The regulations concerning the protection of the national security of the host country and the legitimate expectations of the foreign investments

• DOI: https://doi.org/10.1108/JITLP-07-2021-0037
• Published date: 23 March 2022
• Date: 23 March 2022
• Pages: 122-139
• Subject Matter: Strategy,International business,International business law,Economics,International economics,International trade
• Author: Ahmad Heidari

The regulations concerning the

protection of the national security

of the host country and the

legitimate expectations of the

foreign investments

Ahmad Heidari

Department of Law, Shahid Beheshti University, Tehran, Islamic Republic of Iran

Abstract

Purpose –The purposeof this study is to examine the legal system thatoverrules these concerns within the

body of the international investment laws.The question which remains is how can host countries and their

ruling bodies maintain their national security without disregarding the legitimate expectations of foreign

investmentsand their international responsibilities?

Design/methodology/approach –Balancing the relationshipbetween the national security of the host

country and the legitimate expectationsof the foreign investments is one of the oldest challenges within the

body of the international investment laws because the realization of the right to maintain the national

security, without regulating the host countries, leaves room for corruption, and meeting the legitimate

expectations of the foreign investments can lead to the disruption of the national sovereignty of the host

country.

Findings –Studies show that the internationalinvestment laws do not take a clear stance when it comes to

regulating the relationshipbetween the national security of the host countries and the legitimate expectations

of the foreign investments and that they are, in fact, in somecases, paradoxical and disorganized; there are

instances of attemptsto overprotect the national security of the host country, while the rights and the benef‌its

of the foreign investmentsare disregarded,

Originality/value –At times there is an attempt to expand the realm of legitimate expectations of the

foreigninvestments which would, in turn, disrupt the national security of the host country.

Keywords National security, Host country, Foreign investment, Legitimate expectations,

Regulating investments

Paper type Research paper

1. Introduction

One of the ways to enrich the economy is to attract foreign investments which require the

existence of appropriate legal infrastructure and the removal of the obstacles in the path

of foreign investments. Furthermore, the host countries cannot disregard the need to

protect their own public interest and their national security; therefore, there need to be

some appropriate measures put in place to balance the need for economic development

and the protection of the national security of the host country, on the one hand, and the

attraction of foreign investments, on the other. The concern about the national security

risks that the attraction of foreign investments might introduce has been a predominant

concern for the host countries, but such concerns were raised at their highest levels at

specif‌ic historic periods such as times of war or regional altercations (Pooresmaeili and

Shiravi, 1392,p.34).

JITLP

21,2

122

Received17 July 2021

Revised11 December 2021

Accepted6 January 2022

Journalof International Trade

Lawand Policy

Vol.21 No. 2, 2022

pp. 122-139

© Emerald Publishing Limited

1477-0024

DOI 10.1108/JITLP-07-2021-0037

The current issue and full text archive of this journal is available on Emerald Insight at:

https://www.emerald.com/insight/1477-0024.htm

The challenge of maintaining “national security”has been present ever since the

development of the phenomenon of trade and foreign investments; however, these days,

with the further developments of foreign investments, the other challenge that has been

stressed is meeting “the legitimate expectations of foreign investments”within the host

countries.

Upon viewing the historical precedentsrelated to this matter, it becomes rather clear that

there has been no balance established in the relationship between maintaining national

security and meeting the legitimate expectations of foreign investments, which entails that

at times to maintain the national security of the host country, the legitimateexpectations of

foreign investments are disregarded, while at other instances, to meet the legitimate

expectations of the foreign investments, the national security of the host country has been

subject to inevitable risks. The host countries’rights to maintain their national security do

not correspond with disregarding the rights of the foreigninvestors, while at the same time

directing special attention to the expectations of the foreign investments should not violate

the national security of the host country. Therefore, an appropriate balance needs to be

established between the rights of the host countries to manage their national security and

the expectations of foreigninvestments. This requires that when the host country introduces

specif‌ic measures, for public safety reasons, concurrent with this attempt should be efforts

taken place to make sure that these measuresdo not entertain bias of any kind and that they

are executed accordingto the principles of clarity, propriety and responsibility.

The line between setting regulationsas it relates to maintaining the national security of

the host country and meeting the legitimate expectations of the foreign investments, as it

has been previously observed, is so thin that it cannot be def‌ined without diff‌iculty which

might entail that the terms that are used within investment treaties and contracts could be

interpreted at times in favor of the host country and sometimes even puts the interests of

them at risk. Now, the question that arises is that whether in the interaction between the

host countries’right to maintain its national security and the legitimate expectations of the

foreign investors, does the maintenance of the national security have the upper hand?

Assuming the fact that the host country’s right to maintainits national security bears more

signif‌icance, to answer this question, one must take into account several factors: f‌irst,

national security is a fundamental principle, maintaining of which by the host country

serves the best interest of that countryand the foreign investments that are located in that

country, because there have been multiple instances in which the host country has been

condemned when it was not able to preserve its national security at the face of foreign

investments. Second, the host country’s right to maintain its national security is bound to

their compliance with the legal principles and regulations. Third, foreign investments to

afford themselves the right to claim the violation of their expectations in the interaction

between maintaining the national security of the host country and meeting the legitimate

expectations of the foreign investments must gain the trust of the legal system of the host

country.

Within this paper, the attempt has been to examine the overruling legal system on the

matter at hand within the body of investment laws, while using a descriptive–analytical

approach and with the help of the resources available at the libraries such as law books,

scholarly papers, dissertations, theses, regulationsand regulatory measures. Therefore, this

paper is drafted with the purpose of balancing the relationship between the host country’s

rights to maintain its national security and meeting the legitimate expectations of the

foreign investments, while shedding light on the benef‌its and the shortcomings of

the international investmentlaws so that an appropriate resolution can be introduced to the

countries at the times of drafting internationaltrade contracts, and to the regulating bodies

The

regulations

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