The Right to Regulate in Investor-State Arbitration: Slicing and Dicing Regulatory Carve-Outs
Vanderbilt Journal of Transnational Law, Vol. 50, No. 2, 2017, pp. 355-414
61 Pages Posted: 11 Apr 2017 Last revised: 26 Jan 2023
Date Written: April 10, 2017
This Article examines the “right to regulate” as the power of a sovereign state to adopt and maintain government measures for public welfare objectives. It explores how claims by foreign investors in investor-state dispute settlement (ISDS) may interfere with the state’s ability to regulate, and how the state can protect its right in international investment agreements. The Article first explains the structure of modern international investment law and dispute resolution. It next turns to the right to regulate and explores why regulatory disputes represent a major challenge for ISDS. It continues by analyzing how exceptions, exclusions, and other safeguard provisions can be used in investment treaties to protect the right to regulate. It then critically examines the tobacco carve-out and other safeguard provisions of the Trans-Pacific Partnership (TPP) Agreement as to their ability to protect the right to regulate. Finally, the Article explores alternative solutions to the challenges of ISDS. It concludes by arguing that regulatory disputes are best resolved through a hybrid system of dispute resolution that is amenable to both private interests and public policy considerations.
Keywords: Investor-state dispute settlement, ISDS, investor-state arbitration, investment treaty arbitration, Trans-Pacific Partnership, TPP, the right to regulate, regulatory disputes, tobacco carve-out, Philip Morris, exceptions, exclusions, non-precluded measures, NPM
JEL Classification: I18, K23, K32, K33, K41, Q58
Suggested Citation: Suggested Citation