The Police Powers Doctrine and International Investment Law: Dusting Off An Old Concept in the Pursuit of Sustainable Development

Abstract

In 2010, tobacco giant, Philip Morris, initiated arbitral proceedings against two tobacco control policies implemented by Uruguay. These regulatory measures were enacted to reduce the harms caused by smoking. The Tribunal protected these measures from the legal challenge however, and in doing so, upheld Uruguay’s right to regulate in the public's interest. It did this through the application of the ‘police powers doctrine’.

The police powers doctrine is a customary international law principle which acknowledges that states have the power to enact public interest regulations without incurring an obligation to compensate the private individuals they may affect. This lack of compensation is regardless of any deprivation of property rights an investor may experience as a result of the measure.

Little is known about this doctrine however, and significant confusion exists as to the doctrine’s roots, scope and possible applications. As such, this paper explores this concept of the police powers, and provides some much-needed guidance on its history, doctrinal boundaries, and future deployment. In doing so, this paper helps better situate the doctrine within international investment law and customary international law, particularly in relation to the development of public welfare policies.

The paper concludes that the police powers doctrine is a useful legal mechanism, and one that should continue to be applied in investment disputes to protect policies aimed at sustainable development. That said, this can only be done if it is understood properly.

Keywords: International arbitration, Philip Morris, police powers