Will Greater Precision in Investment Treaties Protect the Right to Regulate? An Assessment of the TPP's Investment Chapter

The recently concluded Trans-Pacific Partnership Agreement (TPP) and negotiations underway for other major trade and investment treaties have drawn renewed attention to the potential to reframe the substantive obligations in new investment treaties in a manner that is more supportive of regulatory autonomy than earlier treaties. One way of doing so is to more precisely define the contours of the obligations of States toward foreign investors and investments in the treaty text. This approach aims to eliminate the likelihood of successful challenges to non-discriminatory public welfare measures by providing
more guidance to arbitral tribunals. To some extent, the provisions of the TPP achieve this aim when compared to New Zealand's existing treaties. The TPP's national treatment clause demonstrates far greater precision in articulating state
commitments toward foreign investors and investments than those seen in the majority of existing treaties, including those to which New Zealand is a party. The indirect expropriation clause also offers a greater degree of precision than clauses in older investment treaties, but nevertheless may not sufficiently constrain arbitral discretion in respect of regulatory measures and
is less precisely drafted than equivalent provisions in some of New Zealand's other treaties. The fair and equitable treatment clause continues previous treaty practice in granting broad discretion to arbitrators through the use of evaluative language and references to imprecise concepts. Experience from the body of decided investment cases suggests that the wording of this provision, in particular, might not go far enough toward ensuring that non-discriminatory public welfare measures do not attract liability, given that previous investment tribunals have interpreted similar provisions in such a way as to find States
liable to compensate foreign investors. States negotiating other investment treaties (such as the Regional Comprehensive Economic Partnership, to which New Zealand is a negotiating party) should consider drafting the relevant provisions with greater precision so as to further reduce the breadth of adjudicative discretion entrusted to tribunals.