International investment law and public health: the need for forward-looking reforms

Abstract

INTRODUCTION

For many years, the potential impact of international investment agreements (IIAs) and investor-state dispute settlement (ISDS) on public health policy has been a cause of concern to many governments and civil society groups. Attention on this issue has often focused, understandably, on the high-profile arbitrations brought by Philip Morris against tobacco control measures implemented by Australia and Uruguay.¹ While Australia and Uruguay were ultimately successful in defending their respective cases,² these and other public health-related disputes contributed to changes in investment treaty drafting by some states, such as the inclusion of general exceptions clauses that cover public health measures and/or carve-outs from ISDS for tobacco control measures.³ However, these changes in treaty drafting were largely reactive to ISDS cases that had already arisen, and changing circumstances and new public health priorities raise new questions about how international investment law might impact public health.

This article considers possible new directions for future research relating to public health and international investment law, focusing on two distinct issues. The first issue is the extent to which IIAs impact states’ policy space to enact public health measures. It begins by briefly surveying the public health-related ISDS claims that have arisen to date, and the common changes in treaty drafting that have emerged in the past fifteen years in reaction to these disputes, including clarifications on the scope of indirect expropriation obligations, general exceptions clauses and tobacco carve-outs. It then considers some broader and more novel treaty provisions that have been adopted or considered, and the research needed to develop techniques that would enable IIAs to create flexibility for states to protect public health and respond to unforeseen threats. The article’s second issue considers a different perspective on the relationship between public health and international investment law. Unlike the discussion of policy space, which views public health and international investment law as being in conflict with one another, the second part of the article considers the new trend of investment facilitation agreements and whether new treaties could be designed that increase and incentivize investments which promote or enhance public health.

POLICY SPACE FOR PUBLIC HEALTH MEASURES

Relevant investment disputes: public health in conflict with investment protection

Much of the literature to date on the relationship between public health and investment protection has focused on the extent to which IIAs can limit or impact states’ autonomy or policy space to regulate and protect public health.⁴ The concern about policy space largely revolves around the scope of actual or potential investor claims that challenge public health-related measures or involve investors in the health sector. While a detailed survey of all of the relevant investor-state disputes is beyond the scope of this article,⁵ a brief overview of these cases is necessary to contextualize the changes in treaty drafting that have been adopted to date. To facilitate this analysis, the cases have been categorized as follows: (i) disputes relating to the tobacco industry; (ii) disputes relating to pharmaceuticals and health services; (iii) disputes relating to hazardous substances and/or environmental health.

Disputes relating to the tobacco industry

The first two investor-state arbitrations involving the tobacco industry were brought under the North American Free Trade Agreement (NAFTA), although neither of these cases focused on public health as the justification for the measures.⁶  Feldman v Mexico concerned the imposition of a sales tax on tobacco products by Mexico that was designed to minimize ‘gray market’ exports,⁷ while Grand River v United States of America involved a challenge by indigenous peoples in Canada to an agreement through which a group of major tobacco companies had settled domestic lawsuits with dozens of US states.⁸

As noted above, Philip Morris’ claims against tobacco control measures adopted by Australia and Uruguay have, in many respects, been the ‘apex’ of the relationship between international investment law and public health. In Philip Morris v Australia, the tribunal never had to consider whether the measures at issue—Australia’s tobacco plain packaging rules—were consistent with the Hong Kong–Australia BIT⁹, because in the jurisdictional phase of the proceedings the tribunal found that Philip Morris had restructured the ownership of its Australian subsidiary to enable it to bring the IIA claim, which constituted an abuse of right.¹⁰ As the case did not end up turning on the public health justification of the measure, it provides little guidance for other public health-related disputes (unless the relevant investor engages in corporate restructuring to access ISDS). Thus, while Philip Morris has lost both of its IIA claims to date, the decision in Philip Morris v Australia did not turn on the public health effects of the measure, instead reflecting the particular factual circumstances and litigation strategy that led to the arbitration.

The Uruguay case, which was initiated first and proceeded to the merits, provides particularly useful insights into how investor-state arbitral tribunals have considered the consistency of public health measures with investment treaties. In the first phase of the proceedings, Uruguay objected to the jurisdiction of the tribunal on the basis that Philip Morris’ investment in the country did not qualify as an investment under Article 25 of the International Centre for the Settlement of Investment Disputes (ICSID) Convention.¹¹ That aspect of the tribunal’s decision is considered further below, but the argument was ultimately rejected by the tribunal. At the merits stage, Philip Morris’ argument that Uruguay’s packaging regulations had indirectly expropriated its trademarks was unanimously dismissed, because the trademarks retained ‘sufficient value’ and, therefore, the measures had not had the level of economic impact on Philip Morris necessary to be deemed an expropriation.¹² The tribunal then noted that even if this were not the case, the measures were also a ‘valid exercise’ of Uruguay’s police powers, which would have provided an alternative basis on which to dismiss the expropriation claim.¹³ The tribunal noted that ‘protecting public health has since long been recognized as an essential manifestation of the State’s police power’,¹⁴ and that a measure which is such an exercise of a state’s legitimate police powers would thereby not constitute a compensable expropriation.¹⁵ Because Uruguay’s tobacco packaging regulations were bona fide measures to protect public health, were non-discriminatory and proportionate, the tribunal held that they would fall within the state’s police powers and, therefore, not constitute an expropriation.¹⁶

Philip Morris had also claimed that Uruguay’s packaging regulations were inconsistent with the obligation to provide fair and equitable treatment. The tribunal unanimously dismissed this claim in relation to the requirement that graphic health warnings cover at least 80 per cent of the front and back of a package, finding that the measure was ‘a reasonable measure adopted in good faith to implement an obligation assumed by the State under the [World Health Organization’s Framework Convention on Tobacco Control]’.¹⁷ The fair and equitable treatment claim was also dismissed in relation to the other measure at issue—the single presentation requirement—because regardless of whether it achieved its aims, it was a ‘reasonable’ measure when adopted,¹⁸ although this aspect of the decision was only by a majority.¹⁹ The dissenting arbitrator, Mr Gary Born, instead concluded that the single presentation requirement violated the fair and equitable treatment obligation because ‘it is wholly unnecessary to accomplishing its only stated objective and instead prohibits substantial categories of conduct that do not accomplish that objective’, leading to a ‘fundamental lack of rationality and proportionality’.²⁰

Disputes relating to pharmaceuticals and health services

There have been several investor-state disputes with publicly available awards that involved claims by pharmaceutical companies, health services providers or other investors in the medical sector. Each of these cases has potential public health implications, concerning access to medicines or the availability of health services, although the government measures being challenged were not always justified on public health grounds. There have also been other claims by pharmaceutical or health companies that were threatened, actually initiated but then withdrawn or settled before arbitration,²¹ or were decided through arbitration but where the documents are not publicly available.²² One of the most notable threats of a dispute that has not yet proceeded to arbitration was a claim by pharmaceutical company Novartis against Colombia’s issuance of a compulsory licence for a prominent cancer drug, Glivec.²³ Poland is also reportedly currently in the early stages of a dispute with a private equity firm that owns a chain of pharmacies, in which the investor is challenging a law that favours individually owned pharmacies over retail chains.²⁴

While the Achmea v Slovak Republic dispute is most famous for its consideration of the applicability of IIAs within the EU, the substance of the dispute was an investor challenging changes to the regulation of the health insurance industry, including a ban on the generation of profits from public health insurance.²⁵ While the Slovak Republic had argued that the reforms were made in the public interest and for the good of the health care system,²⁶ the tribunal ultimately found that regardless of the reason for their enactment, they violated key protections under the IIA, particularly fair and equitable treatment.²⁷

The most well-known dispute involving a pharmaceutical company is Eli Lilly v Canada, in which Eli Lilly challenged the decision of Canadian courts to invalidate patents protecting two of its products. The challenge centred on whether the ‘promise utility doctrine’—which was the basis on which the courts rejected both patents–represented a ‘dramatic’ departure from previous Canadian patent decisions.²⁸ Ultimately Eli Lilly was unsuccessful in proving this, with the tribunal noting that the Canadian court decisions were not arbitrary or discriminatory,²⁹ and rejecting claims that the International Patent Cooperation Treaty gave rise to ‘legitimate expectations’ that their patent would meet the substantive requirements of Canadian law.³⁰

Two known arbitral awards have related to authorizations or regulatory frameworks for medicines other than intellectual property rights. In Apotex v USA the claimant was a generic drug manufacturer who challenged certain decisions and enforcement actions by US regulators that temporarily prevented their products from being sold in the US market.³¹ An earlier claim by Apotex had been dismissed for lack of jurisdiction because the company was not an investor in the USA.³² In a second arbitration its claim of discriminatory treatment proceeded to the merits, but was ultimately dismissed because the companies’ competitors were held not to be in ‘like circumstances’ with Apotex.³³ In Les Laboratoires Servier v Poland, the claimant pharmaceutical company challenged the withdraw of marketing authorization for certain branded medicines by Poland. The public version of the award is heavily redacted, so the party's arguments and the tribunal’s reasoning remain opaque. But the tribunal found that Poland’s actions constituted an indirect expropriation, and were discriminatory and disproportionate.³⁴ It appears that Poland sought to claim the measures fell within the state’s police powers, but the tribunal’s findings on this point are redacted. All that is clear from the award is that the tribunal held that the burden was on the Claimant to establish that the regulatory actions were ‘inconsistent with a legitimate exercise of Poland’s police powers’,³⁵ and it appears that the Claimant succeeded in meeting this burden, but the reasoning on this issue and any public health considerations are unknown.

Disputes relating to hazardous substances and/or environmental health regulations

Several investor-state arbitrations have concerned the regulation of hazardous substances or other environment-related measures that may also affect public health. In many of these cases, the health aspects of any public interest justification of the measures at issue can be hard to disentangle from environmental concerns. The measures could be characterized as environment-related health measures or as health-related environmental measures.³⁶ For example, Tecmed v Mexico concerned administrative action against a landfill, but the tribunal found that the measures were not justified by any risk the landfill posed to the ‘environment, the ecological balance or the health of the population’.³⁷ In the unusual case of Allard v Barbados, an investor sued the state for failing to maintain a sewage facility. This allegedly caused a significant raw sewage spill and consequential environmental-health risks that detrimentally impacted an ecotourism business.³⁸ The investor was ultimately unsuccessful in the claim for an expropriation of their ability to run their ecotourism business.³⁹

In two NAFTA Chapter 11 arbitrations, the respondent state was able to successfully defend a measure controlling substances that posed a serious risk to human, animal or environmental health.⁴⁰ In Chemtura v Canada, Canada successfully defended its decision to cancel approvals for using lindane, a highly toxic pesticide.⁴¹ Similarly, the USA successfully defended a Californian ban on adding methyl tertiary butyl ether (MTBE) to fuel, based on the risk of contamination of water supplies, in Methanex v US.⁴² In both cases, the tribunals found sufficient scientific support to show that the measures at issue were legitimate public interest regulations.⁴³ However, states invoking public health or environmental contamination risks as a justification for regulation have not always succeeded. Canada was found liable to an investor for banning the export of polychlorinated biphenyl (PCB) waste from Canada to the US for treatment in SD Myers v Canada.⁴⁴ Canada had argued that the ban was justified because of the highly toxic nature of PCBs, but the tribunal found on the evidence that there was ‘no legitimate environmental reason for introducing the ban,’⁴⁵ and the measure had been enacted to protect the local Canadian waste disposal industry.⁴⁶

Common themes in investment disputes relating to public health

Some common themes can be discerned from this overview of some of the key public health-related investor-state disputes. First, for both of Philip Morris’ challenges to tobacco control measures (which were labelling regulations that affected the use of trademarks) and in pharmaceutical-related disputes such as Eli Lilly v Canada (which concerned the recognition of patents), intellectual property rights were a key part of the ‘investment’ which was allegedly protected by the relevant IIA.

Second, in several cases, the public health justification of the measure was a key part of the tribunal’s finding that there was no violation of the relevant investment treaty obligation, particularly in Philip Morris v Uruguay, Chemtura v Canada, and Methanex v United States.⁴⁷ The reasoning of each of these tribunals demonstrates that at least some arbitral tribunals are willing to accept public health as a justification for measures that may have negatively impacted an investor covered by an IIA, reinforcing the notion that IIAs do not always curtail regulatory autonomy to enact legitimate public health measures. In those cases where the respondent states were unsuccessful in defending the claims, many of the tribunals found on the evidence that the measures were not, in fact, legitimate public interest regulations, because they were discriminatory or disproportionate,⁴⁸ or were disguised protectionism for local businesses.⁴⁹

Common treaty-drafting approaches to protect public health and their limitations

While these cases illustrate that well-supported public health or environmental-health regulations can be successfully defended before ISDS tribunals, there is no guarantee of such a finding, as future tribunals may take different approaches to interpreting IIAs and investors are likely to continue trying to challenge public health measures. The mere threat of litigation or the costs of defending a claim (even if the state is ultimately successful) can create regulatory chill. For example, the threat of an ISDS claim was reportedly used to deter Canada from pursuing new cigarette labelling rules in the 1990s.⁵⁰ While Australia was ultimately successful in arguing that the tribunal did not have jurisdiction to hear Philip Morris’ claims against its tobacco plain packaging regulations, the cost to Australia of defending the claims was reportedly in the tens of millions of dollars,⁵¹ and while the litigation was pending, it may have contributed to a chilling effect on similar plain packaging measures being adopted in other jurisdictions.⁵²

In light of this, it is unsurprising that many contemporary IIAs include provisions that specifically safeguard policy space for public health measures.⁵³ Some of the most prominent examples are: (i) clarifications on the scope of indirect expropriation; (ii) the inclusion of general exceptions clauses referring to public health; and (iii) tobacco carve-outs. There are other treat drafting reforms that may also increase policy space for public health measures—such as clarification of the kinds of ‘legitimate expectations’ of an investor that might be relevant to whether the fair and equitable treatment obligation has been breached⁵⁴—but this article focuses on reforms that specifically address public health.

It is now typical for investment treaties to include an annex or other provision that clarifies the scope of the indirect expropriation obligation, and that clarifies that ‘non-discriminatory regulatory actions by a Party that are designed and applied to protect legitimate public welfare objectives, such as public health, safety and the environment, do not constitute indirect expropriations, except in rare circumstances’.⁵⁵ These clarifications are similar to the customary police powers doctrine.⁵⁶ Many IIAs concluded in the past 15 years may also contain a general exception clause—modelled on provisions such as Article XX of the WTO’s General Agreement on Tariffs and Trade or Article XIV of the General Agreement on Trade in Services—which allows a state to take measures that are ‘necessary to protect human, animal or plant life or health’, but subject to the proviso that the measures do not constitute ‘a means of arbitrary or unjustifiable discrimination between the Parties where like conditions prevail, or a disguised restriction on investments’.⁵⁷ Either of these provisions would likely be welcome to a state seeking to defend a public health measure against a challenge by an investor,⁵⁸ but the investor claim would still have to be fully litigated to resolve whether the measure constitutes an indirect expropriation or whether it was covered by the general exception. Moreover, at least one arbitral tribunal to date has found that even where a general exception covered the measure at issue this may not absolve the respondent state of the obligation to pay compensation.⁵⁹

The public-health-related treaty provisions that provide the strongest protection for public health, and which appear to be a more direct reaction to controversial ISDS claims, are those that actually prevent investors from bringing claims, through denial of benefits mechanisms or through carve-outs from ISDS.⁶⁰ The first and most well-known of these provisions is the denial of benefits mechanism in the CPTPP relating to ‘tobacco control measures’.⁶¹ This clause was negotiated in the shadow of Philip Morris’ claims against Australia (a CPTPP party) and Uruguay, and represented a compromise after some negotiating parties argued for a wider exclusion of tobacco from protection under the agreement.⁶² While denial of benefits clauses are common in IIAs, using such a mechanism to safeguard policy space for a particular category of measure was novel, and did not appear to be borrowed from any other regime of international law or domestic law. A more straightforward tobacco carve-out from ISDS can be found in several subsequent IIAs, particularly those entered by Australia and Singapore.⁶³ A smaller number of agreements, including the Indonesia–Australia Comprehensive Economic Partnership Agreement⁶⁴ and some Singaporean FTAs, have gone further and included carve-outs from ISDS for any measure ‘that is aimed at protecting or promoting human health’.⁶⁵ A recent note by the Secretariat to United Nations Commission on International Trade Law (UNCITRAL) Working Group III included a broad exclusion of ISDS for measures that protect public health, public safety, or the environment.⁶⁶ This development may suggest that the idea of ISDS carve-outs for public interest measures including public health measures is becoming more widespread, but it is yet to be seen if the model clause drafted by the UNCITRAL Secretariat finds favour with states and is included in any treaties.

Shifting from reactive treaty drafting to proactive flexibility mechanisms

The treaty drafting tools adopted to date to provide policy space in relation to public health are not without utility, and in many disputes could potentially have a meaningful impact on the outcome. However, as the survey of cases above demonstrated, many tribunals had been willing to recognize the importance of public health as a justification for measures even in the absence of these provisions. Thus, as Baetens argues, in many respects, these newer IIAs make explicit the regulatory power of states to enact legitimate public health measures that had already been recognized by at least some arbitral tribunals.⁶⁷ General exceptions clauses and clarifications on the scope of indirect expropriation obligations provide little concrete guidance for states and investors about which public health measures are safeguarded from challenge by the provisions. The use of tests such as ‘necessary to’ in general exceptions has often been interpreted as a demanding burden for host states to fulfil,⁶⁸ while no guidance currently exists on the method of review a tribunal should employ to determine if a measure is ‘designed and applied for public health’ and therefore is not an indirect expropriation.⁶⁹

Similarly, these treaties generally do not define the scope of ‘public health’ itself.⁷⁰ One notable exception is the CPTPP’s clarification on indirect expropriation, which has a footnote which states that:

For greater certainty and without limiting the scope of this subparagraph, regulatory actions to protect public health include, among others, such measures with respect to the regulation, pricing and supply of, and reimbursement for, pharmaceuticals (including biological products), diagnostics, vaccines, medical devices, gene therapies and technologies, health-related aids and appliances and blood and blood-related products.⁷¹

This definition of public health, which is inclusive rather than exhaustive, identifies some of the particular public health priorities of the governments at the time of the treaty’s negotiation, but does not provide any tools to help a tribunal determine which other public interests or policies may fall within (or be excluded from) the scope of ‘public health’.

In contrast to these vague provisions, carve-outs from the scope of ISDS for tobacco control measures provide greater certainty for states and investors about the measures that will be shielded from attack by the provision. These provisions were clearly motivated by a desire to prevent future disputes like the Philip Morris v Uruguay and Philip Morris v Australia cases, but by reacting only to the threat of ISDS claims in relation to tobacco control measures, the carve-outs have limited their future utility as tools to protect public health. Their very clarity also makes these provisions narrower and less flexible, meaning they may not provide policy space for states to regulate to address the next public health crisis. For example, while Australia could rely on this clause in relation to any future claims about tobacco plain packaging laws, there is no similar safeguard against challenges to controversial new e-cigarette regulations, because many e-cigarettes do not contain tobacco or products derived from tobacco and, therefore, fall outside the CPTPP definition of tobacco control measures.⁷² Similarly, the carve-out does not contribute to policy space for the use of labelling regulations or health warning requirements in relation to other products that contribute to greater risk of non-communicable diseases—such as high-calorie processed foods or alcoholic beverages.⁷³

The limitations of the current public health clauses in IIAs became starkly apparent in 2020 with the COVID-19 pandemic and the wide range of radical measures many governments implemented to safeguard public health. Despite some suggestions that investors may use ISDS to challenge some of these measures, there are no known arbitrations under IIAs concerning public health measures taken during the pandemic.⁷⁴ However, there was a real potential for such claims, as highlighted by many law firms and academics.⁷⁵ While it remains unknown whether legitimate public health measures taken to address the threat posed by the COVID-19 pandemic would have withstood challenges through ISDS, it is clear that none of the public health clauses inserted in IIAs to date had contemplated the need for pandemic-related measures or the kinds of widespread emergency measures that were adopted.

Thus, a useful avenue for future research on how to prevent IIAs from creating barriers to public health regulation is to consider how to design novel clauses or mechanisms for these agreements that would create or safeguard policy space, provide sufficient clarity for states and investors to minimize the likelihood of unmeritorious claims bring initiated, but which also provide the flexibility for states to address future public health problems that may, at the time a treaty is drafted, be entirely unforeseen.

One way in which this goal could be achieved is to design treaty provisions that cover a defined yet flexible category of public health measures. For example, treaties could include an exception or carve-out that would exclude measures that are adopted to implement or give effect to international treaties or regulations relating to public health—such as World Health Organization agreements or regulations—from the scope of ISDS. This could draw on a broader proposal by Tienhaara for an exclusion from ISDS for all measures taken ‘in furtherance of obligations under international agreements’, which would cover public health agreements as well as environmental agreements and others.⁷⁶ This would provide flexibility, as the carve-out would automatically cover any international agreements concerning new public health situations. However, such an approach may not be sufficient to deal with public health emergencies, given the slow pace at which international agreements are negotiated, or in situations where there is no multilateral consensus on a public health issue, as is currently the case with e-cigarettes. Another option that could be considered is a mechanism included within the treaty itself or in an annex, such as a list of public health sectors or measures that are excluded from ISDS, which can be updated by the treaty parties from time to time. These are merely early suggestions that may serve as a launching pad for future research, but what they have in common is that they provide the opportunity for a clearer delineation of what ‘public health’ measures may be safeguarded against claims of violation of an IIA, while allowing flexibility to respond to new and unforeseen public health concerns.

Another possibility that could be explored is the adoption of public health exceptions or carve-outs that are accompanied by a procedural mechanism which would allow the treaty parties to decide if the exception/carve-out applied to the measure at issue, with the treaty parties’ decision being binding on any arbitral tribunal.⁷⁷ These procedural mechanisms are similar to the joint interpretation mechanisms that are established by some IIAs, which allow for the treaty parties or a joint committee representing those parties to issue interpretations of treaty provisions which are binding on arbitral tribunals. While such a mechanism does not necessarily provide certainty in advance for states and investors about the measures that would be covered by the exception or carve-out, these procedural mechanisms provide an avenue for greater state control over their interpretation and limit arbitral discretion.

MAKING IIAs WORK FOR PUBLIC HEALTH

The previous section of this article considered the relationship between public health and IIAs as one of conflict, where IIAs are viewed as a potential block or limitation on the ability of states to enact necessary public health measures. However, the aims of international investment law are not opposed to promoting other interests like public health, and there is potential for IIAs to forward public health goals. By channelling investment into projects and services that promote public health, investment treaties can potentially promote better health outcomes.⁷⁸ This section considers two important areas for future exploration, with a particular examination of how investment treaties can be designed to facilitate investments that promote public health goals, and whether there is a need to limit the scope of treaty coverage concerning investments that might cause negative public health effects.

Facilitating investment that is beneficial to public health

There are many kinds of investment that can contribute to public health objectives, including but certainly not limited to investment in: health infrastructure, health services provision, and pharmaceutical manufacturing facilities that provide secure local manufacturing capacity. Even where investment does not directly target the health sector, it may have direct and significant public health benefits, such as investment in water and sanitation infrastructure. Only a relatively small number of IIAs include provisions that promote a positive health agenda, with Thow, Alschner and Aljunied estimating this to be around 4 per cent of IIAs.⁷⁹ These provisions include health-related obligations imposed on investors, but which typically include aspirational rather than mandatory language,⁸⁰ or are clauses that seek to use investment to ‘promote health objectives’.⁸¹

Beyond clauses specific to public health, investment facilitation is becoming an increasing focus of investment treaties. Investment facilitation provisions tackle ‘ground level obstacles to investment’ to make it easier for investors to invest, and can take a wide variety of forms, including clauses relating to the regulatory environment, streamlining of approvals processes, clauses requiring governments to consult with stakeholders, and cooperative mechanisms between the treaty parties, including technical assistance and capacity building initiatives.⁸² Investment facilitation provisions are being included within broader IIAs,⁸³ or in specialized agreements, such as the WTO’s new Investment Facilitation for Development Agreement, the Angola—EU Sustainable Investment Facilitation Agreement and the ASEAN Investment Facilitation Framework.

In addition to provisions that facilitate investment in general, some agreements also include provisions that specifically target sustainable investment, although these provisions are currently the exception and not the rule. The most wide-reaching example is the Protocol on Investment to the African Continental Free Trade Agreement (AfCFTA), which includes a chapter on investment facilitation and promotion, that specifically targets investments that contribute to ‘sustainable development’.⁸⁴ The Protocol defines ‘sustainable development’ to include ‘in accordance with relevant United Nations documents and resolutions, the three interdependent and mutually reinforcing pillars that are economic development, social development, and environmental protection’.⁸⁵ Although not explicitly mentioned, public health would likely fall within the scope of social development, and for many measures may also be related to economic development and environmental protection. Public health is mentioned in the preamble to the agreement as a legitimate public welfare objective.⁸⁶ The Protocol encourages states to streamline administrative procedures and adopt other procedural changes to facilitate investment and explicitly allows states to ‘introduce incentives to attract, retain, and expand investments that foster sustainable development.’⁸⁷

While there are a small number of treaties, such as the AfCFTA Protocol on Investment and the Angola—EU Sustainable Investment Facilitation Agreement that seek to enable a wide range of investments that promote ‘sustainable development’, and thus include investments that further public health, the current focus of investment facilitation is often the green economy and net-zero transition.⁸⁸ There are justified critiques that investment facilitation agreements to date may do little to forward their goals, as many of the necessary policy reforms to enable greater investment need to be taken at the domestic level to ‘address the real economic determinants of sustainable investment’, such as the high cost of finance.⁸⁹ While these criticisms should be borne in mind, there is clear potential for future research on investment treaty provisions that can facilitate and promote investment which furthers public health objectives. These clauses may build from the current wave of investment facilitation agreements and treaty provisions, but there is also potential to consider a wider range of options. For example, Baetens has suggested looking to the Kyoto Protocol as a model for an agreement that ‘aims to harness private capital flows to achieve public goals.’⁹⁰ She suggests working towards ‘a new and ambitious public health agreement’ that could facilitate and incentivise new health-related investments, as well as providing protection for investors, and establish dispute settlement procedures, which would ‘take such cases out of the “general” [ISDS] system’.⁹¹

Limiting the scope of treaty coverage for investments that are harmful to public health

In addition to considering how investment treaties can better facilitate and promote investments that will positively benefit public health, there is also room for future research to explore the complimentary issue of whether investments that pose significant harms to public health should be excluded from investment treaty protections, and how such an exclusion could be affected in the treaties. This is not a novel idea. In Philip Morris v Uruguay, Uruguay argued that the public health impacts and cost of tobacco-related illness in the country meant that Philip Morris had harmed the economic development of Uruguay, and therefore did not meet the criteria to qualify as an ‘investment’ protected under the ICSID Convention.⁹² This argument was unsuccessful, as the tribunal found that contribution to economic development is not a ‘required criterion of investment’ under the ICSID Convention⁹³ and that Philip Morris had made a significant contribution of ‘technical, financial and human resources’ over a thirty year period, had paid significant taxes, and had in fact been encouraged to expand their operations by the Uruguayan Government.⁹⁴ While Uruguay unsuccessfully argued that the tribunal should not have jurisdiction over Philip Morris’ claims on this basis, the relevant IIA did include a provision that would have initially allowed Uruguay to refuse to admit or allow Philip Morris’ investment on the basis of public health reasons.⁹⁵

The suggestion that a contribution to economic development is a requirement to qualify as an ‘investment’ protected by the ICSID Convention, which was most prominently suggested by the tribunal in Salini v Morocco,⁹⁶ has been controversial and has received mixed reactions from arbitral tribunals.⁹⁷ However, some newer investment treaties have explicitly included the criteria in their definition of ‘investment’ that will be protected by the agreement. The Protocol on Investment to the AfCFTA includes the clarification that ‘For greater certainty, the investment must have the following characteristics: commitment of capital or other resources, the expectation of gain or profit, a certain duration, assumption of risk, and a significant contribution to the Host State's sustainable development’ to be protected under the agreement.⁹⁸ By going so far as to refer to sustainable development, rather than the broader term of economic development, this language would arguably strengthen arguments that investments that were harmful to public health or the environment may not qualify for protection under an investment treaty. There is a need to consider the benefits and risks of these provisions in greater detail, and to clarify the most effective language for excluding investments that may harm human health from the protection of investment treaties.

A related area for future research, that will be of particular relevance to states that do not wish to entirely exclude investments that are harmful to human health (or other public interests) from the scope of coverage of an investment treaty, is to consider whether specific aspects of the definition of investment should be curtailed to minimize the risk of specific kinds of health-related ISDS disputes. As was detailed above, many of the public health-related ISDS claims to date concerned intellectual property rights—including both of Philip Morris’ disputes against Australia and Uruguay, and Eli Lilly’s challenge to Canadian patent law. One provision that is already common in IIAs and which has been the subject of recent attention in light of the COVID-19 pandemic and concerns about vaccine availability is an exception from expropriation obligations for the issuance of compulsory licences that comply with the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights.⁹⁹ States could consider whether the scope of intellectual property rights protected by IIAs should be narrowed or set additional requirements before an investor can invoke the IIA’s protections in relation to intellectual property rights.¹⁰⁰

CONCLUSIONS

International economic law in general, and international investment law in particular, are currently undergoing a time of transition. The growth of agreements focussing on investment facilitation, rather than investment protection, and the increasing focus on investment as a tool to promote sustainable development, creates an opportunity for the regime to be rethought and reformed. To date, much of the research on the relationship between IIAs and public health has focused on policy space, and considered the sorts of mechanisms that states have adopted to safeguard regulatory autonomy for public health measures, including clarifications on the scope of indirect expropriation obligations, general exceptions clauses, and dispute settlement carve-outs for tobacco control measures. While carve-outs for tobacco control measures were a novel innovation, and the small number of newer treaties that contain carve-outs for a broader category of public health measures are even more notable, the policy space provisions enacted to date often do not define the scope of what constitutes ‘public health’ and thus leave considerable discretion to arbitral tribunals. There is a need to consider and explore novel and innovative approaches that can provide greater clarity and state control around what public health measures will be shielded from challenge under IIAs. In addition, there is wide scope for new research on how investment treaties can positively impact public health, through investment facilitation and promotion provisions that encourage and enable health-related investments.

Footnotes