Public Health in International Investment Law and Arbitration

Valentina Vadi

• Publisher: Routledge
• Year: 2013
• Print ISBN: 9781138025233
• eBook ISBN: 9781136259296
• Edition: 1
• Topic: Business
• Subtopic: Investments & Securities
• Index: Business

Is a State free to adopt measures to protect the public health of its citizens? If so, what are the limits, if any, to such regulatory powers? This book addresses these questions by focusing on the clash between the regulatory autonomy of the state and international investment governance. As a wide variety of state regulations allegedly aimed at protecting public health may interfere with foreign investments, a tension exists between the public health policies of the host state and investment treaty provisions. Under most investment treaties, States have waived their sovereign immunity, and have agreed to give arbitrators a comprehensive jurisdiction over what are essentially regulatory disputes. Some scholars and practitioners have expressed concern regarding the magnitude of decision-making power allocated to investment treaty tribunals.

This book contributes to the current understanding of international investment law and arbitration, addressing the fundamental question of whether public health has and/or should have any relevance in contemporary international investment law and policy. With a focus on the 'clash of cultures' between international investment law and public health, the author critically analyses the emerging case law of investment treaty arbitration and considers the theoretical interplay between public health and investor rights in international investment law. The book also explores the interplay between investment law and public health in practice, focusing on specific sectors such as pharmaceutical patents, tobacco regulation and environmental health. It then goes on to analyze the available means for promoting consideration of public health in international investment law and suggests new methods and approaches to better reconcile public health and investor rights.

Part I

Foreign direct investments and public health

Defining and connecting the two fields

Introductory note

Traditionally, international investment law and international public health law have been considered two separate branches of public international law. However, these two disciplines have increasingly intersected, and this is confirmed by an emerging jurisprudence. This book scrutinizes the interplay between public health and investor rights in international investment law and arbitration, coping with an existing lacuna in contemporary legal studies.

In a preliminary fashion, since foreign direct investment is deemed to promote economic development, which is of fundamental importance to the achievement of the fullest attainable standard of health, it is clear that in abstract terms the linkage between foreign direct investment and public health may endorse positive outcomes. However, this is not always the case. When countries pursue economic growth, their policy makers may have an incentive to lower health standards to attract foreign investors. In this manner, foreign companies can externalize the health-related costs which are associated to their business and achieve more profits. This regulatory race to the bottom , however, has a negative impact on policy goals such as public health and environmental protection.¹ In addition, the mere possibility of a dispute with a powerful investor can exert a chilling effect on governments’ decisions to regulate in the public interest.²

Part I of this book provides the legal framework and proceeds as follows. The first chapter defines foreign direct investment and briefly explores the main features of contemporary international investment law and policy.

References to international and regional human rights law, international trade law and intellectual property law will often be made by way of analogy. The elements of investment rules that may affect the protection and promotion of public health are set out. The second chapter explores the legal sources which discipline public health in international law. The third chapter concludes the first part of the book exploring the interaction between public health and international investment law at the theoretical level. Particular reference will be made to the contemporary conceptualization of investment law as a species of global administrative law. Also, the third chapter paves the way to the second part of the book which investigates the interaction between public health and international investment law in practice.

Notes

1 N. Rudra, Globalization and the Race to the Bottom – Who Really Gets Hurt? Cambridge: Cambridge University Press, 2008. Contra , see J. Bhagwati, In Defense of Globalization , Oxford: Oxford University Press, 2004, pp. 122–95.

2 For instance, commentators have reported that in 2002 a group of mainly foreign-owned mining companies threatened to commence international arbitration against the government of Indonesia in response to its ban on open-pit mining in protected forests. Six months later, the Ministry of Forestry agreed to change the forest designation from protected to production forests. See S. Gross, ‘Inordinate Chill: BITs, Non-NAFTA MITs and Host-State Regulatory Freedom – An Indonesian Case Study’, Michigan JIL 24, 2002–2003, p. 894.

1 International investment law

Introduction

The law of foreign investment is one of the most complex areas of international law.¹ Traditionally, international investment law has constituted an important part of public international law mainly referring to the concepts of state responsi- bility and diplomatic protection and being articulated in amity, commerce and navigation treaties. As there is still no single comprehensive global treaty, investor rights are mainly defined by a plethora of bilateral investment treaties (BITs)² and investment rules included in Free Trade Agreements (FTAs).³

After defining foreign direct investment and exploring the normative framework which disciplines it, this chapter sets out the elements of investment rules that will be of particular importance when considering their impact on the protection and promotion of public health.

Foreign direct investment: definition and function

Foreign Direct Investment (hereinafter FDI) can be defined as ‘the transfer of tangible or intangible assets from one country into another for the purpose of their use in that country to generate wealth under the total or partial control of the owner of the assets’.⁴ The majority of economists and policy-makers in both developing and developed countries see FDI as an engine for promoting economic growth and development.⁵

As contained in investment treaties, investment is an all-encompassing concept, including almost any kind of business activity. All assets of an enterprise, such as movable and immovable property, contractual rights, intellectual property rights, concessions, licenses, and similar rights are included. Given the broad scope of the concept, some investment provisions include both a general clause and an illustrative list of covered investments, as well as a negative list of areas specifically excluded from the scope of the agreements.⁶ For instance, in the US draft Model BIT,⁷ in relation to the notion of what constitutes an investment, an interpretative note indicates that in order to qualify as an investment, certain characteristics must be present, such as the commitment of capital or other resources, the expectation of gain or other profit or the assumption of risk. These characteristics would exclude from the definition trade operations and financial transactions as such. However, the case law presents a trend to consider some of these features as sufficient to indicate an investment.⁸

As investment treaties are ‘the most important instruments for the protection of foreign direct investment’,⁹ there is a general expectation that the conclusion of such treaties will encourage FDI.¹⁰ Therefore, investment treaties are being strategically pushed by both developed and developing countries albeit for different reasons. On the one hand, host countries – generally developing and least developed countries – assume broad obligations for the protection of foreign investors in order to attract foreign investments. On the other hand, developed countries have adhered to these dealings to protect their nationals’ economic interests and possibly obtain favourable standards.

Recently, however, the traditional distinction between capital importers and capital exporters has become blurred as emerging economies – like India and China – have become capital exporters. In this sense, it is interesting to highlight that investment treaties have increasingly been signed not only among industrialized countries on the one side and developing countries on the other side, but also among less developed countries (LDCs) and emerging economies. As the primary objective of would-be investors is to obtain the effective guarantee that the host state will not act opportunistically once the investment has been made, investment treaties seem to be appropriate solutions to this problem. Therefore, such treaties have come to play a major role in the growing competition to attract FDI and to provide conditions regarded necessary to make countries attractive for foreign investment.

Multilateral failures and bilateral successes

Efforts to constitute a set of global rules to protect investor rights and to settle potential disputes between host countries and investors have been pursued by industrialized countries for a long time.¹¹ A first attempt to create a unified global investment law was made at the Bretton Woods conference in 1944. The conference, which stemmed from the consensus among the major international actors on the importance of establishing international economic institutions to foster peace and economic growth, determined the inception of the charters of the International Monetary Fund (IMF)¹² and the International Bank for Reconstruction and Development (IBRD).¹³ Although the parti- cipants at the conference contemplated the necessity of an International Trade Organization (ITO), the Havana Charter which included rules on investment never came into force.¹⁴

Although the World Trade Organization in some ways has become ‘the missing leg’ of the Bretton Woods ‘stool’,¹⁵ the moves to adopt multilateral investment rules initiated at the Doha Ministerial Conference in 2001 had to be abandoned at the Ministerial Conference in Cancun in 2003, due to the growing opposition from developing countries and strong criticism from the NGO community.¹⁶ Similarly, the Organization for Economic Cooperation and Development (hereinafter OECD)¹⁷ attempted to establish a Multilateral Agreement on Investment (MAI),¹⁸ but this effort collapsed because of the opposition from civil society.¹⁹

However, authors have submitted that there are global rules on foreign investment.²⁰ On the one hand, many instruments under the World Trade Organization aegis directly deal with areas of foreign investment.²¹ On the other hand, the provisions of the Havana Charter, although never ratified, served as an inspiration to many national and regional investment provisions.²²

Notwithstanding the persistent failures at the multilateral level, successful negotiations on investment protection have been undertaken at the bilateral and regional levels. In recent years, there has been steady growth of BITs for the protection of foreign investment,²³ and a growing number of wider economic agreements establishing FTAs have incorporated BIT-style provisions into an investment chapter. All these treaties are designed to clarify what standards of protection will apply to investments from on...

Table of contents

• Cover Page
• Half Title page
• Series page
• Title Page
• Copyright Page
• Contents
• Table of treaties
• Table of cases
• Foreword
• Preface
• Acknowledgements
• List of abbreviations
• Introduction
• Foreign direct investments and public health Defining and connecting the two fields
• 1 International investment law
• 2 Public health in contemporary international law and policy
• 3 The interplay between public health and foreign direct investments
• The interplay of foreign investment and public health in practice
• 4 Access to medicines in international investment law and arbitration
• 5 Trademark protection v. tobacco control in international investment law
• 6 The environmental health spillovers of foreign direct investment in international investment arbitration
• Reconciling public health and investor rights in international investment law
• 7 Reconciling conflicting interests
• Conclusions
• Selected bibliography
• Index