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Do investment treaties unduly constrain regulatory space?

Lorenzo Cotula

Journal article

International investment law (IIL) is at a crossroads. A large number of investment treaties and investor-state arbitrations, and rapidly expanding scholarly writing, have made IIL one of the most dynamic branches of international law. However, the proliferation of treaties and arbitrations has also made IIL a contested field, with campaigners and some experts questioning substantive standards and dispute settlement mechanisms, and commentators warning of a ‘legitimacy crisis’. Controversy about the interface between investment promotion and regulatory space has been central to these developments.

This article argues that investment treaties, even of the ‘recalibrated’ type, can have far-reaching implications for regulatory space, requiring careful thinking through. This is particularly the case in low and middle-income countries, where room for tightening regulatory frameworks may be greater, constraints on public finances harder, and capacity gaps more challenging. Ultimately, choices on the boundaries between investment promotion and regulatory space are eminently political, and a key challenge ahead is increasing democratic participation in the making of these political choices.

This article was produced under IIED’s Legal tools for citizen empowerment project.

Publication information

  • External: X00128
  • Published: Dec 2014 - Questions of International Law
  • Themes: Law, Natural resource management
  • Source pub: Questions of International Law
  • Journal ref: QIL 9 (2014), 19-31
  • Language: English

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Project information

International treaties, national laws and transnational contracts define the terms of an investment and influence the distribution of its costs and benefits. To promote inclusive sustainable development, IIED works with partners to rethink these legal documents and the process through which they are formulated.

More at www.iied.org:
Rethinking investment treaties, laws and contracts