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NIKOLA KURKOVÁ KLÍMOVÁ CYIL 14 (2023) breached only if the State exerts irresistible pressure in an area where another State is by virtue of its sovereignty permitted to decide freely. 68 Although the International Court of Justice (“ICJ”) did not completely rule out that economic coercive acts could run contrary to the principle of non-intervention, the ILC has at the same time made clear that a similar finding would not really matter. 69 If the sanctions violate any of the State’s treaty or customary law obligations, they can still qualify as legal countermeasures, provided such acts comply with the conditions codified in Arts. 49-53 of the ILC Articles. Second, besides the unclear definition of unilateral sanctions, the success of the countermeasures defence is contingent on the nature of investors’ rights under IIAs. 70 Generally, reprisals are only allowed to interfere with the rights of the infringer, not third persons. 71 In investment treaty arbitration, the role of investors has been subject to a long-term debate. While IIAs are built on a triangular relationship, 72 tribunals tend to be more supportive of the reading that the rights embedded therein are owed directly to investors, rather than their home States. 73 This principle applies not only to the substantive rights but also the procedural ones which were summarised under the famous term ‘arbitration without privity’. 74 For the purposes of unilateral sanctions, this conceptualisation, however, suggests that host States would not be able to rely on the defence of countermeasures in the arbitral proceedings. 4.3 Essential security clauses Unlike their predecessors, the modern generation of IIAs has substantially expanded the policy space of host States vis-à-vis foreign investors. In response to the legitimacy crisis of the investor-State dispute settlement system, 75 the new type of IIAs seeks to strike a fairer balance between the sovereign rights of States on the one hand and investment protection on the other hand. One of the means to reach this goal is the incorporation of new treaty clauses safeguarding the interests of States. 76 In this respect, ‘essential security’ exceptions, modelled typically upon Art. XXI of the 1994 General Agreement on Tariffs and Trade (“GATT”), have gained prominence, allowing States to take action which they consider necessary for the protection of their essential security interests under specific factual circumstances, such as in time of war or other emergency in international relations, 77 for the protection of public 68 Military and Paramilitary Activities in and against Nicaragua (Nicaragua v. United States of America) (Merits, Judgment) [1986] ICJ Reports, 14, para. 205. 69 ILC Articles (n 57), pp. 128-139; AGO (n 60), paras. 78–-99. 70 ZRILIČ (n 55), p. 159. 71 ILC Articles (n 57), Art. 49(1). 72 ROBERTS, A. (2015). Triangular Treaties: The Nature and Limits of Investment Treaty Rights. Harvard International Law Journal , Vol. 56, No. 2, 353, pp. 353–354. 73 See e.g. Cargill, Incorporated v. United Mexican States, ICSID Case No. ARB(AF)/05/2, Award, 18 September 2009, paras. 420–428. 74 PAULSSON, J. (1995). Arbitration Without Privity. I CSID Review – Foreign Investment Law Journal , Vol. 10, No. 2, 232, p. 233. 75 WAIBEL, M. et al. (2010). Backlash Against Investment Arbitration (Alphen aan den Rijn: Kluwer Law International); BEHN, D., FAUCHALD, O. K. and LANGFORD, M. (2022). The International Investment Regime and Its Discontents. In: BEHN, D., FAUCHALD, O. K. and LANGFORD, M. (eds.), The Legitimacy of Investment Arbitration (Cambridge: Cambridge University Press), p. 39. 76 On the discussion of the relationship between treaty defences and circumstances precluding wrongfulness under customary international law in the investment jurisprudence, see BJORKLUND (n 56), pp. 493–498. 77 For the interpretation of the scope of this term, see Russia – Measures concerning Traffic in Transit , Panel Report, 5 April 2019, WT/DS512/R (“ Measures concerning Traffic in Transit ”), para. 7.76.

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