Peer-reviewed
Exception clauses in international investment agreements as a tool for appropriately balancing the right to regulate with investment protection
Finding an appropriate equilibrium between investment protection and states' regulatory autonomy has long been a vexing problem in international investment law. In light of genuine problems of uncertainty in international investment arbitration and growing challenges to the legitimacy of international investment agreements (IIAs), stakeholders have a mutual interest in ensuring that IIAs not only fulfil their purpose of protecting foreign investors to the greatest extent possible, but also better clarify and secure states' right to regulate for legitimate objectives, even where this may inhibit investment protection. Appropriately designed exception clauses allow these aims to be achieved simultaneously. This paper develops a model exception clause under which states may define their policy objectives and the extent to which they desire to pursue them, and which precludes tribunals from subjectively assessing these objectives' importance during their analysis. The clause permits states to contradict their substantive IIA obligations while pursuing a particular objective to the desired extent, provided that they act in the manner which is least inconsistent with these obligations. A 'chapeau' requires that states regulate with no motive of restricting foreign investment as a goal in itself. The clause is of general application and subject to full tribunal review
Downloadable Article, 2019
Canterbury Law Review, 25, 201901, 205
2019