Sovereign Investors and National Security Exceptions in WTO and Investment Law

The concept of national security has evolved to address a range of threats, including non-State actors and non-military and non-human threats, such as economic crises, cybersecurity, terrorism, iand climate change. In particular, some States are vigorously expanding the notion of national security to include economic security, protection of critical infrastructure, communications assets, advanced technology, and data. However, the concept of national security cannot be viewed in the abstract. Rather, the well-established rationale of security exceptions to preserve countries’ freedom of action in areas relating to national defence and security has to be viewed within the confines that substantive obligations in international economic agreements impose. It involves a balancing exercise that puts obligations of non-discrimination, due process, predictability, and transparency at the other end of the spectrum. In light of the general intent by the international community to address global problems on a multilateral basis, this chapter argues for a coherent approach to the review of security exceptions under international trade and investment law. First, it sketches the form and structure of security exceptions under both regimes. Second, it discusses the most important issues arising from the adjudication of national security disputes and the choice of the standard of review. Third, it explores the trends in the interpretation of security exceptions in the World Trade Organization (WTO) and investment law and their implications for sovereign investors. This chapter concludes that the clarification of the scope of the security exceptions clauses and their coherent application by international adjudicators under both regimes could help tame the unleashed opportunistic forces by catalyzing domestic legal and policy developments that would ensure a certain level of self-restraint and scrutiny in the application of protectionist measures. In particular, it could promote trade and investment liberalization while preventing sovereign investments from becoming political battlefields and means of circumventing diplomacy