From March 5 to 6, 2025, the Institute for Transnational Arbitration (ITA) hosted its third conference on International Arbitration in the Mining Sector in Toronto, Canada.  The conference explored various topics regarding international arbitration in the mining sector, including contemporary developments like ESG (i.e., environmental, social, and governance) compliance, critical minerals for energy transition, and the rise of arbitration contracts including a “social license to operate.”

This article discusses the panel “The New Protectionism: Selected Investor-State Issues Arising from Critical Minerals Strategies.”  The discussions centered around the role that the rise of protectionism and geopolitical rivalry will have on the mining sector.  However, the most significant development was the election of President Trump and his actions, including threats to annex the Panama Canal, incorporate Canada as a 51st state, and enact tariffs against allied countries.  The panel discussed these matters and how they relate to investment arbitration in the mining sector.

The panel was moderated by Martin K. Valasek of Bennett Jones LLP in Montreal.  The other panelists included Professor Andrea K. Bjorklund of McGill University Faculty of Law in Montreal, Gaela K. Gehring Flores of Hughes Hubbard & Reed LLP in Washington, DC, and Ben Love of Baker Botts LLP in Houston, Texas, who shared their opinions on the subject predicated upon their expertise and experience.

Gaela Gehring Flores discussed how Latin American countries may get caught in the middle of a geopolitical rivalry between China and the United States in a race for critical resources.  She mentioned recent developments in Panama as an example.  Panama rescinded contracts with certain Chinese firms and left the One Belt One Road Initiative, presumably as a result of pressure from President Trump to annex the Panama Canal due to his concerns about Chinese influence over the waterway.1See Sara Kosmajac, Panama Moves to End Silk Road Agreement Amid Rising Tensions with US, Offshore Energy, Feb. 4, 2025, https://www.offshore-energy.biz/panama-moves-to-end-silk-road-agreement-amid-rising-tensions-with-us/.X1  While the situation in Panama is not related to the mining sector, it is emblematic of how other mineral-rich countries in Latin America with ties to the United States and China may get placed in a similar situation.  Ms. Gehring Flores went on to discuss a Senate panel regarding the Panama Canal.  Although the Senate was expected to discuss the impact of the Panama Canal on U.S. trade and national security, they eventually started discussing the issue of Chinese presence in Latin American countries.2See Examining the Panama Canal and Its Impact on U.S. Trade and National Security: Hearing Before Senate Comm. on Commerce, Science, and Transp., 119th Cong. (2025).X2

Countries facing pressure from either China or the United States may take measures that violate bilateral investment treaties (BITs) with other countries.  As Ms. Gehring Flores alluded to, ICSID (i.e., the International Centre for Settlement of Investment Disputes) will likely hear more defense claims from host states on necessity or emergency grounds.  Given that many Chinese companies operating in Latin America are Chinese State-Owned Enterprises (“SOEs”), it is also likely that a more developed framework for ICSID's jurisdiction over SOEs could emerge as an increasing number of disputes go to arbitration.

SOEs have become leaders in international investment.3Aceris Law LLC, States as Claimants in Investment Arbitration, Aceris Law, May 23, 2018, https://www.acerislaw.com/states-as-claimants-in-investment-arbitration/.X3  In 2014, there were roughly 500 state-owned cross-border entities totaling more than US$ 2 trillion in assets.4Id.X4  While ICSID has never formally addressed how tribunals should treat SOEs, the few cases that have addressed the question employ the so-called Broches Test.5Bianca Nalbandian, State Capitalists as Claimants in International Investor-State Arbitration, 81 Questions Int’l L., Zoom-out 5, 16-17 (2021).X5  Named after former ICSID Secretary-General Aaron Broches, the test applies two alternative criteria to determine whether SOEs should have standing under the ICSID Convention.6Id.X6  Under the test, SOEs should not be disqualified unless they are acting as an agent of the government or discharging an essential governmental function.7Id.X7  Two ICSID cases have applied the test conjunctively rather than disjunctively.8Id.X8  In CSOB v. Slovakia,9Ceskoslovenska Obchodni Banka A.S. v Slovak Republic, ICSID Case No ARB/97/4, Decision on Jurisdiction (May 24, 1999).X9 the claimant, Ceskoslevenska Obchodni Bank (CSOB), was a commercial bank 65% owned by the Czech government.10See Nalbandian, supra note 5 (citing CSOB, Decision on Jurisdiction, ¶¶ 15-31).X10  While CSOB had promoted the policies of its host country, the tribunal found that its activities were commercial, and therefore CSOB had standing under the ICSID Convention.11Id.X11  Similarly, in BUCG v. Yemen,12Beijing Urban Construction Group Co. v. Republic of Yemen, ICSID Case No. ARB/14/30, Decision on Jurisdiction (May 31, 2017).X12 the tribunal also applied the test conjunctively.13Nalbandian, supra note 5.; see also Kosmajac, supra note 1.X13  The dispute arose out of the termination of a contract for Beijing Urban Construction Group (BUCG) to build an airport in Sanaa, Yemen.14Nalbandian, supra note 5, at 18-19.X14  The tribunal held that there was no evidence to suggest BUCG was discharging an essential governmental function when constructing the airport.15Id.X15  Accordingly, BUCG was found to be engaged in commercial activity and therefore had standing under the ICSID Convention.16See Kosmajac, supra note 1.X16  Recent developments in global trade and geopolitical rivalries will likely lead to an increase in investment arbitration cases within the mining sector, likely involving Chinese SOEs as parties.

Another resource-rich region that could be impacted by the new wave of protectionism is Africa.  Protectionism in the mining sector has become increasingly profound among African countries, in the form of resource nationalism.17See Audley Sheppard KC et al., Global Arbitration Review: The Middle Eastern and African Arbitration Review 2023: Mining Arbitrations in Africa 11-13 (2023), https://globalarbitrationreview.com/review/the-middle-eastern-and-african-arbitration-review/2023/article/mining-arbitrations-in-africa.X17  For mining, it is difficult to determine the physical and geographical properties of minerals, requiring a longer discovery process and large up-front capital from investors.18See Arif Ali et al., Mining Arbitration in Latin America: Social and Environmental Issues in Investment Arbitration Cases, in Global Arbitration Review: The Guide to Mining Arbitration 183 (Jason Fry & Louis-Alexis Bret eds. 2019).X18  These factors create a situation known as obsolescing bargaining whereby initially, the factors favor the investor, however, as time goes on the state gains the upper hand in the bargain.19Henry G. Burnett & Louis-Alexis Bret, Arbitration of International Mining Disputes: Law and Practice 33 (2017) (citing Raymond Vernon, Sovereignty at Bay: The Multinational Spread of U.S. Enterprises (1971)).X19  Resource nationalism occurs when nations take actions such as raising royalties on minerals that normally violate stabilization clauses.20See Sheppard, supra note 17, at  12-13 (explaining how similar legislation was passed certain resource rich countries in Africa such as Mali, Sierra Leone, Madagascar, and Zimbabwe); Matthew Heller & Alison Preece, Investors Tapping into International Treaties to Fight Back Against Resource Nationalism in Africa and Beyond, Lawdragon, Jan. 13, 2025, https://www.lawdragon.com/news-features/2025-01-13-investors-tapping-into-international-treaties-to-fight-back-against-resource-nationalism-in-africa-and-beyond.X20 [20]  Global instability increases the price of minerals, and African countries have taken advantage of events such as the Ukraine War to increase their revenue and address budgetary gaps caused by the COVID-19 epidemic.22See Heller & Preece, supra note 20.X22  Additionally, several francophone countries in Africa have witnessed coups d'état led by military leaders with more nationalistic agendas than previous political leaders.23See id.X23

Former President Biden hosted a U.S.-Africa Summit to strengthen relations between U.S. and African nations.24See Chris Olaoluwa Ògúnmọ́dẹdé, For Biden and the U.S., Africa Is Still an Afterthought, World Politics Review, Nov. 1, 2024, https://www.worldpoliticsreview.com/biden-us-africa-relations/.X24  One of his last international trips was to Angola to discuss the Lobito Corridor, aimed at encouraging access to critical minerals.25See Sarah Way, What to Know about the Lobito Corridor – and How It May Change How Minerals Move, Atlantic Council, Dec. 20, 2024, https://www.atlanticcouncil.org/blogs/africasource/what-to-know-about-the-lobito-corridor-and-how-it-may-change-how-minerals-move/.X25  However, President Trump has not shown the same interest in Africa as Biden.26See id.X26  Therefore, investment arbitration in the mining sector in Africa will likely not be subject to the same kind of geopolitical tensions that Latin America will experience.  However, global economic disruption exacerbated by Trump’s policies and other developments may increase the global price of critical minerals.27See Sheppard, supra note 17, at 12 (explaining how global disruptions raise the global price of critical minerals).X27  Consequently, tribunals are likely to hear more cases involving states altering their internal fiscal policies in ways that violate the provisions of existing BITs, particularly in the mining sector.28Resource Nationalism on the Rise Amid Geopolitical Tensions, Financial Times, Dec. 12, 2024, https://www.ft.com/content/14dad9e1-bfda-4c00-b1b6-9dd41842650a.X28

The panel also discussed the issue of states invoking necessity and other non-preclusion defenses such as national security in investor-state arbitration tribunals.  Professor Andrea Bjorklund discussed the four Argentine cases that discussed the merits of a host state’s defense of necessity.  She also discussed the defense of essential security, and how there have been fewer restraints on a state invoking this defense.  As of now, a handful of tribunals have addressed claims of necessity.  However, economic uncertainty exacerbated by the tariffs enacted by President Trump and further geopolitical instability will likely lead more host states to claim the defense of necessity for violating retrospective BITs.

The four Argentinian cases, CMS v. Argentina, LG&E Corp v. Argentina, Enron v. Argentina, and Sempra v. Argentina, offer two perspectives on the issue of necessity.  All four cases arose from the Argentine government’s response to its economic crisis in 2001-2002.1See Aurelia Grigera, Necessity in Investment Arbitration: Boosting the ICSID System’s Legitimacy, Am. Rev. Int’l Arb. Blog (2024).X1  Argentina took preventive measures in response to the financial crisis which was one of the worst experienced in its history.2See id.X2  Harmed investors sued under the U.S.-Argentina BIT.3See id.X3  As a defense, Argentina invoked the non-precluded measures (“NPM”) clause under Article XI of the BIT (“Article XI”) and the necessity defense under Article 25 of the International Law Commission Draft Articles on Responsibility of States for Internationally Wrongful Acts (“ILC Draft Articles”).4See id.X4  Under Article 25 of the ILC Draft Articles, necessity is justified when taken to “safeguard essential interest against grave and imminent peril.”5International Law Commission, Draft Articles on Responsibility of states for Internationally Wrongful Acts, with Commentaries, at art. 25(1)(a), U.N. Doc. A/56/10 (2001).X5  The meaning of “grave and imminent peril” has come to mean what was reasonable at the time.6See Federica Paddeu & Michael Waibel, Necessity 20 Years On: The Limits of Article 25, 37 ICSID Rev. Foreign Inv. L.J. 160, 177 (2022).X6

The tribunals in Enron, CMS, and Sempra found that the NPM clause in Article XI was inseparable from Article 25 of the ILC Draft Articles and merely a textual restatement.7See Grigera, supra note 28, at 3-4; Sempra Energy International v. Argentine Republic, ICSID Case No. ARB/02/16, Decision on Liability, ¶ 76 (Sept. 28, 2007).X7  Accordingly, Argentina was bound by the customary international law requirement that the claim of necessity is justified when there were no other alternative options that the state could have taken to respond at the time of the crisis.8See Grigera, supra note 28, at 3-4; see also William Burke-White, The Argentine Financial Crisis: State Liability Under BITs and the Legitimacy of the ICSID System, 3 Asian J. WTO & Int'l Health L & Pol'y 199, 217-18 (2008).X8  The tribunals in the three cases found that Argentina’s actions were not the only options available at the time and therefore, did not satisfy the necessity requirement.9See Burke-White, supra note 35; Grigeria supra note 28, at 4.X9  On the other hand, the tribunal in LG&Econsidered necessity under Article XI and customary international law to be different.10See Burke-White, supra note 35; LG&E Energy Corp. et al. v. Argentine Republic, ICSID Case No. ARB/02/1, Decision on Liability, ¶ 245 (Oct. 3, 2006).X10  Under Article XI, the tribunal decided that Argentina was in a period of crisis, in which it was necessary for the government to enact measures to maintain public order and protect its essential security interest.11LG&E, Decision on Liability, ¶ 267.X11  Therefore, the government’s response complied with Article XI, and any wrongful actions under the U.S.-Argentina BIT were precluded.12Id.X12  The importance of a state having several responses available to protect its essential security and maintain public order has been emphasized.13Burke-White, supra note 35, at 6, 15.X13

Other ICSID cases involving the doctrine of necessity are Union Fenosa Gas v. Egypt and Huawei Technologies v. Sweden.14Unión Fenosa Gas, S.A. v. Arab Republic of Egypt, ICSID Case No. ARB/14/4, Award of the Tribunal (Aug. 31, 2018); Huawei Technologies Co. v. Kingdom of Sweden, ICSID Case No. ARB/22/2.X14  The dispute in Union Fenosa concerned a BIT between Spain and Egypt that did not contain a NPM clause.  Union Fenosa sued Egypt after the government shut down gas supply to the Damietta plant.16See id. at ¶ 2.2.X16  The government argued that cutting off gas supply was justified by the doctrine of necessity under customary international law to preserve public order stemming from the Arab Spring.17Sarah Cassella, Case Comment, Unión Fenosa Gas v. Egypt: The Necessity Defense: Much Ado about Nothing?, 37 ICSID Rev. Foreign Inv. L.J. 552, 556 (2021).X17  Egypt noted how at the time, the state was dealing with historic levels of violence and riots across the country.18Id.X18  The tribunal dismissed Egypt’s plea finding that the country’s response to the gas shortage was not sufficiently related to the revolution.19Id. at 553-54.X19  In Huawei Technologies, the Swedish government invoked an order forbidding multinational organizations in Sweden from implementing a 5G network with an apparatus from Huawei or ZTE, another Chinese company.20Shuailong Ren, The National Security Defence in International Investment Arbitration from Perspective of Customary International Law 37-38 (2024) (LL.M. thesis, Stockholm University), available at https://www.diva-portal.org/smash/get/diva2:1880015/FULLTEXT01.pdf.X20  Huawei alleged that Sweden breached its BIT with China.21Id.X21  Although the arbitration is still pending, it is possible that Sweden has invoked the plea of necessity or essential security under customary international law.22Id.X22

As noted by the panelists, President Trump signed an executive order aimed at boosting domestic critical mineral production in the United States by invoking the Defense Production Act.23See Joseph Sopcisak et al., Key Takeaways from President Trump's Executive Order to Strengthen U.S. Mineral Production, Holland & Knight, (Mar. 26, 2025), https://www.hklaw.com/en/insights/publications/2025/03/key-takeaways-from-president-trumps-executive-order-to-strengthen.X23  The memo accompanying the executive order noted that domestic production of rare minerals was a matter of national security.24Id.X24  Currently, around 70% of U.S. rare earth mineral imports come from China.25See Andrew Foran, U.S. Trade Vulnerabilities in Critical Minerals: Pressure Points Amid Rising Tensions, TD Bank (Oct. 22, 2024), https://economics.td.com/us-trade-critical-minerals.X25  Whether the United States can become completely self-sufficient in mineral production remains questionable.26Willy Shih, It Might Take a Long Time for the U.S. to Become Self-Sufficient in Rare Earth Materials, Forbes (Feb. 24, 2021), https://www.forbes.com/sites/willyshih/2021/02/24/it-might-take-a-long-time-for-the-us-to-become-self-sufficient-in-rare-earth-materials/.X26  As is common in the mining industry, the value or presence of minerals normally is not discovered until later in the production phrase.27See Clara López, Mining in Investment Arbitration: An Analysis of Mining Companies’ Legitimate Expectations, 27 J. Int’l Econ. Law 297, 301 (2024).X27  Furthermore, it is unclear whether the order complies with the Constitution.28See Sopcisak, supra note 49 (explaining how there may be constitutional funding limits for initiatives such as the Mineral Production Fund).X28  Nonetheless, the effort by President Trump is emblematic of his efforts to pull the U.S. away from the global economic order and achieve self-sufficiency.29Adam Orlando, The United States of Mining: Liberation or Subjugation, It’s Trump’s Americanisation, Mining.com.au (Mar. 31, 2025), https://mining.com.au/the-united-state-of-mining-liberation-or-subjugation-its-trumps-americanisation/.X29  A breakdown in the global order could prompt other nations to follow and make efforts to protect their production of minerals in the form of nationalization, higher royalties, or cancellation of joint-venture projects.

If challenged, these efforts will likely—if not inevitably—be justified on the grounds of essential security and necessity if brought before an ICSID tribunal.  If the tribunals adopt the approach followed in Enron, CMS, and Sempra, it is hard to see how a nation could demonstrate a grave and imminent peril.  The plea of necessity requires that there were no other alternative measures at the time which is an extremely high threshold for all cases.  It would be particularly challenging in the mining sector, where the profits and value are not yielded until later in the production.30See López, supra note 53.X30  Mining requires more speculation than other industries,31See id. at 313.X31 which would make this requirement difficult for host countries to meet.  Additionally, in the middle stages of the process, the government normally has the upper hand in the agreement with the investor.32See Burnett & Brett, supra note 19, at 33.X32  Therefore, it is conceivable that a tribunal would find that there were alternative policies available for the host state to pursue.

If tribunals adopt the decision in LG&E, the states will have more latitude in responding to crises.33See Burke-White, supra note 35, at 6, 15.X33  The ability to have fewer restriction may be beneficial for host states, particularly at a time when there is uncertainty as to the future of the global economy and political order.34Id. (explaining in economic crises such as the Argentine Financial Crisis the importance for a state to have multiple levers available).X34  Limiting the right of necessity to the best option at the time of implementation would be burdensome since many states are unsure on to respond given the United States’ departure from its traditional position on the global stage.35See Olivier Knox, The Trumpquake Reverberates Among U.S. Allies, U.S. News (Mar. 6. 2025), https://www.usnews.com/news/u-s-news-decision-points/articles/2025-03-06/worried-u-s-allies-are-feeling-the-trumpquake.X35  However, tribunals should be careful to limit NPM clauses containing essential security provisions to the facts and circumstances of the case, as well as to the substance of the treaty.  Whether an action invoking essential security is justified depends on the intensity of the threat to the state.36Paddeu & Waibel, supra note 33, at 187.X36  The inquiry of intensity is a matter for the state to decide.37Id.X37  While tribunals can review the invocation of the essential security exception, there is a strong implication that determining what is an essential security measure is at the state’s discretion.38Id.X38  Accordingly, while tribunals should honor the intentions of the parties, they should not interpret the treaties too liberally.  That would enable the state to violate the terms at its discretion, undermining a fundamental purpose of the BIT which is to provide the investor with certain rights.

Ben Love discussed how President Trump’s tariffs could push nations to enact countermeasures in response.  Under Article 22 of the ILC Draft Articles, states are allowed to enact countermeasures for the wrongfulness of a state’s action that is not in compliance with international law.1See Federica Paddeu, Third-Party Countermeasures in International Law, 77 Cambridge L.J. 427, 428 (2018) (reviewing Martin Dawidowicz, Third-Party Countermeasures in International Law (2017)).X1  Mr. Love noted how tribunals will hear more states argue their actions were countermeasures, even though few tribunals have addressed this issue.  He discussed the three arbitration cases, Corn Products International, Inc. v. Mexico,2Corn Prods. Int’l, Inc. v. United Mexican States, ICSID Case No. ARB (AF)/04/1, Decision on Responsibility (Jan. 15, 2008).X2 Cargill v. Mexico,3Cargill, Inc. v. United Mexican States, ICSID Case No. ARB(AF)/05/2, Award (Sept. 18, 2009).X3 and ADM v. Mexico,4Archer Daniels Midland Co. & Tate & Lyle Ingredients Ams., Inc v. United Mexican States, ICSID Case No. ARB(AF)/04/5, Award (Nov. 21, 2007).X4 which offered two perspectives regarding the legality of countermeasures under Chapter 11 of the original North American Free Trade Agreement (“NAFTA”).  The cases concerned measures taken by Mexico that harmed U.S. investors, but which Mexico had adopted in response to actions by the United States that Mexico considered illegal.5See Corn Prods., Decision on Responsibility, ¶¶ 4-6; Cargill, Award, ¶ 4; ADM, Award, ¶ 4.X5

The central question to determine the legality of countermeasures was whether investors have substantive rights.6Eran Sthoeger & Christian J. Tams, What is the Role of Countermeasures in ISDS in the Context of the War in Ukraine?, Kluwer Arbitration Blog (May 11, 2023), https://arbitrationblog.kluwerarbitration.com/2023/05/11/what-is-the-role-of-countermeasures-in-isds-in-the-context-of-the-war-in-ukraine/.X6  The tribunals in Cargill and Corn Products found that investors did have substantive rights that were separate from their home state.7Id.X7  For that reason, Mexico’s countermeasures could not exclude the violation of the investors’ rights.8Id.X8  The tribunal in ADM on the other hand, found that investors were granted procedural rights, such as initiating an arbitration, but the substantive protections under NAFTA belonged exclusively to the state.9Id.X9  However, the tribunal found that the lawful conditions for countermeasure were not met.10Id.X10  Another issue that was addressed was whether the tribunal could decide as a matter of law whether a country not a party to the dispute breached international law.11See Anna Ventouratou, Revisiting the Availability of Countermeasures in Investment Arbitration, in Custom and Its Interpretation in International Investment Law 123, 137 (Panos Merkouris et al. eds. 2024).X11  In ADM, the tribunal found that it did have jurisdiction to hear the claims under NAFTA Articles 1102, 1106, and 1110, whereas the tribunal in Cargill found that since the United States was not a party, it could not hear the matter.12Id. at 134-36.X12  The World Trade Organization (WTO) Appellate Body followed a similar approach to Cargill in the case of Mexico – Soft Drinks.13Id. at 144.X13  Other international tribunals have found that they do have jurisdiction to hear outside matters including the International Civil Aviation Organization and the International Court of Justice.14Id. at 145-47.X14

As the panel pointed out, the tariffs enacted during President Trump’s first term were likely just low enough to avoid a violation of the General Agreement on Tariffs and Trade (GATT).15See Reto Caluori, Trump’s Tariffs and International Trade Law, University of Basel (Feb. 6, 2025), https://www.unibas.ch/en/News-Events/News/Uni-Research/Trump-s-tariffs-and-international-trade-law.html.X15  However, 25% or 30% tariffs on goods are likely inconsistent with GATT, which prompted Canada to request a WTO dispute consultation with the United States.16See id.; Canada Initiates WTO Dispute Complaint on US Steel, Aluminium Duties, Reuters (Mar. 13, 2025), https://www.reuters.com/world/canada-initiates-wto-dispute-complaint-us-steel-aluminium-duties-2025-03-13/.X16  Even if the tariffs are found to violate the GATT, the U.S. could effectively appeal the decision into the void, given its decision to block appointments to the panel.17See President Trump Orders 25% Global Tariff on Automative Imports, White & Case (Mar. 27, 2025), https://www.whitecase.com/insight-alert/president-trump-orders-25-global-tariff-automotive-imports.X17  As for the 25% tariff on automobiles, President Trump provided an exemption on automobile parts coming from Mexico and Canada that meet the requirements of the NAFTA-replacing United States-Mexico-Canada Agreement (USMCA).18See id.X18  If President Trump withdraws the exemptions, Mexico and Canada will likely retaliate, potentially prompting American investors to request arbitration.  As an effect, Canada and Mexico could argue that their actions constitute lawful countermeasures.

The election of President Trump and global developments will inevitably bring many challenges to the realm of investor-state arbitration.  The rise of protectionism and geopolitical tensions will likely encourage resource-rich host states to take measures to protect critical minerals testing the limits of international trade agreements.  Geopolitical rivalries, particularly in regions like South America, will put host states into difficult decisions regarding whether to uphold or abandon existing BITs.  These nations are bound to face intense pressure from powerful external nations such as the U.S. or China, which may influence their commitment to such agreements.  While these developments will bring their challenges, they will also bring an opportunity for tribunals to flesh out areas that remain disputed in international investment law.  Tribunals have adjudicated a few disputes involving issues such as the plea of necessity or validity of countermeasures, but the likelihood of an increase in these defenses will provide tribunals with an opportunity to develop a more refined body of jurisprudence.