Research On The Return Of Host States’ Right To Regulate In International Investment Agreements

Host states’ right to regulate is an expression of a country’s sovereignty,which is the freedom of the state to regulate its political,economic,legislative and other regulatory activities,and has a natural legitimacy.In the early days,in order to prevent host countries from infringing on the property rights of private investors,contracting states signed a series of international investment agreements by ceding part of their national regulatory power,and the partial "departure" of regulatory power has achieved great success in promoting capital flows and maintaining a universal international order.With the development of the international investment,the phenomenon of investors using investment agreements that tend to challenge the public interest of host countries has occurred,which has a greater impact on the regulatory power of host countries.Investors’ challenges to regulatory power have even caused the phenomenon of "regulatory chills",with some countries changing or abandoning their legislative process to avoid being involved in huge compensation,and some countries even taking the radical approach of withdrawing from the ICSID,which has triggered the international community’s reflection on the issue of regulatory power.The theory of sustainable development provides a theoretical basis for the return of regulatory power through the clarification of regulatory power and the protection of public interest.The "return" of host states’ right to regulate has become inevitable.Traditional investment agreements create extensive and profound obligations for host states to prevent expropriation and other actions by host countries from infringing on investors’ property rights.The development of neoliberalism has promoted the protection of investors in traditional investment agreements,but neglected the protection of public interests of host countries,which has caused many obstacles to the exercise of host states’ right to regulate.In terms of substantive rules,the absence and ambiguity of the exception clause,the overly broad application of the treatment clause,and the expanded interpretation of indirect expropriation are numerous problems,which make it difficult to provide substantive safeguards for the exercise of the host state’s regulatory power.In terms of procedural rules,investment arbitration,which is derived from commercial arbitration,has shown low transparency of arbitration,the lack of a mechanism to prevent abuses,the excessive power of interpretation of the arbitral tribunal,and the lack of an appeal mechanism to monitor and correct the award.In addition,the high cost of arbitration and the difficulty in guaranteeing the independence of arbitrators also directly affect the fairness of investment arbitration and the host country’s initiative to participate in arbitration.It is common for investors to take advantage of the ambiguity of investment agreement and the tendentious position of arbitral tribunals to challenge the regulatory power of the state,which greatly reduces the regulatory space of host countries in the public sphere,and the legitimacy of traditional international investment agreements and arbitration mechanisms is widely questioned.The "balance" brought by the cession of regulatory power can no longer be adapted to the new international investment order,and has even created new imbalances.The rebalance between investors and host countries has become the core of the new investment agreement reform,which is reflected in the return of national regulatory power.The new investment legislation has gradually changed from the external balance emphasizing checks and balances with other countries’ legislation and international law to the internal balance emphasizing the balance of rights and obligations of the rules themselves,which is specifically reflected in the protection of public interests of host countries in terms of regulatory power,with the ultimate goal of achieving a balance between investor protection and host country policy space.The US 2012 BIT model,CETA,TTIP,TTP and other recent investment agreements reflect the trend of return to the right to regulate.The procedural rules include the pre-arbitration procedures such as consultation and exhaustion of local remedies,the joint interpretation mechanism of the parties,the transparency rules,the procedural safeguards such as the prevention of malicious prosecution,and the construction of the appeal mechanism.The abovementioned institutional arrangements strike a good balance between investment liberalization and government regulation,and provide a good model for the design of rules of regulatory power,which is worthy of our reference.As a large country that is both a capital-importing country and a capital-exporting country,China has a realistic motive to return to the right of regulation,and to a certain extent,its contracting practice reflects the protection of the right of regulation.Facing the new round of rule reconstruction of the international investment order,we should fully investigate and participate in the advanced practices in foreign countries,take into account the scale of China’s investment,investment destinations and other realistic factors,explore the design of China’s regulatory power rules and response strategies for BIT negotiations,and take care of the regulatory power at both domestic and foreign investment law levels,so as to fully protect the legitimate rights and interests of China and its investors and win a greater voice in the practice of international investment reform.This paper takes a look at the national rules and regulations in international investment agreements.This paper takes host states’ right to regulate in international investment agreements as the object of study,explains the concept and the theoretical and practical basis of the return of it,summarizes the specific practice and characteristics of the return of regulatory power through the study and analysis of the rules of regulatory power in traditional investment agreements and new investment agreements,and puts forward suggestions and strategies for the design of the rules of regulatory power and the response to the return of regulatory power in China,taking into account the current situation of the rules of regulatory power in China.