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Public interest and foreign investment protection – recent trends

Public interest and foreign investment protection – recent trends

In a last few years at international investment law scene there has been a sort of a clash between the protection of fair and equitable treatment guaranteed through BITs, usage and enjoyment of investments, intellectual property rights protection etc. on one side and new governmental legislation aimed to protect some of the public interests such as environment and public health

Public interest and foreign investment protection – recent trends

 

 

In a last few years at international investment law scene there has been a sort of a clash between the protection of fair and equitable treatment guaranteed through BITs, usage and enjoyment of investments, intellectual property rights protection etc. on one side and new governmental legislation aimed to protect some of the public interests such as environment and public health. In one of the latest AKT blog-post (https://www.akt.rs/en/publication/changes-of-incentive-measures-for-renewable-energy-production-and-protection-of-foreign-investors---possible-problems), we took a glance at what kind of a trend some of the ICSID tribunals are following in the field of protecting foreign investments and environmental protection, for example the case Eiser v. Spain, where tribunal found that Spain breached Article 10(1) of the Energy Charter Treaty, whereas in a similar case Charanne v. Spain, there was no breach on behalf of Spain.

 

In a similar way, in the field of protection of public health we are entering the “gray” area of protecting the foreign investments through arbitration processes. The area is “gray” because the trend of the decisions that the tribunals are making seems to be somewhat contradictory. International investment protection aims to promote investment through the establishment of favorable conditions for investment, but there are accusations that in effect it leads to a small group of arbitrators ruling on important public interest issues. Cases such as CMS v Argentina and Tecmed v Mexico led to concerns that investors’ rights are overly privileged over State sovereignty and regulatory power. On the other hand,

summarizing two latest cases between some states and tobacco industry, such as:

 

  • Philip Morris v Australia and
  • Philip Morris v Uruguay

 

can cast a different light on different trends in investment arbitration world.

 

Both cases are quite similar, because in them Philip Morris claimed that its investment had lost value due to a new anti-tobacco legislation, although the case against Australia did not go much further because it was not examined in the merits. This tribunal concluded that the claimant unlawfully took advantage of a subsidiary in order to get access to investor-state arbitration. In that sense, maybe the more interesting case for our purposes is the second case against Uruguay, where the decision on the merits was made. The tribunal found that the Uruguayan tobacco legislation did not violate the BIT between Switzerland and Uruguay.

 

Essentially, Philip Morris claimed that these anti-tobacco measures violated several provisions protected by BIT, the main one being a breach of protection of intellectual rights.

 

The claimant’s arguments were based against two Uruguayan regulations: first one being the Uruguayan Ministry of Health ban on selling different varieties of the same brand of cigarettes such as ”light”, ”menthol” or ”gold”, and the second being a presidential decision which increased the images of health warning on cigarette packages from 50% to 80%.

 

In short, despite intellectual property rights indeed being protected by the BIT, the arbitrators found (inter alia) that Phillip Morris did not suffer a sufficient level of damage to establish a violation. Equally importantly, they found that the state has a large policy space to implement reforms aiming to protect legitimate interest, which was the case with Uruguay. The government adopted genuine and serious measures aimed to protect public health.

 

More details on this particular subject can be found on:

 

Iva Zivkovic

 

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