Protection of Regulatory Autonomy and Investor Obligations: Latest Trends in Investment Treaty Design

• Author: Klara Polackova Van der Ploeg
• Position: The Graduate Institute of International and Development Studies. Research funding for this Article was provided by the Swiss National Science Foundation, Project No. P1GEP1-164860.
• Pages: 109-119

Protection of Regulatory Autonomy and Investor

Obligations: Latest Trends in Investment

Treaty Design

K

LARA

P

OLACKOVA

V

AN DER

P

LOEG

1

I. Investment Treaties: A Regulatory Straightjacket?

The scope of states’ power to regulate in the public interest, within the

normative context of an applicable investment protection treaty, has been

the central issue of recent investor-state arbitration cases. This essentially

conceptual issue has important practical consequences. By imposing on host

states wide-ranging obligations for particular treatment of qualifying foreign

investors, investment treaties inherently curtail host states’ regulatory space.

Many regulatory actions that would have been permissible under a state’s

municipal law may constitute violations of applicable investment treaties, for

which the state may be held internationally responsible and liable to provide

sizable financial compensation to foreign investors.

The characteristic feature of cases centered around the scope of states’

regulatory autonomy is the elemental tension between investment

guarantees and a conflicting public interest which the host state aspires to

protect. The most notable of the recent arbitral decisions are the Philip

Morris tobacco packaging cases,

2

in which the tobacco giant challenged,

unsuccessfully, the Australian and Uruguayan measures on tobacco

packaging.

3

Australia and Uruguay introduced the tobacco packaging

requirements to protect public health through health warnings and

reduction in appeal; however, Philip Morris challenged the measures as

interfering with its property and trademark rights protected by the

applicable investment treaties.

4

While the investment aspect of the Philip Morris saga seems dormant for

the time being, the issue of regulation in the public interest remains at the

forefront of the international investment law agenda and a core question of

1. The Graduate Institute of International and Development Studies. Research funding for

this Article was provided by the Swiss National Science Foundation, Project No. P1GEP1-

164860.

2. Philip Morris Asia Ltd. v. Commonwealth of Australia., UNCITRAL, PCA Case No.

2012-12, Award on Jurisdiction and Admissibility (Dec. 17, 2015); Philip Morris Brands S `arl v.

Oriental Republic of Uruguay, ICSID Case No. ARB/10/07, Award (July 8, 2016).

3. Id. While the tribunal in the Australian proceedings dismissed the case on jurisdiction, the

tribunal in the Uruguay case rejected all of Philip Morris’ claims on merits.

4. Id.

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