Safeguarding Public Welfare? Intellectual Property Rights, Health and the Evolution of Treaty Drafting in International Investment Agreements

The term international investment agreement encompasses both bilateral investment treaties (BITs) as well as free trade agreements (FTAs) which include a comprehensive chapter on investment.

Philip Morris Brands Sàrl, Philip Morris Products S.A. and Abal Hermanos S.A. v. Oriental Republic of Uruguay (formerly FTR Holding SA, Philip Morris Products S.A. and Abal Hermanos S.A. v. Oriental Republic of Uruguay), ICSID Case No. ARB/10/7 (February 2010).

Philip Morris Asia Limited v. The Commonwealth of Australia, UNCITRAL, PCA Case No. 2012–2012 (June 2011). There is already a growing amount of literature on these cases, see Voon et al. (2012), Mercurio (2012), Mitchell and Wurzberger (2011), Mitchell and Voon (2011).

Eli Lilly and Company v. The Government of Canada, UNCITRAL, ICSID Case No. UNCT/14/2 (November 2012). Another recently filed claim relating to pharmaceuticals is Apotex Holdings Inc. and Apotex Inc. v. United States of America, ICSID Case No. ARB(AF)/12/1 (February 2012).

The EU recently gained competence over investment matters. For background information, see Chaisse (2012).

Netherlands and Senegal, Agreement Concerning the Encouragement and Protection of Investments (signed 3 Aug 1979, entered into force 5 May 1981) 1261 UNTS 79 (Netherlands−Senegal BIT).

Article 8(1)(a) of the Treaty between the Federal Republic of Germany and Pakistan for the Promotion and Protection of Investments (signed 25 Nov 1959, entered into force 28 Apr 1962) 1963 UNTS 6575 (Germany−Pakistan BIT; emphasis added). See also Article 1.1. (d) of the Accord entre le Gouvernement de la Republique française et le Gouvernement de la Republique de Singapour sur l’encouragement et la protection des investissements, ensemble trois echanges de lettres (signed 8 Sept 1975, entered into force 18 Oct 1976). http://​investmentpolicy​hub.​unctad.​org. Accessed 10 Nov 2016 (France–Singapore BIT); Article 1(d) of the Agreement between Japan and the Arab Republic of Egypt concerning the Encouragement and Reciprocal Protection of Investment (signed 28 Jan 1977, entered into force 14 Jan 1978) 1225 UNTS 163 (Japan–Egypt BIT); Article 1.1. (d) of the Agreement between the Swiss Confederation and the People’s Republic of China on the Promotion and Reciprocal Protection of Investments (signed 27 Jan 2009, entered into force 13 Apr 2010). http://​investmentpolicy​hub.​unctad.​org. Accessed 10 Nov 2016 (Switzerland–China BIT).

For recent examples, see Article 9.1(1) of the Free Trade Agreement between the European Union and the Republic of Singapore (EU–Singapore FTA); Article X.3 of the Comprehensive Economic and Trade Agreement between Canada and the European Union (CETA); Article 14.2(f) of the Agreement between Australia and Japan for an Economic Partnership (signed 8 July 2014, entered into force 15 Jan 2015). http://​investmentpolicy​hub.​unctad.​org. Accessed 10 Nov 2016 (Japan–Australia EPA); and Article 11.28 of the Free Trade Agreement between the Republic of Korea and Australia (signed 8 Apr 2014, entered into force 12 Dec 2014). http://​dfat.​gov.​au/. Accessed 10 Nov 2016 (Korea–Australia FTA). In other agreements such as the Singapore–Japan FTA and the EFTA–Korea BIT, the parties have used similar long lists of examples that include IPRs but do not feature terms such as risk or profit expectation; see Article 72(a)–(b), Chapter 8 of the Agreement between Japan and the Republic of Singapore for a New-Age Economic Partnership Agreement (signed 13 Jan 2002, entered into force 30 Nov 2002). http://​investmentpolicy​hub.​unctad.​org. Accessed 10 Nov 2016 (Singapore–Japan EPA); and Article 1.2 of the Agreement on Investment between the Republic of Korea and the Republic of Iceland, the Principality of Liechtenstein and the Swiss Confederation (signed 15 Dec 2005, entered into force 1 Oct 2006). http://​investmentpolicy​hub.​unctad.​org. Accessed 10 Nov 2016 (EFTA−Korea BIT). Interestingly, Article 1 of the Canada–China BIT uses a positive list for the definition of an investment that includes IPRs and other tangible and intangible rights but thus is complemented by a negative list which clarifies what is not an investment (see Agreement between Canada and the People’s Republic of China for the Promotion and Reciprocal Protection of Investments (signed 9 Sept 2012, entered into force 1 Oct 2014). http://​investmentpolicy​hub.​unctad.​org. Accessed 10 Nov 2016 (Canada–China BIT).

The exact same or similar language is used in several recent agreements, including Article 11.28 of the Free Trade Agreement between the United States of America and the Republic of Korea (signed 30 June 2007, entered into force 15 Mar 2012). https://​ustr.​gov. Accessed 10 Nov 2016 (KORUS); Article 10.28 of the Dominican Republic–Central America–United States Free Trade Agreement (signed 28 May 2004). https://​ustr.​gov. Accessed 10 Nov 2016 (CAFTA–DR); Article 10.1(j) Australia–Chile Free Trade Agreement (signed 30 July 2008, entered into force 6 Mar 2009). http://​dfat.​gov.​au. Accessed 14 Sept 2016 (Australia–Chile FTA); Article 37(b) of the Agreement between the EFTA States and Singapore (signed 26 June 2002, entered into force 1 Jan 2003). http://​www.​efta.​int. Accessed 14 Sept 2016 (EFTA–Singapore FTA); Article 1(1)(d)(iii) of the Agreement on Investment of the Framework Agreement on Comprehensive Economic Cooperation between the People’s Republic of China and the Association of Southeast Asian Nations (signed 15 Aug 2009, entered into force 1 Jan 2010). http://​investmentpolicy​hub.​unctad.​org. Accessed 14 Sept 2016 (China–ASEAN FTA); Article 9.1(1)(g) EU–Singapore FTA; and Article 8.1 CETA. See also Article 1(b)(iv) of the Agreement between the Republic of India and the People’s Republic of China for the Promotion and Protection of Investments (signed 21 Nov 2006, entered into force 1 Aug 2007). http://​investmentpolicy​hub.​unctad.​org. Accessed 14 Sept 2016 (China−India BIT), protecting “intellectual property rights, in accordance with the relevant laws of the respective Contracting Party”. Several Model BITs also explicitly protect IPRs; see, e.g., Article 1 of the 2012 US Model BIT. http://​investmentpolicy​hub.​unctad.​org. Accessed 14 Sept 2016; Article 2(2)(vii) of the 2015 Norway Model BIT (Draft). http://​investmentpolicy​hub.​unctad.​org. Accessed 14 Sept 2016; Article 1(d) of the 2008 German Model BIT. http://​investmentpolicy​hub.​unctad.​org. Accessed 14 Sept 2016.

Emphasis added.

Article 96(i)(GG) of the Agreement between Japan and the United Mexican States for the Strengthening of the Economic Partnership (signed 17 Sept 2004, entered into force 1 Apr 2005). http://​www.​mofa.​go.​jp/. Accessed 14 Sept 2016 (Japan–Mexico FTA); Article 1139(g) of the North American Free Trade Agreement (signed 17 Dec 1992, entered into force 1 Jan 1994), (1993) 32 ILM 289, 605 (NAFTA).

The other provision, Article 1110(7), will be discussed below.

See, e.g., Article 58(f)(vi) of the Agreement between Japan and the Republic of Indonesia for an Economic Partnership (signed 20 Aug 2007, entered into force 1 Aug 2008). http://​www.​mofa.​go.​jp/. Accessed 14 Sept 2016 (Japan−Indonesia EPA); Article 9.1.(1)(h) EU–Singapore FTA.

See, e.g., Christie (1962), p. 311; Higgins (1982), p. 271; Sacerdoti (1997), p. 381; Paulsson and Douglas (2004), p. 152; Schreuer (2005); Chaisse and Nagaraj (2014), pp. 249–250.

See Rudloff Case, Interlocutory Decision (1903), (1959) 9 Reports of International Arbitral Awards (RIAA) 244, 250; Norwegian Shipowners’ Claims (Norway v. United States), Award (13 Oct 1922), 1 RIAA 307, 325; Starrett Housing Corp. v. Iran (19 Dec 1983), 4 Iran−US CTR 122.

Wena Hotels Ltd. v. Arab Republic of Egypt, ICSID Case No. ARB/98/4, Award (8 Dec 2000), (2002) 41 ILM 896, para. 98. See also CME Czech Republic B.V. v. The Czech Republic, UNCITRAL, Partial Award (13 Sept 2001). http://​www.​italaw.​com/​cases/​281. Accessed 15 Sept 2016, paras 591–609.

Ibid., citing Southern Pacific Properties (Middle East) Limited v. Arab Republic of Egypt, ICSID Case No. ARB/84/3, Award on the Merits (20 May 1992), (1993) 8 ICSID Review 328, 375, [Annex W61]. See also Southern Pacific Properties (Middle East) Limited v. Arab Republic of Egypt, paras 164–168.

On the historical development of the conditions, see Reinisch (2008), pp. 171–204; Dolzer and Schreuer (2012), pp. 99–101; Subedi (2012), p. 79. Some consider these factors to be customary international law. See, e.g., OECD (2004), p. 3.

Other IIAs which adopt this or similar language include Article 6(1) of the Agreement between Hong Kong and Australia for the Promotion and Protection of Investments (signed 15 Sept 1993, entered into force 15 Oct 1993). http://​investmentpolicy​hub.​unctad.​org. Accessed 15 Sept 2016 (Australia−Hong Kong BIT); Article 11.6(1) KORUS; Article X.11(1) CETA; Article 9.6(1) EU–Singapore FTA; Article 8(1) China–ASEAN FTA; Article 77(2) Singapore−Japan EPA; Article 11.7 Korea–Australia FTA; Article 14.11 Australia–Japan EPA; Article 4(1)(1) of the Agreement between the Republic of Chile and the People’s Republic of China concerning the Encouragement and the Reciprocal Protection of Investment (signed 23 Mar 1994, entrered into force 1 Aug 1995). http://​investmentpolicy​hub.​unctad.​org/. Accessed 15 Sept 2016 (China–Chile BIT); Article 5(1) of the Agreement between Hong Kong and Japan for the Promotion and Protection of Investment (signed 15 May 1997, entered into force 18 June 1997). http://​investmentpolicy​hub.​unctad.​org/. Accessed 15 Sept 2016 (Japan–Hong Kong BIT). See also Article 6(1) 2012 US Model BIT; Article 13(1) of the 2004 Canada Model BIT. http://​investmentpolicy​hub.​unctad.​org/. Accessed 15 Sept 2016; Article 4(2) 2008 German Model BIT.

See Paulsson (2005), p. 1: “There is no magical formula, susceptible to mechanical application, that will guarantee that the same case will be decided the same way irrespective of how it is presented and irrespective of who decides it”. On the latter point, significant differences in doctrinal and theoretical approaches exist among arbitrators which could affect the outcome of a dispute. This is not to suggest that arbitrators are biased. On this point, see Brower and Schill (2009), p. 492.

Moloo and Jacinta (2013), pp. 552–553.

For instance, Annex X.11(2) of the CETA states that the determination of whether a measure or series of measures constitutes an indirect expropriation “requires a case-by case, fact-based inquiry that considers, among other factors: the economic impact of the measure or series of measures, although the sole fact that a measure or series of measures of a Party has an adverse effect on the economic value of an investment does not establish that an indirect expropriation has occurred; the duration of the measure or series of measures by a Party; the extent to which the measure or series of measures interferes with distinct, reasonable investment-backed expectations; and the character of the measure or series of measures, notably their object, context and intent.” See also Annex 9-A(2) EU–Singapore FTA; Annex 10-C(4)(a) US−CAFTA−DR; Annex B(4)(a) of the Treaty between the United States of America and the Oriental Republic of Uruguay concerning the Encouragement and Reciprocal Protection of Investment (signed 4 Nov 2005, entered into force 1 Nov 2006). http://​investmentpolicy​hub.​unctad.​org/. Accessed 15 Sept 2016 (US–Uruguay BIT); Article 11.7, Annex 11-B(4) Korea–Australia FTA; Annex B.10 Canada−China BIT and with slightly different (and more narrow) wording Annex 2 of the ASEAN Comprehensive Investment Agreement (signed 26 Feb 2009, entered into force 29 Mar 2012). http://​investmentpolicy​hub.​unctad.​org/. Accessed 15 Sept 2016. Several Model BITs likewise incorporate such factors; see, e.g., Annex B(4)(a) 2012 US Model BIT; Annex B.13(1)(b) 2004 Canada Model BIT. Incorporation is also occurring through jurisprudence, see, e.g. Glamis Gold, Ltd. v. United States of America, UNCITRAL, Award (8 June 2009). http://​www.​italaw.​com/​cases/​487. Accessed 15 Sept 2016, para. 356.

See, e.g., Article 6(5) US−Uruguay BIT; Article 10.7(5) of the United States−Panama Trade Promotion Agreement (signed 28 June 2007, entered into force 31 Oct 2012). https://​ustr.​gov/. Accessed 15 Sept 2016 (US−Panama FTA); Article 11.7(5) of the United States−Australia Free Trade Agreement (signed 18 May 2004, entered into force 1 Jan 2005). https://​ustr.​gov/. Accessed 15 Sept 2016 (US−Australia FTA); Article 15.6(5) of the United States−Singapore Free Trade Agreement (US−Singapore FTA); Article 10.9(5) United States−Chile Free Trade Agreement (signed 6 May 2003, entered into force 1 Jan 2004). https://​ustr.​gov/. Accessed 15 Sept 2016 (US–Chile FTA); Article 11.6(5) KORUS. Several IIAs have adopted the exact same language; see, e.g., Article 8(6) China–ASEAN FTA; Article 11.7(5) Korea−Australia FTA; Article 14.11(6) Japan−Australia EPA. Article 10(2) of the Canada−China BIT is similar in effect: “This Article does not apply to the issuance of compulsory licenses granted in relation to intellectual property rights, or to other measures in respect of intellectual property rights, to the extent that such measures are consistent with international agreements regarding intellectual property rights to which both Contracting Parties are parties.” (emphasis added).

This author has made this point in several other publications. See, e.g., Mercurio (2012), pp. 899–900, 905; Mercurio (2014), p. 522. Experience demonstrates the dangers of investment tribunals attempting to interpret WTO jurisprudence; see Kurtz (2009a). See also Howse and Chalamish (2009), Kurtz (2009b). This is not an argument for the continuation of self-containment between and among the investment and trade law regimes, more so for careful consideration when drawing on or implicating another regime. In this regard, even a strong advocate of cross-fertilization between the various parts of public international law such as Kurtz states that it is “deeply regrettable as not every form of cross-systemic borrowing is being conducted sensibly or with due care both by negotiators and adjudicators”. See Kurtz (2015), p. 558.

Article 9.6(3), Annex 9-C EU–Singapore FTA.

It has been reported that Canada had proposed but EU not accepted language which would have stated that expropriation “does not apply to a decision by a court, administrative tribunal, or other governmental intellectual property authority, limiting or creating an intellectual property right, except where the decision amounts to a denial of justice or an abuse of right.” Canada undoubtedly had the Eli Lilly case in mind when proposing this language, but one wonders whether such broad language would be in the long-term interest of parties.

This point was also made in Mercurio (2012), pp. 899–900.

For a similar clause, see Annex 10-B(3)(b) Australia–Chile FTA: “Except in rare circumstances, 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.” See also Annex 10-D(4)(b) US−Chile FTA; Annex 11-B (4)(b) US−Australia FTA; Annex 11-B(5) Korea−Australia FTA; Annex B.10, Article 3 Canada–China BIT; Annex 12, Article 4 Japan−Australia EPA; Annex B(4)(b) 2012 US Model BIT; Annex B.13(1)(c) 2004 Canada Model BIT.

Yannaca-Small (2010), p. 455.

Article 2(2) of the Australia-Hong Kong BIT provides a typical example of the provision: “Investments and returns of investors of each Contracting Party shall at all times be accorded fair and equitable treatment and shall enjoy full protection and security in the area of the other Contracting Party. Neither Contracting Party shall, without prejudice to its laws, in any way impair by unreasonable or discriminatory measures the management, maintenance, use, enjoyment or disposal of investments in its area of investors of the other Contracting Party” (emphasis added). See also Article 1105(1) NAFTA; Article 11.5 KORUS; Article 10.5 CAFTA–DR; Article 10.5 Australia–Chile FTA; Article 39(2) EFTA–Singapore FTA; Article 60 Japan–Mexico FTA; Article 132 of the Free Trade Agreement between the People’s Republic of China and the Republic of Peru (signed 9 May 2009, entered into force 1 Mar 2010). http://​fta.​mofcom.​gov.​cn/. Accessed 19 Sept 2016 (China–Peru FTA); Article 143 of the Free Trade Agreement between New Zealand and the People’s Republic of China (signed 7 Apr 2008, entered into force 1 Oct 2008). https://​www.​mfat.​govt.​nz/. Accessed 19 Sept 2016 (China–New Zealand FTA); Article 7 China–ASEAN FTA.

See, e.g., Total S.A. v. Argentine Republic, ICSID Case No. ARB/04/01, Decision on Liability (27 Dec 2010), para. 106. See also Spyridon Roussalis v. Romania, ICSID Case No. ARB/06/1, Award (1 December 2011), para. 318 (noting that while the undertaking to provide FET to investors and their investments is a standard feature in IIAs, the exact language of such undertakings is not uniform, and the generality of the FET standard beyond general principles (i.e., transparency, good faith) distinguishes it from other specific obligations undertaken by the parties to a BIT). Considering the different ways in which FET may be incorporated into IIAs, the tribunal in Sempra v. Argentina noted that FET is not a clear and precise standard and instead has evolved through case-by-case determinations. See Sempra Energy International v. Argentine Republic, ICSID Case No. ARB/02/16, Award (28 Sept 2007), para. 296. See also El Paso Energy International Company v. Argentine Republic, ICSID Case No. ARB/03/15, Award (31 Oct 2011), para. 338.

The tribunal in Mondev v. United States simply observed that the minimum standard of treatment “applies to a wide range of factual situations, whether in peace or in civil strife, and to conduct by a wide range of State organs and agencies”. See Mondev International Ltd. v. United States of America, ICSID Case No. ARB(AF)/99/2, Award (11 Oct 2002), para. 95.

Waste Management, Inc. v. United Mexican States, ICSID Case No. ARB(AF)/00/3, Award (30 Apr 2004), para. 98. For analysis of fair and equitable treatment, see Yannaca-Small (2008).

See, i.e., International Thunderbird Gaming Corporation v Mexico, UNCITRAL, Award (26 Jan 2006). http://​www.​italaw.​com/​cases/​571. Accessed 15 Sept, para. 194.

Saluka Investments B.V. (Netherlands) v. The Czech Republic, UNCITRAL, Partial Award (17 Mar2006). http://​www.​italaw.​com/​cases/​documents/​963. Accessed 15 Sept 2016, paras. 301–302.

Despite the known threat, some governments continue to negotiate in this manner. See, e.g., Article 7(2)(a) China–ASEAN FTA.

See Article 3(2) of the Agreement between the Swiss Confederation and the Oriental Republic of Uruguay on the Reciprocal Promotion and Protection of Investments (signed 7 Oct 1988, entered into force 22 Apr 1991). http://​investmentpolicy​hub.​unctad.​org/. Accessed 19 Sept 2016 (Switzerland–Uruguay BIT); Article 1105(1) NAFTA and Article 2(2) Australia−Hong Kong BIT.

For a similar, although slightly less detailed, provision, see Article 9.4 EU–Singapore FTA. Of note, the provision contains an enumerated list of potential breaches of FET, limits investors “legitimate expectations” to “specific or unambiguous representations […] so as to induce the investment and which are reasonably relied upon by the investor” and states that a breach of another Article within the agreement or separate international agreement does not establish a breach of FET. On the latter issue, see also Article 7(3) China–ASEAN FTA: “A determination that there has been a breach of another provision of this Agreement, or of a separate international agreement, shall not establish that there has been a breach of this Article”.

European Commission (2016), pp. 1–2.

In so doing, the CETA is taking a minority view on the proper interpretation of a legitimate expectation, as numerous arbitral tribunals have found it is not about explicit guarantees given to a particular investor but more so about the relative fairness, stability and transparency of the local legal regime. See, e.g., International Thunderbird Gaming Corporation v Mexico, UNCITRAL, Award (26 Jan 2006). http://​www.​italaw.​com/​cases/​571. Accessed 15 Sept, at paras 27 and 147; Occidental Exploration and Production Co. v. Ecuador, London Court of International Arbitration Case No. UN 3467, Award (1 July 2004); CMS Gas Transmission Company v Argentina, ICSID Case No. ARB/01/8, Award (12 May 2005); CME Czech Republic BV v Czech Republic, UNCITRAL, Final Award and Separate Opinion, (14 Mar 2003). http://​www.​italaw.​com/​cases/​281. Accessed 15 Sept 2016; GAMI Investments, Inc. v. Mexico, NAFTA/UNCITRAL, Final Award (15 Nov 2004). http://​www.​italaw.​com/​cases/​474. Accessed 15 Sept 2016; Técnicas Medioambientales Tecmed S.A. v The United Mexican States, ICSID Case No. ARB(AF)/00/2, Award (29 May 2003); MTD Equity Sdn. Bhd. and MTD Chile S. A. v. Republic of Chile, ICSID Case No. ARB/01/7, Award (25 May 2004). See, contra, Glamis Gold, Ltd. v. United States of America, UNCITRAL, Award (8 June 2009). http://​www.​italaw.​com/​cases/​487. Accessed 15 Sept 2016, paras 620 and 766; National Grid v. Argentine Republic, UNCITRAL, Award (3 Nov 2008), at para. 173.

It should be noted that a similar limitation appears in other modern agreements, including Article 14.5 Japan−Australia EPA, which provides in Note 1: “The concepts of ‘fair and equitable treatment’ and ‘full protection and security’ do not require treatment in addition to or beyond that which is required by the customary international law minimum standard of treatment of aliens”; and in Note 2 states: “A determination that there has been a breach of another provision of this Agreement, or of a separate international agreement, does not establish that there has been a breach of this Article”. See also Article 11.5 Korea−Australia FTA and Article 4 Canada−China BIT.

Recognition of the importance of public welfare measures can also be seen elsewhere in certain agreements. For instance, the preamble of the investment chapter of the EU–Singapore FTA “reaffirm[s] each Party’s right to adopt and enforce measures necessary to pursue legitimate policy objectives such as social, environmental, security, public health and safety, promotion and protection of cultural diversity…”. In addition, Article 11.30 of the EU–Singapore FTA recognises the “importance” of and calls upon the parties to “ensure consistency” with the Doha Declaration on TRIPS and Public Health and to “respect” the 30 August 2003 Implementation Decision and subsequent amendment of the TRIPS Agreement. Likewise, the preamble to CETA recognizes “that the provisions of this Agreement preserve the right to regulate within their territories and resolving to preserve their flexibility to achieve legitimate policy objectives, such as public health, safety, environment, public morals and the promotion and protection of cultural diversity” and the parties commit to ensuring consistency to the Doha Declaration on TRIPS. Similarly, in the preamble to the Canada−China BIT the parties agree “to promote investment based on the principles of sustainable development” and in Article 18.3 to “recognize that it is inappropriate to encourage investment by waiving, relaxing, or otherwise derogating from domestic health, safety or environmental measures”.

For detailed background information, see Newcombe (2013).

It must be emphasised that there are positive aspects to the fragmentation in this regard given the importance of countries tailoring treaty provisions to their own particular risk profile and level of comfort. One example could be in the area of exceptions. The US, for instance, does not include a General Agreement on Tariffs and Trade (GATT) Article XX-type exception while other states (such as Canada) do so as a matter of course. The behaviour of both countries is rational. The US provides targeted exceptions to select provisions (e.g., the guarantee of compensation for indirect expropriation) in a manner which reflects its own domestic legal system (modelled on US constitutional law), including a strong level of property protection. Other countries do not offer the same level of constitutional protection for private property and it therefore may be more appropriate for these countries to allow for greater a level of policy discretion when it comes to interference of property rights. The author expresses his gratitude to Jürgen Kurtz for raising this issue and persuasively arguing the point.

See, e.g., Article 16 China–ASEAN FTA; Article 14.15 Japan−Australia EPA; Article 33 Canada−China BIT. Similarly, Article 43 of the EFTA-Singapore FTA provides that “nothing in the Investment Chapter shall be construed to prevent a Party from adopting, maintaining or enforcing a measure which is in the public interest, such as measures to meet health, safety or environmental concerns”.

Some IIAs, however, do in fact explicitly refer to the GATS. For instance, Article 4.9 EFTA–Hong Kong FTA states: “The rights and obligations of the Parties in respect of general exceptions and security exceptions shall be governed by Article XIV and paragraph 1 of Article XIVbis of the GATS, which are hereby incorporated into and made part of this Chapter, mutatis mutandis.”; see Free Trade Agreement between the EFTA States and Hong Kong, China (signed 21 June 2011, entered into force for Hong Kong, Iceland, Liechtenstein and Switzerland 1 Oct 2012, for Norway 1 Nov 2012). http://​www.​efta.​int/. Accessed 19 Sept 2016 (EFTA−Hong Kong FTA). See also Article 95 of the Agreement on Free Trade and Economic Partnership between Japan and the Swiss Confederation (signed 19 Feb 2009, entered into force 1 Sept 2009). http://​www.​mofa.​go.​jp/. Accessed 19 Sept 2016 (Switzerland–Japan EPA). Others, including Section 5 of the 2007 Norway Model BIT, and Article 10 2004 Canada Model BIT use similar language. The latter approach is adopted in the recent Article 14.15 Japan−Australia EPA.

For an overview of the relevant principles and jurisprudence, see Lester et al. (2012), Chapter 9 (363–417) and 643–651; Van den Bossche (2008), pp. 614–664.

Mercurio (2012), p. 905. On the other hand, Kurtz makes the point that default rules such as compensation payable for a direct expropriation forced governments to internalize the cost of state action “thereby improv[ing] the overall efficiency of government conduct by ensuring a complete evaluation of the impact (both positive and negative) of state action”. See Kurtz (2015), p. 562. Kurtz goes on to point out that a GATT Article XX-type exception to a direct expropriation would be inconsistent with the longstanding practice and interpretation of the guarantee from expropriation. Ibid., 565–566.

Chaisse, however, questions the usefulness of a general exception provision, stating they are “not a panacea and do […] not help to better balance investment protection and health protection. Such a clause appears in most cases as either unsuited for the investment law regime (with respect to the national treatment standard) or unnecessary due to the congruence with investment protection standards (fair and equitable treatment and full protection and security). Such a clause may still play a role, albeit limited, in the case of violation by tobacco control regulations of the performance requirements and indirect expropriation investment provisions. A ‘general exceptions’ clause similar to GATT Article XX may still allow states to better address health policy concerns and implement measures targeting tobacco industry. However, the main lesson is that countries having inserted a ‘general exceptions’ clause in their recent IIAs might face some disappointments soon when involved in litigation.” See Chaisse (2013), pp. 360–361.

The CETA is not the only recent agreement to establish such a feature. See, e.g., Article 18(2) Canada–China BIT (specifying that the parties may jointly decide to issue binding interpretations of the agreement); Article 21 EFTA–Korea Investment Agreement (the parties agreed to establish a Committee that endeavours to resolve disputes that may arise regarding the interpretation or application of this Agreement); Articles 11.22 and 11.23 Korea-Australia FTA (establishing a Joint Committee on similar lines to that in the EFTA–Korea Investment Agreement).

For instance, questions have arisen whether Section 3(d) of India’s Patents Act 1970 exclusion of patents on “the mere discovery of a new form of a known substance which does not result in the enhancement of the known efficacy of that substance or the mere discovery of any new property or new use for a known substance” is consistent with Article 27 of the TRIPS Agreement. For discussion, see Basheer and Reddy (2008). This section has been used to invalidate a number of patent applications, most notably Novartis’ application for cancer drug Glivec (imatinib mesylate). See Novartis AG v. Union of India (UoI) and Ors., Civil Appeal Nos. 2706–2716 of 2013 (arising out of SLP(C) Nos. 20539–20549 of 2009), Natco Pharma Ltd. v. UoI & Ors., M/S Cancer Patients Aid Association v. UoI & Ors., Civil Appeal No. 2728 of 2013 (arising out of SLP(C) No. 32706 of 2009), Supreme Court of India (1 Apr 2013). Likewise, India’s laws and application thereof relating to the issuance of a compulsory licence have also come under scrutiny as a potential breach of Article 31 of the TRIPS Agreement. See Natco Pharma Ltd. v. Bayer Corporation, Application for Compulsory Licence under Section 84(1) of the Patents Act 1970 in Respect of Patent No. 215758 (9 Mar 2012), finding that the patent holder, Bayer, (1) failed to satisfy the “reasonable requirements of the public”; (2) failed to provide the patented invention to the public “at a reasonably affordable price”; and (3) failed to work the patent in India, as required by Section 84 of the Indian Patents Act 1970.

European Commission (2016), p. 6.

The idea of carve-outs is supported by health advocates and select academics; see, e.g., Chaisse (2013), p. 361; Kelsey (2012), p. 1719. For detailed analysis of carve-outs and exclusions, see Stumberg (2013). For a useful review of options to minimise state liability for tobacco-related measures, see Mitchell and Sheargold (2015).

Office of the United States Trade Representative (USTR), TPP Tobacco Proposal (18 May 2012). This proposal was available on the USTR website but has since been removed. It remains available at http://​www.​scribd.​com/​doc/​162101394/​2013-08-12-TPP-Tobacco-Proposal. Accessed 15 Sept 2016.

USTR, Fact sheet: New proposal on tobacco regulation in the TPP (August 2013). http://​www.​ustr.​gov/​about-us/​press-office/​fact-sheets/​2013/​august/​fact-sheet-tobacco-and-tpp.

Inside US Trade (2013c). See also Action on Smoking and Health (ASH) (2013). Likewise Mitchell and Sheargold state the US affirmation is “unlikely to have much impact on the scope of obligations […] as it would seem relatively obvious that tobacco control falls within the general scope of public health measures”. See Mitchell and Sheargold (2015), p. 151.

Ibid.

Inside US Trade (2013b).

Inside US Trade (2013b). The US proposal of May 2012 explicitly called for a phase-out of tariffs on tobacco products. See USTR (2012). It has been argued that this request, as well as allowing challenges to US tobacco control measures, violates US law. See Harrison Institute for Public Law, Georgetown Law (2013).

Inside US Trade (2013a).

Inside US Trade (2014).

Inside US Trade (2014).

See, contra, Mitchell and Sheargold (2015), p. 151 (concluding that eliminating tobacco from the scope of an agreement or from dispute settlement “may also create a risk of abuse—that is, the exclusion from scrutiny of measures that are designed to protect the local tobacco industry against foreign competitors, for example”).

Department of State Cable 027439, Tobacco: Guidance for U.S. Diplomatic Posts on Health, Trade and Commercial Issues (14 Feb 1998), as cited in Lester (2012), p. 3. Lester also briefly outlines the shift in US policy in the 1990s which replaced active promotion of tobacco exports with a virtual ban on the use of governmental funds to promote tobacco exports.

See WTO, European Communities—Measures Affecting Asbestos and Asbestos Containing Products, Appellate Body Report (5 Apr 2001) WT/DS135/AB/R; WTO, Brazil—Measures Affecting Imports of Retreaded Tyres, Appellate Body Report (17 Dec 2007) WT/DS332/AB/R. See also WTO, United States—Import Prohibition of Certain Shrimp and Shrimp Products, Recourse to Article 21.5 of the DSU by Malaysia, Appellate Body Report (21 Nov 2001) WT/DS58/AB/RW; WTO, United States—Standards for Reformulated and Conventional Gasoline, Appellate Body Report (20 May 1996) WT/DS2/AB/R.

See Mercurio (2014), p. 523. This is in contrast to the earlier model of IIAs, which also attracted criticisms. See, e.g., Callard et al. (2001), p. 68.