BALANCING INVESTOR PROTECTION AND SUSTAINABLE DEVELOPMENT IN INVESTMENT ARBITRATION

Abdurakhmonova Noila

Abstract

Investment arbitration was originally developed primarily to protect
investors from wealthy developed countries against arbitrary expropriations by
governments in developing countries. However, over time, it has taken on a very
broad dynamic and is nowadays often used to limit regulatory interference of any
government with the business plans of any foreign or foreign owned companies.
This is causing "regulatory chill" in many parts of the world, where governments,
in particular in less developed or less affluent countries, are weary of changing or
enforcing environmental protections, labor laws, consumer laws, etc., because they
have already been forced to pay after costly arbitration proceedings in similar
cases. We cite a number of examples where countries were trying to introduce
sensible regulation in response to changing circumstances and ended up paying
damages to investors who might never have been able to implement their business
ideas even in the absence of the regulatory changes. As a result, we not only see an
undue limitation on the sovereignty of many countries and governments and their
ability to regulate in the best interest of their citizens. We also see more and more
countries turning their backs on investor-state arbitration and on bilateral or
multilateral protection treaties in general. A complete breakdown of the established
system may not be imminent but talk about a crisis does no longer seem alarmist.
What is needed, therefore, is a re-balancing of the rights and obligations of the investors and the host countries, and a better appreciation of sustainable
development goals and other valid public interest considerations in the host
countries. This idea is not new and we are not the first ones to postulate the need
for change. However, we may be offering some new ideas and a new evaluation of
some existing ideas on how such a change could be brought about in practice.