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Legal Insights

Sovereign Actions & Implications in a Pandemic

David Y. Amakiri.

At the height of the coronavirus pandemic in 2020, governments in countries such as El Salvador, Ghana, Nigeria, and Peru proposed to defer or outrightly suspend certain utility bill payments by consumers drawing the ire of (local and foreign) investors in those countries. The angst is not entirely unjustified. For one, the pandemic affected all the stakeholders in the society - governments, consumers, and investors in different ways and negatively. Also, given that suspending consumers' obligations to utility providers confer some benefit or 'advantage' to the consumers without any to investors. With government revenues having plunged compared to pre-pandemic levels, the government was not in a strong position to offer fiscal supports or adequate bailouts to these businesses. These raised issues of the legitimacy of government interference in 'free markets' and whether by their responses to the pandemic, governments had inhibited the legitimate expectations of these businesses.

Governments have also relied on the urgent necessity to produce countermeasures that will limit the coronavirus's spread and impact to justify their actions. This defence of (public health) necessity may avail governments, subject to the existence of the conditions necessary for the reliance on such defence among which are that: the measure(s) (i) must protect an essential interest at serious and imminent risk and (ii) were the only way to safeguard that essential interest.

The fact that a government has the responsibility to exercise its power of regulation within its territories during a pandemic is not doubtful. International (investment) law recognises this power. In Philip Morris v. Uruguay, the ICSID gave a hint into how investment law could treat government actions taken because of the COVID-19 pandemic when it stated that: “the responsibility for public health measures rests with the government and investment tribunals should pay great deference to governmental judgments of national needs in matters such as the protection of public health.” In other words, there should be deference to the government's power to legislate for public protection and the power to police such legislations/regulations for public health issues in an emergency public health situation. However, this government's power to protect public health during crisis times does not derogate from the legitimate expectation that a state will honour its obligations to investors. In exercising police powers, governments should be mindful of the consequences of their actions on trade and investments (as it is only when such actions are proportional to the circumstances, they can be accommodated under the defence that the government was exercising its police power).

Governments have also relied on the urgent necessity to produce countermeasures that will limit the coronavirus's spread and impact to justify their actions. This defence of (public health) necessity may avail governments, subject to the existence of the conditions necessary for the reliance on such defence among which are that: the measure(s) (i) must protect an essential interest at serious and imminent risk and (ii) were the only way to safeguard that essential interest. In essence, whether a measure taken in response to the pandemic is necessary will largely depend on the facts and circumstances within which they took the measures. There is no one-size-fits-all. In reference to our introductory example, where it is shown that the pandemic had led to severe economic conditions in which the government could not take any other measure to alleviate the situation, and even where such alternative measures are taken, they would not prevent an imminent and serious risk to consumers, the government could avail itself of the resources available in seeking the reduction or deferment of payment of utility bills for the poorest or most affected consumers. The need for governments to only act proportionally and out of necessity is key even in a pandemic.



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