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Protection of Regulatory Autonomy and Investor Obligations: Latest Trends in Investment Treaty Design

The scope of states’ power to regulate in the public interest, within the normative context of an applicable investment protection treaty, has been the central issue of recent investor-state arbitration cases. Against the backdrop of a debate on the legitimacy and acceptable parameters of international investment protection regimes, many arbitral tribunals have become more sensitive to host states’ public policy objectives and more willing to balance investor protection with other interests. States themselves have sought to intervene in the practice of investment arbitration on the level of applicable treaty norms, as the wording of specific treaty provisions has been a key factor in case outcomes. This practice has received only limited attention in scholarly literature and commentary to date. By analyzing the body of recent investment treaties, this article outlines the treaty design innovations through which states have sought to provide a firm legal basis for a more balanced understanding of investment protection and a more nuanced arbitral approach: (i) specific protections of host states’ regulatory autonomy; and (ii) imposition of binding obligations on investors. The provisions protecting host states’ regulatory autonomy explicitly enshrine the states’ power to regulate and through a variety of tools limit opportunities for broad interpretations of investment guarantees conferred through the investment treaty. The stipulation of investor obligations represents a true paradigm-shifting intervention, which does away with the normative asymmetry of investment treaties but presents a number of novel issues in the process. Together, the treaty innovations characterize the advent of a new, more balanced generation of investment treaties.