Safeguarding Regulatory Autonomy in the Drafting of International Investment Agreements (IIAs)

Transcription

1 Safeguarding Regulatory Autonomy in the Drafting of International Investment Agreements (IIAs) GELN Age of Mega-Regionals Symposium 19 May 2016 Elizabeth Sheargold Melbourne Law School The University of Melbourne

2 Overview Question this presentation addresses is: How have states sought to protect their regulatory autonomy in the drafting of recent IIAs? Focus on regulatory autonomy with regard to measures enacted for public purposes such as the protection of public health or environment. Part of a broader project considering the evolution of the relationship between trade / investment and regulatory autonomy.

3 Agreements Covered (1) Examining IIAs signed between 2010 and 2014 Locating treaties: UNCTAD International Investment Agreements Navigator; Supplemented with Kluwer Arbitration, OUP s Investment Claims and Investor State Law Guide; Government websites and other reliable sources.

4 Agreements Covered (2) Total Number of Known IIAs ( ) Agreements where full text could not be obtained (31) - Agreements where full text in English could not be obtained - Agreement where full text obtained, but not in English (25) Number of IIAs included in study 122 (9)

5 Agreements by Year and Parties All Non-OECD Mixed All OECD

6 Provisions Examined Preambles; Refinement of substantive obligations (e.g. FET and indirect expropriation); Non-conforming measures and carve-outs; Exceptions clauses (e.g. general or security exceptions) Right to regulate provisions; Requirements not to weaken or lower standards to encourage investment; ISDS (including carve-outs and scope for parties to decide certain questions or issue a binding interpretation).

7 Overview of Findings Yes No Other

8 Old Fashioned BITs All Non-OECD Mixed

9 Fair and Equitable Treatment Form of Provision Reference to FET as part of international law 19 Statement that FET does not require anything in addition to the customary minimum standard of treatment No mention of international law or customary standard; FET described by reference to conduct (e.g. lack of due process in judicial proceedings) No mention of international law or customary standard; FET described by reference to domestic legislation No mention of FET, but reference to treatment in accordance with international law No FET standard 3 No. of Agreements

10 Indirect Expropriation (1) Exclusion of indirect expropriation: [investments] shall not be nationalized or expropriated (Macedonia Vietnam BIT (2014), art 6.1). Or to refer to it in narrow terms (in contrast to tantamount or equivalent effect ): any other measures of dispossession (Serbia Malta BIT (2010), art 4.1); indirect expropriation occurs when a Party takes an investor's property in a manner equivalent to direct expropriation, in that it deprives the investor in substance of the use of the investor s property, although the means used fall short of [direct expropriation] (New Zealand Taiwan ECA (2013), Annex 5).

11 Indirect Expropriation (2) Factors relevant to identifying indirect expropriation: whether an action or series of actions by a Party constitutes an indirect expropriation, requires a caseby-case, fact-based inquiry that considers, among other factors: (i)the economic impact of the government action (ii)the extent to which the government action interferes with distinct, reasonable investmentbacked expectations; and (iii)the character of the government action.

12 Indirect Expropriation (3) Factors relevant to identifying indirect expropriation:...among other factors: i. The economic impact of the measure...; ii. The extent to which the measures are discriminatory either in scope or application with respect to a Party or an investor or enterprise; iii. iv. The extent to which the measures or series of measures interfere with distinct, reasonable, investment-backed expectations; The character and intent of the measures..., whether they are for bona fide public interest purposes or not and whether there is a reasonable nexus between them and the intention to expropriate.

13 Indirect Expropriation Qualification on regulatory measures and indirect expropriation: Except in rare circumstances, a non discriminatory measure of a Party that is designed and applied to protect legitimate public welfare objectives, such as health, safety and the environment, does not constitute indirect expropriation. 18% Based on US Model Treaty (as above) 33% Clarifies rare circumstances through reference to proportionality Removes reference to rare circumstances 2% 47% Linked to application of general exception

14 Non-Discrimination Most agreements did not mention the purpose of a measure in relation to whether or not it may be discriminatory But there were exceptions: Morocco Serbia BIT (2013): Article 2.5: Measures that have to be taken by either Contracting Party for reasons of public security, public order, public health or protection of environment shall not be deemed treatment less favourable within the meaning of this article. Estonia Moldova BIT (2010): Article 4.4: Measures that have to be taken for reasons of public security and order or public health shall not be deemed to be less favourable treatment within the meaning of this Article.

15 Non-Conforming Measures (NCMs) Apply to existing measures (or amendments) Nearly always limited to a small range of obligations (non-discrimination, board of directors) Most often an exhaustive list is included of NCMs at the central government level But some agreements simply have a broad reference to any conforming measure in place at the time of the agreement, eg: This Agreement shall not apply to any non-conforming measure maintained by a Contracting Party at the central or local level of government existing upon the entry into force of this Agreement or any future amendment thereto provided that such amendment does not increase its non-conforming effect. (Taiwan Gambia BIT (2010) art 5.6)

16 Carve-Outs for Future Measures Like provisions for existing NCMs, these are nearly always limited in scope to certain obligations (eg non-discrimination) Exception are two agreements of the UAE, which exclude measures relating to natural / energy resources from the scope of the agreements. Considerably more common in PTAs than BITs: Often linked to schedules relating to services Coverage: Some parties use these provisions narrowly to protect a particular interest (e.g. Turkey and real estate); Others provide a schedule that may list several sectors in which they reserve policy space Common examples include energy, public services, transportation and infrastructure, fisheries, discrimination for indigenous or ethnic minorities.

17 General Exceptions Clauses Direct incorproation of GATT or GATS Minor variation on GATT Art XX / GATS Art XIV Other form of general exception

18 General Exceptions by Year Other form of general exception Minor variation on GATT Art XX / GATS Art XIV Direct incorproation of GATT or GATS No General Exception

19 Other General Exceptions Turkey Gambia BIT (2013) Article 5: 1. Nothing in this Agreement shall be construed to prevent a Contracting Party from adopting, maintain, or enforcing any non-discriminatory legal measures: a) Designed and applied for the protection of human, animal or plant life or health, or the environment; b) Related to the conservation of living or non-living exhaustible natural resources. Macedonia Morocco BIT (2010) Article 2: 6. Nothing in this Agreement shall be construed to prevent a Contracting Party from taking any action that is considered as necessary for the protection of public security, order or public health or protection of environment, provided that such measures are not applied in a manner which would constitute a means of arbitrary or unjustified discrimination. UK Colombia BIT (2010) Article VIII: Nothing in this Agreement shall be construed to prevent a Party from adopting, maintaining, or enforcing any measure that it considers appropriate to ensure that an investment activity in its territory is undertaken in a manner sensitive to environmental concerns, provided that such measures are non-discriminatory and proportionate to the objectives sought.

20 Coverage of General Exceptions Public order and/or morals Human, plant or animal life or health Compliance with laws Conservation of exhaustible natural resources Environmental measures National treasures Labour

21 Security and Prudential Exceptions Security Exceptions: The most common form of exception; Drafting varies considerably key differences include: Coverage, e.g. essential security interests, public order, national emergencies, UN actions, social or financial crisis; Whether or not the provision is self- judging; Whether or not the provision is justiciable; Some require that such measures are non-discriminatory or subject them to a standard similar to the chapeau of GATT Article XX. Prudential exceptions: Relatively rare (compared to general exceptions and security exceptions) More common in PTAs than BITs (11/17) Some variations in drafting, but generally more homogenous Usually only requires that measures are reasonable, or that they are not used as a means of avoiding its obligations under this Agreement.

22 Right to Regulate and Maintenance of Standards Right to regulate provisions: Quite rare only in 15 agreements (9 are limited to environmental regulation); Switzerland Georgia BIT (2014), art 9: 1. Nothing in this Agreement shall be construed to prevent a Contracting Party from adopting, maintain or enforcing any measure consistent with this Agreement that is in the public interest, such as measures to meet health, safety, labour or environmental concerns or reasonable measures for prudential purposes. Maintenance of standards: More common provisions, but their impact is questionable: Korea Peru FTA (2010), art 9.9.2: The Parties recognize that it is inappropriate to encourage investment by relaxing their health, safety, or environmental measures. Accordingly, a Party should not waive or otherwise derogate from, or offer to waive or otherwise derogate from, such measures as an encouragement for [investment]. If a Party considers that the other Party has offered such encouragement, the Parties shall consult, upon request, with a view to avoiding any such encouragement.

23 Alterations to ISDS Only looked at a very limited range of the procedural aspects of ISDS, which is focussed on whether any social policy measures are carved out of the scope of ISDS, and whether the parties can intervene in disputes to determine the interpretation of any of the other provisions examined (e.g. substantive obligations or exceptions). Modification of ISDS A. Exclusion of ISDS 7 B. Limitations on ISDS (for certain sectors / subjects) 9 No. of Agreements C. Mechanism for state parties to resolve the application of certain defences D. Within category C, agreements that refer issues relating to NCMs or carve-outs to the state parties for resolution E. Agreements which state that arbitral tribunals are bound by interpretations issued by the state parties

24 Concluding Remarks Most of these tools for the protection of regulatory autonomy are more common in IIAs which are part of a PTA, compared with stand alone IIAs (ie BITs) The negotiation of IIAs that contain none of these tools is increasingly rare (but is till occurring) While the use of some tools to protect regulatory autonomy is now very common, not all of these tools are of equal value There are wide variances in: The use of each of these tools; and The design of each tool (when it is used). This raises important issues with regard to (in)consistency of obligations, and what this may mean for regulatory autonomy: Some states have a more homogenous practice (e.g. Canada, Turkey)

25 Overview of Findings Yes No Other

26 F Thank you for your attention! Elizabeth Sheargold Melbourne Law School The University of Melbourne