The Right to Regulate in International Investment Law (Revisited)

Over the last few years, the right to regulate has evolved from a rather inconspicuous, mistrusted concept to a necessary component of international investment agreements. This brief study offers a complementary account of the right to regulate compared to the author’s treatment of the topic a few years ago. While still addressing some basic questions, such as how we are to understand the right to regulate, the study turns to new questions that keep emerging. The initial concern with imbalanced treaties that one-sidedly favoured investors at the expense of the state’s right to regulate has now become a question of: do new treaties that overly safeguard the right to regulate still have a useful purpose as investment protection instruments? So much has changed in treaty drafting in a short period of time, yet new generation treaties that incorporate the right to regulate through general public welfare exceptions are still very recent — some of them have not yet entered into force and others still mainly “exist” as hopeful negotiating templates. They have seldom as yet been interpreted by arbitral tribunals. When they have been interpreted, their interpretation has often left a lot to be desired, raising — rather than resolving — interpretive conundrums and doubts about the effectiveness of specific treaty provisions and of the right to regulate, in particular. How much policy space is not enough and how much is too much? Focusing on issues such as the interpretation of treaty exceptions and the role that the right to regulate has to play in the reform of investor-state dispute settlement, this study discusses new developments, notably in relation to new treaties and very recent arbitral case law on the right to regulate and the challenges they raise going forward