Challenges to the Credibility of the Investor-State Arbitration System

17 Pages Posted: 25 Apr 2018 Last revised: 12 Jul 2018

Date Written: 2016

Abstract

Investor-state dispute settlement ("ISDS") has been put through the ringer in recent public comment as a system that "threatens domestic sovereignty by empowering foreign corporations to bypass domestic court systems" and "weakens the rule of law."' One such foreign corporation is Philip Morris Asia Limited ("Philip Morris Asia"), which brought a claim against Australia in 2012 for compensation based on the state's cigarette packaging legislation. The case, along with Philip Morris's similar case against Uruguay, created global controversy over states' ability to regulate in the public interest. Some critics argued that the cases created a "chilling effect" on other states that were considering similar tobacco regulation. On December 17, 2015, Australia defeated the multibillion dollar claim when the arbitral tribunal declined jurisdiction over the matter. In response to the tribunal's award, Philip Morris International Inc.'s ("Philip Morris") general counsel appeared to respond to the controversy: "This case has never been about a government's undeniable authority to regulate in the public interest." Nevertheless, the vocal critics of the Philip Morris cases are among many who question whether the ISDS system interferes with democratic regulatory authority.

This Article will describe how the Philip Morris case falls within criticism against the ISDS system over the past decade. Next, the Article will compare similar ideas voiced in the current public debate about the negotiations of the Trans Pacific Partnership and Transatlantic Trade and Investment Partnership. Finally, this Article will assert that the ISDS system will survive in the face of criticism as states begin to reform their ISDS systems.

Keywords: ISDS, Investor-state dispute settlement, gomestic sovereignty, foreign corporation, philip morris asia limited, tobacco regulation, trade, transatlantic trade and investment partnership, transpacific partnership

Suggested Citation

Nolan, Michael D., Challenges to the Credibility of the Investor-State Arbitration System (2016). American University Business Law Review, Vol. 5, No. 3, 429, Available at SSRN: https://ssrn.com/abstract=3157420

Michael D. Nolan (Contact Author)

Milbank, Tweed, Hadley & McCloy ( email )

United States

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