Scope limitation or affirmative defence? The purpose and role of investment treaty exception clauses

Despite their increasing prevalence in investment treaties, the purpose and role of exception clauses is not well understood. Inconsistent interpretations of exception clauses by investment tribunals and annulment committees has created uncertainty about the nature of states’ treaty commitments to foreign investors and the way exceptions to those commitments should be dealt with in investor–state dispute settlement. This chapter argues that exceptions should be understood as limiting the scope of the substantive investment obligations such that those obligations do not apply to measures that come within the exception, and not as affirmative defences that operate to justify what would otherwise be prohibited by the treaty; and that, as such, security exceptions are conceptually distinct from the customary defence of necessity and are not lex specialis manifestations of the defence.