This chapter looks at the wide topic of public interest as a justification for breaches of investment treaty protections. It considers non-economic matters such as environmental protection, human rights and culture as well as the concept of the right to regulate which has afforded states more policy space in their interactions with foreign investors.

Chapter 7 takes the analysis beyond the conduct of hostilities and issues related to physical damage to foreign investments. It addresses the rules on expropriation universally included in investment treaties and analyses them against the backdrop of armed conflict. The chapter shows that the protection from expropriation in times of armed conflict principally follows the same general parameters as in times of peace: investment treaties offer protection from abusive property seizures often observed during armed conflict as well as unreasonable or discriminatory restrictions on the use of property and businesses. When it comes to indirect expropriation, the chapter suggests to follow a mitigated version of the so-called police powers doctrine. While the debate on the delineation between expropriatory measures and non-compensable regulations is not new, the context of armed conflict provides new insights based on domestic and international case law on war-time property restrictions. Armed conflict and the interests involved, the chapter argues, broaden the scope of police powers and increase the state’s leeway in restricting the free enjoyment of property.

Chapter 8 concludes the analysis of the most important substantive investment treaty clauses by examining the fair and equitable treatment standard. It argues that armed conflict does not put into question certain guarantees of fair decision-making and adjudication, whereas it proposes a balanced relativisation of the protection of investor expectations in the context of armed conflict. The determination of whether treatment is fair and equitable can only be made in the light of the individual circumstances of conflict. When balancing the interests of investors in a stable regulatory framework against the state’s regulatory interests, the urgency and severity of these public interests in armed conflict should be accorded particular weight. Under the proposed reading, the fair and equitable treatment standard is flexible enough to consider the circumstances of an armed conflict in a balanced and nuanced way. Well aware of existing controversies and opposing lines of jurisprudence, the chapter suggests ways to embrace the standard’s flexible nature and counteract tendencies in arbitral practice that arguably overemphasise investor interests.

In this chapter, the method of ‘frame-determination’ for IIA expropriation clauses is applied and three limits of the actus reus condition of typical IIA expropriation clauses are identified. (1) On the macro-structural level, concerning the interaction of IIA clauses with the rest of international law, facile references to customary international law are shown to be problematic: ‘’ in IIAs does not refer to a customary norm of certain validity and great specificity. (2) On the micro-structural level, the necessity of treating direct and indirect expropriation as fully equivalent is structurally inherent in typical IIAs. (3) All legality conditions are equal and cannot be doubled in the actus reus of indirect expropriation. The structure of typical IIA clauses does not support the majority of arguments based on ‘police powers’ or on a ‘right to regulate’.

This chapter deconstructs the main argument of orthodox doctrinal scholarship on regulatory expropriation. It argues that the strong impetus of orthodox scholarship to solve problems leads both those favouring strong investor protection and those arguing for a wide state freedom to regulate to see the problem in virtually the same terms and to develop the same solution. The problem identified is that neither of the two extremes is sustainable; the solution is that a balance has to be struck. Yet such a view is ideological, not legal, because it cannot contemplate and must deny a priori the possibility that IIA expropriation clauses are skewed in one direction or that the law does not provide for a balanced, proportional solution. Doctrinal scholarship, however, must analyse the law as it is, not as we may wish it to be.

This Chapter introduces the focus of the work. It explains that international adjudication has come under increasing criticism and backlash in recent years, and links this to long-lasting debates about the proper reach of international law and adjudication. The Chapter explains that adjudicative deference to States has been frequently identified as a possible option to respond to these concerns. The Chapter thereafter connects deference to debates about State sovereignty and autonomous decision-making authority. It introduces the structure of the book and identifies the key audiences and benefits to which it is directed, as well as how it differs from existing scholarship on deference in international adjudication.

This chapter draws together the preceding conceptual and empirical analysis of deference in international adjudication to explore how the principles discussed in the preceding pages might be used to inform approaches to deference in practice. This chapter does not develop a prescriptive approach to deference in international adjudication. It instead offers a framework to inform the analysis of deference in international adjudication. Section 10.1 addresses debates as to whether international adjudicative deference to domestic decision makers is desirable at all. Section 10.2 examines whether approaches to deference should be ‘fixed’ in favour of some doctrinal approaches over others. Section 10.3 explores how a framework for analysing deference might be created, which allows evolution and malleability in approaches to deference while securing some level of predictability and transparency in practice. Section 10.4 concludes.

This Chapter concludes the book. It notes that the book has identified the structures of deference in international adjudication and the implications of deference for adjudication under public international law. It has developed a conceptual framework for understanding deference, to demonstrate that different modes of deference disclose differing approaches to dividing authority between domestic and international decision makers. The study has also linked deference to several fundamental debates about the relationship between public international law and domestic law, and between private property rights and State interests. Pursuing these lines of analysis, the book used deference to tell a story of international law, with international private property claims providing a useful setting for this story. By analysing approaches to deference in the private property cases of adjudicators in four such regimes, the study revealed the relationship between deference, State sovereignty, and power in international adjudication. It further identified how international adjudicators use deference to manage continuity and change, and to settle conflicting claims to authority.

This Chapter introduces the concept of deference and illustrates how it functions in international adjudication. Section A links the concept of ‘deference’ to that of ‘authority’. It explains that ‘authority’ refers to an actor’s ability to induce deference from another actor. Linking deference to authority provides a conceptual framework to expand the analysis of possible reasons for deference, and further explains why different adjudicators may structure deference more or less categorically. The Chapter introduces the concept of ‘second-order reasons’, and examines four accounts of authority based upon differing second-order reasons. It uses this analysis to explore why international adjudicators might defer to domestic decision making authority. Section B examines how theories of authority impact the ‘degrees’ of deference. Some theoretical accounts conceptualise authority as conclusive or suspensive, and thus their application in adjudicative reasoning might prompt categorical approaches to deference. Other approaches to conceptualising authority, by contrast, accommodate more flexible analysis. This conceptual framework informs the empirical evaluation in Part II.

Rather than treating second-order reasons for deference as conclusive, the adjudicator could instead treat them as suspensive. Adjudicators adopt a suspensive view of domestic authority in the modes of deferral and abstention. Adjudicators adopting this view of authority refer to second order reasons for deference to justify not engaging with certain matters for a period of time (deferral) or at all (abstention). In both modes, domestic decisions are not endorsed. The adjudicator instead declines to exercise its own decision making authority in favour of the exercise of domestic decision-making authority. This is a form of ‘passive’ judicial participation. In these modes, deference is displayed by the adjudicator refraining from exercising its decision-making authority in preference to the decision-making authority of a domestic actor. The adjudicator does by declining to determine a dispute, or a particular matter in dispute, until a domestic decision maker has had an opportunity to make a decision relevant to the case (deferral) or at all (abstention).

The law of expropriation stands at the crossroad of three fundamental rights: the right of States to expropriate, their right to regulate and the right of foreign investors to property. Underlying these rights and their interplay, one finds the protection of public and private interests and the conflict between them. In establishing a balance between these, international investment agreements (IIAs) have traditionally subjected the legality of expropriation to certain conditions and failed to address explicitly the issue of the right of States to regulate. A great number of IIAs concluded in the 2010s tackle this issue, typically by distinguishing expropriatory measures from regulatory measures. Likewise, those agreements also contain articles or annexes that specify the scope and modalities of application of the expropriation provision with regards to specific matters pertaining in particular to intellectual property rights, land, subsidies and grants. Those specifications are analysed in Chapter 7. Analysing in detail treaty practice and arbitration practice as well as their evolution, Chapter 6 examines the two main issues raised by the protection of foreign investors against illegal expropriation: (1) the types of expropriation covered; and (2) the conditions of legality of expropriation. As a preliminary matter, it first focuses on the types of property protected, in particular contractual rights.

As a result of the multilateralisation of FDI operations, of the criticism formulated against international investment law and arbitration and of the evolution of States’ policies, limitations placed on the protection of foreign investors have spread and diversified over time in international investment agreements (IIAs). Chapter 7 focuses on these limitations as contained in IIAs concluded in the 2010s, as these IIAs incorporate both traditional limitations and the new limitations that have recently appeared in treaty practice. It provides an analysis of treaty limitations by distinguishing between them on the basis of their scope of application, meaning mainly whether they apply to IIAs as a whole or to specific provisions thereof.

The UN Sustainable Development Goals (SDGs) established under the 2030 Agenda espouse a notion of sustainable development articulated along three integrated dimensions: economic development, social development and environmental protection. When exploring relevant trade regimes, the 2030 Agenda considers exclusively the role of the WTO. In this way, significant evolutions in the international trade agenda are overlooked, in particular the growing efforts on the conclusion of trade liberalisation deals on a preferential basis. One distinctive feature of these negotiations is the emergence of a common will to reach an agreement on sustainable development issues. As a result, most recent preferential trade agreements (PTAs) usually include a chapter on trade and sustainable development (TSD) covering both the promotion of labour rights and the protection of the environment. In view of this evolution, the question arises as to whether and to what extent the PTAs contribute to the attainment of the SDGs. Against this background, this chapter offers a legal appraisal of the environmental provisions included in the TSD chapters of the latest EU PTAs. This practice is relevant, in view of the role the EU has been playing in the setting of the current network of PTAs and in the negotiations for multilateral environmental agreements.