Sovereign States have inherent power to regulate in the public interest.1 This regulatory power has been recognized as a rule of customary international law.2 Some tribunals have interpreted investment treaties which do not expressly refer to the right to regulate as importing that right from customary international law.3 To this extent, tribunals have considered that State regulation enjoys a presumption of legitimacy.4 They have also given a certain amount of deference to the State’s decisions and policies5 (see particularly in the NAFTA context)6 while remaining cautious as to the scope of the State’s margin of appreciation.7
States may regulate in the public interest via legislation (i.e. tax laws) but also via its different organs or entities excercising regulatory functions.8 See Attribution, Section III for further analysis on the relationship between States and their entities.
Crawford, J., Brownlie’s Principles of Public International Law, Oxford University Press, 2012, p. 624.
Brownlie, I., Public International Law, Oxford University Press, 6th ed., 2003, p. 509.
Higgins, R., The Taking of Property by the State: Recent Developments in International Law, Recueil des Cours – Académie de Droit International, 1982, Vol. 176, pp. 276-277; United Nations Conference on Trade and Development (UNCTAD), Environment, U.N. Doc. UNCTAD/ITE/IIT/23, UN Sales No. E.01.II.D.3, 2001, p. 63; Achmea B.V. (formerly Eureko B.V.) v. The Slovak Republic (I), PCA Case No. 2008-13, Final Award, 7 December 2012, para. 294; Achmea B.V. v. The Slovak Republic (II), PCA Case No. 2013-12, Award on Jurisdiction and Admissibility, 20 May 2014, para. 251; AIG Capital Partners, Inc. and CJSC Tema Real Estate Company v. Republic of Kazakhstan, ICSID Case No. ARB/01/6, Award, 7 October 2003, para. 10.4.1; CME Czech Republic B.V. v. The Czech Republic, Partial Award, 13 September 2001, para. 603; BG Group Plc. v. Republic of Argentina, UNCITRAL, Award, 24 December 2007, para. 268; Oxus Gold plc v. Republic of Uzbekistan, the State Committee of Uzbekistan for Geology & Mineral Resources, and Navoi Mining & Metallurgical Kombinat, Final Award, 17 December 2015, paras. 741-744; Mathias Kruck, Frank Schumm, Joachim Kruck, Jürgen Reiss and others v. Kingdom of Spain, ICSID Case No. ARB/15/23, Decision on Jurisdiction, Liability and Principles of Quantum, 14 September 2022, para. 288; LSG Building Solutions GmbH and others v. Romania, ICSID Case No. ARB/18/19, Decision on Jurisdiction, Liability and Principles of Reparation, 11 July 2022, para. 1067; Casinos Austria International GmbH and Casinos Austria Aktiengesellschaft v. Argentine Republic, ICSID Case No. ARB/14/32, Award, 5 November 2021, para. 333.
Marvin Roy Feldman Karpa v. United Mexican States, ICSID Case No. ARB(AF)/99/1, Award, 16 December 2002, para. 103; El Paso Energy International Company v. Argentine Republic, ICSID Case No. ARB/03/15, Award, 31 October 2011, para. 238; SAUR International v. Argentine Republic, ICSID Case No. ARB/04/4, Décision sur la compétence et sur la résponsabilité, 6 June 2012, para. 398.
Saluka Investments BV v. The Czech Republic, PCA Case No. 2001-04, Partial Award, 17 March 2006, para. 254; Invesmart v. Czech Republic, Award, 26 June 2009, para. 498; Philip Morris Brand Sàrl (Switzerland), Philip Morris Products S.A. (Switzerland) and Abal Hermanos S.A. (Uruguay) v. Oriental Republic of Uruguay, ICSID Case No. ARB/10/7, Award, 8 July 2016, paras. 290, 301.
Técnicas Medioambientales Tecmed, S.A. v. United Mexican States, ICSID Case No. ARB(AF)/00/2, Award, 29 May 2003, para. 122; Marion Unglaube v. Republic of Costa Rica, ICSID Case No. ARB/08/1, Award, 16 May 2012, para. 258; Reinhard Hans Unglaube v. Republic of Costa Rica, ICSID Case No. ARB/09/20, Award, 16 May 2012, para. 258; Electrabel S.A. v. The Republic of Hungary, ICSID Case No. ARB/07/19, Decision on Jurisdiction, Applicable Law and Liability, 30 November 2012, para. 8.35; Les Laboratoires Servier, S.A.S., Biofarma, S.A.S., Arts et Techniques du Progres S.A.S. v. Republic of Poland, Award, 14 February 2012, para. 568; Invesmart v. Czech Republic, Award, 26 June 2009, para. 484; Crystallex International Corporation v. Bolivarian Republic of Venezuela, ICSID Case No. ARB(AF)/11/2, Award, 04 April 2016, paras. 583-584; Philip Morris Brand Sàrl (Switzerland), Philip Morris Products S.A. (Switzerland) and Abal Hermanos S.A. (Uruguay) v. Oriental Republic of Uruguay, ICSID Case No. ARB/10/7, Award, 08 July 2016, paras. 399, 418-419; Mr. Jürgen Wirtgen, Mr. Stefan Wirtgen, and JSW Solar (zwei) GmbH & Co.KG v. Czech Republic, PCA Case No. 2014-03, Final Award, 11 October 2017, para. 444; RREEF Infrastructure (G.P.) Limited and RREEF Pan-European Infrastructure Two Lux S.à r.l. v. Kingdom of Spain, ICSID Case No. ARB/13/30, Decision on Responsibility and on the Principles of Quantum, 30 November 2018, paras. 242-244, 468; Pac Rim Cayman LLC v. The Republic of El Salvador, ICSID Case No. ARB/09/12, Award, 14 October 2016, para. 8.31; Saluka Investments BV v. The Czech Republic, PCA Case No. 2001-04, Partial Award, 17 March 2006, paras. 284, 337; Renée Rose Levy de Levi v. Republic of Peru, ICSID Case No. ARB/10/17, Award, 26 February 2014, para. 161; Adel A Hamadi Al Tamimi v. Sultanate of Oman, ICSID Case No. ARB/11/33, Award, 3 November 2015, para. 389; Koch Minerals Sarl and Koch Nitrogen International Sarl v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/11/19, Award, 30 October 2017, para. 7.22; Cavalum SGPS, S.A. v. Kingdom of Spain, ICSID Case No. ARB/15/34, Decision on Jurisdiction, Liability and Directions on Quantum, 31 August 2020, para. 424; Invesmart, B.V. v. Czech Republic, UNCITRAL, Award, 26 June 2009, para. 501; Eco Oro Minerals Corp. v. Republic of Colombia, ICSID Case No. ARB/16/41, Decision on Jurisdiction, Liability and Directions on Quantum, 9 September 2021, para. 751; Bank Melli Iran and Bank Saderat Iran v. The Kingdom of Bahrain, PCA Case No. 2017-25, Final Award, 9 November 2021, para. 636; RENERGY S.à r.l. v. Kingdom of Spain, ICSID Case No. ARB/14/18, Award, 6 May 2022, para. 901.
International Thunderbird Gaming Corporation v. The United Mexican States, Arbitral Award, 26 January 2006, para. 127; S.D. Myers, Inc. v. Government of Canada, Partial Award (Merits), 13 November 2000, para. 263; Crompton (Chemtura) Corp. v. Government of Canada, PCA Case No. 2008-01, Award, 02 August 2010, paras. 123, 134; Mercer International, Inc. v. Canada, ICSID Case No. ARB(AF)/12/3, Award, 06 March 2018, para. 7.42; United Parcel Service of America, Inc. (UPS) v. Government of Canada, ICSID Case No. UNCT/02/1, Award on the Merits, 24 May 2007, Separate Statement of Dean Ronald A. Cass (Award on the Merits), para. 125; William Ralph Clayton, William Douglas Clayton, Daniel Clayton and Bilcon of Delaware, Inc. v. Government of Canada, PCA Case No. 2009-04, Award on Jurisdiction and Liability, 17 March 2015, paras. 598-599, 738; Gemplus, S.A., SLP, S.A., and Gemplus Industrial S.A. de C.V. v. United Mexican States, ICSID Case No. ARB(AF)/04/3, Award, 16 June 2010, para. 6.26.
Bernhard von Pezold and others v. Republic of Zimbabwe, ICSID Case No. ARB/10/15, Award, 28 July 2015, para. 465; Glamis Gold Ltd. v. United States of America, Award, 08 June 2009, para. 617; Quasar de Valores SICAV S.A., Orgor de Valores SICAV S.A., GBI 9000 SICAV S.A. and ALOS 34 S.L. v. The Russian Federation, SCC Case No. 24/2007, Award, 20 July 2012, paras. 22-23; Philip Morris Brand Sàrl (Switzerland), Philip Morris Products S.A. (Switzerland) and Abal Hermanos S.A. (Uruguay) v. Oriental Republic of Uruguay, ICSID Case No. ARB/10/7, Award, 08 July 2016, Concurring and Dissenting Opinion of Gary Born, paras. 138-145; RREEF Infrastructure (G.P.) Limited and RREEF Pan-European Infrastructure Two Lux S.à r.l. v. Kingdom of Spain, ICSID Case No. ARB/13/30, Decision on Responsibility and on the Principles of Quantum, 30 November 2018, Dissenting Opinion of Robert Volterra, para. 21; Marfin Investment Group Holdings S.A., Alexandros Bakatselos and others v. Republic of Cyprus, ICSID Case No. ARB/13/27, Award (redacted), 26 July 2018, paras. 899-900; Olympic Entertainment Group AS v. Ukraine, PCA Case No. 2019-18, Award, 15 April 2021, paras. 95, 116; Border Timbers Limited, Timber Products International (Private) Limited, and Hangani Development Co. (Private) Limited v. Republic of Zimbabwe, ICSID Case No. ARB/10/25, Award, 28 July 2015, para. 465; Bank Melli Iran and Bank Saderat Iran v. The Kingdom of Bahrain, PCA Case No. 2017-25, Final Award, 9 November 2021, para. 637.
A Hamadi Al Tamimi v. Sultanate of Oman, ICSID Case No. ARB/11/33, Award, 3 November 2015, para. 344; UAB E energija (Lithuania) v. Republic of Latvia, ICSID Case No. ARB/12/33, Award of the Tribunal, 22 December 2017, para. 804; Crompton (Chemtura) Corp. v. Government of Canada, PCA Case No. 2008-01, Award, 2 August 2010, para. 266.
Public interest for a general overview of treaty practice and interpretation on the State’s right to regulate in the public interest.
Police powers, Regulatory expropriation and Right to regulate in expropriation for a specific analysis on the State’s right to regulate under expropriation claims.
These powers are often viewed through the lens of the common law police powers doctrine9 that protects the regulatory measures from being subject to compensation under certain conditions.10 Other competing doctrines, however, are used to assess the legitimacy of exercising the State regulatory power. See for example Sole Effect Doctrine.
The concept of the sovereign regulatory powers is not tied solely to the expropriation context and often appear in the analysis of the fair and equitable treatment, full protection and security and other international standards of investment protection.11
While the right to regulate covers a variety of different standards of protection including expropriation, the police powers doctrine seems to constitute a valid defense for expropriation claims only.12 For a specific analysis on expropriation related claims, see Police powers doctrine.
Wagner, J.M., International Investment, Expropriation and Environmental Protection, Golden Gate University Law Review, Vol. 29, Issue 3, 1999, pp. 533-34; Orellana, M.A., Science, Risk and Uncertainty, in Kahn, P. and Walde, T.W. (eds.), New Aspects Of International Investment Law, 2007, p. 429; Mugler v. Kansas, 123 U.S. 623, 8 S. Ct. 273, 291, 31 L. Ed. 205 (1887).
Philip Morris Brand Sàrl (Switzerland), Philip Morris Products S.A. (Switzerland) and Abal Hermanos S.A. (Uruguay) v. Oriental Republic of Uruguay, ICSID Case No. ARB/10/7, Award, 8 July 2016, paras. 422-423; EDF (Services) Limited v. Republic of Romania, ICSID Case No. ARB/05/13, Award, 8 October 2009, para. 219; El Paso Energy International Company v. Argentine Republic, ICSID Case No. ARB/03/15, Award, 31 October 2011, para. 374; Plama Consortium Limited v. Republic of Bulgaria, ICSID Case No. ARB/03/24, Award, 27 August 2008, para. 177; CMS Gas Transmission Company v. The Argentine Republic, ICSID Case No. ARB/01/8, Award, 12 May 2005, para. 277; National Grid PLC v. The Argentine Republic, Award, 3 November 2008, paras. 189-190; Total S.A. v. Argentine Republic, ICSID Case No. ARB/04/01, Decision on Liability, 27 December 2010, para. 197.
Suez, InterAguas Servicios Integrales del Agua S.A., Sociedad General de Aguas de Barcelona S.A. v. The Argentine Republic, ICSID Case No. ARB/03/17, Decision on Liability, 30 July 2010, para. 148; Mr. Jürgen Wirtgen, Mr. Stefan Wirtgen, and JSW Solar (zwei) GmbH & Co.KG v. Czech Republic, PCA Case No. 2014-03, Final Award, 11 October 2017, para. 273; Suez, Sociedad General de Aguas de Barcelona, S.A. and Vivendi Universal, S.A. (formerly Aguas Argentinas, S.A., Suez, Sociedad General de Aguas de Barcelona, S.A. and Vivendi Universal, S.A.) v. Argentine Republic (II), ICSID Case No. ARB/03/19, Decision on Liability, 30 July 2010, para. 140; United Utilities (Tallinn) B.V. and Aktsiaselts Tallinna Vesi v. Republic of Estonia, ICSID Case No. ARB/14/24, Award, 21 June 2019, para. 767.
Foreign investors may be perceived as encroaching on the host State’s regulatory power when they challenge its regulatory measures.13 States may be perceived as intentionally or unintentionally abusing their regulatory powers when they eclectically chip away the value of the foreign investment.14 Some standards may strike a balance. See further Fair and Equitable Treatment Standard, Most-Favoured Nations Standard, Non-Discrimination Standard, Due Process, Minimum Standard of Treatment.
In the context of expropriation in particular, tribunals have clarified that the customary or treaty-based right to regulate does not automatically absolve the respondent State of its responsibility to pay compensation for the direct or indirect taking resulting from a regulatory measure.15 As the Pope & Talbot tribunal has noted, “a blanket exception for regulatory measures would create a gaping loophole in international protections against expropriation.”16 The investment tribunals therefore have recognized that the powers to regulate must be exercised on a fair, just, and non-discriminatory basis.17
Tribunals have considered that States cannot be bound to “please every constituent and address every harm with each piece of legislation.”18 This may be the natural consequence of the State’s right to regulate but this right is not absolute and the State must respect their international obligations per the applicable investment agreement.19 Although there is no set formula to assess the legitimacy of the State’s regulatory measure, the following factors have been considered by tribunals in the past:20
But see also Robert Volterra’s dissenting opinion in Eastern Sugar v. Czech Republic.
Glamis Gold Ltd. v. United States of America, Award, 08 June 2009, para. 804; William Ralph Clayton, William Douglas Clayton, Daniel Clayton and Bilcon of Delaware, Inc. v. Government of Canada, PCA Case No. 2009-04, Award on Jurisdiction and Liability, 17 March 2015, para. 437; Eastern Sugar B.V. v. The Czech Republic, SCC Case No. 088/2004, Partial Award, 27 March 2007, para. 272; Eastern Sugar B.V. v. The Czech Republic, SCC Case No. 088/2004, Final Award, 12 April 2007, Partial Dissenting Opinion of Robert Volterra (Final Award), paras. 9-10; El Paso Energy International Company v. Argentine Republic, ICSID Case No. ARB/03/15, Award, 31 October 2011, para. 295.
ADC Affiliate Limited and ADC & ADMC Management Limited v. Republic of Hungary, ICSID Case No. ARB/03/16, Award, 2 October 2006, para. 423; AES Corporation v. Argentine Republic, ICSID Case No. ARB/02/17, Decision on Jurisdiction, 26 April 2005, para. 57; Daimler Financial Services AG v. Argentine Republic, ICSID Case No. ARB/05/1, Award, 22 August 2012, paras. 100-102; Occidental Petroleum Corporation and Occidental Exploration and Production Company v. Republic of Ecuador (II), ICSID Case No. ARB/06/11, Award, 5 October 2012, para. 529; British Caribbean Bank Ltd. v. The Government of Belize, PCA Case No. 2010-18, Award, 19 December 2014, para. 236; Perenco Ecuador Limited v. Republic of Ecuador (Petroecuador), ICSID Case No. ARB/08/6, Interim Decision on the Environmental Counterclaim, 11 August 2015, para. 347; Quiborax S.A., Non-Metallic Minerals S.A. v. Plurinational State of Bolivia, ICSID Case No. ARB/06/2, Award, 16 September 2015, para. 89; Marfin Investment Group Holdings S.A., Alexandros Bakatselos and others v. Republic of Cyprus, ICSID Case No. ARB/13/27, Award (redacted), 26 July 2018, para. 900; Foresight Luxembourg Solar 1 S.À.R.L., et al. v. Kingdom of Spain, SCC Case No. 2015/150, Final Award, 14 November 2018, para. 364; RREEF Infrastructure (G.P.) Limited and RREEF Pan-European Infrastructure Two Lux S.à r.l. v. Kingdom of Spain, ICSID Case No. ARB/13/30, Decision on Responsibility and on the Principles of Quantum, 30 November 2018, para. 468; Watkins Holdings S.à r.l. and others v. Kingdom of Spain, ICSID Case No. ARB/15/44, Award, 21 January 2020, para. 521; Eco Oro Minerals Corp. v. Republic of Colombia, ICSID Case No. ARB/16/41, Decision on Jurisdiction, Liability and Directions on Quantum, 9 September 2021, paras. 629, 829.
Generally, a State is not liable for its bona fide, non-discriminatory regulations.21 This reasoning has often been applied in the context of taxation measures.22 See further Taxes. Tribunals have also held that good faith errors in implementing public interest regulations would not render them arbitrary or irrational.23
Wagner, J.M., International Investment, Expropriation and Environmental Protection, Golden Gate University Law Review, Vol. 29, Issue 3, 1999, pp. 517-18; Methanex Corporation v. United States of America, Final Award of the Tribunal on Jurisdiction and Merits, 3 August 2005, Chapter IV, Part D, para. 15; Saluka Investments BV v. The Czech Republic, PCA Case No. 2001-04, Partial Award, 17 March 2006, para. 255; Crompton (Chemtura) Corp. v. Government of Canada, PCA Case No. 2008-01, Award, 1 August 2010, para. 215; Mobil Investments Canada Inc. and Murphy Oil Corporation v. Government of Canada (I), ICSID Case No. ARB(AF)/07/4, Decision on Liability and Principles of Quantum, 22 May 2012, para. 153; Apotex Holdings Inc. and Apotex Inc. v. United States of America, ICSID Case No. ARB(AF)/12/1, Award, 25 August 2014, para. 8.75; Petrobart Limited v. The Kyrgyz Republic (II), SCC Case No. 126/2003, Award, 29 March 2005, paras. 410-411; Invesmart v. Czech Republic, Award, 26 June 2009, paras. 454, 459-460; AES Summit Generation Limited and AES-Tisza Erömü Kft. v. Republic of Hungary (II), ICSID Case No. ARB/07/22, Award, 23 September 2010, paras. 10.3.34-10.36; Guaracachi America, Inc. and Rurelec PLC v. The Plurinational State of Bolivia, PCA Case No. 2011-17, Award, 31 January 2014, para. 431; Hydro Energy 1 S.à r.l. and Hydroxana Sweden AB v. Kingdom of Spain, ICSID Case No. ARB/15/42, Decision on Jurisdiction, Liability and Directions on Quantum, 9 March 2020, para. 568; Merrill & Ring Forestry L. P. v. Government of Canada, ICSID Case No. UNCT/07/1, ICSID Administrated, Award, 31 March 2010, paras. 236-237; Magyar Farming Company Ltd, Kintyre Kft and Inicia Zrt v. Hungary, ICSID Case No. ARB/17/27, Award, 13 November 2019, para. 364; Eco Oro Minerals Corp. v. Republic of Colombia, ICSID Case No. ARB/16/41, Decision on Jurisdiction, Liability and Directions on Quantum, 9 September 2021, paras. 698-699.
EnCana Corporation v. Republic of Ecuador, LCIA Case No. UN3481, Award, 3 February 2006, para. 177; RosInvestCo UK Ltd. v. The Russian Federation, SCC Case No. 079/2005, Final Award, 12 September 2010, para. 628; Burlington Resources, Inc. v. Republic of Ecuador, ICSID Case No. ARB/08/5, Decision on Liability, 14 December 2012, paras. 391-392; Marvin Roy Feldman Karpa v. United Mexican States, ICSID Case No. ARB(AF)/99/1, Award, 16 December 2002, para. 113; Sergei Paushok, CJSC Golden East Company and CJSCVostokneftegaz Company v. The Government of Mongolia, Award on Jurisdiction and Liability, 28 April 2011, para. 310, 316; Nations Energy, Inc. and others v. Republic of Panama, ICSID Case No. ARB/06/19, Award, 24 November 2010, paras. 690-691.
Regulatory measures that do not reach the threshold of “substantial deprivation” are often perceived as legitimate in the context of expropriation analysis.24 In contrast, a complete deprivation of value of the investment is often considered tantamount to expropriation.25 See Sole Effect Doctrine, Police powers doctrine.
Compania de Aguas del Aconquija S.A. and Vivendi Universal S.A. v. Argentine Republic, ICSID Case No. ARB/97/3, Award, 20 August 2007, para. 7.5.11; Marvin Feldman v. Mexico, Case No. ARB(AF)/99/1, Award, 16 December 2002, para. 152; Nykomb Synergetics Technology Holding AB v. The Republic of Latvia, SCC, Award, 16 December 2003, paras. 135-138; Técnicas Medioambientales Tecmed, S.A. v. United Mexican States, ICSID Case No. ARB(AF)/00/2, Award, 29 May 2003, para. 115.
Some tribunals consider proportionality of the measure compared to the harm incurred by the investors as a factor in assessing the legitimacy of the measure.26 A disproportionally harsh measure, where a least restrictive measure was readily available to the State, could be considered tantamount to indirect expropriation.27
The legitimacy of the State’s regulation is based upon the risk assessment (the legitimate goals of the government) and risk management (the methods by which the regulation deals with the risk).28 States should assess the availability of reasonable and less restrictive alternatives to address these risks.29
Técnicas Medioambientales Tecmed, S.A. v. United Mexican States, ICSID Case No. ARB(AF)/00/2, Award, 29 May 2003, para. 122; Burlington Resources, Inc. v. Republic of Ecuador, ICSID Case No. ARB/08/5, Decision on Liability, 14 December 2012, para. 504; Fireman's Fund Insurance Company v. The United Mexican States, ICSID Case No. ARB(AF)/02/1, Award, 17 July 2006, para. 176; Les Laboratoires Servier, S.A.S., Biofarma, S.A.S., Arts et Techniques du Progres S.A.S. v. Republic of Poland, Award, 14 February 2012, para. 569; Azurix Corp. v. The Argentine Republic (I), ICSID Case No. ARB/01/12, Award, 14 July 2006, paras. 311-312; UP and C.D Holding Internationale v. Hungary, ICSID Case No. ARB/13/35, Award, 9 October 2018, para. 363.
Electrabel S.A. v. The Republic of Hungary, ICSID Case No. ARB/07/19, Award, 25 November 2015, paras. 179-180; 9REN Holding S.a.r.l v. Kingdom of Spain, ICSID Case No. ARB/15/15, Award, 31 May 2019, para. 323; Olympic Entertainment Group AS v. Ukraine, PCA Case No. 2019-18, Award, 15 April 2021, paras. 89-90.
The “nature, purpose and character” may determine whether a regulatory measure is bona-fide.30 Absent legitimate public purposes, the regulatory measure may not be considered bona-fide and hence would result in State’s liability.31 The tribunal in S.D. Myers found “no legitimate environmental reason for introducing the ban. Insofar as there was an indirect environmental objective … it could have been achieved by other measures."32 The tribunal noted that in the assessment of the government measure, the tribunal “must look at the real interests involved and the purpose and effect of the [such] measure."33
The Azurix tribunal has criticized the Myers decision holding that public purpose was insufficient in itself for determining whether compensation was owed.34 Other tribunals have also recognized the investor’s right to get compensation against expropriation even if such expropriation was motivated by public purpose. In that context, the police power doctrine is sometimes contrasted with the doctrine of eminent domain found in common law jurisdictions.35 The Santa Elena tribunal further held that “the purpose of protecting the environment for which the property was taken does not alter the legal character of the taking for which adequate compensation must be paid."36
Tribunals may also take into consideration the duration of the measure in determining its legitimacy.37 For instance, in Azurix, the tribunal distinguished between a single and multiple measures which depend on the duration of their cumulative effect. There is no mathematical formula to reach a mechanical result and each case should be decided on an individual basis.38
Tribunals have found that legitimate regulations must respect due process.39 See further Due process in expropriation and Due process in fair and equitable treatment.
Marion Unglaube v. Republic of Costa Rica, ICSID Case No. ARB/08/1, Award, 16 May 2012, para. 258; Reinhard Hans Unglaube v. Republic of Costa Rica, ICSID Case No. ARB/09/20, Award, 16 May 2012, para. 258; Mr. Franck Charles Arif v. Republic of Moldova, ICSID Case No. ARB/11/23, Award, 8 April 2013, para. 537; Marfin Investment Group Holdings S.A., Alexandros Bakatselos and others v. Republic of Cyprus, ICSID Case No. ARB/13/27, Award (redacted), 26 July 2018, paras. 899-900; TECO Guatemala Holdings, LLC v. Republic of Guatemala, ICSID Case No. ARB/10/23, Award, 19 December 2013, para. 493; Methanex Corporation v. United States of America, Final Award of the Tribunal on Jurisdiction and Merits, 3 August 2005, Part IV, Chapter D, para. 7; El Paso Energy International Company v. Argentine Republic, ICSID Case No. ARB/03/15, Award, 31 October 2011, para. 240; Muhammet Çap & Sehil Inşaat Endustri ve Ticaret Ltd. Sti. v. Turkmenistan, ICSID Case No. ARB/12/6, Award, 4 May 2021, para. 960; Bank Melli Iran and Bank Saderat Iran v. The Kingdom of Bahrain, PCA Case No. 2017-25, Final Award, 9 November 2021, para. 637.
The “undeniable” right of the State to regulate may also be limited by its obligation to provide stability and predictability in its regulatory framework.40 See further Stability in FET and Legitimate expectations, Section IV.
Tribunals have generally held that explicit assurances in the form of stabilization clauses or similar specific promises41 given to the investors at the time of the investment must not be violated in the process of excericising the State’s regulatory power.42 At least one tribunal has however considered that a State exercising its legitimate right to regulate in the public interest is not bound to its commitments.43 See further Stabilisation clause, Section IV and Legitimate expectations, Section IV.
Investors’ legitimate expectations are protected—contingent on the reasonableness of the circumstances and the investor’s exercise of due diligence—and must be balanced against the State’s legitimate regulatory powers.44 Some tribunals have held that the threshold for the investor is high in this respect.45 See further Legitimate expectations, Section IV.
CMS Gas Transmission Company v. The Argentine Republic, ICSID Case No. ARB/01/8, Award, 12 May 2005, paras. 275-277; LG&E Energy Corp., LG&E Capital Corp. and LG&E International Inc. v. Argentine Republic, ICSID Case No. ARB/02/1, Decision on Liability, 03 October 2006, para. 125; National Grid PLC v. The Argentine Republic, Award, 3 November 2008, paras. 178-179; Silver Ridge Power BV v. Italian Republic, ICSID Case No. ARB/15/37, Award, 26 February 2021, para. 413; Sevilla Beheer B.V. and others v. Kingdom of Spain, ICSID Case No. ARB/16/27, Decision on Jurisdiction, Liability and the Principles of Quantum, 11 February 2022, para. 717.
El Paso Energy International Company v. Argentine Republic, ICSID Case No. ARB/03/15, Award, 31 October 2011, para. 375, 394; Antaris Solar GmbH and Dr. Michael Göde v. Czech Republic, PCA Case No. 2014-01, Award, 2 May 2018, para. 360; Eco Oro Minerals Corp. v. Republic of Colombia, ICSID Case No. ARB/16/41, Decision on Jurisdiction, Liability and Directions on Quantum, 9 September 2021, paras. 687-694.
Parkerings-Compagniet AS v. Lithuania, ICSID Case No. ARB/05/8, Award, 11 September 2007, para. 332; Ampal-American Israel Corp., EGI-Fund (08-10) Investors LLC, EGI-Series Investments LLC, BSS-EMG Investors LLC and David Fischer v. Arab Republic of Egypt, ICSID Case No. ARB/12/11, Decision on Liability and Heads of Loss, 21 February 2017, paras. 182-183; Methanex Corporation v. United States of America, Final Award of the Tribunal on Jurisdiction and Merits, 03 August 2005, Part IV, Chapter D, paras. 9-10; TECO Guatemala Holdings, LLC v. Republic of Guatemala, ICSID Case No. ARB/10/23, Award, 19 December 2013, para. 629; Ronald S. Lauder v. Czech Republic, Award, 03 September 2001, para. 297; Iurii Bogdanov and Yulia Bogdanova v. Republic of Moldova (IV), SCC Case No. 091/2012, Final Award, 16 April 2013, para. 186; Perenco Ecuador Limited v. Republic of Ecuador (Petroecuador), ICSID Case No. ARB/08/6, Decision on Remaining Issues of Jurisdiction and on Liability, 12 September 2014, para. 586; Blusun S.A., Jean-Pierre Lecorcier and Michael Stein v. Italian Republic, ICSID Case No. ARB/14/3, Award, 27 December 2016, para. 319; Global Telecom Holding S.A.E. v. Canada, ICSID Case No. ARB/16/16, Award, 27 March 2020, para. 563; ESPF Beteiligungs GmbH, ESPF Nr. 2 Austria Beteiligungs GmbH, and InfraClass Energie 5 GmbH & Co. KG v. Italian Republic, ICSID Case No. ARB/16/5, Award, 14 September 2020, paras. 421-422.
Saluka Investments BV v. The Czech Republic, PCA Case No. 2001-04, Partial Award, 16 March 2006, para. 305; Total S.A. v. Argentine Republic, ICSID Case No. ARB/04/1, Decision on Liability, 27 December 2010, para. 333; Rusoro Mining Ltd. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB(AF)/12/5, Award, 22 August 2016, para. 525; STEAG GmbH v. Kingdom of Spain, ICSID Case No. ARB/15/4, Decision on Jurisdiction, Liability and Directions on Quantum, 8 October 2020, para. 634; Cavalum SGPS, S.A. v. Kingdom of Spain, ICSID Case No. ARB/15/34, Decision on Jurisdiction, Liability and Directions on Quantum, 31 August 2020, para. 429; Hydro Energy 1 S.à r.l. and Hydroxana Sweden AB v. Kingdom of Spain, ICSID Case No. ARB/15/42, Decision on Jurisdiction, Liability and Directions on Quantum, 9 March 2020, para. 568; Foresight Luxembourg Solar 1 S.À.R.L., et al. v. Kingdom of Spain, SCC Case No. 2015/150, Final Award, 14 November 2018, para. 377; Flemingo DutyFree Shop Private Limited v. Republic of Poland, PCA Case No. 2014-11, Award, 12 August 2016, para. 551; Hesham Talaat M. Al-Warraq v. The Republic of Indonesia, Final Award, 15 December 2014, para. 619; Cervin Investissements S.A. and Rhone Investissements S.A. v. Republic of Costa Rica, ICSID Case No. ARB/13/2, Award, 7 March 2017, para. 504; RENERGY S.à r.l. v. Kingdom of Spain, ICSID Case No. ARB/14/18, Award, 6 May 2022, paras. 608, 681.
RREEF Infrastructure (G.P.) Limited and RREEF Pan-European Infrastructure Two Lux S.à r.l. v. Kingdom of Spain, ICSID Case No. ARB/13/30, Decision on Responsibility and on the Principles of Quantum, 30 November 2018, para. 262; SunReserve Luxco Holdings SRL v. Italy, SCC Case No. 132/2016, Final Award, 25 March 2020, para. 692; Adel A Hamadi Al Tamimi v. Sultanate of Oman, ICSID Case No. ARB/11/33, Award, 3 November 2015, para. 390; FREIF Eurowind Holdings Ltd v. Kingdom of Spain, SCC Case No. 2017/060, Final Award, 8 March 2021, para. 542.
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