Regulatory Chill In Investor-State Arbitration: Impact On State Sovereignty
- IJLLR Journal
- 2 hours ago
- 1 min read
Salony Kumari, Amity University Noida (Amity Law School)
Dr. Rekha Verma, Amity University Noida (Amity Law School)
“Investor-State Dispute Settlement cases have increased to over 1,200 cases worldwide as of 2023, and concerns have been raised about their impact on state regulatory autonomy and sovereignty.”
Source: United Nations Conference on Trade and Development (UNCTAD) Investment Dispute Settlement.
ABSTRACT
Investor-state dispute settlement (ISDS) mechanisms embedded in international investment agreements (IIAs) have increasingly attracted scholarly and policy attention on account of their potential chilling effect on legitimate state regulation.
This paper examines the phenomenon of 'regulatory chill' the deterrence of good- faith public-interest legislation driven by states' apprehension of liability under investment treaty arbitration. Drawing upon arbitral jurisprudence, empirical case studies, and doctrinal analysis, the paper demonstrates that ISDS creates structural asymmetries which inhibit the sovereign regulatory capacity of host states, particularly in the domains of public health, environmental protection, and fiscal policy. The paper further argues that existing doctrinal safety valves such as the necessity defence, the police powers doctrine, and the fair and equitable treatment standard are insufficient to fully restore regulatory autonomy. In response, it advocates for systemic reforms including explicit treaty carve- outs, the establishment of a multilateral investment court, and enhanced transparency norms, in order to reconcile the imperatives of investment protection with the inviolable right to regulate in the public interest.
Keywords: Regulatory Chill; Investor-State Arbitration; State Sovereignty; ISDS Reform; Fair and Equitable Treatment; Police Powers Doctrine; International Investment Agreements.
