Internalisation of International Investment Agreements in Public Policymaking: Developing a Conceptual Framework of Regulatory Chill
| Date | 01 May 2018 |
| DOI | http://doi.org/10.1111/1758-5899.12545 |
| Author | Arne Ruckert,Ronald Labonté,Ashley Schram,Sharon Friel,J. Anthony VanDuzer |
| Published date | 01 May 2018 |
Internalisation of International Investment
Agreements in Public Policymaking: Developing
a Conceptual Framework of Regulatory Chill
Ashley Schram and Sharon Friel
The Australian National University
J. Anthony VanDuzer, Arne Ruckert and Ronald Labont
e
University of Ottawa
Abstract
The growing number of public policy measures challenged through investor-state dispute settlement has raised critiques that
international investment agreements could lead governments to avoid introducing new policy measures out of a fear that
these could be challenged by foreign investors, often referred to as ‘regulatory chill’. While the body of work on regulatory
chill is still in its infancy, there is a need to interrogate extant studies to better understand the state of the knowledge and
the methodological approaches being employed to produce an evidence base. Grounded in a critical review of the existing lit-
erature, this paper develops a conceptual framework of regulatory chill, identifying it as one possible policy response wherein
investment agreements are internalised by policy makers as considerations during their policy decision-making. Three distinct
bodies of work were identified in the literature which helped to populate this framework, including analysis of investment
treaty language and awards, interviews with policy makers to explore internalisation of such treaties, and case studies of sus-
pected regulatory chill policy responses. The conceptual framework is intended to help drive forward a cohesive research
agenda on regulatory chill that can underpin the ongoing investment treaty reform.
Policy Implications
•Threats of international investment arbitration by powerful companies can be effective in guiding a state’s regulatory
behaviour.
•Regulatory chill is a relevant consideration for all public policy areas, not just within environmental regulation where the
concept has originated and developed.
•Policy responses to a perceived threat of arbitration are mediated by political and economic factors including political will
and financial capacity of the state.
•Improving policy maker knowledge of the obligations produced by international investment agreements and existing case
law may reduce the chance of regulatory chill responses.
Introduction
International investment agreements (IIAs) are treaties
between two or more states usually for the purpose of pro-
motion and protection of cross-border investments. IIAs out-
line a set of rights for foreign investors, such as the right to
fair and equitable treatment and the right to compensation
in the case of direct or indirect expropriation (Bernasconi-
Osterwalder et al., 2012). Most IIAs also provide for a form
of international arbitration referred to as investor-state dis-
pute settlement (ISDS), which gives foreign investors a pro-
cess to sue states within which they have invested if
government actions (broadly defined as ‘measures’within
such treaties) are perceived to negatively impact the value
of their investment. The IIA indicates for the purposes of the
agreement ‘who’is an investor and ‘what’is an investment,
informing which investors have access to ISDS and for
which investments (International Institute for Sustainable
Development and The Royal Institute of International Affairs,
2016).
IIAs were developed in response to the expropriation of
foreign investments and other forms of mistreatment by
governments in socialist and newly developing states,
alongside a fear that courts in these states would be biased
in favour of national interests (Tienhaara, 2016). For devel-
oped states IIAs have been claimed to provide an avenue
to protect and promote foreign investment, and ensure fair
and effective procedures for the peaceful resolution of dis-
putes (Shekhar, 2016). For developing states they were con-
sidered a pathway to increased foreign direct investment
Global Policy (2018) 9:2 doi: 10.1111/1758-5899.12545 ©2018 University of Durham and John Wiley & Sons, Ltd.
Global Policy Volume 9 . Issue 2 . May 2018 193
Research Article
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