chapter  10
19 Pages

The ‘object and purpose’ of Indian international investment agreements: failing to balance investment protection and regulatory power

ByPRABHASH RANJAN

In recent times, a number of Investor-State Arbitration (ISA) disputes have emerged between foreign investors and host states involving a wide array of host states’ sover eign regu latory meas ures such as envir on mental pol icy,1 privatization pol icy,2 urban pol icy,3 meas ures to protect water ser vices,4 monetary pol icy,5 taxation6 and many others (Dolzer and Schreuer 2008: 7-8; Kaushal 2009: 511-12). This is not to suggest that in each such dispute regu latory meas ures have been found violating the International Investment Agreement (IIA).7 In fact, limited empirical work done in this area shows that that the number of cases decided in favour of host coun tries are more than cases decided in favour of foreign investors (Franck 2007), and that stat ist ically there is no evid ence to show that the outcome of the ISA cases is de pend ent on the de velopment status of the respondent state or the presiding arbitrator (Franck 2009). However, inconsistent legal conclusions and reasoning of arbit ral tri bu nals (Spears 2010),8 adjudication of such wide range of sover eign regu latory meas ures by ISA tri bu nals and award of substantive damages to foreign investors in some high-profile cases9 have gen erated an intense debate about limits to regu latory power of the host state to adopt meas ures for pursuing non-investment ob ject ives due to their IIA obli ga tions,10 in both the de veloping and de veloped world. For example, South Africa is reviewing its entire IIA programme,11 Bolivia and Ecuador gave up their mem ber ship of the International Centre for the Settlement of Investment Disputes (ICSID),12 the Russian Federation decided to terminate the pro vi sional applica tion of the Energy Charter Treaty in July 2009 (Salacuse 2010:470), the United States and Canada adopted new model IIAs.13