We recently contributed Chapter 15 of Part V - Multilateral Treaties: The Trans-Pacific Partnership to The Investment Treaty Arbitration Review.

The Investment Treaty Arbitration Review fulfils an essential function. Updated every year, it provides a current perspective on a quickly evolving topic. Organised by topic rather than by jurisdiction, it allows readers to access rapidly not only the most recent developments on a given subject, but also the debate that led to, and provides context for, those developments.

This article was first published in The Investment Treaty Arbitration Review, 1st edition (published in April 2016) and is reproduced with permission from Law Business Research Ltd.


1. Introduction

The inclusion of investor state dispute settlement (ISDS) provisions in international investment agreements, including the recently disclosed Trans-Pacific Partnership, has become contentious around the world. In Australia, at least, the concern intensified after Philip Morris Asia sued the Australian Government in 2011 under the Hong Kong-Australia Bilateral Investment Treaty challenging Australia's tobacco plain packaging legislation. Critics believe the inclusion of ISDS in international investment agreements compromises a government’s sovereignty by enabling foreign corporations to sue a government for passing new laws or implementing new policies – effectively, domestic regulation in the public interest.

The authors consider that there is a real issue to be addressed, but properly understood, it is not ISDS clauses that give rise to this issue, but rather the vague nature of the substantive rights created by treaties which contain ISDS clauses. Those rights are intended to promote investment and therefore growth for the States entering into the treaties. If the advantage of growth through investment is real and the price of that investment is the creation of substantive rights stipulated in the treaties, then there must be a way for an investor to enforce those rights. Absent a proper mechanism for enforcement, the rights granted are hollow and will be unlikely to promote the investment sought.

The vague nature of the rights created by old treaties has been directly considered in the TPP. The TPP is part of a new generation of international investment agreements which, by its terms, better achieves the balance between investment protection and regulatory discretion. In our view, the TPP is unlikely to restrict a government of a member State from legitimately regulating in the public interest. We discuss below the key provisions of the TPP’s Investment Chapter (Chapter 9) which, we say, supports our argument. We concentrate on the expropriation protection in Article 9.8 primarily because it is this standard that has engendered particular concern about the potential to limit a State’s right to regulate in pursuit of non-investment policy objectives.

The protections afforded to investors in the TPP’s Investment Chapter are typical protections (such as fair and equitable treatment), which, as drafted, appear to be derived from US investment treaty practice, and can be found in similar terms in many of Australia’s modern free trade agreements. However, the TPP incorporates language that clarifies the protections, particularly the protection against expropriation. It thereby instructs the arbitrators to conduct a balancing exercise between investment protection and regulatory discretion, rather than leaving the protections open to different interpretations by different arbitrators.[1] The TPP also enlarges the ambit of the exceptions to the protections. That is, it allows a State to be exempt from the obligations of the treaty in certain listed situations in which compliance would be incompatible with key policy objectives.

With one exception, the investment protections can be enforced directly by TPP investors through ISDS. The one exception is ISDS will not apply between Australia and New Zealand (by side letter). This is not a new scenario.[2] There was a similar bilateral carve-out under the ASEAN-Australia-New Zealand Free Trade Agreement; a recognition that each country has strong mutual trust and understanding of each other’s court system, demonstrated also by the Trans-Tasman treaty on enforcing court judgments.[3]

The ISDS mechanism in the TPP is also fairly typical of modern international investment agreements, but it includes additional procedural safeguards which protect governments from unmeritorious claims, ensure transparency, and allow TPP member States to maintain control over the TPP’s interpretation (rather than the arbitral tribunal).

Critics who argue that there should be no ISDS at all in the TPP and other international investment agreements risk rendering investment protections virtually unenforceable. By relying solely on inter-state dispute resolution measures, the affected investor must persuade its State to pursue a claim. It is also important to remember the historical justification for ISDS, which was to protect businesses that invested in foreign jurisdictions where there may not have been robust democracies, rule of law or effective enforcement systems. Although most of the TPP member countries are developed nations, concerns continue, because even in developed countries, States can, consistent with their own laws, breach the acceptable standards enshrined in treaties. Given that the treaties are designed to promote investment by providing clear statements of principle, it is appropriate that the final determination of whether that principle has been violated should be truly independent of the State which is the defendant. It would also be unsaleable for a treaty to stipulate that an investor from a developing country can only have recourse to the host State’s courts, while an investor from a developed country can prosecute its claim by independent arbitration. The agreement evidenced by the TPP is most unlikely, unless it is enforceable by investors from all countries in the same manner. That is, there must be reciprocity.

A blanket exclusion of ISDS in all international investment agreements is not the answer to concerns about a government’s right to regulate in the public interest. The answer lies in the drafting of the investment protections themselves and, we submit, the text of the TPP goes some way to achieving the necessary balance between investment protection and regulatory discretion.

2. The Trans-Pacific Partnership

2.1 Introduction

The TPP is the world’s largest regional free trade agreement, between 12 countries who represent approximately 40% of the global economy – Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam.[4] The text of the TPP, negotiated for about 7 years, was agreed on 5 October 2015.

It is not known how soon it will enter into force (or if at all, being at the whim of each country’s domestic politics)[5]. It will enter into force when (or if) at least six of the original signatories, who must account for at least 85% of the combined GDP of the original signatories in 2013, have ratified the agreement.[6] This means that the TPP cannot enter into force unless both Japan and the United States ratify it.

There are many extant agreements between TPP member countries. Australia, for example, already has an investment agreement with every TPP member country except Canada.[7] Although Australia’s existing agreements with Mexico, Peru and Vietnam will terminate on entry into force of the TPP, by side letter,the remainder of Australia’s investment agreements (and indeed, it seems all of the extant agreements between other TPP member countries) will remain in effect. This may mean that a foreign investor has a choice between suing under an existing investment agreement and suing under the TPP and, if it has that choice, will no doubt choose the agreement which provides to it the best protection. However, as discussed below, the curtailed scope of the application of the most-favoured nation clause in the TPP means that an investor is unlikely to be able to sue under the TPP and rely on better terms in an existing agreement (or the absence of carve outs from investment protection in that existing agreement as found in the TPP). This is because the MFN clause in the TPP is limited in its application to future international investment agreements only.

2.2 The TPP – its terms


Non-investment policy objectives rarely appear in the preamble of older international investment agreements (such as the Hong Kong-Australia BIT). As a result, tribunals resolving disputes under those agreements have interpreted the standards therein (and any exceptions) in light of the narrow stated object and purpose of the treaty (i.e. investment protection and promotion). The preamble is an aid to the interpretation of a treaty[8] and is commonly used by arbitral tribunals to identify the treaty’s object and purpose and to construe its terms.[9]

By contrast, some modern agreements contain language in the preamble which lists other non-investment policy objectives (such as the promotion of sustainable development). The preamble to the TPP does this; it expressly recognises a State’s “inherent right to regulate”. It also states that the TPP member countries resolve to:

preserve the flexibility of the Parties to set legislative and regulatory priorities, safeguard public welfare, and protect legitimate public welfare objectives, such as public health, safety, the environment, the conservation of living or non-living exhaustible natural resources, the integrity and stability of the financial system and public morals.

This preamble should go some way to identifying areas which will be legitimate areas of regulation, even if that regulation adversely affects an investment of an entity from another TPP member State. However, it is unlikely that the preamble amounts to carte blanche for regulation in the specified areas. Presumably regulation must otherwise be consistent with the terms of the TPP; for example, it must not be discriminatory (i.e. discriminate in favour of domestic investments) and it must be reasonable (interpreted widely) to meet a legitimate policy.

Investor and Investment

The definitions of investor and investment are important to the scope of application of the rights and obligations of an international investment agreement. This is subject to the terms of the ‘denial of benefits’ clause which permits the exclusion of certain investors from protection.

Other than a State Party, there are two types of investors under the TPP: a national or an enterprise of a Party.[10]

A “national” is a natural person who has the nationality of a Party according to Annex 1-A or a permanent resident of a Party.[11] Annex 1-A provides for Party-specific definitions of ‘nationality’. As with most investment treaties, the TPP bases nationality exclusively on the laws of the State of the claimed national. In Australia, a natural person who is an Australian citizen, as defined in the Australian Citizenship Act 2007, has Australian nationality.

An “enterprise of a Party” is an enterprise constituted or organised under the law of a Party or a branch located in the territory of a Party which also carries out business activities there.[12] In respect of the inclusion of a “branch”, an enterprise of a Party need not be an enterprise constituted or organised under the law of a Party. It may be constituted and organised under the law of any State (including a non-State Party). However, in that case what is critical is that the entity carries out ”business activities” in a State that is a Party to the TPP.

However, this definition needs to be read with Article 9.14, a denial of benefits clause, which permits the exclusion of certain investors. Such a clause is not uncommon in modern treaties. It enables a TPP member country to deny the protections in the Investment Chapter to:

  • an investor, who is owned or controlled[13] by a (natural or legal) person of a non-State party or the denying State party, who has no substantial business activities in the territory of any State party other than the denying State Party;

  • an investor, who is owned or controlled by a (natural or legal) person of a non-Party and the denying State party has in place measures with respect to that non-Party (or a person of the non-Party) that prohibits transactions with the investor or that would be breached if the benefits of the Investment Chapter were accorded to the investor.

The first carve-out gives TPP member countries the authority to carve out from the definition of “investor” shell companies owned by persons of a third country which do not have substantial business activities in the territory of a State Party. Its purpose is to stop treaty shopping. Unlike earlier treaties, it will not be possible for investors from non-Party States to structure their investment to take advantage of the treaty. While the principle of “abuse of right” prevented the late adoption of a nationality for the purpose of a treaty, that general principle of international law is much narrower than the denial of benefits clause in the TPP.

The second carve out relates to an entity which has a substantial business in a TPP member State but the State, which might otherwise have been the subject of a claim, has regulations in place which prohibit transactions with the investor. An example of such a regulation is the long standing US embargo[14] on almost all trade and investment involving Iran, prohibiting US persons[15] from engaging in transactions or dealings with Iran. On 16 January 2016, the US lifted the nuclear-related “secondary sanctions” (directed towards non-US persons for conduct involving Iran that occurs outside the US) but the domestic trade embargo remains in place.

Article 9.14 will not operate automatically. The right to deny will need to be exercised through positive action by the TPP member country in question (such as an exchange of letters with the relevant investor).[16]

“Investment” is defined widely and is again based on US investment treaties (including the Australia-US FTA).[17] The definition sets out numerous specific (but non-exhaustive) examples of an investment including intellectual property rights, equity participation in an enterprise and construction contracts and other similar contracts. The definition of “investment” expressly excludes “an order or judgment in a judicial or administrative action”. In addition, the TPP also requires that the asset has the “characteristics of an investment” such as the commitment of capital, the expectation of gain or profit, or the assumption of risk. This is not a new test.[18] It is, however, an additional hurdle for an investor to meet when bringing a claim.

Article 9.8: Expropriation and Compensation

The obligation on TPP member countries not to expropriate is described in terms with which we are already familiar. The language used is almost identical to that used in each of the existing investment treaties Australia has with TPP member countries.

Under Article 9.8, a Party must not expropriate or nationalise a covered investment, directly or indirectly though measures equivalent to expropriation or nationalisation, except:

  • for a public purpose – which is said to be a reference to a concept in customary international law[19],

  • in a non-discriminatory manner,

  • on payment of prompt, adequate and effective compensation; and

  • in accordance with due process of law.

As discussed below, Article 9.8 is to be interpreted in accordance with Annex 9-B.

By Article 9.8(6), the concept of ‘expropriation’ is clarified and narrowed. A State’s decision not to issue, renew or maintain a subsidy or grant, or to modify a subsidy or grant, absent a legal or contractual commitment to do so, or in accordance with the terms of the subsidy or grant, does not of itself constitute expropriation.

It is worth mentioning that the Hong Kong-Australia BIT, on which Philip Morris Asia relied, uses “deprivation” language only in its expropriation clause, which is atypical of investment agreements.[20] Article 6(1) of that treaty requires that investors “shall not be deprived of their investments nor subjected to measures having effect equivalent to such deprivation”. This language, which prohibits the “deprivation” of an investment, is significantly wider than the language in the TPP, which prohibits expropriation. The term “expropriation” carries with it the connotation of a “taking” of a person’s property with a view to transferring ownership of that property to another person (such as the State).[21] By contrast, a “deprivation” can occur without a ‘taking’.[22]

The meaning and scope of “public purpose” under customary international law is obviously important. The tribunal in ADC Affiliate Ltd v The Republic of Hungary[23]stated that the treaty requirement of “public interest”[24] requires some “genuine interest of the public”. Andrew Newcombe and Lluis Paradell state that, at the very least, there must be some demonstrable public interest or genuine public need and the expropriation must be made in “good faith”.[25]

It seems clear that the public purpose requirement would be breached if property were seized for the personal use of a dictator or third party or as a reprisal for another State’s conduct.[26] It is theoretically possible that the termination of a contract by a State due to a financial crisis may be a termination for a public purpose (although this has not been established on the facts in cases to date).[27]

Two cases in which the State taking was said not to be in the public interest are ADC Affiliate Ltd v The Republic of Hungary[28] and Siemens AG v The Argentine Republic.[29]

In the former, a 2001 Hungarian decree voided investors’ contracts for the operation and management of the Budapest airport. The airport was subsequently taken over by the State in 2002 but then privatised in 2005. The Hungarian government argued its measures were part of the process for Hungary’s access to the EU and served the strategic interests of the State. However, the tribunal concluded that the taking was not in the public interest. It said the subsequent privatisation of the airport which earned Hungary USD 2.26 billion rendered any public interest argument unsustainable.

In the latter case, the tribunal found there was no evidence of a public purpose because the measures in question, which had the effect of terminating a contract for the provision of national identity cards, were taken to reduce the costs to Argentina of the contract, which had been awarded through public competitive bidding, as part of a change of policy by a new government.

Neither decision should fuel a concern that a State’s right to regulate for a public purpose is being curtailed.

Indeed, according to Newcombe and Paradell, the jurisprudence suggests that States are afforded a wide margin of appreciation in determining whether an expropriation serves a public purpose. To this extent, the concern that the obligation not to expropriate may curtail a State’s right to regulate in the public interest is overstated. However, provided that the relevant State action falls within the more constrained definition of ‘expropriation’ in the TPP (as a consequence of Annex 9-B – discussed below), an expropriation which is legal, for a public purpose, and non-discriminatory must still be subject to prompt, adequate and effective compensation.

Annex 9-B

Annex 9-B circumscribes the meaning of ‘expropriation’.[30] The form of this Annex originates from the US and Canadian Model BITs which were revised in 2004.[31]

Annex 9-B expressly provides that whether an action by a Party constitutes indirect expropriation requires a case-by-case, fact based inquiry that includes consideration of the following factors:

  • the economic impact of the government action (although an adverse effect on the economic value of an investment is not sufficient of itself – a clear move away from the oft-criticised “sole effects” doctrine[32]);
  • the extent to which the government action interferes with distinct, reasonable investment-backed expectations; and
  • the character of the government action.

In respect of the second factor, the TPP expressly clarifies, by footnote,[33] that whether an investor’s investment-backed expectations are reasonable depends on factors such as whether the government provided the investor with binding written assurances and the nature and extent of governmental regulation or potential regulation in the relevant sector. We have suggested previously[34] that rights inherent in an investment should be construed to be flexible rights having regard to the natural evolution of the legal framework which existed at the time of the investment. The nature and course of that evolution will obviously differ between countries for cultural reasons. Accordingly, the concept of expropriation should only arise where the change in regulation falls outside the evolution of the law which could reasonably have been contemplated at the time of the investment.

The third factor above - the “character” of the government action - is not further explained in the TPP. The ASEAN-Australia-NZ FTA and the Malaysia-Australia FTA state that the character of government action includes its objective and whether the action is disproportionate to the public purpose. A test of “proportionality” was endorsed by the tribunal in Tecmed v Mexico.[35] The tribunal said “there must be a reasonable relationship of proportionality between the charge or weight imposed to the foreign investor and the aim sought to be realized by any expropriatory measure”.[36]

The above gives some clarity to the meaning of “indirect expropriation” under the TPP. Further, paragraph 3(b) of Annex 9-B states:

“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 expropriation, except in rare circumstances.”

Regulatory actions to protect public health are said[37] to include 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.

While some suggest the language “except in rare circumstances” should be removed from paragraph 3(b), so that non-discriminatory regulation can never be indirect expropriation, to do so would unduly favour the host State and disadvantage the investor, to the detriment of the whole purpose of international investment agreements.

In addition, Article 9.15, entitled “Investment and Environmental, Health and other Regulatory Objectives”, states:

“Nothing in this Chapter shall be construed to prevent a Party from adopting, maintaining or enforcing any measure otherwise consistent with this Chapter that it considers appropriate to ensure that investment activity in its territory is undertaken in a manner sensitive to environmental, health or other regulatory objectives.

This language is also found in the Australia-United States FTA however in that agreement it is limited to environmental objectives. The TPP is broader in its reach to “health or other regulatory objectives”. Article 9.15 requires the State to show that it determined that the measure was appropriate with respect to the objective sought. Presumably this requirement will require proof that, prior to the action the subject of complaint, the State actually turned its mind to the issue and made the determination. In addition, it seems reasonably arguable that the State must show the decision was made in good faith (i.e. not for a collateral purpose, such as avoiding the operation of the TPP).

Investment Schedules

The TPP also contains Schedules to the Investment Chapter in which each country has listed country specific measures or sectors that are exempt from particular provisions of the Investment Chapter. The exemptions are not insignificant. But, they do not apply to the expropriation protection in the Investment Chapter. Australia, for example, has listed foreign investment policy decisions including decisions made pursuant to recommendations of the Foreign Investment Review Board (FIRB), which regulates significant investments into the country. Australia has also reserved the right to adopt or maintain any measure (for example):

  • according preferences to Indigenous persons;

  • with respect to the provision of law enforcement and correctional services;

  • with respect to social services established or maintained for a public purpose such as social welfare, public education, child care, public utilities, public transport, and public housing;

  • with respect to the creative arts, Indigenous cultural expressions and other cultural heritage;

  • with respect to gambling and betting.

2.3 Does the MFN clause undo all of the work of the TPP protections?

Some commentators have suggested the most-favoured-nation clause in the TPP undermines the protections therein to the extent that it allows an investor from a TPP member country to (for example) import substantive protections[38] or more favourable definitions[39] or to bypass procedural pre-conditions to arbitration[40] from another BIT. In our view, it does not do so.

First, although it is unsettled as to whether an investor can use a MFN clause to bypass preconditions to arbitration (such as the requirement to litigate a dispute in the local courts for a certain period of time before submitting the dispute to arbitration), this issue does not arise under the TPP because the MFN clause (at Article 9.5(3)) expressly excludes dispute resolution from its scope. In any event, the procedural pre-conditions to arbitration in the TPP are competitive, as discussed below.

Secondly, Australia’s Schedule to Annex II to the Investment Chapter expressly excludes past treaties from its scope. It says:

“Australia reserves the right to adopt or maintain any measure that accords more favourable treatment to any service supplier or investor under any bilateral or multilateral international agreement in force or signed prior to the date of entry into force of this Agreement.”

Indeed, all of the TPP countries appear to have expressed in some form that the MFN clause will not extend to legal protections in treaties that are currently in force; they will extend only to protections in those treaties a host country signs in the future.

This means, for example, an investor cannot argue that Australia should be liable for actions taken under conditions that are exempt from liability which are not exempt under other BITs (for example, a decision of the Australian government not to renew a subsidy or grant which is protected under Article 9.8(6) of the TPP).

2.4 ISDS mechanism

The TPP permits arbitration not only of claims for breach of the treaty’s substantive investment protections but also for breach of an investment authorisation or investment agreement. It provides for arbitration under the UNCITRAL, ICSID and ICSID Additional Facility rules, as well as under other rules agreed by both parties.

However, the TPP shows some deference to certain forum-selection clauses that might be contained in investment agreements. Annex 9-L prohibits arbitration of claims for breach of an investment agreement’s obligations pursuant to the TPP’s ISDS mechanism if the investment agreement already provides for arbitration under one of the following prominent arbitral rules - UNCITRAL, ICSID, ICC or LCIA - and the arbitration would take place outside the territory of the respondent and in a signatory to the New York Convention. Interestingly, this carve-out would not cover investment agreements which provide for arbitration under other, equally recognisable, arbitral rules, such as the rules of SIAC, AAA, HKIAC and ACICA.

Article 29.5 (Tobacco Control Measures)

Against the backdrop of threatened and actual ISDS following the introduction of tobacco plain packaging legislation in Australia, the TPP has introduced a special (and unprecedented) clause preventing tobacco companies making use of the TPP’s ISDS provisions. This is the first product-specific exclusion of its kind. Under Article 29.5, a Party can elect to deny the use of ISDS for claims challenging a tobacco control measure. A tobacco control measure is defined very broadly.[41] The time at which such an election is to be made is effectively at large. If a Party has not elected to deny the use of ISDS with respect to such claims by the time a claim to arbitration is made (e.g. by domestic legislation), the Party can still elect to do so during the proceedings (even, it seems, after the hearing). By so doing, the claim will be automatically dismissed.

It is important to note that the carve-out is limited to ISDS only; the rights and obligations in the TPP still apply to tobacco. However, a tobacco company would have to rely on the host State’s courts to bring proceedings under Chapter 28 for any alleged breach of the TPP in relation to tobacco. Chapter 28 allows one State to pursue a dispute with another. Although this mechanism remains, it will be much harder for a tobacco company to initiate a claim. It is unlikely that a government (including the governments of the TPP member countries) would agree to bring such an action.

Procedural safeguards

Importantly, the ISDS provisions in the TPP offer ‘procedural safeguards’, some of which are common to investment agreements, some of which are new. These are summarised below.

Prior to initiating proceedings, the investor must first endeavour to resolve its dispute with the State through consultations and negotiations for at least 6 months, a time period which is typical of consultation periods in investment agreements.[42] The investor must initiate proceedings within three and a half years from the date on which the investor first acquired, or should have first acquired, knowledge of the alleged breach.[43] This limitation period is also typical.[44]

The notice of arbitration must be accompanied by a waiver, by the investor, of any right to initiate the claim before any other domestic or international court or tribunal. This requirement is intended to prevent the investor forum shopping.[45] There is also scope for the tribunal to decide as a preliminary question, on an expedited basis, an objection that a claim is manifestly without legal merit.[46] This provides a mechanism to strike out frivolous or baseless claims. A related mechanism to discourage frivolous claims is the tribunal’s ability to award costs against the investor if the tribunal finds in favour of the respondent’s objection.[47]

The investor is also expressed to have the burden of proving all elements of its claim.[48] This is unlikely to constitute a change from the position which would have prevailed absent such a provision.

The TPP has improved provisions which ensure both transparency of the arbitral proceedings and that its interpretation is within the control of member States. In respect of the former, the host State is required to provide all of the arbitral documents (including the notice of arbitration, pleadings, transcripts and the award) to the other non-disputing TPP members and to the public,[49] and hearings are open to the public. These requirements are subject to provisions for the protection of appropriate confidential information.

As regards its interpretation, the TPP’s provisions enable Parties to maintain some control. A TPP Party who is a party to an arbitration can have the question of whether a measure falls within one of its exceptions to the TPP (under Annex I or II to Chapter 9) determined jointly by the TPP Parties[50] rather than the tribunal, which interpretations are binding on the tribunal.[51]

Finally, there is a commitment by TPP member States to consider, at a later date, both a Code of Conduct for arbitrators to ISDS[52] and an appellate review mechanism to correct errors of law[53].

3. Conclusion

The worldwide concern that ISDS provisions allow foreign companies to sue governments in respect of laws and policies aimed at safeguarding the environment, health and other sensitive areas, is misdirected. It is not the ISDS mechanism that should be critiqued. Rather, attention should be directed to the substantive investment protections themselves - the nature of the rights which are created and the consequences of those rights.

The TPP aims to protect public welfare by ensuring the investment protections, such as the protection against expropriation discussed in this Chapter, build in those public welfare considerations. They are relevant to the content of the investment protection itself and not just as a possible exception to its application. To this end, the TPP goes some way to balancing the interests of governments and investors by promoting foreign investment while recognising the inherent right of governments to regulate in the public interest.

It remains the case that unless investment protections are backed by ISDS, the alternative, which would allow an investor to seek redress, is litigation in the courts of the State alleged to have breached the treaty. This would severely reduce the value of the protections on offer, particularly for those States with developing economies who have not yet developed a strong rule of law or institutions capable of applying it, particularly against the State. Accordingly, a blanket exclusion of ISDS in international investment agreements is not the answer to the above-mentioned concern.