The Role of International Investment Arbitration in Interpretation of Precautionary Principle in Oil Disputes

Precautionary principle requires that, states should refrain from any activity that harms human health, natural resources or ecosystem.The absence of scientific certainty does not justify delaying appropriate measures. The precautionary principle has three components :significant or serious danger, scientific uncertainty and precautionary action.The implementation of this principle in oil contracts occurs when host states, in the face of significant or serious risks, take precautionary measures such as the environmental impact assessments, suspensions, re-zoning, cancellation of permit or termination of contracts. In Mamidoil v. Albania, host state prohibition on investment activities was not considered as indirect expropriation due to the risks of constructing oil tankers nearby residentental zone. But on the contrary in Burlington v. Ecuador, the arbitral tribunal considered termination of the deal and taking possession of the oil blocks as illegal expropriation. This paper examines the views of international investment arbitration on two oil disputes related to the precautionary principle and tries to find the reasons for rejecting or accepting precautionary measures and violation of investor's rights.