“The Commission’s consultation document is an extraordinary text. On the one hand, the document contains fierce (and, in our opinion, fully justified) criticism of the international investment treaty arbitration regime as it has developed over the last two decades or so in a rapidly expanding number of awards under some 2800 Bilateral Investment Treaties, NAFTA, and the Energy Charter. Both explicitly and implicitly, the document disapproves of widespread expansive interpretations of nearly every provision found in investment treaties: from Most Favored Nation to umbrella clauses, from National Treatment to Fair and Equitable Treatment, from indirect expropriation to threshold issues of corporate nationality. The document also implicitly condemns the investment arbitration community for its failure to police itself adequately in matters of ethics, independence, competence, impartiality, and conflicts of interest. By implication, the document acknowledges that the institutional design of investment arbitration has given rise to reasonable perceptions that the decision-making process is biased against some states and investors as well as various interests of the general public.
And yet, on the other hand, the Commission seems content to entrust to these same actors the vital constitutional task of weighing and balancing the right to regulate of sovereign states and the property rights of foreign investors. This task is one of the most profound roles that can be assigned to any national or international judicial body. The proposed text requires arbitrators to determine whether discriminatory measures are ‘necessary’ in light of the relative importance of the values and interests the measures seek to further; whether the impact of non-discriminatory ‘indirect expropriations’ have a ‘manifestly excessive impact’ on investors in light of the regulatory purpose of these measures; whether other non discriminatory measures amount to arbitrariness or fall short of standards of due process and transparency, and whether prudential regulations are ‘more burdensome than necessary to achieve their aim’. To entrust these decisions to the very actors who have an apparent financial interest in the current situation and moreover remain unaccountable to society at large is a contentious situation. In light of the criticism inherent in the consultation document, not to mention the fundamental concerns of many observers of the system, there seems to be consensus that the regime falls short of the standards required of an institutionally independent and accountable dispute settlement system.”
On the right to regulate:
The approach “[f]ails to protect the ‘right to regulate’ as a general right of states alongside the many elaborate rights and protections of foreign investors, let alone as a component of the FET and Expropriation standards”. ” By its omissions, the consultation text actually confirms boldly that the right to regulate has not been affirmed and preserved, by a clear and unequivocal statement of the right, alongside the rights and protections of foreign investors.”
On protecting public funds in a sovereign debt crisis:
“In light of the social misery and hardship the sovereign debt crisis has brought, it requires little discussion to conclude that the mere thought of speculative investors in government bonds seeking damages before investment arbitration Tribunals is utterly unacceptable.”