restrict the pallet of the policymaking and they wave their immunity for the sake of an alternative dispute resolution system , first, do not want to wave their sovereign right to withdraw from a treaty, and second do make
such concessions temporarily.
119
An investment treaty of short duration gives more room for flexibility
to policymaking and favors the host state.
120
Sunset clauses are a key mechanism to create a common ground between two antithetical interests: on the one hand the legal certainty for investors, on the other hand the sovereign right to withdraw from a treaty and unchain policymaking. Once the host state expresses its intention to withdraw from an investment treaty unilaterally, the
sunset clauses are activated. The countdown starts of a transitional period between investment
protection and no protection. For such transitional period, investments already made are protected
from the sudden unilateral termination of an investment treaty.
The duration safeguards in the investment treaties (such as the initial validity period and the sunset
clause) permit investors to calculate the risk of time-limited protection and de-invest in their
investment. Hence, sunset clauses offer legal certainty about the duration and the expiration of such
protection. In other words, the specific expiration date of treaties makes the law predictable, and
investors can plan accordingly and be guided.
In addition, it is worth mentioning that
between stability and flexibility, the duration of the sunset clause is critical. If the period is long, states value more peace and encourage more investments. On the other hand, if the term of the clause is short, it seems that states value more flexibility. 118
See Kathryn Gordon and Joachim Pohl, ‘Investment Treaties over Time – Treaty Practice and Interpretation in a Changing
World’ OECD Working Papers on International Investment 19 (OECD Publishing) 6.
119
There are a number of apparatus used in investment treaties to enhance flexibility such as escape clauses and explicit
public policy exceptions. For more details, see Anne van Aaken, ‘International Investment Law Between Commitment
and Flexibility: A Contract Theory Analysis’ (2009) 12 Journal of International Economic Law 507, 522.
120
See Anne van Aaken, ‘International Investment Law Between Commitment and Flexibility: A Contract Theory Analysis’
(2009) 12 Journal of International Economic Law 507, 518.
Sunset Clauses in International Law and their Consequences for EU Law
PE 703.592
33