Challenges to the Credibility of the Investor-State Arbitration System

By Nolan, Michael | American University Business Law Review, January 3, 2016 | Go to article overview

Challenges to the Credibility of the Investor-State Arbitration System


Nolan, Michael, American University Business Law Review


Introduction

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."1 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.2 The case, along with Philip Morris's similar case against Uruguay, created global controversy over states' ability to regulate in the public interest.3 Some critics argued that the cases created a "chilling effect" on other states that were considering similar tobacco regulation.4 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."5 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.

II. ISDS Criticism

A. Philip Morris Asia v. Australia

The Tobacco Plain Packaging Act 2011 became law in Australia on December 1, 2011.6 Among other requirements, the law mandated certain health warnings and limited branding on cigarette packages.7 On June 27, 2011, Philip Morris Asia filed a Notice of Claim against Australia pursuant to the Hong Kong-Australia Bilateral Investment Treaty (1993) ("Hong Kong-Australia BIT").8 This claim was the first ISDS dispute that was brought against Australia.9 Philip Morris Asia argued that Australia's tobacco plain packaging measure constituted an expropriation of its Australian investments in breach of the BIT.10 Philip Morris Asia further argued that Australia's tobacco plain packaging measure was in breach of its commitment under Article 2(2) of the Hong Kong-Australia BIT, which required fair and equitable treatment to Philip Morris Asia's investments." Finally, Philip Morris Asia asserted that tobacco plain packaging constitutes an unreasonable and discriminatory measure and that Philip Morris Asia's investments have been deprived of full protection and security in breach of Article 2(2) of the Hong Kong-Australia BIT.12

The arbitration was conducted under the United Nations Commission on International Trade Law ("UNCITRAL") Arbitration Rules 2010. The tribunal hearing the case was composed of three arbitrators: Australia appointed Professor Don McRae of the University of Ottawa as an arbitrator; Philip Morris Asia appointed Professor Gábriellé KaufmannKohler as an arbitrator; and the Secretary-General of the Permanent Court of Arbitration appointed Professor Dr. Karl-Heinz Böckstiegel as the presiding arbitrator.13 Over the course of four years, Australia and Philip Morris submitted full statements of claims and defense.14 On December 17, 2015, the tribunal declined jurisdiction over Philip Morris's claims.15 On May 16, 2016, the Permanent Court of Arbitration published a redacted version of the award in the Case Repository of the Permanent Court of Arbitration.16

Before its arbitral positions were vindicated in this first investor-state case against it, Australia had distanced itself from ISDS. In fact, Australia categorically rejected the inclusion of ISDS provisions in a bilateral investment treaty ("BIT"). …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

Challenges to the Credibility of the Investor-State Arbitration System
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this article
  • Highlights & Notes
  • Citations
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.