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Report No. 260

F. Article 24: Duration and Termination

(i) Analysis and comment:

7.6.1

This clause requires express agreement every ten years to prevent automatic lapse of the treaty. The 2003 Model states that the treaty will be in force for ten years, and will be automatically extended unless a party gives notice of intention to terminate.

7.6.2 Both types of clauses achieve the same legal effect but in different ways. The 2015 Model treats termination as the norm and renewal as the exception. This could lead to inconvenience regarding the continued subsistence of the treaty, as it would require re-drafting fresh written renewals periodically. The Organisation for Economic Cooperation and Development (OECD) has also acknowledged that automatic renewal clauses are the norm, and that automatic lapsing (with an option to renew) in such a treaty is an "unusual policy choice".113 The version of the clause in the 2003 Model may be retained.

113 Pohl, J. (2013), "Temporal Validity of International Investment Agreements: A Large Sample Survey of Treaty Provisions", OECD Working Papers on International Investment, 2013/04, OECD Publishing, p. 30.

7.6.3 Article 24 suggests that treaty may be terminated even during the initial ten-year period of its subsistence, which is inconsistent with international practice. Further, an intention to not even make mandatory the first ten-year period following the treaty's entry into force sends incorrect signals to the international community. Further, it is unclear as to when the treaty will be terminated.

For example, if a notice to terminate is received by a Party on the same day as it is served by the other Party, the treaty would be terminated in 60 days from that date, which would be 4 months before the "6 months" previously specified. This provision therefore does not provide sufficient clarity regarding when the treaty would be terminated subsequent to the notice being served.

7.6.4 Article 24.2 (the "survival clause") specifies the duration for which the treaty will be in force for existing investments following termination. This clause reduces the survival period to 5 years, from the 15 years in the 2003 Model. It is suggested that in the interest of promoting long-term investments, and creating incentives for investors, this duration should be raised to not less than 10 years. A 10-15 year term is accepted across various model BITs,114 with some extending this period to even twenty years.115

114 2012 U.S. Model Bilateral Investment Treaty, Article 22(3); Colombian Model August 2007, Article XIII(3); Agreement Between Canada and (...) for the Promotion and Protection of Investments, Article 52(3).

115 German Model Treaty - 2008, Article 13(3); Draft Agreement Between the Government of the Republic of France and the Government of the Republic of (...) on the Reciprocal Promotion and Protection of Investments, Article 11.

7.6.5 There are also ambiguities regarding the time period from when the survival clause is invoked. Article 24.2 specifies this cause of action only in cases of termination of the BIT and not in cases of lapse, despite the fact that Article 24.1 deals with instances of termination and lapse. This clause also does not specify from which date this five-year survival clause will begin to subsist and only states that the treaty will remain in force "for a period of five years" with respect to investments made before the treaty was terminated.

7.6.6 In light of suggestions for Article 24.1, where only termination should occur by notice, 'lapse' need not be mentioned. This is because no situation of lapse would arise where parties can only opt out to effect termination, and the period of survival can be linked to start "from the date of termination of the treaty".



Analysis of the 2015 Draft Model Indian Bilateral Investment Treaty Back




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