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The Right to Regulate in Investor–State Arbitration: Slicing and Dicing Regulatory Carve-Outs

Posted by on Monday, July 3, 2017 in Articles, Blog, Lecture, Left column, Vol. 50 No. 2, Volume 50, Volumes.

This Article examines the “right to regulate” as the power of a sovereign state to adopt and maintain government measures for public welfare objectives. It explores how claims by foreign investors in investor–state dispute settlement (ISDS) may interfere with the state’s ability to regulate, and how the state can protect its right in international investment agreements. The Article first explains the structure of modern international investment law and dispute resolution. It next turns to the right to regulate and explores why regulatory disputes represent a major challenge for ISDS. It continues by analyzing how exceptions, exclusions, and other safeguard provisions can be used in investment treaties to protect the right to regulate. It then critically examines the tobacco carve-out and other safeguard provisions of the Trans-Pacific Partnership (TPP) Agreement as to their ability to protect the right to regulate. Finally, the Article explores alternative solutions to the challenges of ISDS. It concludes by arguing that regulatory disputes are best resolved through a hybrid system of dispute resolution that is amenable to both private interests and public policy considerations.

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