Protecting Regulatory Autonomy Through Greater Precision in Investment Treaties: The TPP, CETA and TTIP

Abstract

The recently concluded Trans-Pacific Partnership and Canada-EU Comprehensive Economic and Trade Agreement and the negotiations underway for the Transatlantic Trade and Investment Partnership have drawn renewed attention to the potential for treaty parties to frame the substantive obligations in new investment treaties in a manner that is more supportive of regulatory autonomy than earlier treaties. One way of doing so is to more precisely define the contours of states' obligations toward foreign investors and investments, in an attempt to eliminate the likelihood of successful challenges to non-discriminatory public welfare measures.

More precise norms place greater constraints on the decision-making criteria employed by adjudicators, fettering their discretion to make evaluative judgements. Treaty parties may adopt more precise language to provide guidance or to exert control over adjudicators in light of previous decisions that are regarded as erroneous, in light of concerns about adjudicator incompetence or to constrain subjective value choices. Concerns about the impact of vaguely drafted provisions in existing investment treaties are well documented. It is reasonable to assume that drafting states' obligations with greater precision will constrain the scope of investment arbitrators' interpretive discretion.

This article examines the extent to which the TPP, CETA and draft TTIP provisions on fair and equitable treatment, indirect expropriation, national treatment and exceptions follow this recent trend and analyses any innovations they make in this area. These provisions contain several instances of greater precision in articulating state commitments toward foreign investors and investments than those seen in the majority of existing treaties. Yet, they continue to grant broad discretion to investment arbitrators through the use of evaluative language such as 'manifestly arbitrary', 'rare circumstances', 'excessive' and 'necessary'. Experience from the body of decided cases suggests that these provisions might not go far enough toward ensuring that non-discriminatory public welfare measures do not attract liability. The paper concludes that the TTIP negotiating parties — and states negotiating other investment treaties — should consider drafting such provisions with greater precision so as to further reduce the breadth of adjudicative discretion entrusted to tribunals.

Keywords: International Investment Law, Investment Treaties, TPP, TTIP, CETA, indirect expropriation, fair and equitable treatment, non-discrimination, treaty exceptions, non-preluded measures, investor-state arbitration, national treatment, ISDS, rules and standards