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Published online by Cambridge University Press: 08 June 2018
National governments have signed and ratified over three thousand International Investment Agreements (IIAs), which for the first time give multinational firms standing to sue host governments in international arbitration tribunals. IIAs have led to a host of high-profile and controversial legal disputes that have led to claims that investor state arbitration may be impeding governments in their ability to regulate and to protect their citizens’ well-being, a phenomenon known as “regulatory chill.” To understand the normative implications of regulatory chill, I analyze investor state arbitration over tobacco in Australia and Latin America. I examine legislative discussions over possible regulatory changes in Australia and Uruguay, the two cases that have faced disputes over tobacco laws, as well as in Latin American countries that provide access to the legislative debates and had legislative initiatives that sought to strengthen tobacco legislation. These cases demonstrate that tobacco packaging laws in a number of countries have been delayed or reduced as a result of fears of potential arbitration among the government and legislators. This regulatory chill is normatively problematic as it suggests that states may be giving up more of their regulatory authority than they initially believed they would have to under IIAs.
1 IIAs come in many different forms, including one of the most popular—bilateral investment treaties (BITs).
2 UNCTAD, “Bilateral Investment Treaties 1959–1999” (New York: United Nations, 2000); and UNCTAD, “Investment Policy Hub: International Investment Agreements Navigator,” investmentpolicyhub.unctad.org/IIA.
3 “Investment Policy Hub: Investment Dispute Settlement Navigator,” investmentpolicyhub.unctad.org/ISDS.
4 Metalclad Corp. v. United Mexican States, ICSID Case No. ARB(AF)/97/1, “Award” (August 30, 2000). Although Metalclad's claims were brought under the North American Free Trade Agreement (NAFTA), the protections granted to investors under this agreement were modeled after—and are almost identical to—those afforded under bilateral investment treaties (BITs).
5 In this essay, I take a broad view of sovereignty as conferring not only rights but responsibilities for governments. See, for example, Deng, Francis M., Kimaro, Sadikiel, Lyons, Terrence, Rothchild, Donald, and Zartman, I. William, Sovereignty As Responsibility: Conflict Management in Africa (Washington, D.C.: Brookings Institution Press, 1996)Google Scholar.
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10 Simmons, “International Law and State Behavior,” pp. 819–35.
11 While under the WTO, governments are able to avail themselves of a dispute settlement mechanism, disputes are between countries (as opposed to an investor filing against a government in ISDS), and the panel is constituted by the WTO dispute settlement board as opposed to being selected by the parties to the dispute under ISDS. IIAs are the sole international treaty to give investors the right to sue governments under international arbitration.
12 Dolzer, Rudolf, Stevens, Margrete, and International Centre for Settlement of Investment Disputes, Bilateral Investment Treaties (The Hague: M. Nijhoff, 1995)Google Scholar.
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14 Dolzer et al., Bilateral Investment Treaties.
15 Wong, Jarrod, “Umbrella Clauses in Bilateral Investment Treaties: Of Breaches of Contract, Treat Violations, and the Divide between Developing and Developed Countries in Foreign Investment Disputes,” George Mason Law Review 14 (2006), p. 137Google Scholar. Although BITs can grant access to a number of autonomous institutions to serve in this dispute resolution capacity, ICSID is the most frequently used tribunal. ICSID is established under the auspices of the World Bank, providing a forum for investment disputes and a set of basic international arbitration rules.
16 According to UNCTAD, as of January 2017 there are 817 publicly known treaty-based investor-state arbitrations either ongoing or concluded. See investmentpolicyhub.unctad.org/ISDS.
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18 ISDS panels typically consist of three arbitrators: one is selected by the state, the second by the investor, and the third is chosen by the first two arbitrators (with oversight from the parties).
19 See Franck, Susan D., “The Legitimacy Crisis in Investment Treaty Arbitration: Privatizing Public International Law through Inconsistent Decisions,” Fordham Law Review 73, no. 4 (2005), p. 1521Google Scholar for an early discussion of a number of diametrically opposed ISDS decisions.
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23 See Sophie Boot, “Tobacco Firm Ponders Challenge As Plain Packaging Bill Passes,” New Zealand Herald, September 10, 2016, www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11707230.
24 For text and updates to the Tobacco Plain Packaging Act 2011, see the Australian Government Federal Register of Legislation at www.legislation.gov.au/Details/C2016C00892.
25 Australian Government, National Preventative Health Taskforce, “Australia: The Healthiest Country by 2020” (Canberra: Commonwealth of Australia, 2009), www.health.gov.au/internet/preventativehealth/publishing.nsf/Content/nphs-roadmap.
26 Australian Government, National Preventative Health Taskforce, “Technical Report 2, Tobacco Control in Australia: Making Smoking History” (Canberra: Commonwealth of Australia, 2009), www.health.gov.au/internet/preventativehealth/publishing.nsf/Content/96CAC56D5328E3D0CA2574DD0081E5C0/$File/tobacco-jul09.pdf.
27 Prochaska, Judith J. et al. , “Evaluation of an Evidence-Based Tobacco Treatment Curriculum for Psychiatry Residency Training Programs,” Academic Psychiatry 32, no. 6 (2008), pp. 484–92CrossRefGoogle ScholarPubMed; Goldberg, Marvin E., Liefeld, John, Madill, Judith, and Vredenburg, Harrie, “The Effect of Plain Packaging on Response to Health Warnings,” American Journal of Public Health 89, no. 9 (1999), pp. 1434–435CrossRefGoogle ScholarPubMed; and Beede, P., and Lawson, R., “The Effect of Plain Packages on the Perception of Cigarette Health Warnings,” Public Health 106, no. 4 (1992), pp. 315–22CrossRefGoogle ScholarPubMed. For further evidence, see Australian Government (2009) National Preventative Health Taskforce,“Australia: The Healthiest Country by 2020” (Canberra: Commonwealth of Australia), www.health.gov.au/internet/preventativehealth/publishing.nsf/Content/nphs-roadmap.
28 Philip Morris Asia v. Australia, PCA Case No. 2012–12.
29 PMI along with British American Tobacco, Japan Tobacco International, and Imperial Tobacco also initiated claims on the same grounds in Australia's high court.
30 The arbitral tribunal agreed with Australia's claim that PMI had reorganized its assets to make PM-Australia a wholly owned subsidiary of PM-Asia in Hong Kong solely to have access to the Hong Kong-Australia BIT.
31 FTR Holdings S.A. (Switzerland) v. Oriental Republic of Uruguay, ICSID Case No. ARB/10/7, “Request for Arbitration” (February 19, 2010), paragraphs 3, 4, and 5.
32 Ibid., paragraphs 77, 82, and 83.
33 Philip Morris Brands Sàrl, Philip Morris Products S.A., and Abal Hermanos S.A. v. Oriental Republic Of Uruguay, ICSID Case No. ARB/10/7, “Award” (July 8, 2016), para. 271.
34 Ibid., para. 302.
35 To do this, I have analyzed the legislative documents (parliamentary debates, floor speeches, and position papers) of a similar set of countries to determine whether decisions over enacting new regulations are influenced (positively or negatively) by the potential for costly international arbitration. I focused on Latin America for three reasons: (1) the common language across the majority of the region makes text analysis easier, (2) most countries make parliamentary documents accessible, and (3) through regional proximity, most countries were likely aware of the arbitration against Uruguay. Of the seventeen Spanish- and English-speaking countries in Central and South America, five (Belize, Bolivia, Colombia, Panama, and Venezuela) either banned access to most of their plenum discussions and their respective commissions’ position papers completely, or access was so limited or unreliable that a proper investigation of the registries could not be conducted. Twelve countries provided access to most of their plenum discussions and the position papers of some of their commissions online, and had legislative initiatives that sought to strengthen tobacco legislation. In seven of these countries (Argentina, Costa Rica, Ecuador, El Salvador, Nicaragua, Paraguay, and Peru), I found no references by legislators concerned that the laws in question violated international treaties. For the remaining five countries that provide access (Chile, Guatemala, Honduras, Mexico, and Uruguay), I found evidence that during debates over new tobacco regulations there were concerns among regulators that new laws could lead to costly international arbitration.
36 Uruguay: “Política De Control De Tabaquismo,” Versión taquigráfica de la reunión realizada el día 10 de agosto de 2010.
37 Ibid.
38 Mexico: Gaceta Parlamentaria, año XVI, número 3731-V, martes 19 de marzo de 2013.
39 Guatemala: “Dictamen: 002-2010, A la Iniciativa de Ley numero 4150: Ley para el Control y Regulación del Empaquetado y Etiquetado de los Productos de Tabaco Guatemala,” p. 17. Translated by author.
40 Guatemala: Comisión de Salud y Asistencia Social, Congreso de la Republica. Iniciativa Número 4908 que Dispone Aprobar la Ley Para La Proteccion de la Salud a Traves del Control del Tabaco, pp. 6–8. Translated by author.
41 Honduras: La Gaceta, Republica de Honduras, No, 32,488, Sección A, Acuerdos y Leyes, Poder Legislativo, Decreto Nacional No. 12-2011.
42 República de Chile, Diaro de Sesiones del Senado, Publicación Oficial, Legislatura 363ª, Sesión 10ª, En Miércoles 15 De Abril De 2015, Sesión Ordinaria; República de Chile, Diaro de Sesiones del Senado, Publicación Oficial, Legislatura 363ª, Sesión 33ª, En Miércoles 8 De Julio De 2015, Sesión Ordinaria; República de Chile, Diaro de Sesiones del Senado, Publicación Oficial, Legislatura 363ª, Sesión 35ª, En Miércoles 15 De Julio De 2015, Sesión Extraordinaria; República de Chile, Diaro de Sesiones del Senado, Publicación Oficial, Legislatura 363ª, Sesión 9ª, En Martes 14 De Abril De 2015, Sesión Ordinaria.
43 Global Legal Center, “The Anti-Tobacco Trade Litigation Fund,” www.global.tobaccofreekids.org/what-we-do/global/legal/trade-litigation-fund.
44 Freeman, Becky, Chapman, Simon, and Rimmer, Matthew, “The Case for the Plain Packaging of Tobacco Products,” Addiction 103, no. 4 (2008), pp. 580–90CrossRefGoogle ScholarPubMed; Wakefield, Melanie et al. , “Australian Adult Smokers’ Responses to Plain Packaging with Larger Graphic Health Warnings 1 Year after Implementation: Results from a National Cross-Sectional Tracking Survey,” Tobacco Control 24, Issue Suppl. 2 (2015), pp. ii17–ii25CrossRefGoogle ScholarPubMed; Hoek, Janet, Wong, Christiane, Gendall, Philip, Louviere, Jordan, and Cong, Karen, “Effects of Dissuasive Packaging on Young Adult Smokers,” Tobacco Control 20, no. 3 (2011), pp. 183–188CrossRefGoogle ScholarPubMed; and Eadie, Douglas, Hastings, Gerard, Stead, Martine, and MacKintosh, Anne Marie, “Branding: Could It Hold the Key to Future Tobacco Reduction Policy?” Health Education 99, no. 3 (1999), pp. 103–10CrossRefGoogle Scholar.
45 Wakefield et al., “Australian Adult Smokers’ Responses to Plain Packaging with Larger Graphic Health Warnings 1 Year after Implementation”; and Dunlop, Sally M., Dobbins, Timothy, Young, Jane M., Perez, Donna, and Currow, David C., “Impact of Australia's Introduction of Tobacco Plain Packs on Adult Smokers’ Pack-Related Perceptions and Responses: Results from a Continuous Tracking Survey,” BMJ Open 4, no. 12 (2014), pp. 1–10CrossRefGoogle ScholarPubMed.
46 Brennan, Emily et al. , “Are Quitting-Related Cognitions and Behaviours Predicted by Proximal Responses to Plain Packaging with Larger Health Warnings? Findings from a National Cohort Study with Australian Adult Smokers,” Tobacco Control 24, Issue Suppl. 2 (2015), pp. ii33–ii41CrossRefGoogle ScholarPubMed.
47 Young, Jane M. et al. , “Association between Tobacco Plain Packaging and Quitline Calls: A Population-Based, Interrupted Time-Series Analysis,” Medical Journal of Australia 200, no. 1 (2014), pp. 29–32CrossRefGoogle ScholarPubMed.
48 Diethelm, Pascal A. and Farley, Timothy M., “Refuting Tobacco-Industry Funded Research: Empirical Data Shows a Decline in Smoking Prevalence Following the Introduction of Plain Packaging in Australia,” Tobacco Prevention & Cessation 1 (2015), p. 23Google Scholar.
49 Tasneem Chipty, Study of the Impact of the Tobacco Plain Packaging Measure on Smoking Prevalence in Australia, “Appendix A, Post-Implementation Review Tobacco Plain Packaging” (2016).
50 See, for example, Técnicas Medioambientales Tecmed S.A. v. United Mexican States, ICSID Case No. ARB(AF)/00/2, “Award” (May 29, 2003).
51 See, for example, Cargill, Incorporated v. United Mexican States, ICSID Case No. ARB(AF)/05/2.
52 See, for example, Les Laboratoires Servier, S.A.A., Biofarma, S.A.S., Arts et Techniques du Progres S.A.S. v. Republic of Poland, United Nations Commission on International Trade Law.
53 See, for example, Cosigo Resources, Ltd., Cosigo Resources Sucursal Colombia, Tobie Mining and Energy, Inc. v. Republic of Colombia, United Nations Commission on International Trade Law.
54 See, for example, Portigon AG v. Kingdom of Spain, ICSID Case No. ARB/17/15.
