States may invoke public interest as a defence against an investor’s claims for breach of treaty standards of protections (e.g., Fair and equitable treatment, National treatment, or unlawful expropriation) to justify “regulation[s] with a basis other than a state of necessity, national security or the public order.”2 Public interest exceptions may also be incorporated into treaties to safeguard the state’s ability to regulate. See further State regulatory power; Police powers.
II. Related Wiki Notes
State regulatory power on the relationship between the State’s right to regulate and different standards of protection including expropriation, fair and equitable treatment, full protection and security, etc.
III. Legal basis for public interest exceptions
A. Explicit references to public interest exceptions
Treaties may contain explicit references and refer to (i) States’ the right to regulate to protect the environment)12 or (ii) positive obligations by which investors should abide (e.g., corporate social responsibility obligations).13 Increasingly, investment agreements contain exceptions that incorporate or resemble the general exceptions provided by GATT, Article XX, and GATS, Article XIV-bis.14
B. Unqualified or implicit references to public interest exceptions
Treaties may also contain unqualified,15 or implicit16 references. While the determination of the scope of unqualified exceptions requires a case-by-case assessment, the scope of implicit public interest exceptions can be derived from other elements or from the wording of more general treaty provisions.17
C. Preambular references to public interest exceptions
References to the public interest may also be incorporated in the preamble of an investment treaty,18 such as providing that “investment protection is to be realised without compromising public policy objectives.”19 Although such an incorporation in the preamble of an investment treaty does not grant States any specific right to regulate, it may serve as an interpretative tool for tribunals when assessing the legality of a State’s challenged measure.20
D. Customary international law
IV. Public interest defences
A. Deference to the State's regulatory decision
In the context of national security clauses, tribunals have found that States may “derogate from an international obligation based on unilateral considerations” if this is expressly provided for in the treaty (self-judging clauses).24 However, when the applicable treaty contains a compromissory clause or if the relevant provision is conditioned (e.g., by subjecting the application of the provision to non-discriminatory treatment), tribunals tend to consider that it is not self-judging, thus submitting the regulations to review.25 Tribunals have also posited that even if arguendo the provision could be considered self-judging, the regulation at stake would be subject to a good faith review.26 See further Necessity.
If the investor claims that the State has interfered with its rights, tribunals have usually engaged in a proportionality analysis to balance investors' rights under the investment agreement with the host State’s sovereign right to implement public Interest reforms.27 Furthermore, tribunals have held that the State’s conduct should be bona fide and not “manifestly violate the requirements of consistency, transparency, even-handedness and non-discrimination”;28 and that the State should not “unreasonabl[y] or inequitabl[y] exercise [...] its legislative power”.29
V. Trends on public interest defences/exceptions in the ISDS context
A. Examples of cases in which investors have prevailed
Investors have prevailed, inter alia, in cases concerning:
B. Examples of cases in which States have prevailed
Tribunals have instead upheld States’ public interest defences, based either on specific treaty provisions, customary international law or implicit obligations stemming from the text of the relevant treaty, in support of among others:
VI. Other public interest considerations
A. Amicus curiae petitions
In accepting or rejecting amicus curiae petitions from third parties, tribunals tend to assess whether the petitioner addressed matters of public interest.37 See further Amicus curiae, Sections IV and V.
B. Provisional measures
Choudhury, B., Exception provisions as gateway to incorporating human rights issues into international investment agreements, Columbia Journal of Transnational Law, Vol. 49, Issue 3, 2011, pp. 670-716.
Kingsbury, B. and Schill, S.W., Public Law Concepts to Balance Investors’ Rights with State Regulatory Actions in the Public Interest: The Concept of Proportionality, in Schill, S.W. (ed.), International Investment Law and Comparative Public Law, 2010, pp. 75, 78.
Martinez-Fraga, P.J. and Reetz, R.C., Public Purpose in International Law: Rethinking Regulatory Sovereignty in the Global Era, 2015, p. 126.
Sauvant, K.P. and Ong, M., with Lama, K., and Petersen, T., The rise of self-judging essential security interest clauses in international investment agreements, Columbia FDI Perspectives No. 188, 5 December 2016, pp. 1-8.
Schill, S.W., and Djanic, V., Wherefore Art Thou? Towards a Public Interest-Based Justification of International Investment Law, ICSID Review-Foreign Investment Law Journal, 2018, pp. 29, 43.
Titi, C., The Right to Regulate in International Investment Law, Studies in International Investment Law, 2014, p. 101.
Wang, W., The Non-Precluded Measure Type Clause in International Investment Agreements: Significances, Challenges, and Reactions, ICSID Review, 2017, pp. 447-456.
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