Police Powers in a Pandemic: Investment Treaty Interpretation and the Customary Presumption of Reasonable Regulation

Abstract

The COVID-19 pandemic triggered calls for a moratorium on investment treaty arbitration to ensure that States could adopt a range of health, social, and economic measures. But such measures already fall under a presumption of customary international law that there is no State responsibility for reasonable regulation of foreign investment. Here I trace this regulatory dimension of territorial sovereignty and its systemic integration in investment treaty interpretation, reflected in arbitral references to the police powers doctrine, the right to regulate, and a margin of appreciation. A heightened presumption is supported by classical practice on the treatment of alien property in times of infectious disease—including the cases of the Azorian (1861), Lavarello (1893), and Bischoff (1903)—but may be conditioned today by the 2005 International Health Regulations (IHR) of the World Health Organization (WHO). Given the defined scope of a public health emergency of international concern (PHEIC), the proportionality inquiry mandated by Article 43 of the IHR has limited relevance for investment treaty interpretation in claims arising from the social and economic aftermath of a PHEIC.

Keywords: investment arbitration, customary international law, treaty interpretation, police powers doctrine, International Health Regulations, COVID-19 pandemic