Introduction to Investment Treaties and Health Benn M c Grady, PhD O’Neill Institute for National and Global Health Law Georgetown University Law Center

Introduction to Investment Treaties and Health

Benn McGrady, PhDO ’Neill Institute for National and Global Health Law Georgetown University Law [email protected]

Outline1. Background and rationales for

investment treaties2. Standards of protection 3. Contemporary treaty practice

Introduction to Trade and Health

Benn McGrady, PhDO ’Neill Institute for

National and Global Health Law

1Background and rationales




1

International investment agreements • Primarily bilateral (bilateral investment

treaties (BITs) or investment chapters in FTAs)

• Function is to protect assets of nationals when invested abroad

• Investors have standing to bring claims against states under international law

• Claims are settled through arbitration (ICSID and UNCITRAL)

• Awards are enforced under domestic law




1

Rationales• Capital exporting countries seek IIAs

to secure the assets of their nationals, when invested abroad.

• IIAs are often sought with countries perceived to have ‘weak’ legal systems so that foreign investors can bypass domestic courts.

• For countries hosting foreign investment (host states) an IIA may make their countries more attractive to foreign investors.




Plain packaging claim

• Referred to in Guidelines to the WHO FCTC

• Implemented by Australia

• Challenged by Philip Morris under an investment treaty on the basis that it expropriates property rights and is unreasonable

Trade, Investment and Non-Communicable Diseases

Uruguayan packaging claim

• Graphic warnings covering 80% of the surface

• A ban on misleading branding, including brand variants

• Challenged by Philip Morris under an investment treaty on the basis that it expropriates property rights and is unreasonable

Trade, Investment and Non-Communicable Diseases

2Standards of protection




2Introduction to Trade

and Health



Common standards• Protection against expropriation or

nationalization• Guarantee of ‘fair and equitable

treatment’• National Treatment• Most-favored nation treatment• Compliance with commitments to

investors (umbrella clauses)


and Health



Expropriation• Typically, it is permissible to expropriate

for a public purpose, provided that the act is non-discriminatory and compensation is paid.

• Different clauses are interpreted in a similar manner.

• Direct expropriation occurs if title to property is taken.

• Indirect expropriation may occur if government action tantamount or equivalent to expropriation occurs.


and Health



Expropriation• There is a line between legitimate

government intervention that is non-compensable and measures equivalent to expropriation. 1. Is there a substantial interference with

property rights?2. If so, are other factors relevant?

• The reasonable expectations of the investor

• The character of a measure• Proportionality to the objective in light

of interference with property rights• Whether a measure is a valid exercise

of sovereign police powers to regulate in the public interest


and Health



Fair and equitable treatment• FET clauses differ significantly in their

terms.• Some clauses import a standard from

customary international law.• Other clauses set out an autonomous

standard of treatment.• Although debates exist about the

substance of the two standards, it is generally recognized as more difficult for an investor to establish violation of the customary standard.


and Health



Non-discrimination• National treatment clauses prohibit less

favorable treatment of foreign investors or investments than of like domestic investors or investments.

• Most-favored nation treatment prohibits less favorable treatment of nationals of the contracting parties than of nationals of third countries.• MFN clauses are often invoked to

require higher standards of treatment found in other bilateral treaties to which a host state is a party.


and Health



Umbrella clauses• Umbrella clauses require host states to

respect commitments made to investors.• These clauses make contracts and other

commitments part of the applicable law of the arbitration.


and Health



Contemporary treaty practice


and Health



Clarifying regulatory authority

• Exemptions for specific classes of investments

• Annexes clarifying the definition of indirect expropriation

• Annexes clarifying use of the customary standard of treatment in FET clauses (or the standard of protection itself)

• Clarifications concerning the scope of MFN clauses

• General exceptions

Documents

Introduction to Investment Treaties and Health Benn M c Grady, PhD O’Neill Institute for National and Global Health Law Georgetown University Law Center