Swords, Shields and Other Beasts

ICSID Review, Vol. 37, No. 1-2 (2022), pp.
121–137
doi: https://doi.org/10.1093/icsidreview/siac005
Published Advance Access 14 June 2022 WINTER/SPRING 2022
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20TH ANNIVERSARY OF ARSIWA
Swords, Shields and Other Beasts: The
Role of Countermeasures in Investment
Arbitration
Eran Sthoeger1 and Christian J Tams2
I. INTRODUCTION: OLD AND NEW, SWORDS AND

SHIELDS
Our topic can be thought of as a meeting of the old and the new, and it can be
approached via a straightforward question: is there room, in the contemporary world
of investment arbitration, for countermeasures, that traditional means of self-help?
Countermeasures—and more so the concept’s traditional label, reprisals—evoke
an era of interstate international law of limited reach: an era which, for lack of ade-
quate institutions, accommodated ideas of ‘private justice’ to a significant extent,
notably by accepting the right of one State to respond to another State’s wrong-
ful conduct by means of coercion. This right permitted the State to respond to
wrongful conduct affecting State rights as well as rights of nationals, despite the
obvious risk of abuse. As investment lawyers with a measure of historical awareness
know full well, in the field of foreign investment, the risk of abuse regularly mate-
rialised, as ‘home States’ (in the contemporary parlance) reacted coercively against
host States accused of having interfered with rights of foreign investors. Newcombe
and Paradell’s summary account is matter-of-factly, yet eloquent:
During the nineteenth and early twentieth centuries, the exercise of diplomatic protection
by powerful states was often accompanied by ‘gun-boat diplomacy’—the threat or the use
of force to back up diplomatic protection claims. At the time, the use of force in the exer-
cise of diplomatic protection was not inconsistent with international law. Despite the fact
that the 1899 and 1907 Hague Convention for the Pacific Settlement of International Disputes …
provided for state parties ‘to use their best efforts to ensure the pacific settlement of interna-
tional differences’, both the US and the European powers used force and threats of force on
numerous occasions to back up and enforce claims of diplomatic protection. For instance,
1
Litigator and consultant in international law, Adjunct Professor of International Law at Brooklyn Law School and
Seton Hall Law School. Email: Eran.Sthoeger@eransthoeger.com.
2
Professor of International Law at the University of Glasgow, UK, Academic Member Matrix Chambers, London,
UK. Email: christian.tams@glasgow.ac.uk.
© The Author(s) 2022. Published by Oxford University Press on behalf of ICSID. All rights reserved.
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122 ICSID Review VOL. 37 1-2
between 1820 and 1914, Great Britain intervened in Latin America at least forty times to
enforce British claims for injuries to its nationals and to restore order and protect property.
These claims were sometimes based on limited or erroneous evidence and frequently led to
reprisals out of proportion to the injury suffered.3
Over time, the right to take countermeasures would be gradually limited.4 Under
article 1 of the 1907 Drago Porter Convention, States ‘agree[d] not to have recourse
to armed force for the recovery of contract debts claimed from the Government of one
country by the Government of another country as being due to its nationals’.5 The
Naulilaa Award, a landmark decision rendered almost a century ago, clarified that
reprisals had to be proportionate.6 In 1945, States accepted a general ban on the use
of force, which meant that countermeasures would henceforth be ‘non-forcible’.7 In
the interstate jurisprudence of the last decades8 and ILC’s work on State respon-
sibility,9 these and further limitations would be articulated and translated into a
more sophisticated regime governing resort to countermeasures. And while coun-
termeasures continue to be ‘regarded with a heavy (and probably healthy) dose of
scepticism’,10 the concept has proven surprisingly enduring: ‘archaic’ it may be, but
it retains its place in general international law.
On the face of it, investment arbitration belongs to a different era, which has over-
come antiquated features, and limits, of early twentieth-century international law. It
certainly marks a new order, in which disputes concerning foreign investment are reg-
ularly settled, not by self-help, but before international tribunals. And in that process,
a particular type of non-State actor—investors—occupies a prominent place, enjoy-
ing far-reaching procedural and perhaps also substantive rights under international
treaties.
Do countermeasures still have a role to play in this ‘new order’? Much depends
on the type of countermeasures in question. For our purposes, two scenarios are
of particular relevance. The first looks at countermeasures as a means of enforcing
standards of investment protection, and it is the one with heavy historical baggage
3
Andrew Newcombe and Lluis Paradell, Law and Practice of Investment Treaties: Standards of Treatment (Kluwer Law
International 2009) 9 (footnotes omitted).
4
For more on the gradual ‘taming’ of countermeasures, see Omer Y Elagab, The Legality of Non-Forcible Counter-
Measures in International Law (OUP 1988); Elisabeth Zoller, Peacetime Unilateral Remedies: An Analysis of Countermeasures
(Dobbs Ferry 1984); Federica Paddeu, Justification and Excuse in International Law: Concept and Theory of General
Defences (CUP 2018) 225–84. For a condensed account, see Bruno Simma and Christian J Tams, ‘Reacting Against
Treaty Breaches’ in Duncan B Hollis (ed), The Oxford Guide to Treaties (2nd edn, OUP 2020) 568, 585–92; Christian J
Tams, ‘Treaty Breaches and Responses’ in Christian J Tams, Antonios Tzanakopoulos and Andreas Zimmermann (eds),
Research Handbook on the Law of Treaties (Edward Elgar 2014) 476, 480–96.
5
See Convention on the Limitation of Employment of Force for Recovery of Contract Debts’ (signed 18 October
1907, entered into force 26 January 1910) in Deuxiéme Conférence internationale de la Paix. Actes et documents, vol 1
(La Haye Imprimerie Nationale 1907) 620 (Original French).
6
Responsabilité de l’Allemagne à raison des dommages causés dans les colonies portugaises du sud de l’Afrique (Portugal v
Allemagne) [1928] 2 RIAA 1011 (Naulilaa Award). The Award concerned belligerent reprisals, but its pronouncement
on proportionality has been applied to peacetime countermeasures.
7
See James Crawford, State Responsibility: The General Part (CUP 2013) 690: ‘The exclusion of forcible counter-
measures in ARSIWA Article 50(1)(a) is uncontroversial: the rules embodied in the UN Charter relating to the use of
force are widely regarded as peremptory’.
8
See notably Case Concerning Gabčíkovo–Nagymaros Project (Hungary/Slovakia) Judgment [1997] ICJ Rep 7
(Gabčíkovo Judgment); Application of the Interim Accord (13 September 1995) (Former Yugoslav Republic of Macedo-
nia v Greece) Judgment [2011] ICJ Rep 644; Case Concerning the Air Services Agreement of 27 March 1946 between the
United States of America and France [1978] 18 RIAA 417 (Air Services).
9
See International Law Commission (ILC), ‘Draft Articles on the Responsibility of States for Internationally Wrong-
ful Acts with Commentaries’, UN Doc A/56/10 (2001) (ARSIWA) arts 22, 47–54. For more on the ILC’s approach, see
Section II of this article.
10
Paddeu (n 4) 226.
Swords, Shields and Other Beasts 123
alluded to in Newcombe and Paradell’s summary11 just quoted: where a host State
violates, or is accused of violating, investment standards (eg by expropriating foreign
investors), the investors’ home State may be tempted to respond by taking action so
to pressure the host State to make reparation and/or give up the wrongful conduct.
While contemporary international law clearly excludes resort to force, it may still per-
mit home States to rely on non-forcible means—such as the freezing of host State’s
assets or the suspension of treaty benefits. In this first scenario, countermeasures are
used, in Martins Paparinskis’s terminology, as a ‘sword’12 —and it needs to be asked
whether this ‘sword’ can still be wielded in the contemporary era of investment law.
But countermeasures can equally serve as a ‘shield’, justifying conduct that otherwise
would be unlawful.13 This second scenario encompasses disputes in which one State
retaliates against the wrongful conduct of another State—say, that other State’s impo-
sition of tariffs in violation of trade law disciplines, or its unlawful suspension of treaty
rights. The matter becomes relevant for investment lawyers if the retaliation affects
investors from the other State: can this retaliation be justified as a countermeasure,
shielding the responding State from the consequences of its conduct?
The two scenarios reflect what is referred to as the ‘dual role’14 of countermeasures,
which are both a means of enforcing international law and a circumstance precluding
the wrongfulness of otherwise unlawful conduct. Both scenarios raise questions of a
different nature, and our discussion in the following addresses them separately. The
underlying tension, however, is the same, and it reflects the tension between com-
peting visions of international law—which can be thought of as a primarily interstate
legal order (in which coercive self-help by States remains indispensable) or viewed
as ‘an inclusive international legal system’15 (in which the rise of institutions and
acceptance of investor rights limits the availability of self-help).
Quite how that tension is to be resolved, remains disputed. To some extent, this
reflects a relative lack of authoritative guidance. The ILC’s Articles on Responsibility
of States for Internationally Wrongful Acts (ARSIWA) provide some clues, but do not
explicitly address the interaction between countermeasures and investment arbitra-
tion. Investment tribunals, whose jurisprudence has clarified many other aspects of
the interaction between the general regime of State responsibility and the special rules
governing investments, have had little occasion to address countermeasures—and on
some of those occasions, may have further muddied the waters. The scholarly debate
has highlighted the tension brought out in this Introduction, but does not yield bright-
line rules. As a result, the interaction of countermeasures and investment arbitration
continues to cause friction. Our discussion in the following highlights as much, and
it does not postulate bright-line rules where the law is genuinely unclear. However,
it identifies the framework in which the tension between the old, persistent concept
of countermeasures and the new world of investment arbitration is to be addressed,
and it suggests how this framework should be applied when countermeasures are
purported to be used as a ‘sword’ or ‘shield’.
11
See (n 3).
12
Martins Paparinskis, ‘Investment Arbitration and the Law of Countermeasures’ (2008) 79 BYIL 264, 279.
13
ibid 317.
14
Paddeu (n 4) 228.
15
cf Robert McCorquodale, ‘An Inclusive International Legal System’ (2004) 17(3) Leiden J Intl L 477.
II. THE FRAMEWORK: COUNTERMEASURES IN

ARSIWA
The ILC’s work on State responsibility provides the obvious starting point of the
analysis. As hinted at in the Introduction, the ILC’s text, in its articles 22 and 49–54
ARSIWA, offers ‘a detailed articulation of the requirements and conditions for the
taking of countermeasures’ under general international law.16 The ‘articulation’ was
not a straightforward process. Aspects of it indeed proved ‘vexed’,17 and on at least
two occasions, disputes about the proper approach risked derailing the Commission’s
project.18 But overall, with the benefit of 20 years’ hindsight, it seems that the ILC
managed to consolidate and clarify the regime of countermeasures. Benefiting from
statements by the ICJ in the Gabčíkovo judgment,19 helpfully rendered at the start of
the second reading, the Commission recognised the continuing relevance of coun-
termeasures under general international law, and it channelled concerns about their
archaic nature into a set of limitations and conditions. For present purposes, four
features of the ILC’s framework are relevant:
First, Article 49 enshrines the ILC’s understanding of countermeasures as a ‘sword’, that

is, ‘in order to induce that State to comply with its obligations’ to cease wrongful conduct
and/or make reparation for the injury caused. This ‘sword’ can only be used to strike back,
viz. if a State’s rights have been violated.20 In that setting, though, the responding State
enjoys wide discretion. It can respond in kind by choosing not to perform its own obligations
owed to the responsible State. While Article 49 is careful to formulate this negatively (‘may
only take…’), countermeasures are not limited to responses in the same sector or concerning
the same treaty.21
Second, precisely because of this potential breadth, the ARSIWA make an effort
to ‘tame’ countermeasures by subjecting them to three types of restrictions:
(i) As an exclusionary clause, article 50, ringfences particularly important rules

of international law, which countermeasures must not affect.22 This clause
clarifies, for example, that when States resort to countermeasures, these must
not violate obligations outlawing military force and protecting fundamental
human rights.
16
Paddeu (n 4) 251.
17
Crawford (n 7) 48.
18
Namely Special Rapporteur Arangio-Ruiz’s proposal to make resort to countermeasures dependent on the exhaus-
tion of dispute settlement mechanisms and the ILC Drafting Committee’s willingness to recognise the legality of
third-party countermeasures. On the former aspect, see Draft art. 12 proposed in Arangio-Ruiz’s Fourth Report on State
Responsibility, ILC YB 1992, vol II/1, 11, para 52; and the provisions on post-countermeasure dispute settlement pro-
posed in his Fifth Report on State Responsibility, ILC YB 1993, vol II/1, 28–29, paras 106–08. On the latter aspect, see
Draft art. 54(2) of the 2000 ‘penultimate’ version of the ILC’s text, reproduced in ILC YB 2000, vol II/2, 70.
19
Gabčíkovo Judgment (n 8) paras 82–87.
20
In line with that, the ILC is clear that there must have been an actual breach, nothing that ‘[a] State taking coun-
termeasures acts at its peril, if its view of the question of wrongfulness turns out not to be well founded’. ARSIWA (n 9)
art 49, commentary para 3.
21
This flexibility sets countermeasures apart from other responses against breaches of international law, among them
responses against material breaches of a treaty taken pursuant to art 60 of the Vienna Convention on the Law of Treaties.
As paras 1 and 2 of art 60 clarify, the responding party is limited to suspending or terminating the very treaty that had
been materially breached. For more on this see, Simma and Tams (n 4) 587–88; Tams (n 4) 494–95.
22
As the ILC puts it in the explanatory commentary, ‘[s]o far as the law of countermeasures is concerned, [these
ringfenced obligations] are sacrosanct’. ARSIWA (n 9) art 50, commentary para 1.
(ii) Conditioning countermeasures, article 52(1) imposes certain procedural

requirements, among them a duty of notification, and clarifies that where
countermeasures are used to defend rights of nationals, the requirements for
diplomatic protection must be observed.23
(iii) Finally, articles 49(3), 51 and 53 limit the scope of the response, which must
notably be proportionate and, as a general rule, reversible.24
Third, reflecting the idea of a ‘shield’, article 22 ARSIWA clarifies that counter-
measure respecting these limitations are not unlawful—even though, by definition,
they involve the violation of another State’s rights. The State’s prima facie breach of
international law, in other words, is justified.
Fourth, just as the ILC’s text in general, so the regime of countermeasures is resid-
ual in nature. It applies across the board, but is disapplied ‘where and to the extent
that the … implementation of the international responsibility of a State [is] governed
by special rules of international law.’25 Precisely because countermeasures evoke con-
cerns, such derogation is more than a theoretical possibility: States can of course
agree that in developed subfields of international law, the enforcement of interna-
tional law should not be a matter for self-help, or that it should not be a matter for
States. In line with this, in its explanatory commentary to article 50, the ILC recog-
nised this possibility—‘a bilateral or multilateral treaty might renounce the possibility
of countermeasures being taken for its breach, or in relation to its subject matter’.26
It also clarified that ‘[i]t will depend on the special rule to establish the extent to
which the more general rules on State responsibility set out in the present articles are
displaced by that rule’.27 The relevance of countermeasures-as a sword or a
shield-may very much depend on whether such special rules have been established
in the field of investment law.
III. INVESTMENT ARBITRATION AND THE ‘SWORD’

OF COUNTERMEASURES
A. The Normative Context
The ILC’s approach outlined in the previous section helps situate the first question—
that of countermeasures as a sword. In line with the fourth point just highlighted,
it needs to be assessed whether, by agreeing to the possibility of investment arbi-
tration, States have ‘renounce[d] the possibility of countermeasures being taken’28
in response to breaches of investor rights. This would be a significant step: signifi-
cant if seen against the historical backdrop of coercive interference for the protection
23
As art 52(2) makes clear, the duty to notify and negotiate does not preclude the taking of ‘urgent countermeasures
as are necessary to preserve [the responding State’s] rights’; this would include, eg, ‘[t]emporary stay orders [or] the
temporary freezing of assets’. ibid art 52(2) and commentary para 6.
24
Drawing on the ICJ’s Gabčíkovo Judgment, the ILC describes the ‘essential limit’ of proportionality in the fol-
lowing terms: ‘Countermeasures must be commensurate with the injury suffered, taking into account the gravity of the
internationally wrongful act and the rights in question’. ibid art 51; cf Gabčíkovo Judgment (n 8) para 85.
25
ARSIWA (n 9) art 55. This article, as the Commission notes, ‘reflects the maxim lex specialis derogat legi generali’.
ibid art 55, commentary para 2.
26
27
28
ibid.
of property interests, and because to this date, home States continue to con-
sider coercive responses in high-profile investment disputes to bring host States
‘in line’.29
Whether a fallback on countermeasures remains a lawful option depends, as the
ILC’s commentary makes clear, essentially on the special regime in question—it is
the lex specialis that is the focus of the inquiry, not the lex generalis (though, as will
be noted below, the ILC does hint at a solution). So, do the treaties shaping the
contemporary framework of investment arbitration derogate from the general power
of States to take countermeasures?
In addressing this question, investment lawyers need not start from scratch. There
is a long tradition of debates addressing the relationship between dispute settlement
systems and the general concept of countermeasures. For disputes about trade rules
addressed in the WTO, for example, prior to the current paralysis of the WTO dispute
settlement system, it seemed generally accepted that, having agreed on the Dispute
Settlement Understanding (DSU), WTO member States could not simply fall back
on the general concept of countermeasures. In the Section 301 case, a WTO Panel
considered the DSU to ‘prevent member States from unilaterally resolving their dis-
putes in respect of WTO rights and obligations’.30 This is not dependent on any
express provision of the DSU: the renunciation is implied because the DSU as lex
specialis provides a preferable method of dispute resolution that was, prior to the
current crisis, considered to be sufficiently effective to preclude a fallback. In the
human rights field, by contrast, the global mechanisms permitting individuals and
States to raise violations of human rights treaties with treaty bodies leave State rights
to respond unaffected. That, at least, is suggested by the repeated practice of States
using countermeasures to respond to human rights violations,31 and it reflects—as
in the case of the WTO—an assessment of the special regime’s nature and effective-
ness. As the interstate mechanisms do not result in a binding outcome and are rarely
used, the fallback on the general concept of countermeasures is not precluded. In the
words of the UN Human Rights Committee:
[T]he mere fact that a formal interstate mechanism for complaints … does not mean that
this procedure is the only method by which States Parties can assert their interest in the
performance of other States Parties. On the contrary, the article 41 procedure should be seen
as supplementary to, not diminishing of, States Parties’ interest in each other’s discharge of
their obligations.32
29
The Spanish–Argentinean YPF Repsol dispute is a recent illustration. See eg Ilan Brat, ‘Spain Steps Up
Argentina Pressure’ (Wall Street Journal, 22 April 2012) <www.wsj.com/articles/SB100014240527023039781045
77359980046021686> accessed 1 April 2021, noting that ‘Spain’s foreign minister on Sunday called on European and
other global leaders to enact concrete sanctions against Argentina in a bid to prod the country to fully compensate Spanish
oil firm Repsol YPF SA for the expropriation of its Argentine unit’.
30
WTO, United States—Sections 301/310 of the Trade Act of 1974—Report of the Panel (22 December 1999)
WT/DS/152/R [7.35]–[7.46]. Whether the same remains true under the present ‘crisis’/conditions is a separate mat-
ter. As briefly mentioned below (Section III), there is a debate about the potential ‘fallback’ on general international law
if the special mechanisms of a dispute settlement regime fail.
31
For more on this, see Christian J Tams, Enforcing Obligations Erga Omnes in International Law (CUP 2005) 286–99
(with further references).
32
UN Human Rights Committee, ‘General Comment No 31 [80], The Nature of the General Legal Obliga-
tion Imposed on States Parties to the Covenant’ (26 May 2004) UN Doc CCPR/C/21/Rev.1/Add.13 <www.refworld.
org/docid/478b26ae2.html> accessed 1 April 2021.
B. Article 27 of the ICSID Convention

As far as proceedings under the ICSID rules are concerned, the ICSID Convention
speaks to the matter in its article 27.33 The provision does not mention counter-
measures directly, but addresses the relationship between diplomatic protection and
investment arbitration more generally:
Article 27
1. No Contracting State shall give diplomatic protection, or bring an interna-

tional claim, in respect of a dispute which one of its nationals and another
Contracting State shall have consented to submit or shall have submitted to
arbitration under this Convention, unless such other Contracting State shall
have failed to abide by and comply with the award rendered in such dispute.
2. Diplomatic protection, for the purposes of paragraph (1), shall not include
informal diplomatic exchanges for the sole purpose of facilitating a settlement
of the dispute.
While it has not featured prominently in arbitral awards, article 27 is of significant

conceptual relevance. It reflects the fundamental shift—perhaps one might say, ‘the
deal’—at the heart of the ICSID Convention’s system of investor-State dispute set-
tlement. Capital-importing States accepted the right of foreign investors to institute
proceedings before an internationalised tribunal, and they did so on the understand-
ing that these mixed proceedings would replace the right of home States to espouse
claims.34 The drafters of the ICSID Convention were fully aware of this ‘deal’: in
their discussion, the preclusion of article 27 appeared as the ‘corollary of the princi-
ple of allowing an investor direct and effective access to a foreign State without the
intervention of his national State’:
In this way it was sought to ensure that States would not be faced with having to deal
with a multiplicity of claims and claimants. The Convention would therefore offer a
means of settling directly, on the legal plane, investment disputes between the State
and the foreign investor and insulate such disputes from the realm of politics and
diplomacy.35
33
Provisions based on art 27 are contained in a number of bilateral investment treaties: pars pro toto, see the Agreement
between the Government of the Republic of Turkey and the Government of the Italian Republic on the Reciprocal
Promotion and Protection of Investments (signed 22 March 1995, entered into force 2 March 2004) art 8(4); and the
Agreement between the Federal Republic of Germany and the United Arab Emirates for the Promotion and the Reciprocal
Protection of Investments (signed 21 June 1997, entered into force 2 July 1999) art 8(5). Our discussion in the following
sections remains focused on the arbitration frameworks.
34
See Christoph H Schreuer and others, The ICSID Convention: A Commentary (2nd edn, CUP 2009) 416: ‘by
consenting to ICSID arbitration the host State obtain[ed] the assurance that it [would] not be exposed to an international
claim by the investor’s home State’. Judge Alvarez had anticipated it all in his 1952 dissent in the Anglo Iranian Oil Co
case before the ICJ: ‘diplomatic protection will disappear or will undergo changes when the new international law clearly
establishes the international rights of the individual, i.e. those rights which he will be entitled to invoke directly against
a State without resorting to the diplomatic protection of the country of which he is a national’. Anglo-Iranian Oil Co
Case (United Kingdom v Iran) Preliminary Objection Judgment [1952] ICJ Reports 93, 120 (Dissenting Opinion of Judge
Alvarez) (original French).
35
Consultative Meeting of Legal Experts, Summary Record of Proceedings, 1963, in ICSID, History of the ICSID
Convention: Documents Concerning the Origin and the Formulation of the Convention on the Settlement of Investment Disputes
between States and Nationals of Other States, vol II-1 (ICSID Publication 1968) 242 (History of ICSID vol II). See also
Rodrigo Polanco, The Return of the Home State to Investor-State Disputes: Bringing Back Diplomatic Protection? (CUP 2019)
36: ‘The hope was that developing countries would be more satisfied by dealing with a neutral arbitral tribunal rather
The limited jurisprudence recognises this point; in the words of the AMCO annul-
ment committee: under article 27, ‘the national State of the investor is precluded
from exercising its normal right of diplomatic protection’.36
C. Article 27’s Implications for Countermeasures
How does all this relate to countermeasures? While countermeasures are not men-
tioned expressly, it is clear that article 27 affects them: as mentioned above and
recognised in article 49 ARSIWA, countermeasures serve as a means of enforcing
responsibility.37 A home State that relies on countermeasures must show that it has a
right to invoke the responsibility of the host State against which its countermeasure is
directed.38 Where the host State’s responsibility is the result of violations of investor
rights, the home State can invoke such responsibility (only) through the mechanism
of diplomatic protection. Article 27 however is precisely intended to preclude the
home State’s ‘normal right of diplomatic protection’.39 To the extent that that ‘normal
right’ is suspended, the possibility of enforcing it through countermeasures cannot
subsist. The ILC recognised as much in the explanatory commentary (although it
hid its statement in the depths of a footnote): summarising the effect of article 27,
the Commission noted that it ‘excludes all forms of invocation of responsibility by
the State of nationality, including the taking of countermeasures’.40
The historical background to article 27 corroborates this understanding. The
drafters hoped that by creating a system of mixed arbitration, one could ‘insulate
[investment] disputes from the realm of politics and diplomacy’—while in many ways
naive41 —primarily reflects a desire to limit recourse to coercive forms of interstate
dispute settlement. A passage from Banro American Resources v Congo reflects this
understanding:
One of the main objectives of the mechanisms instituted by the Washington Convention
was to put an end to international tension and crises, leading sometimes to the use of force,
generated in the past by the diplomatic protection accorded to an investor by the State of
which it was a national.42
The upshot of all of this is that by precluding home States from ‘giv[ing] diplo-
matic protection, or bring[ing] an international claim’, article 27 derogates from
the general power of States to take countermeasures. When recognising the right
than “with officials from one of the world’s larger economies, whose leverage over smaller states on a range of unrelated
issues is likely to be considerable”’ (citing Christopher F Dugan and others, Investor–State Arbitration (OUP 2008) 9).
36
Amco Asia Corporation and others v Republic of Indonesia, ICSID Case No ARB/81/1, Decision on Annulment
(16 May 1986) para 21 (1993) ICSID Rep 413, para 21. See also Camuzzi International SA v Argentine Republic, ICSID
Case No ARB/03/7, Decision on Objections to Jurisdiction (10 June 2005) para 157 (original Spanish); Banro Ameri-
can Resources, Inc and Socie´te´Aurife`re du Kivu et du Maniema SARL v Democratic Republic of the Congo, ICSID Case No
ARB/98/7, Award (1 September 2000) para 15 (Banro Award); AES Corporation v Argentine Republic, ICSID Case No
ARB/02/17, Decision on Jurisdiction (26 April 2005) para 99.
37
See Section II.
38
Paparinskis (n 12) 280: ‘[t]he right to take countermeasures to induce compliance with obligations under the law
of responsibility is … logically predicated on the right to invoke responsibility in the first place’.
39
Amco Decision on Annulment (n 36) para 21.
40
ARSIWA (n 9) art 52, commentary para 8, fn 791.
41
As debates since the 1990s illustrate, investment disputes are not easily depoliticised. But the politics play out
between different actors. For more on this, see Martins Paparinskis, ‘The Limits of Depoliticisation in Contempo-
rary Investor-State Arbitration’ in James Crawford and Sarah Nouwen (eds), Select Proceedings of the European Society
of International Law, vol 3 (Bloomsbury 2010) 271.
42
Banro Award (n 36) para 15.
of investors to initiate arbitral proceedings, States have ‘renounce[d] the possibility

of countermeasures being taken … in relation to [investment-related disputes]’.43
D. The Scope of the Renunciation
The renunciation of countermeasures is significant, but it is quite clearly defined:
countermeasures are not precluded in investment law tout court, and neither do States
renounce their right to respond to another State’s violations of bilateral or multilateral
investment treaties. By virtue of article 27, home States accept not to use counter-
measures in disputes that investors and host States have agreed to settle by means of
arbitration. Conversely, until investors and host States have consented to arbitration,
diplomatic protection (and the right to enforce diplomatic claims by means of coun-
termeasures) remains, in principle, available. The consent referred to in article 27(1)
is ‘mutual consent’; in the peculiar setting of treaty-based arbitration, such consent
is typically not perfected until the investor initiates proceedings.44 In that sense, the
Tribunal in the Italy v Cuba case rightly noted that ‘tant que l’investisseur ne s’est
pas soumis a l’arbitrage international contre l’Etat d’accueil, son droit a la protection
diplomatique subsiste’.45
Perhaps more importantly, article 27 expressly envisages that the right to exercise
diplomatic protection can ‘revive’—so the ‘renunciation’ really is a suspension.46 It
revives in a narrowly defined situation, viz. ‘when [the host State] shall have failed to
abide by and comply with the award’. The rationale behind this revival clause is easy
to see: a host State that does not honour an ICSID award is in breach of its inter-
national obligations, and it will have been found so in an impartial and independent
process.47 This in turn means that—just as under other dispute settlement systems—
States can ‘fall back’ on countermeasures as a last resort. Adapting the language of
Bruno Simma and Dirk Pulkowski, one could say that under article 27:
[States] merely relinquish their facultés under general international law in favour of a
special regime’s procedures to the extent that and as long as those procedures prove effi-
cacious. When such procedures fail, enforcement through countermeasures under general
international law becomes an option.48
When the ICSID ‘procedures fail’, the Convention’s focus switches from limit-
ing the risk of abuse, towards ensuring the effective implementation of an award.
Countermeasures now (again) become available: as a sword to be wielded for a cause
considered proper, and perhaps even (as has been suggested) ‘designed to counterbal-
ance any State immunity that is preserved by Art. 55 of the [ICSID] Convention’.49
The US government’s efforts to induce Argentina to comply with awards rendered
43
ARSIWA (n 9) art 50, commentary para 10.
44
For further details on this point, see Paparinskis (n 12) 305; Schreuer and others (n 34) 424–25.
45
Republic of Italy v Republic of Cuba, ad hoc State–State Arb, Interim Award (15 March 2005) para 65 (original
French) [‘As long as the investor has not submitted to arbitration against the host State, its right to diplomatic protection
protection remains’ (authors translation)].
46
See History of ICSID vol II (n 35) 527: ‘The investor State’s right of espousal, which disappeared on the assumption
that the investor had a remedy under the Convention, revived when that remedy was frustrated’ (Mr Broches).
47
As Schreuer and others note, the precise formulation of the ‘revival clause’ was subject to some debate (n 34) 427
(with further references).
48
Bruno Simma and Dirk Pulkowski, ‘Of Planets and the Universe: Self-contained Regimes in International Law’
(2006) 17 EJIL 483, 508–09.
49
Schreuer and others (n 34) 427.
in favour of US investors, including by suspending Argentina’s access to the Gener-

alized System of Preferences, are a case in point;50 they show the nuanced system of
article 27 ‘in action’.
E. Countermeasures and Non-ICSID Proceedings
Can the approach adopted for ICSID proceedings be generalised? Other arbitral
frameworks do not contain provisions equivalent to article 27 of the ICSID Con-
vention. This, however, is hardly the end of the debate; it merely means that it needs
to proceed from a different starting point. Few of the regimes that are claimed to
‘opt out’ of the general regime of State responsibility do so expressly. Article 27
(which, while not mentioning countermeasures, does expressly address diplomatic
protection) in this respect is unusual.51 Under WTO law, for example, the renunci-
ation of countermeasures is implied; it follows from the DSU’s claim to exclusivity
and its reasonable degree of effectiveness.52 Commentators and courts assessing the
relationship between countermeasures and dispute settlement regimes have typically
relied on the same two criteria, viz. intended exclusivity and reasonable effective-
ness.53 They have also drawn distinctions based on the scope of the derogation: in this
respect, a mere temporary suspension is easier to justify than a complete exclusion
without fallback.54
Applying these considerations, a strong argument can be made that article 27 of the
ICSID Convention reflects a general requirement to pursue options for investor-State
dispute settlement before a home State can resort to countermeasures. In the absence
of an express clause, this argument is open to challenge—and some commentators
have noted the absence of clear-cut practice supporting the exclusion of counter-
measures.55 Still, there is significant force to an argument by analogy: like ICSID
arbitration, other arbitral frameworks permit access to a dispute process resulting
in binding decisions—and regularly allow investors to choose among them. While
other arbitral frameworks do not require third States to recognise awards as binding
(as per article 54 of the ICSID Convention), the New York Convention and related
agreements ensure the reasonably effective enforcement of non-ICSID awards. Per-
haps most importantly, it is worth reiterating that article 27 of the ICSID Convention
does not result in the complete exclusion of countermeasures. A fallback is envisaged:
the right to use countermeasures revives if and when the dispute settlement system
has been gone through and the host States refuses to comply with an award.
The similarity between the different arbitral frameworks, and the availability of a
fallback, on balance provides strong support for an argument by analogy. This cer-
tainly was the approach favoured by the Tribunal in the Italy v Cuba case, which,
50
For details, see Mathieu Raux, ‘Article 27′ in Julien Fouret and others, The ICSID Convention, Regulation and Rules:
A Practical Commentary (Edward Elgar 2019) 253.
51
In their discussion of special regimes in the field of human rights and economic integration, Simma and Pulkowski
note that ‘[n]one of the treaty regimes presented as candidates for self-contained regimes contains an explicit provision
regarding the applicability vel non of the rules of state responsibility’ (n 48) 501.
52
For details, see Joost Pauwelyn, Conflict of Norms in Public International Law: How WTO Law Relates to other Rules
of International Law (CUP 2003) 216–17 and 228–36; Simma and Pulkowski (n 48) 519–23.
53
For judicial/arbitral support, see eg Air Services (n 8) para 94: ‘an institutional framework ensuring some degree of
enforcement’; Case Concerning United States Diplomatic and Consular Staff in Teheran (United States v Iran) Judgment
[1980] ICJ Rep 3, 86–87 (curiously considering remedies under the Vienna Convention on Diplomatic Relations to be
‘entirely efficacious’).
54
For details, see eg Simma and Pulkowski (n 48), 507–10.
55
See notably Paparinskis (n 12) 285.
in an ad hoc interstate arbitration noted that, where the investor had commenced
arbitral proceedings, its home State was precluded from exercising diplomatic pro-
tection: ‘L’absence … d’une disposition semblable a I’article 27 de la Convention de
Washington de 1965 n’empeche pas l’application de ce principe par analogie’.56
F. Interim Conclusion
As regards the first scenario—of countermeasures as a sword—the analysis yields a
relatively clear outcome. Insofar as home States are alleged to have violated rights
of foreign investors, dispute settlement by investment tribunals replaces the general
right of States to enforce the law through countermeasures. This replacement—
mandated by article 27 of the ICSID Convention, and arguably applicable as well to
other effective arbitration frameworks—is not absolute: countermeasures are merely
precluded insofar as they concern a dispute about foreign investment (not related
matters); the right to take countermeasures does not disappear but is merely eclipsed;
and it revives (or reappears) once the preferable method of settling the investment
dispute has failed to deliver. But the conceptual and practical import of the suspen-
sion is significant: it is the corollary of the rise of investment arbitration, a crucial
aspect of the ‘deal’ at the heart of the contemporary system of investment protection.
The ILC’s text on State responsibility has not brought about this suspension, which
is imposed by the special rules of investment protection. However, the ILC’s system-
atic framework, recognising the lex specialis principle, accommodates the outcome.
In this respect, like in many others, it is a successful exercise in consolidation.
IV. COUNTERMEASURES AS A SHIELD

A. The Normative Context
Our second scenario raises questions of a different nature: it does not look at coun-
termeasures as a tool to enforce investment standards, but at responses affecting
rights owed under investment treaties. As such, considerations of the effectiveness
of the dispute settlement mechanisms in investment regimes are unhelpful, because
those would appertain to the regime governing the initial wrongful act of the home
State, which may well be outside the investment law regime, not the subsequent
countermeasure of the host State designed to effect compliance with the initial rule
breached.57
As noted above,58 as a flexible concept, countermeasures grant responding States
wide discretion to choose how to respond against breaches by another State. But can
a State relying on countermeasures—say, in response to another State’s violation of
a bilateral treaty, or the unlawful freezing of its currency reserves—respond by tar-
geting investors of that other State? The ILC’s provisions on countermeasures do
not necessarily settle the matter. Tribunals—as well as scholars— have occasionally
pronounced on the issue, reaching varying conclusions based on their understanding
of the nature of the rights involved. Yet, as we shall see, the answer to our question
56
Republic of Italy Interim Award (n 45) para 65 [‘The absence ... of a provision similar to Article 27 of the Washington
Convention of 1965 does not prevent the application of this principle by analogy’ (authors’ translation)].
57
See the analysis of Simma and Pulkowski (n 48) 508–09.
58
See Section II.
may not necessarily depend on whether investors enjoy rights independent of those
of their home State. Another possible approach is one that focuses more on the tri-
angular relationship between the host State, home State and investors, as well as the
scope and inherent limits of the rights in question—an aspect that did not really fea-
ture in traditional visions of interstate international law, but become crucial in the
contemporary, more inclusive system.
B. The ILC’s Framework

Article 49(1) ARSIWA describes countermeasures as an interstate concept that only
produces effects within the reciprocal relation between the responding State and
the targeted State. The provision clarifies that countermeasures may only be taken
against the State ‘which is responsible for an internationally wrongful act’. This
undoubtedly excludes the application of countermeasures against third States, as the
Commentaries make clear.59
But if the underlying rationale of the article is the protection of the rights of third
parties more generally, this should apply to the individual rights of investors.60 Fur-
thermore, the Commentaries also refer to other parties, not just third States, that may
be adversely affected by Countermeasures.61 This may suggest that whether or not a
host State can legally apply countermeasures that affect foreign investors as a shield
against an internationally wrongful act of their home State depends on whether third
party rights are really at issue. In other words, whether the investors hold individual
rights that are separate from that of their home State.62
On the other hand, the ARSIWA’s chapter on countermeasures explicitly concerns
responsibility between States and is not addressed to investor-State relations.63 More-
over, as noted above,64 article 50, excludes the application of countermeasures that
affect certain rights and obligations, such as ‘fundamental human rights’. Investor
rights are not mentioned in article 50, which suggests that countermeasures could
affect them. This view is more in line with the way international law historically
grouped the State and its nationals together for the purpose of countermeasures.65
The ILC Commentaries reflect this attitude when discussing the possible adverse
effects of countermeasures:
other parties, including third States, may be affected thereby. If they have no individual
rights in the matter they cannot complain. The same is true if, as a consequence of sus-
pension of a trade agreement, trade with the responsible State is affected and one or more
companies lose business or even go bankrupt. Such indirect or collateral effects cannot be
entirely avoided.66
59
60
Kate Parlett, ‘The application of the rules on countermeasures in investment claims: Visions and realities of interna-
tional law as an open system’ in Christine Chinkin and Freya Baetens (eds), Sovereignty, Statehood and State Responsibility:
Essays in Honour of James Crawford (CUP 2015) 397; Paparinskis (n 12) 331–45.
61
62
Parlett (n 60) 397.
63
In the words of the ILC, the articles deal ‘with measures that would otherwise be contrary to the international
obligations of an injured State vis-a`-vis the responsible State’. ARSIWA (n 9), Ch II: Countermeasures, commentary
para 1. See also Junianto J Losari and Michael Ewing-Chow, ‘A Clash of Treaties: The Lawfulness of Countermeasures
in International Trade Law and International Investment Law’ (2015) 16 JWIT 274, 295–303.
64
See Section II.
65
Cysne (Responsibility of Germany for acts committed subsequent to 31 July 1914 and before Portugal entered the war)
(Portugal/Germany) [1930] 2 RIAA 1035, 1056–57 (original French); Losari and Ewing-Chow (n 63) 303–04.
66
Differing understandings of the nature of investors’ rights has thus led to different
readings of the ARSIWA, and the same can be said for the limited jurisprudence, as
will be seen below.
C. Arbitral Decisions on the Matter
This issue has not come up often in investment arbitration thus far, but was front
and centre in three NAFTA cases, where Mexico unsuccessfully attempted to invoke
countermeasures as a circumstance precluding the wrongfulness of any alleged breach
of its obligations under NAFTA towards investors.67 The backdrop of these cases
was a Mexican tax on soft drinks with high-fructose corn syrup (HFCS). HFCS was
exported by US producers, which argued that the tax caused them to lose the value
of their investment. Mexico responded that its tax was a lawful countermeasure in
response to the USA’s illegally blocking Mexican sugar producers from access to US
markets, in violation of NAFTA.
In all three disputes—ADM, Corn Products and Cargill—the tribunals engaged with
the ILC’s provisions on countermeasures, which they held to be reflective of cus-
tomary international law and applicable to investor-State disputes.68 In ADM, the
tribunal opined that the substantive rights under NAFTA were those of the home
State, while its nationals only enjoy independent procedural rights that materialise
when an investor initiates arbitral proceedings against the home State.69 As the sub-
stantive rights are owed to the home State, and countermeasures do not impair
the investor’s procedural right to initiate arbitration, the Tribunal concluded that
a host State can invoke countermeasures as a circumstance precluding wrongfulness
of NAFTA breaches.70 Ultimately, the Tribunal found that Mexico’s actions did not
meet the conditions for lawful countermeasures under customary international law
since they were not intended to induce the USA to comply with its NAFTA obli-
gations and were not proportionate.71 This approach has been endorsed by scholars
emphasising the derivative nature of investors’ rights under investment treaties, which
depend on rights of their home State and remain entirely revokable by the latter. As
such, investor rights are not ‘separable’ and thus can be affected by countermeasures
targeting the investors’ home State.72
The Corn Products Tribunal, in contrast, categorised the investor’s rights under
NAFTA as substantive and independent of those owed to its home State.73 Basing
itself on the ARSIWA and their Commentaries, it concluded that the wrongfulness of
the host State’s violation of the investor’s rights, a third party, could not be precluded
by claiming countermeasures in response to a breach by the home State. Mexico’s
reliance on countermeasures could thus only produce effects vis-à-vis the USA, but
could not justify any interference with rights of the investor.74 The Cargill Tribunal
67
Corn Products International, Inc v United Mexican States, ICSID Case No ARB(AF)/04/01, Decision on Responsibil-
ity (15 January 2008); Archer Daniels Midland Company and Tate & Lyle Ingredients Americas, Inc v United Mexican States,
ICSID Case No ARB(AF)/04/05, Award (21 November 2007) (ADM Award); Cargill, Incorporated v United Mexican
States, ICSID Case No ARB(AF)05/2, Award (18 September 2009).
68
Corn Products Decision on Responsibility (n 67) paras 167–79; Cargill Award (n 67) para 420.
69
ADM Award (n 67) para 173.
70
ibid paras 161, 179.
71
ibid para 180.
72
Losari and Ewing-Chow (n 63) 303.
73
Corn Products Decision on Responsibility (n 67) para 160.
74
ADM Award (n 67) para 180.
took a somewhat similar approach, though its rationale was slightly different. It did
not find it useful to classify an investor’s rights under NAFTA as substantive or pro-
cedural.75 Rather, it noted that for all purposes, ‘it is the investor that institutes the
claim, that calls a tribunal into existence, and that is the named party in all respects
to the resulting proceedings and award’, emphasising the independence of those
rights from that of the home State, in practice.76 The approach of the Corn Prod-
ucts and Cargill Awards, essentially equates the position of investors as third States
under the ARSIWA. And, as Paparinskis notes, ‘since individuals are structurally
incapable of breaching international obligations owed to States, the conditions for
lawful application of countermeasures against them will never be fulfilled’.77
D. The Triangular Nature of Investment Treaties

While reaching different conclusions, the approaches discussed so far all seem to
proceed from an analysis of the nature of investor rights. This focus on investor rights
however risks ignoring the perspective of States parties to a given BIT and the scope
of their rights and obligations: it is the rights enumerated in these treaties, after all,
that in the shield scenario, are the subject of countermeasures. And as States create the
rights and obligations under these treaties, including those that pertain to investors,
a proper analysis should emphasise, as Anthea Roberts has noted, the ‘interests and
intentions of the treaty parties, rather than the interests or expectations of investors’
in what she calls a ‘third-party-beneficiary’ paradigm, based on principles of contract
law.78 Applying such a perspective, investors, as beneficiaries of a BIT, have the right
to enforce obligations of the State parties owed to them.79 But it is the relationship
between the State parties that defines the content and scope—i.e. the extent and
limits—of those rights or benefits in the first place. The scope and limits of the rights
are those that apply to State rights under customary international law, to the extent
that they are not altered by the State parties by agreement. And when extending these
rights to third party beneficiaries, the rights retain their original scope and limits.
Thus, whether these rights are considered independent and/or substantive rights
under the relevant treaty is perhaps less determinative, since, in any event, investor
rights stem from the treaty relationship between the States. Just as third-party ben-
eficiaries under contracts, investors are subject to defences that the host State, as
promisor, can assert against the home State, the promisee. Unless the States agreed
otherwise, as the host State is not limited in its ability to assert a defence for a vio-
lation of the treaty against the home State, including countermeasures, it is equally
able to do so as a defence in investor-State disputes against the nationals of the home
State, the third-party beneficiaries of the treaty.80
75
Cargill Award (n 67) para 426.
76
ibid; Parlett (n 60) 401.
77
Paparinskis (n 12) 332. For Paparinskis, this is the same rationale for the exclusion of countermeasures from
affecting human rights obligations owed towards individuals, ie, third parties. See ibid 334. Of course, if individuals are
incapable of breaching international obligations owed to States, that could also lead to the conclusion that they, and their
rights, are immaterial to the regime of countermeasures, with the exceptions enumerated in ARSIWA art 50.
78
Anthea Roberts, ‘Triangular Treaties: The Extent and Limits of Investment Treaty Rights’ (2015) 56(2) Harvard
Intl L J 353, 366.
79
ibid 373.
80
ibid 401.
This ‘third-party beneficiary’ paradigm, while initially formulated to address coun-

termeasures adopted solely in response to violations of BITs,81 can be applied to the
relationship between States (and the scope and limits of their rights and obligations)
and investors, more generally. Under customary international law, States may resort
to countermeasures in their bilateral relations, in accordance with the ARSIWA.
As noted above, when two States enter into an investment treaty, their rights and
obligations under customary international law are altered only to the extent of their
agreement. A State party to the treaty retains the right to resort to any measures under
customary international law that are not prohibited by the treaty. States also remain
subject to customary rules of a secondary order, to the extent that those default
rules are not altered by the lex specialis.82 Thus, in their bilateral relations, unless
agreed otherwise and subject to the specifically enumerated limitations of article 50
ARSIWA, a State retains the right to resort to countermeasures and, simultaneously,
it also remains susceptible to countermeasures from the other State party in cer-
tain circumstances, if it commits an international wrongful act, under the treaty or
otherwise.
At the same time, a State can only assign the rights—along with their scope and
limits—it itself enjoys and it cannot assign to another, such as its nationals, more than
it enjoys. It follows that the rights transferred by State parties to investors cannot be
more than what they themselves enjoy. Even if they are indeed independent investors’
rights, the investors receive the rights with their inherent caveats and limitations.
Ergo, if the State’s rights and obligations under the investment treaty remain subject
to the regime of countermeasures from another State, so are any rights transferred
to the investors that rely on the treaty. A proper analogy may be that of a contract
to transfer to a third-party beneficiary of ownership over real property that is subject
to a lien. The property, now owned by the third-party beneficiary, remains subject
to the lien, regardless of the transfer of ownership. Similarly, even if investors’ rights
are independent of those of their home State, their content and limits did not change
when granted, and thus they are not immune from countermeasures.
Of course, that is not to say that there may not be other applicable rules that pro-
hibit resort to countermeasures as a shield in specific circumstances, such as when
they target the fundamental human rights of the investors.83 As noted above, the
parties to a BIT may ‘renounce the possibility of countermeasures being taken for its
breach, or in relation to its subject matter’.84 But with no indication to that effect, we
would hope that tribunals will not rush to exclude the availability of countermeasures
as shield as a matter of principle, as this does not seem to have a basis in custom-
ary international law de lege lata, nor can it be justified based on considerations of
intended exclusivity and reasonable effectiveness.
V. CONCLUDING THOUGHTS
The preceding discussion suggests that there remains at least some room for the
traditional notion of countermeasures in the contemporary world of investment arbi-
tration. The countermeasures that do persist have little in common, one would hope,
81
ibid.
82
ARSIWA (n 9) art 55 and commentaries.
83
ibid art 50(1); Roberts (n 78) 401–02; Paparinskis (n 12) 318–19.
84
with the practice of gun-boat diplomacy that dominated a significant part of the his-
tory of investment protection and from which contemporary investment law must
retain maximum distance as it engages in its own legitimacy discourse. Article 27 of
the ICSID Convention clarifies that the rise of investors as powerful actors benefiting
from access to arbitration has an impact on diplomatic protection: in the triangular
relationship characterising contemporary investment treaties, the State’s right to take
countermeasures as a ‘robust’, coercive form of exercising diplomatic protection can-
not exist alongside investor-State dispute settlement. However, as Section III of this
article highlights, countermeasures as a sword are not completely excluded; they can
revive for the specific purpose of enforcing arbitral awards if the host State refuses to
honour them.
The triangular relationship is equally relevant to appreciating the continued rele-
vance of countermeasures as a shield. Tribunals have struggled to reach agreement on
whether investors should be viewed as ‘third parties’ for the purposes of countermea-
sures, with the attendant result that countermeasures could not justify violations of
their rights. As discussed in Section IV, to simply equate foreign investors with third
States for the purposes of countermeasures in unjustified. Their status as third-party
beneficiaries of treaty-based investment guarantees suggests that they do not enjoy
protection over and above that enjoyed by their home State. This in turn means that,
subject to the limitations spelled out in articles 49–53 ARSIWA, investors are not
categorically shielded against countermeasures taken by the host State. Looking at
the actors involved, one might say that reliance on the interstate enforcement tool of
countermeasures can have collateral effects on investors, as it has historically.
Where, in all this, does the work of the ILC fit in? Looking at the two scenarios of
‘sword’ and ‘shield’, it seems fair to say that the ILC’s Articles on State Responsibility
remain highly relevant but, at the same time, they do not impose on investment arbi-
tration lawyers the one and only response. As far as countermeasures as a sword are
concerned, the ILC clearly recognised that special frameworks for dispute settlement
can contract out of the general enforcement system—but that this is a matter for the
special regime to determine. In that sense, article 55 ARSIWA, giving effect to the lex
specialis principle, accommodates the claim to exclusivity formulated in article 27 of
the ICSID Convention, which can be applied by analogy to non-ICSID frameworks.
As far as countermeasures as a shield are concerned, the ILC’s provisions approach
countermeasures as a tool for enforcing responsibility between States; in that recipro-
cal framework, investors sit awkwardly. The ILC’s efforts to protect third-party rights
have been picked up by some tribunals and led them to consider investor rights to be
‘sacrosanct’ from host State countermeasures. This approach, however, may not be
the best suited to determine the applicability of the ILC’s Articles. It is to be hoped
that in future disputes, tribunal will rediscover the flexibility of the ILC’s regime of
State responsibility, which—as has become clear in the 20 years since the adoption
of the Articles in 2001—is crucial to their success as an authoritative framework of
reference.
The conclusion that countermeasures as a shield are still available in investment
law is not without its difficulties. A State’s ability to argue before a tribunal that its
actions to the detriment of investors are not wrongful but rather legal countermea-
sures against an investor’s home State arguably necessitates evaluating the actions
of the latter, which is not a party to the proceedings, a scenario that some authors
fear will result in procedural hurdles for investors invoking available dispute settle-
ment mechanisms against the host State.85 But, even assuming they are correct, and
undesirable as those may be, those factors cannot negate the fundamental under-
standing of the nature of the relationship between the relevant actors, the scope of
the rights and benefits involved, and, more generally, the interaction between the
customary rules found in the ARSIWA—including those on countermeasures—and
investment law. Jurisdictional questions will need to be dealt with by tribunals and, if
deemed desirable, by the States themselves during the treaty drafting or amendment
process.86
85
Paparinskis (n 12) 338–39; Roberts (n 78) 402.
86
See Losari and Ewing-Chow (n 63) 293–94.

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

I. INTRODUCTION: OLD AND NEW, SWORDS AND

II. THE FRAMEWORK: COUNTERMEASURES IN

First, Article 49 enshrines the ILC’s understanding of countermeasures as a ‘sword’, that

(i) As an exclusionary clause, article 50, ringfences particularly important rules

(ii) Conditioning countermeasures, article 52(1) imposes certain procedural

III. INVESTMENT ARBITRATION AND THE ‘SWORD’

B. Article 27 of the ICSID Convention

1. No Contracting State shall give diplomatic protection, or bring an interna-

While it has not featured prominently in arbitral awards, article 27 is of significant

of investors to initiate arbitral proceedings, States have ‘renounce[d] the possibility

D. The Scope of the Renunciation

in favour of US investors, including by suspending Argentina’s access to the Gener-

IV. COUNTERMEASURES AS A SHIELD

B. The ILC’s Framework

D. The Triangular Nature of Investment Treaties

This ‘third-party beneficiary’ paradigm, while initially formulated to address coun-

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