The North-South Divide of Regulatory Chill : A Comparative Analysis of the Impact of Investor-State Dispute Settlement on Policy Makers in Developed and Developing Countries

The concept of regulatory chill remains one of the most controversial topics in international investment law. To this day, scholars have produced an abundance of academic works with contradictory conclusions on whether the existence of ISDS mechanisms in International Investment Agreements has a negative impact on policy makers’ pursuit of legitimate policy objectives. This article argues that these contradictions can be resolved by approaching regulatory chill from a position that considers the structural differences between the Global North and South and their impact on regulatory processes. In particular, this means that regulatory chill must be regarded as a variable process that may manifest itself in different forms depending on the context in which it exists. The results of this analysis suggest that high bureaucratic capacity in developed countries increases their vulnerability to those forms of regulatory chill that rely on the administrative vetting of regulatory proposals. By contrast, the distinct legal, financial, economic and political conditions in which policy makers in developing countries operate seem to make them more prone to chilling policies before they even reach the drafting phase. Considering the dangerous implications this might have in a time where the greatest challenges to mankind necessitate a coordinated policy effort of the Global North and South, the article seeks to raise awareness for the need to accelerate the reform of the international investment regime and to assist developing countries in retaining their capacity to regulate for the public interest