Advancing doctrine through devil’s advocacy: A response to Alan O. Sykes

Abstract

Alan Sykes’ editorial comment, Economic “Necessity” in International Law, provides a multi-layered analysis of the defense of “necessity” in international investment disputes. Sykes’ main proposition is that the obligation to compensate investors for government measures prejudicing their investments during economic emergencies mitigates the risk of moral hazard and incentivizes States to “select the least expensive way to protect their interests (the optimal policy instrument).”¹ Otherwise, he contends, “actors will take risks that imperil them to an excessive degree if they can save themselves by imposing costs on others.”² Sykes nonetheless argues that payment of the compensation could be deferred in light of the emergency, and not be subject to market interest rates.³