The Right to Regulate in International Investment Law

The chapter takes a fresh look at the right to regulate in foreign investment law. The right to regulate is indissolubly linked to the concept of sovereignty and is central in understanding the relationship between the host state and foreign investors. Such relationship requires a continuous balancing and recalibrating of the stimulation of private business, on the one hand, and the exercise by the state of regulatory powers, on the other hand. After a couple of decades during which investment-related instruments—and especially investment treaties—manifestly favoured foreign investors, the pendulum has started swung in the opposite direction in an attempt to better ensure that the host state is able to exercise its sovereign prerogatives and discharge its duties in the pursue of public interest. What follows is an analysis of such process of adjustment, which can be appreciated most prominently from the standpoint of indirect expropriation and fair and equitable treatment standard. The chapter regularly refers to arbitral decisions and finally reviews the recent treaty practice on the right to regulate.