Last week, I said that it wasn't clear to me how the "right to regulate" provision in the European Commission's proposed TTIP ISDS rules would function, or whether it would have any real impact. Now I see that some people are worried it will have too much impact. This is from Inside US Trade:
U.S. business representatives are expressing fear that the European Commission's proposal for reconfiguring investment protection rules in the U.S.-EU trade deal would make it almost impossible for investors to successfully sue governments for failing to treat their investments fairly.
Officials from the U.S. Chamber of Commerce and the National Foreign Trade Council (NFTC) last week argued that the proposal appears to give governments an unfettered “right to regulate.” They also said they fear that the proposal will shift the dispute process to favor governments more than is the case under the current model of investor-state dispute settlement (ISDS).
...
[The proposal would] appear to give the government an unrestricted right to regulate, Heather and Wolff noted. They pointed to language in Article 2 of the commission proposal saying parties have the right to regulate “within their territories through measures necessary to achieve legitimate policy objectives, such as the protection of public health, safety, environment or public morals, social or consumer protection or promotion and protection of cultural diversity.” Heather said there is nothing in this language that constrains a government's right to regulate.
Wolff speculated that the commission's proposal would allow any government that is a party to it to justify any measure, and that investors would be prevented from seeking compensation. In particular, Wolff said what a government can do under the guise of protecting social policy or cultural diversity can be interpreted broadly.
I remain skeptical, and it still seems to me that if you want to maintain domestic regulatory autonomy, what you really need is an exception along the lines of GATT Article XX. The Inside US Trade article also notes:
Other investment experts, however, have said that previous iterations of such wording -- usually contained in the preamble to investment chapters or agreements -- has had limited impact. They have viewed it as a general endorsement of a principle, rather than creating a meaningful right for governments that could serve as a shield in litigation.
It seems like the drafters have tried to move beyond the weak preambular language used in the past, but weren't willing to go as far as a fully functioning exception. Instead, they split the difference, and will leave the resolution up to the judicial process.
