NON PRECLUDED MEASURES IN BILATERAL INVESTMENT TREATIESANALYSING THE NORTH-SOUTH DIVIDE IN INTERNATIONAL INVESTMENT
LAW
A recent analysis1 of the Non Precluded Measures2 (NPM) clauses in India’s bilateral investment
treaties (BIT) concludes that the present formulation of NPM clauses in such treaties is inadequate to
permit the exercise of regulatory power by India for all its policy needs. Indeed the analysis finds that
matters such as public health and public order are independent permissible objectives are found in
only one and five agreements respectively.
The aforementioned analysis does not scrutinize the NPM clauses in Indian international investment
agreements from a comparative global vantage point. This makes it impossible to determine whether
NPM clauses in Indian IIAs are in accordance with global practice or an exception to the rule. This
lacunae renders any possible question of reform of Indian IIAs nugatory, since any ideas of reforming
India’s regulatory powers over foreign investors cannot operate in isolation without any reference to
general global practice.
Using India as a platform to begin a comparative study, this proposed thesis aims to be a universal
objective study of NPM provisions across a vast range of Bilateral Investment Treaties (BIT) as well
as the decisions of tribunals interpreting these treaties with the objective of thoroughly studying the
drafting of NPM clauses as well as investigating the factors, legal, social, economic and cultural- which
influence the ways in which these clauses are drafted and interpreted.
The comparative study of the trends and practices in the regulatory power of host states over foreign
investors cannot be isolated. It is necessary to take into account certain important notions and
conceptions in international law which would play a role in determining the outcome of this study.
This proposed study aims to take two major factors in account, while determining the question of
whether the NPM clauses in Indian IIAs are inadequately drafted.
The first factor to be taken into account is the doctrine of Regulatory Chill” which is describes the
phenomenon of states not undertaking regulatory measures which might result in the violation of a
treaty because of the unaffordability of the quantum of awards which might be passed against them.
Regulatory Chill is often viewed from a developed versus developing Nation perspective. Therefore,
the question which arises here is whether the perceived inadequacy in the drafting of India’s NPM
provisions is actually an example of regulatory chill.
Secondly, it is important to take into account the fact that an increasing number of developing states
are now being viewed as exporters of capital and technology. Therefore, another significant question
which arises in light of this study is whether the traditional north-south divide in international
investment law still exists? There have been numerous observations that developed nations are
becoming more conservative in their investment approach and the revival of the Calvo 3doctrine
signifies a change of direction in international investment law, neo-liberalism no longer dominates
1
Prabhash Ranjan, “Non Precluded Measures in Indian International Investment Agreements and India’s Regulatory Power as a
Host Nation” (2012) 2: AJL 21 (Cambridge Journals).
2 A clause which allows cause for exceptions to a country’s liability in regard to matters such as public health , public order,
environmental matters, essential security interests etc.
3The Doctrine essentially asserts “two concepts of non-intervention and absolute equality of foreigners with nationals, with
emphasis placed on the rejection of the superiority or imperial prerogatives of powerful states and their nationals in Wenhua
Shan, “From North-South Divide to Private-Public Debate: Revival of the Calvo Doctrine and the Changing Landscape in
International Investment Law” (2007) 27:3 Nw. J. Int’l L. & Bus. 631.
international investment law making , and more balanced, and perhaps also a more conservative and
nationalistic approach, is gaining ground. 4 This gives rise to a second point of analysis-Does India’s
standing as far as NPM clauses are concerned reflect a now outdated and inadequate developing
country approach to international investment, from the point of view of attracting foreign capital and
technology for the purposes of economic and social development. Both the questions raised above
are interconnected and are related to the wider question of the viability and sustainability of Investor
State Dispute Settlement (ISDS) mechanisms from the point of view of welfare of developing nations.
The aforementioned proposed study which this thesis aims to undertake will take into account
whether the drafting of NPM clauses and the interpretation of these NPM clauses by tribunals reflect
and encourage the phenomenon of regulatory chill and secondly whether such drafting and
interpretation reflects winds of change in the North-South divide in international investment law.
It is reiterated that India is merely being used as a platform to begin this study, but the study does not
aim to be India centric. This study endeavours to be a global analysis of the doctrine of regulatory chill
and an analysis of the North-South Divide, which might lead the way for any possible reform in Indian
policy, should the possibility arise.
4
Wenhua Shan, “From North-South Divide to Private-Public Debate: Revival of the Calvo Doctrine and the Changing Landscape
in International Investment Law” (2007) 27:3 Nw. J. Int’l L. & Bus. 631.