRODUCTION
Force majeure is a classic excuse for non-performance of obligations in most domes-
tic legal systems, and has been accepted as a ‘general principle of law’.3 In public
international law, force majeure has been stipulated as one of the ‘circumstances
1
Lecturer and Member of the Herbert Smith Freehills China International Business and Economic Law (CIBEL)
Centre, Faculty of Law and Justice, UNSW Sydney, Australia. (Corresponding Author) Email: lu.wang10@unsw.edu.au.
2
Ministry of Education Yangtze River Chair Professor of International Economic Law & Dean of Law School, Xi’an
Jiaotong University, China. Email: shan@xjtu.edu.cn.
The authors are grateful to the valuable comments of two anonymous reviewers.
The authors are grateful to the China National Social Science Research Fund Major Research Project ‘Legal Issues
of Outbound Investment Protection and Promotion’ and the UNSW Law and Justice Faculty for the funding support.
Special thanks go to Nicholas Parker for his editing assistance and comments on an earlier draft.
3
For example, in Mobil Oil Iran, the Iran–United States Claims Tribunal held that ‘force majeure as a cause of full or
partial suspension or termination of contract, is a general principle of law which applies even when the contract is silent’
(Mobil Oil Iran, Inc, et al, Partial Award No 311–74/76/81/150–3, 14 July 1987, 16 Iran–US CTR 39).
© The Author(s) 2022. Published by Oxford University Press on behalf of ICSID. All rights reserved.
For permissions, please e-mail: journals.permissions@oup.com
Force Majeure and Investment Arbitration 139
precluding wrongfulness’ under the Articles on Responsibility of States for Inter-

nationally Wrongful Acts (ARSIWA) adopted by the International Law Commission
(ILC) in 2001.4 Despite the close connection between the rules of State responsibil-
ity and international investment law,5 references to force majeure under the ARSIWA
have been less common and rarely successful in investment treaty claims. In contrast,
parties in investment contract claims have often sought to invoke force majeure with
much higher success rate. With an ongoing global pandemic of Covid-196 and treaty
mechanisms such as the umbrella clause bridging investment treaty and contractual
claims, force majeure is likely to gain wider use in investment arbitration in the years
to come.
This article addresses force majeure in international investment arbitration as it
interacts with relevant domestic, commercial and international laws. It first traces
the origin and evolution of the force majeure doctrine in domestic and international
laws (Section II), before analysing it as a ground for precluding wrongfulness of the
act of State under the ARSIWA (Section III). It then engages in a close examination
of force majeure in investment arbitration practice including treaty, contractual and
mixed claims (Section IV). It concludes that while the distinction between treaty and
contractual claims on the conditions of force majeure has its legitimate historical and
legal foundations, the contemporary commercial world would be better served if a
more consistent approach could be furnished (Section V).
II. THE CONCEPT OF FORCE MAJEURE: ITS ORIGIN

AND EVOLUTION
The notion of force majeure has its roots in Roman law where a number of concepts
such as vis major and casus fortuitus were used to deal with the ‘legal consequences
of the occurrence of supervening events’.7 The actual term force majeure originated
in the French Civil Code of 1804, deriving from the concept of vis major in Roman
law.8 The French law recognises three requirements of force majeure, namely, the
existence of an ‘external event’ beyond the obligor’s control, the ‘unforeseeability’
of the event and the requirement of ‘irresistibility’.9 It is agreed that the term may
apply to a wide range of extraordinary events or circumstances due to both natural
phenomena and human conduct, including a war, strike, insurrection or any ‘act of
4
See the International Law Commission, ‘Draft Articles on the Responsibility of States for Internationally Wrongful
Acts with Commentaries’, UN GAOR 56th Session Supp 10, ch 4, UN Doc A/56/10 (2001) (ARSIWA).
5
It has been noted that in the earlier work on State responsibility, the ILC had made efforts to formulate substantive
international rules relating to ‘the protection of alien property in host States’ which turned out to be a complete failure and
thus the ILC moved on to set out rules of international law on State responsibility, see James Crawford SC, ‘Investment
Arbitration and the ILC Articles on State Responsibility’ (2010) 25 ICSID Rev—FILJ 127, 127.
6
Recently, a lottery company was reported to lodge a contract-based arbitration claim against Greece, contesting that
its liability to make certain payments to Greece under a concession was disrupted by the pandemic-related restrictions
on the company’s operation. The Claimant invoked the contractual force majeure clause as well as applicable Greek law
provisions on the impossibility of performance and unforeseeable circumstances. Although the Tribunal’s interpretation
remains to be seen, it would certainly not be the last case where force majeure defence is invoked in the context of the ongo-
ing pandemic. See IAReporter, ‘Lottery Company Lodges LCIA Claim against Greece, Arguing Force Majeure Due to
Pandemic-Related Restrictions’ (1 April 2021) <www-iareporter-com.wwwproxy1.library.unsw.edu.au/articles/lottery-
company-lodges-lcia-claim-against-greece-arguing-force-majeure-due-to-pandemic-related-restrictions/>.
7
See Federica Paddeu, ‘A Genealogy of Force Majeure in International Law’ (2012) 82 BYBIL 381, 386.
8
Articles 1147 and 1148 of the French Civil Code of 1804, see ibid 387; Peter Mazzacano, ‘Force Majeure, Impossi-
bility, Frustration & the Like: Excuses for Non-Performance; the Historical Origins and Development of an Autonomous
Commercial Norm in the CISG’ (2011) Nordic Journal of Commercial Law 1, 39–40.
9
Mazzacano (n 8) 43.
140 ICSID Review VOL. 37 1-2
God’.10 In addition, force majeure may be invoked as a defence to either contractual

breach or delictual responsibility,11 and in most cases where force majeure was found,
both parties were discharged from contractual obligations.12
A. Force Majeure in Domestic Legal Systems
Historically, domestic legal systems used different terms and developed an array
of doctrines, such as force majeure, frustration, impossibility, hardship or imprac-
ticability, to deal with the fundamental change in circumstances for contractual
performance.13 Nonetheless, force majeure can be distinguished from the other terms
in many respects, even though these terms are sometimes used interchangeably.14
As an exception to contractual performance, the civil and common law systems have
developed along divergent lines.15
Despite the important principle of pacta sunt servanda, the civil law tradition gener-
ally recognised the flexibility provided in rebus sic stanticus and placed great emphasis
on the Roman rule ‘nemo tenetur ad impossibile’ (‘no one is bound to the impossi-
ble’) in relation to performance.16 In this context, the requirement of ‘irresistibility’
as a characteristic of force majeure in France and many other civil law systems have
incorporated the principle of rebus sic stanticus.17 In any event, force majeure must
entail the impossibility of performance, and the civil law courts have applied this
requirement strictly while rejecting unanimously the excuse of ‘increased difficulty
of performance’.18
Common law tradition, in contrast, places pacta sunt servanda in primacy and never
adopts the Roman rule ‘nemo tenetur ad impossibile’.19 In this context, a party would
be held liable for non-performance of contractual obligations, even though without
fault and the performance had become impossible.20 The early common law did
not legislate force majeure, until parties incorporated it into their contracts.21 In this
respect, the scope of force majeure is derived specifically from the language of the
contractual clause agreed by parties.22 As a result, force majeure is mostly a contractual
right in common law traditions, rather than a generally applicable doctrine as in civil
law jurisdictions.23
Notably, common law has developed the doctrine of frustration, derived from
Roman law, to deal with contractual non-performance because of ‘radical’ changes in
circumstances.24 The doctrine of frustration implies ‘impossibility’ of performance,
10
See Paddeu (n 7) 387; Mazzacano (n 8) 43.
11
Paddeu (n 7) 388.
12
Mazzacano (n 8) 43.
13
Paddeu (n 7) 386–87; Mazzacano (n 8) 17.
14
See generally eg Mazzacano (n 8).
15
ibid 12, 18.
16
ibid 12–13.
17
ibid 43.
18
Paddeu (n 7) 388.
19
Mazzacano (n 8) 50.
20
ibid.
21
ibid.
22
ibid 34.
23
ibid 35.
24
Paddeu (n 7) 390; Mazzacano (n 8) 18. For frustration in English law, see also Davis Contractors Ltd v Fareham
Urban District Council [1956] AC 696, 729 (Lord Radcliffe).
though the requirement is often applied in a relative yet strict way, and has cov-
ered the frustration of the purpose of the contract and temporary impossibility.25
As an exception, the US jurisprudence has accepted the doctrine of ‘impractica-
bility’ as a ground of contractual discharge, though the requisite threshold remains
high whereby the performance must be ‘excessively more onerous’.26 Some com-
mentators point out that force majeure is distinct and has a broader and more flexible
application compared with the common law doctrines of contractual frustration
or impracticability.27 In particular, frustration normally operates to ‘relieve par-
ties permanently from all of their contractual obligations’, requiring that ‘the entire
subject matter or underlying rationale for the contract be entirely destroyed’.28 In
contrast, force majeure allows greater flexibility in respect of the unforeseen events
giving rise to relief, as well as the rationale or subject matter of the contract.29
Additionally, force majeure allows parties to suspend their contractual obligations
‘temporarily’, though they need to ‘reinstate’ the contract when the supervening event
passes.30
B. Force Majeure in International Legal Instruments

Despite the divergence in domestic laws, States have made effort at the interna-
tional level to harmonise the various legal concepts and doctrines in relation to
non-performance of contractual obligations. The United Nations Convention on
Contracts for the International Sale of Goods (CISG) article 79, for instance, was
meant to present a bridge between civil and common law, where ‘impediment’
beyond control would discharge a party from contractual obligations.31 Although the
CISG avoids explicit reference to force majeure, impossibility, hardship, frustration,
impracticability or other related terms used in the varied legal systems, the scope of
article 79 has been considered so ‘extremely broad’ as to cover force majeure events
and other related situations of non-performance.32
The UNIDROIT Principles of International Commercial Contracts contains sim-
ilar rules for non-performance of international commercial contracts.33 Unlike the
CISG, the UNIDROIT Principles are a soft law instrument which become binding
upon parties only when they agree to use it to interpret and supplement domestic law
25
Paddeu (n 7) 391; Mazzacano (n 8) 18.
26
Mazzacano (n 8) 31.
27
ibid 35.
28
ibid 36.
29
ibid.
30
ibid.
31
See the Convention on the International Sale of Goods (adopted 11 April 1980, entered into force 1 January
1988) 1489 UNTS 3 (CISG) art 79(1): ‘A party is not liable for a failure to perform any of his obligations if he proves
that the failure was due to an impediment beyond his control and that he could not reasonably be expected to have
taken the impediment into account at the time of the conclusion of the contract or to have avoided or overcome it or its
consequences.’
32
Mazzacano (n 8) 51.
33
The UNIDROIT Principles art 7.1.7 states:
(1) Non-performance by a party is excused if that party proves that the non-performance was due to an impediment
beyond its control and that it could not reasonably be expected to have taken the impediment into account at the time of
the conclusion of the contract or to have avoided or overcome it or its consequences. (2) When the impediment is only
temporary, the excuse shall have effect for such period as is reasonable having regard to the effect of the impediment on
the performance of the contract. (3) The party who fails to perform must give notice to the other party of the impediment
and its effect on its ability to perform. If the notice is not received by the other party within a reasonable time after the
party who fails to perform knew or ought to have known of the impediment, it is liable for damages resulting from such
nonreceipt. (4) Nothing in this article prevents a party from exercising a right to terminate the contract or to withhold
performance or request interest on money due.
or the CISG, or as the applicable law in international commercial arbitration. The

use of ‘autonomous principles and rules’ in international commercial contracts and
arbitration, as argued by some commentators, represents the development of a ‘new
law merchant or lex mercatoria’.34
Compared with domestic rules, international commercial law tends to adopt a
broader and more flexible approach to force majeure events for non-performance of
contractual obligations. This is not surprising given the rationale of CISG and other
international legal instruments for harmonising international commercial law.35
Apart from domestic and international commercial laws, force majeure is also widely
accepted in public international law, such as the United Nations Convention on the
Law of the Sea (UNCLOS), the Vienna Convention on Diplomatic Relations, and
the Vienna Convention of the Consular Relations.36 However, the central role of
force majeure in international law is codified in article 23 of the ARSIWA as a cir-
cumstance precluding wrongfulness under the law of State responsibility, which is
explored below.
III. FORCE MAJEURE UNDER ARSIWA: A ‘NARROW

AND STRICT’ DEFINITION
As mentioned earlier, the law of State responsibility has had a close connection to the
law of foreign investment protection. Historically, it was because the effort for formu-
lating substantive rules of international law on the protection of alien property entirely
failed that the ILC decided to change the strategy to identify the so-called secondary
rules under which States would be responsible for breaches of ‘primary obligations’
under treaty commitments and/or customary international law.37 In contemporary
international investment arbitration, it has become common practice for tribunals to
first identify attribution and breach of obligations by the (host) State as two necessary
conditions of State responsibility.38
A. The Codification History

The codification of force majeure had undergone some drastic changes.39 In Garcia-
Amador’s First Report on International Responsibility, force majeure was coupled with
necessity as the exonerating or extenuating circumstances for the consideration of
international responsibility.40 In the Third Report, the Special Rapporteur affirmed
that force majeure was a ‘general principle of law’ and proposed a draft article on
34
Mazzacano (n 8) 54.
35
Jure Zrilič, ‘Armed Conflict as Force Majeure in International Investment Law’ (2019) 16 Manchester J Intl Econ
L 28, 52.
36
See the United Nations Convention on the Law of the Sea (adopted 10 December 1982, entered into force 16
November 1994) 1833 UNTS 397 art 18; the Vienna Convention on Diplomatic Relations (adopted 18 April 1961,
entered into force 24 April 1954) 500 UNTS 95 art 40(4); the Vienna Convention on Consular Relations (adopted 18
April 1961, entered into force 24 April 1954) 500 UNTS 95 art 54(4).
37
See Crawford (n 5) 127.
38
Martins Paparinskis, ‘Circumstances Precluding Wrongfulness in International Investment Law’ (2016) 31 ICSID
Rev—FILJ 484.
39
See generally eg Paddeu (n 7).
40
See Francisco Garcia-Amador, First Report on International Responsibility, Yearbook of International Law Commission
1956, vol II, UN Doc A/CN.4/SER.A/1956/Add.l, 208.
force majeure as a defence for State responsibility.41 This draft article was amended in
his Sixth Report, which dropped the reference to the state of necessity and provided
a requirement of impossibility for a State to perform international obligation.42 In
the Eighth Report to the ILC, Ago proposed draft articles on force majeure and fortu-
itous events,43 focusing on ‘situations’, rather than ‘events’, of force majeure due to an
‘external circumstance… which makes it impossible for [the State] to act otherwise’.44
In this draft, the external factor might be either a natural event or human action,45
but the impossibility of performance must be ‘absolute’ so as to completely nullify the
will of the State, under which situation any conduct in question would be entirely
‘involuntary’.46
Twenty years later, Crawford as the final Special Rapporteur suggested fur-
ther modifications to the draft articles of force majeure.47 In particular, Crawford
abandoned the reference to fortuitous events,48 and clarified the two situations to
exclude the invocation of force majeure.49 The text proposed by Crawford eventu-
ally became ARSIWA article 23, with minor changes by the Committee, reading as
follows:
1. The wrongfulness of an act of a State not in conformity with an international

obligation of that State is precluded if the act is due to force majeure, that
is the occurrence of an irresistible force or an unforeseen event, beyond the
control of the State, making it materially impossible in the circumstances to
perform the obligation.
2. Paragraph 1 does not apply if:
a. the situation of force majeure is due, either alone or in combination with
other factors, to the conduct of the State invoking it;
41
See Francisco Garcia-Amador, Third Report on International Responsibility, Yearbook of International Law Commission
1958, vol II, UN Doc A/CN.4/SER.A/1958/Add.l, 52. In the Third Report, Garcia-Amador proposed a draft art 13(1):
‘Notwithstanding the provisions of the Article last preceding, the State shall not be responsible for injuries caused to an
alien if the measures taken are the consequence of force majeure or a state of necessity due to a grave and imminent peril
threatening some vital interest of the State, provided that the State did not provoke the peril and was unable to counteract
it by other means.’
42
See Francisco Garcia-Amador, Sixth Report on International Responsibility, Yearbook of International Law Commission
1961, vol II, UN Doc A/CN.4/SER.A/1961/Add.I, 48. Article 17(1) presented as follows: ‘An act or omission shall not
be imputable to the State if it is the consequence of force majeure which makes it impossible for the State to perform
the international obligation in question and which was not the consequence of an act or omission of its own organs or
officials.’
43
See Eighth Report on State responsibility by Mr. Roberto Ago, Documents of the thirty-first Session, Yearbook of the
International Law Commission 1979, vol II (pt 1) UN Doc A/CN.4/SERA/1979/Add.l (pt 1) 66:
Article 31. Force majeure
1. The international wrongfulness of an act of a State not in conformity with what is required of it by an interna-
tional obligation is precluded if it is absolutely impossible for the author of the conduct attributable to the State
to act otherwise.
2. The international wrongfulness of an act of a State not in conformity with what is required of it by an inter-
national obligation is likewise precluded if the author of the conduct attributable to the State has no others
means of saving himself, or those accompanying him, from a situation of distress, and in so far as the conduct
in question does not place others in a situation of comparable or greater peril.
3. The preceding paragraphs shall not apply if the impossibility of complying with the obligation, or the situation
of distress, are due to the State to which the conduct not in conformity with the obligation is attributable.
44
ibid 49, para 106.
45
ibid para 107.
46
ibid.
47
Paddeu (n 7) 456.
48
In the view of Crawford, the field had been well covered by the force majeure (Second Report on State Responsibility
by Mr. James Crawford, UN Doc A/CN.4/498 and Add.1–4, 67, para 265).
49
ibid 66–67, paras 263–64.
b. the State has assumed the risk of that situation occurring.50
As one of the six ‘circumstances precluding wrongfulness’ envisioned in Chapter V

of the ARSIWA, force majeure is characterised as an ‘excuse’ or ‘technique’ excluding
the responsibility of State triggered by a breach of international law.51 Further, the
Commentary to ARSIWA makes it clear that the circumstances precluding wrongful-
ness in Chapter V has developed independently on conditions and limitations, even
though they operate like defences or excuses in domestic legal systems.52 In general,
the definition of force majeure under ARSIWA has been considered ‘strict and nar-
row’.53 Specifically, it provides, on the one hand, three constitutive elements of the
situation of force majeure, namely: (i) unpredictability or irresistibility of a triggering
event; (ii) beyond the State’s control; (iii) material impossibility of performance. On
the other hand, it explicitly states two exceptions to apply force majeure for precluding
international responsibility of a State, namely the State has induced the situation of
force majeure or accepted the risk of force majeure.
B. The Constitutive Elements

Under article 23, force majeure is only applicable in ‘the occurrence of an irresistible
force or an unforeseen event’, which is ‘beyond the control of the State’. According
to the Commentary, ‘irresistibility’ implies that the State must ‘not be able to avoid
or oppose by its own means’, while ‘unforeseeability’ means that the event must
be ‘neither foreseen nor of an easily foreseeable kind’, including both objective and
subjective components.54 A comprehensive study carried out by the Secretariat illus-
trates that it is sufficient for a force majeure event to be either ‘unforeseeable’ or
‘foreseeable but inevitable or irresistible’.55 In this regard, the situation of force majeure
may be induced by a natural disaster like an earthquake, flood and drought and/or
human interventions such as war, revolution or mob violence, which is distinct from
the common law expression act of God that only encompasses natural forces.56 In
practice, force majeure has been invoked frequently in the case of human interventions,
including the situation of economic or financial necessity.57
Although force majeure contains the idea of ‘necessity’, it is distinct from the latter
as a separate ground for precluding the wrongfulness of an act of a State. The most
crucial feature of force majeure, compared to the state of ‘necessity’ is the require-
ment of an ‘involuntary act’ or at least ‘no element of free choice’, ie the situation
of force majeure has compelled the State to act in a manner not in conformity with
50
See ARSIWA (n 4) 76.
51
See Jorge E Viñuales, ‘Seven Ways of Escaping a Rule: Of Exceptions and Their Avatars in International Law’ in
Lorand Bartels and Federica Paddeu (eds), Exceptions in International Law (OUP 2020) 65, 75.
52
See ARSIWA (n 4) 72.
53
James Crawford and S Olleson, ‘The Nature and Forms of International Responsibility’ in Malcolm Evans (ed),
International Law (3rd edn, OUP 2010) 461.
54
See ARSIWA (n 4) art 23, commentary para 2. See also Andrea Bjorklund, ‘Emergency Exceptions: State of
Necessity and Force Majeure’ in Peter Muchlinski, Federico Ortino and Christoph Schreuer (eds), The Oxford Handbook
of International Investment Law (OUP 2008) 499.
55
See study prepared by the Secretariat, “‘Force Majeure” and “Fortuitous Event” as Circumstances Precluding
Wrongfulness: Survey of State Practice, International Judicial Decisions and Doctrine’ UN Doc A/CN.4/315, Yearbook
of the International Law Commission 1978, vol II, pt 1, 69, para 15.
56
ibid 66 and 68, paras 4 and 10.
57
ibid 75, para 34.
international obligations.58 By contrast, the act of State under necessity is voluntary

in nature, ie the State in effect chose to act in violating international obligations so
as to ‘safeguard an essential interest against a grave and imminent peril’.59 Conse-
quentially, the plea of necessity as embodied in ARSIWA article 25 is exceptional
and subject to more stringent restrictions.60
Some commentators point out that States in cases from the early twentieth cen-
tury invoked force majeure claims concerning situations that appeared better addressed
by the plea of necessity.61 In the Russian Indemnity case, for instance, the Ottoman
Empire invoked the ‘exception of force majeure’ to justify a delay in paying the debt
to the Russian government, among other reasons. However, the Permanent Court
of Arbitration (PCA) Tribunal rejected the claim and considered that the claim of
financial difficulties was more like an exception of necessity.62 In fact, the neces-
sity defence was not generally recognised by States and international tribunals in the
nineteenth and early twentieth centuries, which partly contributed to the practice of
States invoking the plea of force majeure in situations of necessity.63 With the codifi-
cation of necessity in international law on State responsibility, States have turned
to invoke necessity, rather than force majeure, or, alternatively, the more specific
investment treaty exceptions in cases of financial or economic crisis,64 which will
be further discussed in the next section.
As required by ARSIWA article 23, the occurrence of irresistible force or unfore-
seen event must make the State ‘materially impossible’ to perform its obligation.
Thus there must be a causal link between the situation of force majeure and the result
of ‘material impossibility’ of performance, namely the situation of force majeure caused
by natural events and/or human intervention has rendered the performance of obli-
gation ‘materially impossible’.65 The Commentary to ARSIWA explicitly states that
‘force majeure does not include circumstances in which performance of an obligation
has become more difficult, for example, due to some political or economic crisis’.66
This may explain the fact that the claim of force majeure has been rarely success-
ful in economic or financial crisis cases.67 Indeed, some commentators have noted
that, although force majeure does not exclude its application to financial obligations,
in practice, the non-performance of financial commitments in effect turns to be ‘an
increased difficulty of performance’ since ‘the obligation to pay money is never prac-
tically impossible to fulfil’.68 In Russian Indemnity, for instance, the PCA Tribunal
58
See ARSIWA (n 4) art 23, commentary para 1.
59
ARSIWA (n 4) art 25(1).
60
ibid. The ARSIWA art 25 uses negative language on ‘necessity’, stating that ‘[n]ecessity may not be invoked …
unless…’, and the action taken by a State invoking the defence of necessity must be the ‘only way’ to protect the State’s
essential interest. Furthermore, ‘[i]n any event’, the plea of necessity is not available to a State that has contributed to
the situation of necessity or if the international obligation in question has excluded reliance on necessity.
61
Paddeu (n 7) 443.
62
ARSIWA (n 4) art 25, commentary para 7.
63
Paddeu (n 7) 444.
64
ibid 446; Zrilič (n 35) 37.
65
66
ibid, commentary para 3.
67
See Sandra Szurek, ‘Circumstances Precluding Wrongfulness in the ILC Articles on State Responsibility: Force
Majeure’ in James Crawford, Alain Pellet and Simon Olleson (eds), The Law of International Responsibility (OUP 2010)
478; Bjorklund (n 54) 500.
68
Paddeu (n 7) 459.
rejected the plea of force majeure, given that the payment of debt was not materi-
ally impossible.69 In Serbian Loans, the Permanent Court of International Justice
(PCIJ) held that the war itself could not affect the legal obligations of loan contracts—
although it caused economic dislocations, resulting in the impossibility of payment
in gold francs—yet the payment of the equivalent amount of francs could still be
made.70 Similarly, in Brazilian Loans, the PCIJ held that the economic dislocation
caused by the Great War could not release the government from its obligation, and
the equivalent in gold value was obtainable.71 In Socobelge, although the PCIJ did not
address the argument of force majeure, it maintained that the financial circumstances
of Greece were not sufficient to repudiate the res judicata effect of the award on com-
pensation, while the ‘debtor’s capacity to pay’ would be considered for the execution
of awards as formulated.72
A tricky issue for force majeure as an excuse in public international law is whether the
impossibility of performance of an obligation is construed as absolute. As mentioned
earlier, Ago emphasised that the impossibility must be absolute so as to completely
nullify the will of the State, which would thereby satisfy the nature of ‘involuntari-
ness’ required by force majeure.73 Yet Ago also recognised that it was not common
for a State to be in ‘a real and insurmountable situation of being materially unable to act
in conformity with the obligation’.74 The Drafting Committee replaced the adjective
‘absolutely’ with ‘materially’ in draft article 31 to ‘convey the idea of an objective
rather than a subjective criterion for determining the situation of impossibility’.75 In
Rainbow Warrior, the Tribunal held that the test for the application of force majeure
required ‘absolute and material impossibility’, since ‘a circumstance rendering per-
formance more difficult or burdensome does not constitute a case of force majeure’.76
But, Crawford maintained that the ‘adjective “absolute” did not seem necessary,
notwithstanding the use of that word in Rainbow Warrior’.77 Eventually, the term
force majeure adopted in the ARSIWA article 23 is concerned only with the ‘material
impossibility’ of performance. Nonetheless, the threshold of ‘material impossibility’
is still stringent in practice—a survey of State practice indicated that claims of force
majeure were successful only where the impossibility had been material and abso-
lute,78 and the Commentary to article 23 also reiterates that force majeure does not
include the increased difficulty of performance.79
It is worth noting that the requirement of ‘impossibility of performance’ under force
majeure should be distinguished from the notion of ‘impossibility of performance’ as a
ground for termination or suspension of a treaty under article 61 of the Vienna Con-
vention on the Law of Treaties (VCLT).80 To be specific, force majeure under the law
69
ARSIWA (n 4) art 23, commentary para 7, citing the Russian Claim for Interest on Indemnities (Russia v Turkey)
(1912) 11 RIAA 421, para 443.
70
See Serbian Loans (France v Serb–Croat–Slovene) [1929] PCIJ Ser A No 20, paras 82–83.
71
See Brazilian Loans (France v Brazil) [1929] PCIJ Ser A No 21, para 66.
72
See Société Commerciale de Belgique (Socobelge) [1939] PCIJ Rep Series A/B No 78, para 167.
73
See Eighth Report on State responsibility by Mr. Roberto Ago (n 43) 49, para 106.
74
ibid 52, para 111.
75
However, the Drafting Committee did not provide any further elaboration on this point, see Paddeu (n 7) 454.
76
See Rainbow Warrior Affair (New Zealand v France) (1990) 20 RIAA 217, 253.
77
See Yearbook of the International Law Commission 1999, vol I, UN Doc A/CN.4/SR.2592, 179, para 35.
78
See Paddeu (n 7) 452.
79
See ARSIWA (n 4), art 23, commentary para 5.
80
Article 61 of the VCLT (1969) states that:
1. A party may invoke the impossibility of performing a treaty as a ground for terminating or withdrawing from it
if the impossibility results from the permanent disappearance or destruction of an object indispensable for the execution
of State responsibility is a defence for presumptive breach of primary rules in which

the ‘material impossibility’ of performance will suffice the plea, whereas article 61 of
the VCLT operates to terminate or suspend the primary rules contained in interna-
tional treaties in which the impossibility is caused by ‘the permanent destruction of an
object indispensable to the performance of the treaty’.81 In this sense, the ‘degree of
difficulty’ associated with force majeure for precluding wrongfulness is ‘less than’ that
is required by VCLT article 61.82 Furthermore, the Commentary has made it clear
that the circumstances prescribed in ARSIWA ‘only preclude wrongfulness and thus
responsibility for as long as the circumstances in question continue to exist and to
satisfy the conditions laid down for their invocation’.83 Accordingly, the impossibility
of performance under force majeure is in effect a ‘temporary’ impossibility. In drafting
the VCLT, the ILC and the UN Conference had considered the view that equated
force majeure as a circumstance precluding wrongfulness about treaty performance
with the supervening impossibility of performance as a ground for treaty termination.
Still, the Conference insisted on a narrow formulation of article 61, for the interest of
the stability of treaties.84 As the ICJ pointed out in the Gabčikovo–Nagymaros Project:
Article 61, paragraph 1, requires the ‘permanent disappearance or destruction of an object

indispensable for the execution’ of the treaty to justify the termination of a treaty on grounds
of impossibility of performance. During the conference, a proposal was made to extend
the scope of the article by including in it cases such as the impossibility to make certain
payments because of serious financial difficulties … Although it was recognized that such
situations could lead to a preclusion of the wrongfulness of non-performance by a party of
its treaty obligations, the participating States were not prepared to consider such situations
to be a ground for terminating or suspending a treaty, and preferred to limit themselves to
a narrower concept.85
Clearly, force majeure as an excuse for wrongful act still requires an insurmountable
degree of difficulty to perform obligations so as to satisfy the test of ‘material impos-
sibility’. Moreover, as noted above, to strengthen the ‘impossibility’, draft article 31
includes a requirement of ‘beyond the control of the State’, which has been retained
in ARSIWA article 23. In Gould Marketing, the Iran–US Claims Tribunal held that:
By ‘force majeure’, we mean social and economic forces beyond the power of the state to
control through the exercise of due diligence. Injuries caused by the operation at such forces are
therefore not attributable to the state for purposes of its responding for damages.86
Accordingly, the State would be liable if it had failed to exercise ‘due diligence’ in
preventing or mitigating the situation of force majeure. Some commentators therefore
argue that the adjudicator recognised the duty of due diligence as a higher threshold
of the treaty. If the impossibility is temporary, it may be invoked only as a ground for suspending the operation of the
treaty. 2. Impossibility of performance may not be invoked by a party as a ground for terminating, withdrawing from or
suspending the operation of a treaty if the impossibility is the result of a breach by that party either of an obligation under
the treaty or of any other international obligation owed to any other party to the treaty.
81
Paddeu (n 7) 396–97.
82
See Second Report on State Responsibility by Mr. James Crawford (n 48) 66, para 259.
83
ibid 85, para 350.
84
See ARSIWA (n 4) art 23, commentary para 4.
85
Gabčikovo–Nagymaros Project (Hungary/Slovakia) (Judgment) [1997] ICJ Rep 7, para 102.
86
Gould Marketing, Inc v Iran et al. (1983) 3 Iran–US CTR 147, para 153 (emphasis added). Similarly, General
Dynamics Telephone Sys Ctr v Iran (1985) 9 Iran–US CTR 153, para 160; Anaconda–Iran Inc v Iran et al. (1986) 13
Iran–US CTR 199, para 213.
of ‘uncontrollability’ applied for force majeure.87 In other words, force majeure is avail-
able in an event that is outside the power of the State to control even by exercising
due diligence. Nonetheless, neither ARSIWA nor the Commentaries refer to the due
diligence standard in relation to force majeure, so it remains unclear whether and to
what extent a State’s failure to exercise due diligence will disqualify itself from invok-
ing the excuse of force majeure. In any event, the obligation of due diligence could
not require a State to do the impossible. In other words, the exercise of due dili-
gence should be subject to a State’s capacity to adopt the ‘necessary and appropriate’
measures considering their available technical, human and economic resources.
C. The Exceptions
Apart from the above rigorous rules associated with affirmative requirements, article
23 of ARSIWA has explicitly excluded the application of force majeure where States
have ‘contributed’ to the situation of force majeure or if the State has voluntarily
assumed the risk. In particular, the first exception concerns the element of ‘impos-
sibility’. In Libyan Arab Foreign Investment Company (LAFICO) and the Republic of
Burundi, the Tribunal rejected the plea of force majeure because the alleged impossibil-
ity had not resulted from ‘an irresistible force or an unforeseen external event beyond
the control of Burundi’, but rather from a unilateral decision of the invoking State.88
In Gould Marketing, the Iran–US Claims Tribunal emphasised that force majeure did
not preclude wrongfulness if the existence of force majeure was ‘attributable to the
fault of the Respondent party’.89
ARSIWA article 23 goes further by a reference to ‘due to’. According to the Com-
mentary, force majeure is not applicable for situations ‘brought about by the neglect
or default of the State concerned, even if the resulting injury itself was accidental
and unintended’.90 By contrast, in the case where a State ‘may have unwittingly con-
tributed to the occurrence of material impossibility by something which, in hindsight,
might have been done differently but which was done in good faith and did not itself
make the event any less unforeseen’, the force majeure defence remains applicable.91
Nonetheless, the ‘contribution’ of an invoking State does not necessarily satisfy the
exception which requires that the role of the State to be ‘substantial’,92 as the invoking
State must have contributed to the situation of force majeure ‘through its own wrong-
ful conduct’,93 in line with the rules of ‘attribution’. In this context, the exclusion of
force majeure for ‘attributability’ may imply an expectation on the invoking State to
exercise the obligation of due diligence. In other words, the State must have taken
steps to overcome the event or situation of force majeure, albeit unsuccessfully.
To summarise, force majeure has been codified as a ground for precluding wrongful
act of State under ARSIWA, which contains robust rules and conditions surrounding
the situations of force majeure and the ‘material impossibility of performance’ in line
with the case law to restrict the application of force majeure and to ensure the rigorous
87
Zrilič (n 35) 45.
88
Libyan Arab Foreign Investment Company v Republic of Burundi (1994) 96 ILR 279, 318 (para. 55), quoted in
89
Gould Marketing (n 86).
90
91
ibid art. 23, commentary para 9.
92
ibid.
93
See Second Report on State Responsibility by Mr. James Crawford (n 48) 67, para 263.
performance of State responsibility. In this sense, it is indeed a ‘strict and narrow’

definition of force majeure under public international law.
IV. FORCE MAJEURE IN INVESTMENT ARBITRATION:
BETWEEN TREATY AND CONTRACT CLAIMS
In investment arbitration practice, force majeure has been invoked in both treaty and
contract claims. At times, such treaty and contractual claims may exist jointly or in
parallel, which may be called ‘mixed claims’. This would happen particularly when
the applicable investment treaty includes an umbrella clause that might ‘elevate’ a
contractual breach to become a treaty breach. The following discusses the three types
of claims in turn.
A. Force Majeure in Treaty Claims

As noted, investment tribunals have frequently referred to ARSIWA in dealing with
issues of (host) State responsibility, and in many Argentine cases, article 25 on
the state of necessity has been often invoked to justify the breach of investment
treaty obligations. However, force majeure as one of the six ‘circumstances precluding
wrongfulness’ of State conduct under ARSIWA has been less frequently and hardly
successfully invoked in treaty-based investor-State dispute settlement (ISDS) cases.94
The Güris˛ and others v Syria case is a rare example of the known treaty-based
claims in which the defence of force majeure has been seriously argued and examined
(together with the defence of necessity).95 In this case, the Respondent State asserted
force majeure (together with necessity) arising from Syria’s conflict as circumstances
precluding wrongfulness of any breaches of investment treaty on its part, excluding
responsibility under a war-losses indemnity clause (article 4) of the Syria–Italy BIT in
conjunction with a MFN clause of the Syria–Turkey BIT.96 The ICC Tribunal sug-
gested that the State’s obligation concerned was to ‘offer adequate compensation’ to
investors—ie an obligation of monetary redress for harm already occurred—rather
than presupposing that host State had a prior duty to avert or not to cause the ‘losses
or damages’.97 Accordingly, the obligation concerned was ‘a purely economic obliga-
tion in the nature of an indemnity which must be shown to be ‘materially impossible in
the circumstances to perform’ [required by force majeure] (or to be precluded by con-
duct that is ‘the only way for the State to safeguard an essential interest against a grave
and imminent peril’ as required by necessity defence)’ and was ‘fact-specific, requir-
ing cogent evidence’.98 Eventually, the Tribunal held that the Respondent failed to
satisfy those legal tests.99
94
A search of the UNCTAD ISDS database finds that of over 1100 publicly known ISDS cases included in the
database, none of them refers to force majeure in their case name, summary of the dispute and/or details of investment,
which suggests that force majeure has rarely been seriously argued in ISDS practice, <https://investmentpolicy.unctad.org/
investment-dispute-settlement/advanced-search>.
95
Güris Construction and Engineering Inc v Syrian Arab Republic, ICC Case No 21845/ZF/AYZ, Final Award (31
August 2020).
96
ibid para 315.
97
ibid para 319.
98
ibid para 320.
99
For completeness, the Tribunal also held that the defence of force majeure was in any event unavailable since the host
State ‘has assumed the risk of the situation [of force majeure] occurring’ by virtue of the war-losses provision under the
There may be many reasons for such limited usage of force majeure in treaty-based
ISDS claims. Some commentators posit that the ARSIWA set high thresholds for
satisfying the excuse of force majeure.100 Also, force majeure is not the only defence or
technique available to States to avoid responsibility under the investment treaty.101
Other customary defences such as necessity can be more relevant and appropriate for
justifying a State action in the situation of emergency.102 Furthermore, some invest-
ment treaties have incorporated express exceptions or the so-called non-precluded
measures (NPM) clauses that allow States to derogate from fulfilling obligations
under the applicable investment treaty.103
In investment treaty arbitration, tribunals often treat ARSIWA as ‘accurately
expressing customary international law’.104 The Argentine tribunals, for instance,
have all accepted that ARSIWA article 25 formulates the customary rules on
necessity, despite the divergences on the application of the doctrine of necessity
as well as on the relationship between customary defences and investment treaty
exceptions.105 While the Argentine cases mainly focused on necessity defence, sim-
ilar issues would likely arise with respect to a claim of force majeure. In particular,
the ISDS cases have revealed that, on the one hand, the host State may invoke rules
under ARSIWA regarding the breach of investment obligations in times of economic
or financial crisis; and on the other hand, the defences under ARSIWA as a part of
‘secondary rules’ on State responsibility have an uneasy relationship with the primary
obligations of States contained in an international investment treaty.106
The ILC has made it clear that the function of the ARSIWA is not to ‘specify the
content of the obligations laid down by particular primary rules, or their interpre-
tation’, but to ‘deal only with the responsibility for conduct which is internationally
wrongful’.107 In ADM v Mexico, the Tribunal concluded that ‘provisions of the ILC
Articles may be derogated from by [investment] treaty, as expressly recognized in
Article 55 as lex specialis … customary international law does not affect the conditions
for the existence of a breach of the investment protection obligations’.108 The CMS
Syria–Italy BIT—ie the contracting parties assumed the risk that ‘war, other forms of armed conflict, a state of emergency,
civil strife or other similar events’ might occur and cause ‘losses or damages’ on foreign investment (ibid paras 320, 322).
100
See eg Zrilič (n 35) 30; Bjorklund (n 54) 499; Szurek (n 67) 476.
101
See generally eg Viñuales (n 51) 65.
102
See Zrilič (n 35) 34.
103
Article XI of the USA–Argentina BIT, for example, is one such NPM clause that has been frequently used
in the series of Argentine cases. With regard to force majeure, however, most investment treaties do not contain an
express reference. The most commonly found reference is an inclusion of force majeure circumstances in the ‘war losses’
clauses which require national and most-favoured-nation (MFN) treatment to foreign investors with regard to restitution,
indemnification, compensation or other settlement. See eg art III (3) of the US–Ukraine BIT which provides that:
Nationals or companies of either Party whose investments suffer losses in the territory of the other Party owing to
war or other armed conflict, revolution, state of national emergency, insurrection, civil disturbance or other similar events
shall be accorded treatment by such other Party no less favourable than that accorded to its own nationals or companies
or to nationals or companies of any third country, whichever is the most favourable treatment, as regards any measures
it adopts in relation to such losses.
Exceptionally, art 3(4) of the Ethiopia–UAE BIT does the opposite by expressly excluding ‘acts of God, natural
hazard and force majeure’ from the undertaking by the host State to provide national and MFN treatment for losses of
foreign investors ‘owing to war or other armed conflict, revolution, revolt, insurrection or riot’, with regard to restitution,
indemnification, compensation or other settlement.
104
Paparinskis (n 38) 487.
105
For example, some tribunals considered that the relevant customary law should inform the interpretation of treaty-
based exception, namely art XI of the US–Argentina BIT. But other tribunals held that the treaty-based exception and
the customary defence of necessity are two totally different legal concepts and that one should not be confused with the
other. See Crawford (n 5) 132.
106
Bjorklund (n 54) 463.
107
ARSIWA (n 4) 31, general commentary para 4.
108
Archer Daniels Midland and Tate & Lyle Ingredients Americas Inc v United Mexican States, ICSID Case No
ARB(AF)/04/5, Award (21 November 2007) para 116.
Annulment Committee also confirmed that although the necessity defence under cus-
tomary international law would be available, treaty defence, as lex specialis, should be
applied first in an ISDS case, and only if ‘there was conduct not in conformity with
the Treaty would [the Tribunal] have had to consider whether Argentina’s responsi-
bility could be precluded in whole or in part under customary international law’.109
In other words, the application of defences relating to State responsibility is based on
a premise that there has been a breach of international obligations under the applica-
ble investment treaty and/or customary international law. If no breach of investment
obligation is found, or if an investment treaty expressly allows States to derogate
from obligations, there is no need for invoking any defences under the law of State
responsibility. Nonetheless, further clarification in investment treaties seems needed,
given that the uncertainty remains due to different approaches of the subsequent
investment tribunals.110
Another issue is whether a State is fully exempted from responsibility for any vio-
lation of obligations contained in an investment treaty in circumstances precluding
wrongfulness under the ARSIWA like necessity or force majeure. According to some
commentators, it is plausible to argue that contracting parties have waived their rights
to raise the customary defences by entering into an investment treaty.111 While this
position is debatable as it depends on the wordings of the specific treaty provisions, it
is clear that the content of primary obligations under the applicable investment treaty
will play a greater role and may exclude the invocation of customary defences—this
approach is also in line with the purpose of investment treaties to protect investors
from State abuses and the principle of pacta sunt servanda.
Finally, even when a customary defence is invoked successfully in an ISDS case,
the State might still be obliged to pay compensation. Under the ARSIWA, compen-
sation for damages is possible in certain cases, though the text does not specify in
what circumstances compensation should be payable.112 In Enron, the Tribunal sug-
gested that if the affected party and the Respondent could not agree on a negotiated
settlement including payment, it would set the appropriate level of compensation.113
ARSIWA article 27 presumes that compensation for any ‘material loss’ caused by cir-
cumstances precluding wrongfulness under chapter V is concerned only with the need
for the ‘adjustment of losses’, which is distinct from compensation within the frame-
work of reparation under ARSIWA article 34.114 According to some commentators,
‘appropriate compensation might be less than full reparation, but would be limited
to actual losses’, and ‘[l]imiting the compensation available suggests that there could
be some benefit to a State in establishing a successful defence, but that the investor
or her home State would not bear the entire burden of the damages flowing from the
109
CMS Gas Transmission Company v The Argentine Republic, ICSID Case No ARB/01/8, Decision of the ad hoc
Committee on Annulment, paras 133–34.
110
The El Paso Tribunal, for example, seemed to have included the ‘non-contribution’ requirement of ARSIWA art 23
in the interpretation of art XI of the US–Argentina BIT, which was subsequently confirmed by the Annulment Committee,
see El Paso Energy International Company v The Argentine Republic, ICSID Case No ARB/03/15, Award (31 October
2011) paras 613, 624; Decision of the ad hoc Committee on the Application for Annulment of the Argentine Republic
(22 September 2014) paras 247–48.
111
Bjorklund (n 54) 490; August Reinisch, ‘Necessity in International Investment Arbitration—An Unnecessary Split
of Opinions in Recent ICSID Cases’ (2007) 8 Journal of World Trade and Investment 191, 204–05.
112
ARSIWA (n 4), art 27.
113
Enron Corporation and Ponderosa Assets LP v Argentine Republic, ICSID Case No ARB/01/3, Award (22 May 2007)
para 345.
114
ARSIWA (n 4), art 27, commentary para 4.
wrongful conduct’.115 In fact, investment tribunals have at times relied on ARSIWA

article 27 in determining the issue of compensation.116
B. Force Majeure in Contract Claims
Apart from being an exception to State responsibility, force majeure has been invoked
as an excuse for non-performance of contractual obligation in investment arbitration,
especially in contract-based cases. When investment tribunals deal with questions
of contractual obligation, those questions are subject to the proper law of the con-
tract and the contract provisions, sometimes together with the applicable rules of
international law.
The Autopista v Venezuela case was one of the earliest contract-based ISDS cases
that involved the issue of force majeure since the ARSIWA was adopted in 2001.
The dispute arose out of a Concession Agreement which provided contractual force
majeure expressly referring to circumstances that impeded the Concessionaire to per-
form.117 The Tribunal resorted to Venezuelan law to interpret force majeure, and also
held that international law would prevail over ‘conflicting national rules’.118 The Tri-
bunal held that Venezuela’s breach of contractual obligation to raise the tolls could not
be excused by force majeure for lack of ‘unforeseeability’.119 In terms of ‘impossibility’,
the Tribunal simply held that there should be no different standard between national
and international law, by making reference to ARSIWA and some cases without any
further analysis.120 However, under the Venezuelan administrative law, force majeure
event does not necessarily need to be ‘irresistible’; instead, ‘it suffices that by all rea-
sonable judgement the event impedes the normal performance of the contract’.121 By
contrast, the requirement of impossibility under ARSIWA, as noted above, refers to
an element of ‘material impossibility’.
Unlike Autopista, some of the Argentine tribunals have observed that force majeure
as a ground for exoneration from responsibility under ARSIWA might be distinct
from the doctrine of force majeure under domestic law. The Enron Tribunal, for
example, noted that the concept of force majeure under ARSIWA article 23 required
additional express conditions compared to the theory of imprévision applied in the
context of Argentine law, in particular excluding circumstances in which performance
of an obligation has become more difficult due to a political or economic crisis.122
While the Award was annulled for other reasons later, the Committee recognised
such comparison and appeared to have accepted that the doctrine of imprévision in
the context of domestic law was not identical to article 23 of the ARSIWA.123 The
Sempra Tribunal made an observation in identical terms as the Enron Tribunal.124
115
Bjorklund (n 54) 516.
116
See eg CMS (n 109), Award (12 May 2005), para 390; Enron (n 113), paras 343–45; Sempra Energy International
v The Argentine Republic, ICSID Case No ARB/02/16, Award (28 September 2007) para 393. The LG&E Tribunal and
the CMS Annulment Committee also acknowledged that ARSIWA art 27 was a ‘non-prejudice’ clause, see LG&E v.
Argentina, ICSID Case No. ARB/02/1, Decision on Liability (3 October 2006), para 225; CMS (n 109), para 147.
117
Autopista Concesionada de Venezuela, C.A. v Bolivarian Republic of Venezuela, ICSID Case No ARB/00/5, Award (23
September 2003) para 107.
118
ibid paras 105 and 107. The Tribunal noted that contractual force majeure did not address non-performance of
Venezuela, so the consequences of force majeure were governed by the applicable law rather than the contract.
119
ibid para 119.
120
ibid para 123 (the Tribunal referred to ARSIWA, among others, when arriving at this conclusion).
121
ibid para 121.
122
Enron (n 113), para 217.
123
The Annulment Committee did not accept that there was an error in the application of law in relation to force
majeure in the Tribunal’s decision, and held that even if the Tribunal was of the view that the content of the doctrine of
imprévision was identical to the ILC art 23, such an error of law would not amount to a ground of annulment, see Enron
(n 113) Decision on Annulment, paras 286–87.
124
Sempra (n 116), para 246.
In Niko Resources v Bangladesh, the Respondent relied on force majeure as an excuse

for non-payment of the invoices under a contract (‘GSPA’).125 The ICSID Tribunal
rejected the plea because the alleged event was known to the Respondent at the time
when the contract was concluded, while both the Bangladesh Contract Act and the
GSPA provided the condition of ‘unforeseeability’ for a case of force majeure.126 The
Tribunal went on to examine whether the Respondent had complied with its obliga-
tion to take ‘reasonable action to overcome’ the impediment under the contract and
common law.127 Ultimately, the Tribunal held that Petrobangla did not take reason-
able steps nor did it provide a satisfactory explanation.128 In this regard, the Tribunal
seemed to suggest that a force majeure event should not obviate all obligations of the
invoking party such as taking actions to mitigate the risk, which appeared similar to
the position taken by the Gould Marketing Tribunal regarding the existence of a ‘due
diligence’ obligation.129
In RSM v Central African Republic, the investor invoked a force majeure clause to
justify its non-performance of contractual obligations due to the political and secu-
rity situation in the host State. The Tribunal confirmed that the security situation
was covered by the contract’s definition of force majeure and that the contractual force
majeure required the same elements as those under international law without further
analysing how the same elements were identified.130 The Tribunal held that the con-
flict situation in the host State was unforeseeable, which inhibited the exploration
activity of the investor.131 However, the Tribunal also suggested that the force majeure
situation did not suspend all obligations under the contract, in particular, the investor
could have sought to renew its exploration licence at least two months before the
expiry date.132
It should be noted that in cases where the underlying contract has stipulated
specific terms on force majeure, such terms often play a crucial role, not only in
determining the conditions but also in clarifying the scope of supervening events and
allocating risks. In a recent UNCITRAL award in Rutas de Lima v Lima, for instance,
the majority of the Tribunal rejected the Respondent’s several defences, including
one related to the alleged supervening impossibility by reason of social unrest on the
basis that the parties had expressly excluded social revolts against tool units from the
definition of force majeure.133
125
Niko Resources (Bangladesh) Ltd. v Bangladesh Petroleum Exploration & Production Company Limited (‘Bapex’) and
Bangladesh Oil Gas and Mineral Corporation (‘Petrobangla’), ICSID Case No ARB/10/18, Decision on the Payment Claim
(11 September 2014) para 192.
126
ibid paras 196–205.
127
128
129
Gould Marketing (n 86).
130
RSM Production Corp v Central African Republic, ICSID Case No ARB/07/02 (Decision on Jurisdiction and Liability,
7 December 2010) paras, 178, 185.
131
Zrilič (n 35) 49.
132
See Luke Eric Peterson, ‘ICSID Tribunal Deems Central African Republic Oil Contract to Have Ended; US
Investors Obtained Default Judgement in US Court against C.A.R. Leaders over Bribe Allegation’ (Investment Arbitration
Reporter, 16 December 2010) <www-iareporter-com.wwwproxy1.library.unsw.edu.au/articles/icsid-tribunal-deems-
central-african-republic-oil-contract-to-have-ended-u-s-investor-obtained-default-judgment-in-u-s-court-against-c-a-r-
leaders-over-bribe-allegation/>.
133
See Lisa Bohmer, ‘Analysis: Recently-Surfaced UNCITRAL Award Reveals Why Arbitrators Rejected Corruption
Allegations against Odebrecht-Owned Consortium in Lima Toll Dispute’ (Investment Arbitration Reporter, 19 August
2020) <www-iareporter-com.wwwproxy1.library.unsw.edu.au/articles/analysis-recently-surfaced-uncitral-award-reveals-
why-arbitrators-rejected-corruption-allegations-against-odebrecht-owned-consortium-in-lima-toll-dispute/>.
As noted by Zrilič, contractual force majeure governed by domestic and interna-

tional commercial law should be treated differently from force majeure as a general
international law defence codified in ARSIWA.134 In particular, contractual force
majeure presents two major features. First, contractual force majeure can be invoked
by either party of the investment contract to excuse it from non-performance of con-
tractual obligations. In this regard, it is a device for allocating risk in international
transactions between ‘equal’ parties rather than providing a defence to preclude State
responsibility in public international law.135 Second, as a contractual clause, parties
can tailor force majeure for their own needs by, for example, expanding or narrowing
the scope of force majeure situations or events.
The force majeure clause typically includes a list of events that can trigger the
application of the clause. The International Chamber of Commerce (ICC),136 for
example, has developed a model clause including a general definition below together
with a list of typical force majeure events:
‘Force Majeure’ means the occurrence of an event or circumstance (‘Force Majeure Event’)
that prevents or impedes a party from performing one or more of its contractual obligations
under the contract, if and to the extent that the party affected by the impediment (‘the
Affected Party’) proves:
a) that such impediment is beyond its reasonable control; and

b) that it could not reasonably have been foreseen at the time of the conclusion
of the contract; and
c) that the effects of the impediment could not reasonably have been avoided or
overcome by the Affected Party.137
Clearly, the ICC force majeure clause has replaced the requirement of ‘impossi-
bility’ by a criterion of commercial ‘reasonableness’, which apparently lowers the
standard to the level of ‘commercial impracticability’.138 The trend towards the more
lenient standard of ‘impracticability’ is also reflected in the codifications of interna-
tional commercial rules and customs such as the CISG and UNDROIT Rules.139
The ICC makes it clear that the contracting parties may ‘modify the [model] clause
by making it more restrictive (eg by cancelling the reference to reasonableness) or
more flexible (eg by excluding the unforeseeability requirement)’ to change the bal-
ance of force majeure and benefit both parties.140 In terms of the listed events, the
parties may also add or exclude certain events to the ICC list; and, more impor-
tantly, an event outside the list may still qualify as force majeure, though the invoking
134
Zrilič (n 35) 46.
135
ibid 47.
136
The ICC states that a force majeure clause is to ‘draw a reasonable compromise between … the right of a party to be
exonerated from its obligations when their fulfilment is prevented by unforeseeable events for which it is not responsible,
and the right of the other party to obtain the performance of the contract’, see the ICC Force Majeure and Hardship Clauses
2020 <https://iccwbo.org/content/uploads/sites/3/2020/07/icc-forcemajeure-introductory-note.pdf> 1. As explained ear-
lier, civil law and common law jurisdictions are different in drafting force majeure clauses: civil law lawyers tend to specify
the conditions (unforeseeability, event out of the parties’ control, irresistibility) required for an event to be qualified as
force majeure, while common law lawyers tend to list a number of specific circumstances (eg acts of God) which qualify
as a force majeure event. The ICC clause draws a compromise between the common and civil law approaches.
137
ibid 2–3.
138
See Mark Augenblick and Alison Rousseau, ‘Force Majeure in Tumultuous Times: Impracticability as the New
Impossibility’ (2012) 13 JWIT 59, 60.
139
Zrilič (n 35) 52, citing art 79 of the CISG and art 7.1.7 of UNIDROIT Rules.
140
See ICC (n 136) 3.
party is required to prove all three conditions prescribed above.141 However, some
commentators argue that ‘unless the type of events is specifically listed in the force
majeure clause, virtually no external event will be deemed unforeseeable and consti-
tute force majeure excusing contractual performance’.142 On the consequences, the
ICC provides that force majeure applies ‘only as long as the impediment invoked pre-
vents performance’ of contractual obligations, and the affected party must ‘notify the
other party as soon as the impediment ceases’; if the long duration of force majeure
has deprived the contracting parties of what they could reasonably expect from the
contract, either party has the right to terminate the contract by notifying the other
party within a reasonable time.143
In Gujarat v Yemen, the ICC Tribunal relied exclusively on the wording of a
broadly drafted force majeure clause and found no need to aid interpretation by rely-
ing on Yemeni domestic law which governed the contract.144 The Tribunal found the
contractual force majeure to be exhaustive and self-contained, and thereby no need
to consider additional requirements (such as unforeseeability and impossibility).145
Nevertheless, the Tribunal suggested that it would have reached the same conclu-
sion even if the force majeure clause had expressly provided for an ‘unforeseeability’
requirement.146 To the Tribunal, the key of the ‘unforeseeability’ requirement was
not the existence of force majeure risk at the time of contracting, but rather ‘whether
there’s a significant and sharp increase in risk beyond what was contemplated by the
parties at the time of contracting’.147 Likewise, the Tribunal held that even though
the force majeure clause included an ‘impossibility’ condition, it would not render a
different decision, because ‘impossibility in the context of force majeure meant that
it was not possible to perform an obligation in a practical way’.148 Accordingly, the
Tribunal held that the requirement of ‘impossibility’ in the context of investment
contracts denoted commercial impracticability, rather than absolute impossibility.149
C. Force Majeure in ‘Mixed Claims’

Due to the mixed nature of investor-State disputes, investment tribunals at times
have to deal with interactions between contract and treaty claims, particularly when
there is an umbrella clause included in the governing investment treaty. In Strabag v
Libya, the Claimant relied on an umbrella clause under the Austria–Libya BIT and
brought multiple claims arising out of alleged breaches of obligations under several
contracts with Libyan State entities. The ICSID Tribunal upheld jurisdiction over
the Claimant’s contract claims pursuant to the umbrella clause of the BIT that the
breach of contractual obligations amounted to a breach of international law.150 The
Claimant then advanced substantial claims related to both treaty obligations and con-
tract provisions.151 In assessing the force majeure claims, the Tribunal suggested that
141
ibid 5.
142
Augenblick and Rousseau (n 138) 62.
143
ICC (n 136) 6.
144
Gujarat State Petroleum Corporation Limited v the Republic of Yemen and the Yemen Ministry of Oil and Minerals, ICC
Arbitration No 19299/MCP (Award, 10 July 2015) para 105.
145
ibid para 158.
146
ibid para 159.
147
ibid.
148
ibid para 160.
149
Zrilič (n 35) 53.
150
Strabag SE v Libya, ICSID Case No ARB(AF)/15/1, Award (29 June 2020) paras 137–208.
151
ibid para 246.
the nature of force majeure provisions under contracts or general law was to ‘allocate
risks resulting from exceptional, often large-scale, events that cannot be anticipated
or prudently planned for’, and thus its task was to ‘identify and give effect to the
risk allocation agreed by the parties in each contract’.152 Accordingly, the Tribunal
found that the parties had placed in the Benghazi, Misurata and TIAR-NE contracts
the burden of losses resulting from a force majeure event such as the Revolution in
Libya on the investor and no compensation was owned thereof, but in the Garaboulli,
TIAR and Tajura contracts the investors were allowed for recovery of losses due to
force majeure.153 The Tribunal did not resort to ARSIWA when dealing with the force
majeure claims since the claims were invoked primarily on the basis of contracts rather
than the BIT, though the treaty referred to force majeure in article 5 on compensation
for losses in times of armed conflict, emergency and the like.154
The Ampal-American and others v Egypt was another case in point as it touched
on the relationship between parallel contractual and treaty arbitrations. The ICSID
Tribunal held that its jurisdiction derived from the US–Egypt BIT, and it should
apply the treaty standards and international law in the analysis of whether the Respon-
dent failed to exercise due diligence in reaction to the attacks on a pipeline (the
investment) and thus breached the full protection and security obligation under the
BIT, even though the Respondent invoked force majeure under the investment con-
tract (the GSPA) to justify its non-performance.155 The investment treaty Tribunal
noted that a parallel ICC Tribunal’s Award was relevant to the treaty claims—in par-
ticular, the commercial arbitration tribunal dismissed the force majeure defence raised
by EGAS as it failed to act as a Reasonable and Prudent Pipeline Operator under
the investment contract—and these findings of fact had a res judicata effect between
the parties in the investment arbitration proceedings.156 Nonetheless, the investment
treaty Tribunal also conducted its own evaluation of the evidence on the same fac-
tual matters and found that the investment contract was terminated wrongfully by the
Respondent.157 The investment treaty Tribunal was satisfied with the ICC Award on
force majeure under the investment contract and did not further elaborate on the force
majeure defence invoked by the Respondent.
The preceding paragraphs have demonstrated the sharp contrast and close interac-
tion between treaty and contract claims involving force majeure. Clearly, the conditions
of force majeure as applied in contract claims are broader and more flexible than those
applied in treaty claims, which corresponds to the different governing laws as analysed
above. The most fundamental rationale for such a difference might be the different
roles of the host State presumed in these distinct claims: in treaty claims under an
investment treaty and general international law, the role of the host State is presumed
as a public international law subject exercising sovereign authority, while in contrac-
tual claims under investment contracts, the host State is normally presumed as acting
primarily in its commercial capacity. Acting in a sovereign capacity, the host State
is regarded as extremely resourceful and powerful, particularly when compared with
152
ibid para 791.
153
154
ibid para 213.
155
Ampal-American Israel Corporation and others v Arab Republic of Egypt, ICSID Case No ARB/12/11, Decision on the
Liability and Heads of Loss (21 February 2017) paras 235–46.
156
ibid paras 271–74 and 330–31.
157
foreign investor, and hence it is only reasonable to ‘narrowly and strictly’ define the
excuses such as force majeure that it might resort to, to ensure that the host State could
not easily escape international obligations. Acting in a commercial capacity, by con-
trast, the host State is supposed to be on an equal footing with the foreign investor
and hence should enjoy an equal level of protection as the foreign investor, including
the benefit of force majeure under the commercial or contractual standards. While the
logic of domestic and international laws is easily understandable, its application to
the field of investor-State disputes might be problematic, given the ‘mixed’ nature of
the disputes, involving both public and private parties and interests, including both
public and private roles of the host State, at the same time. Particularly when the
applicable investment treaty contains an ‘umbrella clause’ that bridges contractual
and treaty claims and ‘elevates’ the former to the latter, there might be an issue of
parallel proceedings and conflict of (treaty vs contractual) standards, as demonstrated
in the Strabag v Libya and Ampal-American the other v Egypt cases.
Equally noticeable is the fact that when investment tribunals referred to force
majeure under international law including the ARSIWA, they rarely engaged in
detailed analysis thereon, particularly when international laws were applied together
with contracts and/or domestic law. Indeed, Crawford had noted the phenomenon
that most investment tribunals sought to rely on ARSIWA by way of ‘signposting’
in their decisions, like ‘a drowning man might grab a stick at sea in the hope of
having certainty’, but the rule itself is ‘inherently uncertain’.158 It would certainly be
much more helpful had the international law aspects been more fully and thoroughly
examined.
V. CONCLUSION AND OUTLOOK

The inherent tension between the principle of pacta sunt servanda and the change
of circumstances has led to the creation of varied conceptions and mechanisms. In
the context of domestic or international commercial laws, the doctrine or clauses of
force majeure is a mechanism to allocate risks between parties in extraordinary and
unanticipated situations. In the context of public international law, especially the
rules of State responsibility, force majeure is an excuse or justification for the wrongful
act of a State in exceptional circumstances.
As a secondary rule of international law, ARSIWA article 23 on force majeure comes
into play normally only when a court or tribunal has arrived at a tentative conclusion
that the impugned act of a State was not in conformity with what was required of
it by a rule of international law, including obligations under a governing investment
treaty. If force majeure is invoked and the State meets all requirements for the suc-
cessful invocation, the effect is to preclude the wrongfulness of the State’s conduct
even though that conduct is not in conformity with the State’s international obliga-
tions. To succeed with the plea of force majeure, the adjudicator must be satisfied with
158
Yet Crawford pointed out that ARSIWA were ‘predicated upon a process of integration into practice’, which needed
to be developed with engaging in ‘an act of creation’, calling for actual integration of the substance of ARSIWA into
investment arbitration decisions, see Crawford (n 5) 128. Bjorklund also noted that the ILC Articles ‘were not drafted
to serve the interests of investor-State arbitration, or even of investment generally’ and thereby these principles ‘will need
to be developed in the context of investment law, and in the context of individual investors bringing cases to protect their
interests’, see Bjorklund (n 54) 522.
all requirements embodied in ARSIWA, including ‘involuntariness’, ‘unforeseeabil-

ity’, ‘irresistibility’ and ‘material impossibility’. The ground is not applicable for the
invoking State if it has already accepted the risk of force majeure, or has caused or
induced the situation of force majeure.
In investment arbitration practice, force majeure has been invoked to justify non-
performance of contractual obligations or treaty obligations. For the former, the
contractual force majeure clause is crucial. For the latter, investment treaty tribunals
tended to refer to the ARSIWA’s requirements of force majeure where the thresh-
olds remain stringent. The case law has demonstrated that most arbitral tribunals
would consider ‘unforeseeability’ and ‘impossibility’ in their determination of the
force majeure plea, but the standard might vary in different cases. In the context of
State responsibility, the commentaries to ARSIWA have made it clear that there must
be ‘material impossibility’ of performance and merely ‘increased difficulty’ is not
applicable. By contrast, in the context of contract claims, the test seems to be only
‘reasonable impossibility’ or ‘commercial impracticability’. Clearly, the conditions
for the invocation of force majeure as a circumstance precluding wrongfulness under
the rules of State responsibility are much narrower and stricter than the conditions
set for invoking force majeure in the context of contract or commercial law.
The different standards applied by treaty and contract arbitration tribunals are
rooted in the distinct systems of applicable law, which is public international law for
investment treaty arbitration, and domestic and/or international commercial law for
contractual arbitration. Traditionally, the two sets of laws operated in their distinct
spheres, which did not cause many problems, nor did they attract much attention.
With the increasingly blurred boundaries between domestic and international, private
and public laws, the legitimacy and sustainability of such conventional distinction
might demand reconsideration. The problem is particularly acute in the field of inter-
national investment arbitration, where tribunals are frequently and increasingly called
upon to address ‘transboundary’ issues of public international law and commercial
law. Under the ICSID Convention, for example, tribunals are required to apply ‘the
law of the Contracting State party to the dispute (including its rules on the conflict
of laws) and such rules of international law as may be applicable’, in the absence
of a choice of governing law by the parties.159 This means that the tribunals have
to apply both public international law, as well as domestic private (and/or public)
laws, at the same time. To make it worse, the umbrella clauses commonly found in
investment treaties have created bridges or ‘elevators’ for the obligations under the
two distinct systems to meet, interact and integrate. This may partly explain why
investment tribunals have often shied away from engaging in extensive discussions
on the interaction between the two sets of laws jointly applied to the cases before
them.
In the future, it might help to explore a more consistent interpretation and appli-
cation of force majeure claims under the two legal systems.160 One way forward might
be to allow more flexibility in the interpretation and application of article 23 under
ARSIWA so that the international rules on force majeure might be better aligned
159
See the Convention on the Settlement of Investment Disputes between States and Nationals of Other States
(adopted 18 March 1965, entered into force 14 October 1966) 575 UNTS 159, art 42(1).
160
Zrilič also noted that differences with force majeure in international law and commercial law could give rise to a
problem when the content of the force majeure clause in international commercial law is read into the force majeure defence
under the international law of state responsibility see Zrilič (n 35) 56.
with force majeure under commercial law. Indeed, Special Rapporteur Ago once
described ‘material impossibility’ as ‘relative impossibility’, the threshold of which
was met when the performance would result in a ‘sacrifice that could not be reason-
ably required’.161 Zrilič also argued that, in international law, whether the criteria of
unforeseeability and impossibility are met must be assessed against the circumstances
of a case, in particular the circumstances on the side of the obligor and the charac-
teristics of the event (unforeseeability), the nature of the breached obligation and the
availability of reasonable alternatives (impossibility).162 In practice, similar flexibility
in treaty interpretation and application has already been presented in certain cases
such as LG&E where the Tribunal interpreted and applied article 25 under ARSIWA
(the necessity defence) to be able to cover, for the first time in the series of cases, the
circumstances of certain period of the Argentine financial crisis.163 Such suggestions
and practices seem to have pointed towards the right direction of development.
161
See the Eighth Report on State Responsibility by Mr. Roberto Ago (n 43) paras 103, 106. In addition, the ILC also
noted that there is no real freedom of choice, if one of the alternatives could not be reasonably required to be followed,
see Yearbook of the International Law Commission 1979, vol I, UN Doc A/CN.4/SR.1569, 185, para 6. EU law appears
to have supported a similar interpretation of impossibility, where the ECJ has permitted the defence in situations when
performance would be possible by making unreasonable and excessive sacrifice, see Michael Parker, ‘Force Majeure in
EU Law’ in Ewan McKendrick (ed), Force Majeure and Frustration of Contract (Routledge 2014) 341; Anastasios Gour-
gourinis, ‘Financial Crisis as Force Majeure under International Law and EU Law: Defending Emergency Measures, à
l’Europenne, in Investment Arbitration under Intra-EU BITs’ in Christian Tams and others (eds), International Investment
Law and Global Financial Architecture (Edward Elgar 2017) 296–304.
162
Zrilič (n 35) 56.
163
See LG&E (n 116), paras 245–66. On this point, Bjorklund (n 54) 462 noted that:
Notwithstanding the primary basis for its decision, the tribunal in the ICSID case LG&E v Argentina suggested
that it was possible to apply the customary international law conditions in a more flexible manner that would lead to the
partial exculpation of the State for having violated its treaty obligations. It thus remains an open question whether the
customary international law necessity defence has been so stringently limited that its successful invocation is virtually
impossible, particularly in the context of foreign investment, or whether flexibility in interpretation might yet give it a role
to play.

Force Majeure and Investment Arbitration

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Force Majeure and Investment Arbitration

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ICSID Review, Vol. 37, No. 1-2 (2022), pp.

Abstract—This article addresses force majeure in international investment arbitration as

precluding wrongfulness’ under the Articles on Responsibility of States for Inter-

II. THE CONCEPT OF FORCE MAJEURE: ITS ORIGIN

God’.10 In addition, force majeure may be invoked as a defence to either contractual

B. Force Majeure in International Legal Instruments

or the CISG, or as the applicable law in international commercial arbitration. The

III. FORCE MAJEURE UNDER ARSIWA: A ‘NARROW

A. The Codification History

1. The wrongfulness of an act of a State not in conformity with an international

b. the State has assumed the risk of that situation occurring.50

As one of the six ‘circumstances precluding wrongfulness’ envisioned in Chapter V

B. The Constitutive Elements

international obligations.58 By contrast, the act of State under necessity is voluntary

of State responsibility is a defence for presumptive breach of primary rules in which

Article 61, paragraph 1, requires the ‘permanent disappearance or destruction of an object

performance of State responsibility. In this sense, it is indeed a ‘strict and narrow’

A. Force Majeure in Treaty Claims

wrongful conduct’.115 In fact, investment tribunals have at times relied on ARSIWA

B. Force Majeure in Contract Claims

In Niko Resources v Bangladesh, the Respondent relied on force majeure as an excuse

As noted by Zrilič, contractual force majeure governed by domestic and interna-

a) that such impediment is beyond its reasonable control; and

C. Force Majeure in ‘Mixed Claims’

V. CONCLUSION AND OUTLOOK

all requirements embodied in ARSIWA, including ‘involuntariness’, ‘unforeseeabil-

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