The Social Cost of International Investment Agreements: The Case of Cigarette Packaging

Abstract

Abstract National governments have signed and ratified over three thousand International Investment Agreements (IIAs), which for the first time give multinational firms standing to sue host governments in international arbitration tribunals. IIAs have led to a host of high-profile and controversial legal disputes that have led to claims that investor state arbitration may be impeding governments in their ability to regulate and to protect their citizens’ well-being, a phenomenon known as “regulatory chill.” To understand the normative implications of regulatory chill, I analyze investor state arbitration over tobacco in Australia and Latin America. I examine legislative discussions over possible regulatory changes in Australia and Uruguay, the two cases that have faced disputes over tobacco laws, as well as in Latin American countries that provide access to the legislative debates and had legislative initiatives that sought to strengthen tobacco legislation. These cases demonstrate that tobacco packaging laws in a number of countries have been delayed or reduced as a result of fears of potential arbitration among the government and legislators. This regulatory chill is normatively problematic as it suggests that states may be giving up more of their regulatory authority than they initially believed they would have to under IIAs.