The Seda v. Colombia award stands out as the most significant engagement with the concept of “self-judgment” by an investment tribunal in decades. While ultimately upholding Colombia’s reliance on a self-judging essential security exception in the U.S.-Colombia Trade Promotion AgreementFootnote ¹ (TPA) and dismissing the case entirely, the dispute marks the first time an investment tribunal has reviewed the invocation of a self-judging provision in an investment agreement, reinforced by a footnote aimed at limiting judicial scrutiny. The award contributes to the ongoing debate on the balance between state authority and international judicial oversight by providing an extensive interpretation of the self-judging provision and applying a good faith review despite the “reinforced” version of the clause.

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In Seda v. Colombia,Footnote ² a group of American investors brought a claim against Colombia for confiscating their real estate on the basis of the property’s historical association with transactions linked to organized crime. Starting in 2008, Mr. Seda, a U.S. national, made multiple investments in Colombian real estate. One of these ventures, the Meritage project—a planned luxury hotel and residential complex near the city of Medellín—was funded by Mr. Seda and several other legal and natural persons. The investors’ corporate vehicle for the Meritage project secured the land intended for its development through a series of agreements with a local firm between 2012 and 2015. Before finalizing the purchase, the investors undertook due diligence, including a title study, and obtained certification from the Colombian Attorney General’s Office to confirm that the property was not implicated in any criminal proceedings or investigations.

In 2014, a man named Mr. López, who had previously been convicted of drug trafficking, claimed ownership of the Meritage property, and purportedly demanded payment from Mr. Seda. Mr. López alleged that, in the early 2000s, he had been forced to relinquish the property under duress. After negotiations between Mr. López and Mr. Seda broke down, Mr. López filed criminal proceedings in Colombia with the Organized Crime Unit of the Attorney General’s Office in Bogotá, claiming that he was the rightful owner of the property. Simultaneously, unrelated investigations into a cartel prompted Colombian authorities to investigate the property’s history (para. 218).

In the area surrounding Medellín, drug cartels have historically engaged in money laundering through real estate transactions (paras. 183, 185). To provide authorities with an effective tool against such transactions, Colombian law permits courts to order the forfeiture of assets linked to money laundering activities (paras. 219–20).Footnote ³ Based on these laws the Asset Forfeiture Unit of the Colombian Attorney General’s Office seized the Meritage property in 2016 (para. 229). The investigation had revealed irregularities in previous transactions involving the property and the authorities argued that further transfers of the ownership needed to be prevented (para. 231).

The claimants unsuccessfully sought to contest the seizure before specialized asset forfeiture courts, the Bogotá Superior Court, and the Supreme Court of Justice. While some of these domestic proceedings before the Superior Tribunal of Bogotá and the Second Criminal Court Specialized in Asset Forfeiture were still ongoing, the claimants initiated arbitration under the TPA, seeking more than $255 million in compensation for the confiscation of the property and negative spillover effects on other business activities that they had been conducting in Colombia. According to the claimants, Colombia’s actions breached the TPA’s protections against unlawful expropriation and violated guarantees of fair and equitable treatment, national treatment, and full protection and security.

To defend the sequestration, Colombia invoked the essential security interests exception in Article 22.2(b) of the TPA,Footnote ⁴ the interpretation of which emerged as the crucial issue in the proceedings. Colombia argued that its essential security interest was “to fight the activities of a criminal organization whose members, including those of the highest rank, have successively held the Meritage Lot and have engaged in money laundering operations that permeate its transfers up to the present” (paras. 418, 766).

Colombia’s interpretation of Article 22.2(b) of the TPA varied at different stages of the proceedings. It claimed variously that the invocation of the provision meant that the tribunal “lacks jurisdiction,” was “non-justiciable,” or only allowed for a “prima facie test” (paras. 422, 427, 440). The common denominator of these different legal categorizations was that the tribunal was “bound to apply the exception automatically.”Footnote ⁵ For Colombia, the reinforced self-judging language made it “explicitly clear that the State parties intended to retain the right to unilaterally determine the legality of such extraordinary measures, which thus cannot be subject to judicial adjudication.”Footnote ⁶ Arguably, “the applicable standard does not allow, let alone require, the Tribunal to assess whether the measures were adopted in good faith or in an arbitrary or discriminatory manner.”Footnote ⁷ The only finding the tribunal was permitted to make was that Colombia had decided to invoke the clause.

By contrast, the claimants argued that the tribunal was required to conduct at least a good faith review of Colombia’s invocation of the essential security requirement under Article 26 of the Vienna Convention on the Law of Treaties (VCLT) (para. 278). They also claimed that Colombia had breached this good faith standard, as it had not initially classified the interest in fighting organized crime as a national security matter; nor had it established a rational nexus between the seizing of the property and the fight against a cartel.

The United States participated in the proceedings as a non-disputing party to support Colombia’s arguments. Because of the provision’s “clearly self-judging” nature it argued that the tribunal was barred from carrying out a good faith review and that the state parties alone could ensure that the provision was invoked in good faith (paras. 599, 605).

The tribunal sided with Colombia in dismissing the case on the basis of the essential security interests exception. At the same time, it held that it was tasked with conducting a good faith review of Colombia’s invocation of Article 22.2(b) of the TPA (para. 655). As a starting point, and consistent with the decision of the International Court of Justice (ICJ) in Nicaragua v. United States as well as investment tribunal awards, the tribunal held that the self-judging character of a norm must be explicit (para. 722).Footnote ⁸ The wording (“it considers necessary”), according to the tribunal, left “no doubt that this provision is self-judging” (para. 638).

Nevertheless, the tribunal determined that the standard of review for the self-judging provision was scarcely impacted by footnote 2 to Article 22.2 of the TPA.Footnote ⁹ It found that the clause left “an important matter open: what is the standard of review” (para. 661). In particular, as the footnote established that the tribunal had to make a “finding” and the provision fell “short of the express language exempting the measure … from any review” the matter was not “non-justiciable” (paras. 659, 723–25). As the TPA had not—in the tribunal’s view—explicitly ruled out any review, and to avoid abuse, it decided to apply a good faith standard drawing on the approach by the ICJ and World Trade Organization (WTO) panels for self-judging provisions without reinforcing language. Under this “light-touch” review, the tribunal evaluated the classification of certain interests as “security interests” and the plausibility of the measure for satisfying such interests—that is, the nexus between the measure and the stated security interests (paras. 650, 655).

Applying this standard, the tribunal did not find any basis for rejecting Colombia’s claim that the fight against organized crime qualified as an essential security interest (para. 782). It also found that Colombia’s seizing of the property was plausibly linked to its efforts to combat organized crime (paras. 792–93). Consequently, it concluded that the property seizure was “placed outside of the scope of the Treaty” (para. 801) and the case was dismissed.

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Colombia declared its win “historic,”Footnote ¹⁰ and with good reason: it was the first case in which an explicit self-judging provision was invoked before an investment tribunal, and the first time an investment tribunal recognized the self-judging character of a provision and dismissed a claim on that basis.Footnote ¹¹ Furthermore, the award in Seda v. Colombia is one of the first occasions when a security exception has been accepted in investment arbitration proceedings.Footnote ¹² Its interpretation of the reinforced self-judging provision marks the latest chapter in the dynamic development of self-judgment before international judicial bodies.Footnote ¹³

Against this background, I argue that the most important contribution of Seda v. Colombia to investment law, and international law more generally, lies in the fact that the tribunal conducted a review of Colombia’s invocation of Article 22.2(b) of the TPA at all. By doing so, the tribunal rejected the arguments by Colombia and the United States that a “clarificatory” footnote could preclude a tribunal from conducting good faith review, as would be required for a regular self-judging provision.

Article 22.2(b) of the TPA exemplifies what is typically known as an explicit “self-judging” or “self-judgment” provision.Footnote ¹⁴ The wording “it considers necessary” confers particular authority to the state invoking the exception, which underpins the self-judging nature of the clause.

While most states traditionally argued that the invocation of explicit self-judging provisions was beyond judicial scrutiny, a series of rulings by international judicial bodies have established that even explicit self-judging provisions remain subject to good faith review by competent judicial bodies.Footnote ¹⁵ This has become widely accepted. Good faith review dictates that the judicial body does not assess whether the invocation of the self-judging element was substantively “correct” but solely whether it occurred in good faith.Footnote ¹⁶ This is usually done by analyzing whether states acted in compliance with the purpose of a particular norm as opposed to invoking the clause arbitrarily.Footnote ¹⁷

Footnote 2 to Article 22.2 of the TPA makes the exception part of a newer generation of self-judging provisions that especially the United States and India have increasingly incorporated into some of their investment agreements. Whereas the U.S. variant usually employs the “shall find” language,Footnote ¹⁸ the Indian treaties frequently lay down that the invocation of the clause “shall be non-justiciable.”Footnote ¹⁹ These “reinforced self-judging” provisions, while varying in their wording, go further than classic self-judgment by further emphasizing, or reinforcing, the state’s authority to decide on the application of the clause.Footnote ²⁰

Although good faith review is a lenient standard, the tribunal’s approach in Seda v. Colombia appears to expand the role of judicial bodies in relation to self-judging provisions. This becomes clear when considering how the effect of reinforced self-judgment has been viewed. In the past, commentators have largely rejected any ability of international judicial bodies to review invocations of reinforced self-judging provisions. According to José Alvarez and Kathryn Khamsi, reinforced self-judging language such as in Seda “strongly suggests” a provision’s invocation to be “an entirely unreviewable matter not subject to any ‘good faith’ gloss.”Footnote ²¹ With regard to the Indian formula, Andrew Newcombe and Lluis Paradell claimed that it “would seem to make state invocation of the security exception completely immune from arbitral review, even with regard to whether it was made in good faith.”Footnote ²² While these observations were made before Russia – Traffic in Transit and the subsequent string of WTO panel decisions interpreting the General Agreement on Tariffs and Trade security exception in recent years,Footnote ²³ they demonstrate the weight which scholars have attributed to the reinforcement of self-judging provisions—through either clarificatory footnotes or annexes to treaties.

If one is to interpret reinforced self-judging provisions effectively, one has to consider what the reinforcement adds to “regular” self-judging language.Footnote ²⁴ All tribunals that have ruled on self-judging provisions so far have found that their review—if it is to be accepted at all—must be limited to a good faith review of the provision in light of the self-judgment wording.Footnote ²⁵ This standard is indeterminate at its fringes but has to be located at the deferential end of a tribunal’s scrutiny of state actions.Footnote ²⁶ There does not seem to be a standard available that is “more lenient” than a good faith review and the corresponding plausibility test. If self-judging provisions are only subject to a good faith review, an effective interpretation of reinforced self-judging provisions would seem to require eliminating the ability of judicial bodies to conduct even that level of review.

While the tribunal correctly points out the risk of abuse arising out of this approach (paras. 638, 722), there is little indication that international law would not allow for provisions to be interpreted this way. There is no obligation for states to submit to the competence of international judicial bodies. Even when states generally agree to the jurisdiction of such bodies to rule on disputes arising under a treaty, they are free to exempt parts of the treaty from this competence.Footnote ²⁷ Additionally, states are generally free to tailor the power of such third parties to rule on disputes.Footnote ²⁸ They may—and do—create quasi-judicial bodies or employ non-judicial means of dispute settlement, such as conciliation, conducted by entities not endowed with the power to make decisions binding on states.Footnote ²⁹ On this basis, it could be argued that states are free to establish judicial bodies that are only competent up until the point when a state invokes a reinforced self-judging provision.

This approach likely was unappealing to the tribunal as it would have been obliged to simply accept the invocation of the provision and dismiss the case without further consideration. Its “hook” to enter a prolonged analysis of the security exception and conduct the good faith review was that footnote 2 to Article 22.2 of the TPA required it “to find that the exception applies,” which the tribunal distinguished from the Indian formula declaring the invocation non-justiciable (paras. 713–18). The issue with this interpretation is that it effectively renders the footnote meaningless, as the tribunal ended up applying exactly the same standard it would have used, had Colombia invoked a regular self-judging provision.

It remains to be seen what impact the Seda v. Colombia award will have on treaty-making and future decisions. States determined to preserve space for unilateral decision making within otherwise judicialized treaties may consider shifting to the Indian variant of reinforced self-judgment. However, one should hope that this remains an exception. States that choose to rely on international judicial bodies in the first place can sufficiently protect sensitive interests through regular self-judging language. Requiring judicial bodies to accept the unilateral determination of a state party, while legally possible, does little to foster trust in peaceful resolution of disputes through law. If states wish to avoid judicial dispute resolution, they are free to specify alternative mechanisms in their agreements. But if they decide to employ judicial bodies, it is prudent not to undermine the bodies’ authority—whether through legal or non-legal means. The tribunal in Seda v. Colombia tried balancing these considerations but it appears unlikely that this decision will be the final word on self-judgment.