Balancing Regulatory Interests through an Exceptions Framework under the Right to Regulate Provision in International Investment Agreements
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BALANCING REGULATORY INTERESTS THROUGH AN
EXCEPTIONS FRAMEWORK UNDER THE RIGHT TO
REGULATE PROVISION IN INTERNATIONAL
INVESTMENT AGREEMENTS
JULIE KIM*
INTRODUCTION
The primary purpose of the bilateral investment treaty (BIT)
program has long been to provide foreign investment protection to
the capital-exporting, developed countries.1 In contrast, the capi-
tal-importing, developing countries entered into BITs to attract
foreign investment without fully appreciating the legal conse-
quences. 2 Free trade agreements (FTAs) with investment chapters
such as the North American Free Trade Agreement (NAFTA) were
concluded to achieve milestone objectives such as investment pro-
motion and liberalization (in addition to investment protection)
while not seriously considering the policy space of the contracting
states.3 Indeed, prior to NAFTA, carving out policy space in inter-
national investment agreements (IIAs) was not of utmost concern
* Research Associate, Asia Pacific Law Institute of Seoul National University
(SNU). This article is from myJ.S.D. dissertation which was completed at the SNU School
of Law in 2017. I would like to express my gratitude to Professor Hi-Taek Shin, my advisor,
for his invaluable guidance and support.
1. SeeANDREW NEWCOMBE & LLUfS PARADELL, LAW AND PRACTICE OF INVESTMENT TREA-
TIES: STANDARDS OF TREATMENT 44-47 (2009); UNITED NATIONS CONFERENCE ON TRADE &
DEV., INTERNATIONAL INVESTMENT RULE-MAKING: STOCKTAKING, CHALLENGES AND THE WAY
FORWARD 12 (2008), http://unctad.org/en/Docs/iteiit20073-en.pdf (The underlying
assumption was that the treaty would protect investment from the developed country in the
territory of the developing country and, in that way, attract additional investment from the
developed country to the developing country.) [https://perma.cc/P3QA-HX8U].
2. See Lisa E. Sachs & Karl P. Sauvant, BITs, DT~s, and FDI Flows: An Overview, in THE
EFFECT OF TREATIES ON FOREIGN DIRECT INVESTMENT: BILATERAL INVESTMENT TREATIES,
DOUBLE TAXATION TREATIES AND INVESTMENT FLOWS xxvii (Karl P. Sauvant & Lisa E. Sachs
eds., 2009). From the point of view of the capital-exporting country, the basic purpose of
bilateral investment treaties (BITs) is to protect investors from political risks and instability
and, more generally, safeguard the investments made by its nationals in the territory of the
other state. This is why they were originally concluded primarily between developed and
developing countries, as the former were virtually the only sources of foreign direct invest-
ment (FDI), and the latter were seen as often having risky and volatile business environ-
ments. See id.
3. See Trans-Pacific Partnership art. 9.15, Feb. 4, 2016, New Zealand Ministry of For-
eign Affairs & Trade, https://www.mfat.govt.nz/en/about-us/who-we-are/ treaties/ trans-
pacific-partnership-agreement-tpp/text-of-the-trans-pacific-partnership/ [hereinafter TPP]](ViewImageLocal?handle=hein.journals/gwilr50&div=12&collection=&method=preview&ext=.png&size=3)
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