Recently, I had been wondering about "survival" clauses in investment treaties. These are provisions that allow for investment claims to be brought even after the treaty has been terminated. Here's an example from the US Model BIT, in Article 22, paragraph 3:
For ten years from the date of termination, all other Articles shall continue to apply to covered investments established or acquired prior to the date of termination, except insofar as those Articles extend to the establishment or acquisition of covered investments.
Such provisions always seemed fascinating and strange to me. How is it possible that governments would agree to limit their powers in this way? Presumably, if both parties decide at some future date to terminate the treaty, that must mean that they don't like the treaty very much and would not want it to continue to apply. Yet, under this provision, it would continue to apply for ten years.
There must be a way out of this, I thought. Couldn't they just amend the treaty first, to take out the survival clause, and then terminate it?
In addition, as a matter of contract law, about which I don't remember much from law school, I wondered if such a provision really could be included in a treaty. Isn't there something inherent in this kind of provision that would make it inapplicable?
That was as far as I'd gotten with the issue, when I saw this paper by Voon, Mitchell, and Munro. They examine this issue from a public international law perspective and conclude:
Our analysis shows that, as a matter of public international law, neither the notion of ‘acquired rights’ nor the common inclusion of survival clauses in IIAs poses an inherent obstacle to the termination of IIAs by consent. On the contrary, States parties to an IIA may choose to rescind all investors’ past, present and future rights under an IIA (with the exception of exercised rights— that is, claims that are already on foot). However, certain presumptions will generally apply to a termination if not otherwise agreed. In particular, the termination will be presumed: to be governed by the existing treaty terms, including any survival clause; not to affect any right, obligation or legal situation of the parties created through the execution of the treaty prior to its termination; and not to be retroactive. Thus, to the extent that the IIA confers rights on investors, these may persist unless the parties agree to expunge them.
Parties seeking to terminate an IIA by consent should include certain elements in their termination agreement if they intend to modify these presumptions. The agreement should state that: no provisions of the relevant IIA survive the termination or have any operation after the termination; the survival clause and dispute settlement mechanism have no further effect; all past, present and future rights, obligations and responsibilities of the parties and any rights of any investor of any party arising from the IIA are extinguished, including any recourse to domestic or international dispute settlement fora for treaty breaches arising before or after the termination. Any unexercised rights of investors pursuant to a provision of the original IIA or a doctrine of acquired rights would be extremely unlikely to survive a termination agreement that explicitly covers these elements. Of course, the eccentricities of individual IIAs may also need to be accounted for.
Thus, in their view, governments can terminate in a way that removes the effect of the survival clause (that is, the survival clause will not survive). That sounds like it resolves the issue when both parties want to terminate. Is the purpose of such clauses, then, just to make sure unilateral terminations don't affect investors' rights immediately?
