#equitable treatment

Revised Common Lectionary Proper 16 Roman Catholic Proper 21

Complementary Hebrew Scripture from the Former Prophets: 1 Samuel 7:3-13

Then Samuel said to all the house of Israel, “If you are returning to the Lord with all your heart, then put away the foreign gods and the Astartes from among you. Direct your heart to the Lord, and serve him only, and he will deliver you out of the hand of the Philistines.” So Israel put away the Baals and the Astartes, and they served the Lord only.

Then Samuel said, “Gather all Israel at Mizpah, and I will pray to the Lord for you.” So they gathered at Mizpah, and drew water and poured it out before the Lord. They fasted that day, and said, “We have sinned against the Lord.” And Samuel judged the people of Israel at Mizpah.

When the Philistines heard that the people of Israel had gathered at Mizpah, the lords of the Philistines went up against Israel. And when the people of Israel heard of it they were afraid of the Philistines. The people of Israel said to Samuel, “Do not cease to cry out to the Lord our God for us, and pray that he may save us from the hand of the Philistines.” So Samuel took a sucking lamb and offered it as a whole burnt offering to the Lord; Samuel cried out to the Lord for Israel, and the Lord answered him. As Samuel was offering up the burnt offering, the Philistines drew near to attack Israel; but the Lord thundered with a mighty voice that day against the Philistines and threw them into confusion; and they were routed before Israel. And the men of Israel went out of Mizpah and pursued the Philistines, and struck them down as far as beyond Beth-car.

Then Samuel took a stone and set it up between Mizpah and Jeshanah, and named it Ebenezer;¹ for he said, “Thus far the Lord has helped us.” So the Philistines were subdued and did not again enter the territory of Israel; the hand of the Lord was against the Philistines all the days of Samuel.

¹Ebenezer means Stone of Help.

Semi-continuous Hebrew Scripture Torah Lesson: Exodus 1:1-7

These are the names of the sons of Israel who came to Egypt with Jacob, each with his household:

Reuben, Simeon, Levi, and Judah, Issachar, Zebulun, and Benjamin, Dan and Naphtali, Gad and Asher.

The total number of people born to Jacob was seventy. Joseph was already in Egypt. Then Joseph died, and all his brothers, and that whole generation. But the Israelites were fruitful and prolific; they multiplied and grew exceedingly strong, so that the land was filled with them¹.

¹Stephen mentions this in his defense before the Sanhedrin in Acts 7:1-53.

Complementary Psalm 18:1-3, 20-32

I love you, O Lord, my strength. The Lord is my rock, my fortress, and my deliverer,  my God, my rock in whom I take refuge,  my shield, and the horn of my salvation,  my stronghold. I call upon the Lord, who is worthy to be praised,  so I shall be saved from my enemies.

The Lord rewarded me according to my righteousness;  according to the cleanness of my hands he recompensed me. For I have kept the ways of the Lord,  and have not wickedly departed from my God. For all his ordinances were before me,  and his statutes I did not put away from me. I was blameless before him,  and I kept myself from guilt. Therefore the Lord has recompensed me according to my righteousness,  according to the cleanness of my hands in his sight.

With the loyal you show yourself loyal;  with the blameless you show yourself blameless; with the pure you show yourself pure;  and with the crooked you show yourself perverse. For you deliver a humble people,  but the haughty eyes you bring down. It is you who light my lamp;  the Lord, my God, lights up my darkness. By you I can crush a troop,  and by my God I can leap over a wall. This God—his way is perfect;  the promise of the Lord proves true;  he is a shield for all who take refuge in him.

For who is God except the Lord?  And who is a rock besides our God?— the God who girded me with strength, and made my way safe.

Psalm 8

O Lord, our Sovereign,  how majestic is your name in all the earth!

You have set your glory above the heavens.  Out of the mouths of babes and infants you have founded a bulwark because of your foes,  to silence the enemy and the avenger.¹

When I look at your heavens,  the work of your fingers,  the moon and the stars that you have established; what are human beings that you are mindful of them,  mortals that you care for them?

Yet you have made them a little lower than God,  and crowned them with glory and honor. You have given them dominion  over the works of your hands;  you have put all things under their feet,² all sheep and oxen,  and also the beasts of the field, the birds of the air, and the fish of the sea,  whatever passes along the paths of the seas.

O Lord, our Sovereign,  how majestic is your name in all the earth!

Jesus quotes part of this verse in Matthew 21:16, when he is cleansing the temple. ²This entire passage is quoted in Hebrews 2:6-9, about Jesus' exaltation. The last part (You have given … under their feet) is quoted in 1 Corinthians 15:27, part of a passage about resurrection of the dead, and again in Ephesians 1:22, about God's action in Christ.

New Testament Epistle Lesson: Romans 2:1-11

Therefore you have no excuse, whoever you are, when you judge others; for in passing judgment on another you condemn yourself, because you, the judge, are doing the very same things. You say, “We know that God's judgment on those who do such things is in accordance with truth.” Do you imagine, whoever you are, that when you judge those who do such things and yet do them yourself, you will escape the judgment of God? Or do you despise the riches of his kindness and forbearance and patience? Do you not realize that God's kindness is meant to lead you to repentance? But by your hard and impenitent heart you are storing up wrath for yourself on the day of wrath, when God's righteous judgment will be revealed. For he will repay according to each one's deeds:¹ to those who by patiently doing good seek for glory and honor and immortality, he will give eternal life; while for those who are self-seeking and who obey not the truth but wickedness, there will be wrath and fury. There will be anguish and distress for everyone who does evil, the Jew first and also the Greek, but glory and honor and peace for everyone who does good, the Jew first and also the Greek. For God shows no partiality.

¹Psalm 62:12 and Proverbs 24:12

Year A Ordinary 21, RCL Proper 16, Catholic Proper 21 Monday

Philip Morris v Uruguay: an affirmation of ‘Police Powers’ and ‘Regulatory Power in the Public Interest’ in International Investment Law

Philip Morris v Uruguay: an affirmation of ‘Police Powers’ and ‘Regulatory Power in the Public Interest’ in International Investment Law

In recent years there has been criticism that international investment treaties and investor-State arbitration conducted under those treaties increasingly, and unacceptably, have encroached upon the legitimate uses of States’ regulatory power. These concerns have not only been expressed in scholarship, but have also been at the forefront of State negotiations in recent multilateral and bilateral trade and investment agreements (see, for example, the recent discussion by Anthea Roberts and Richard Braddock here on the China-Australia Free Trade Agreement). The concerns have led to policy proposals from States and international organisations for greater safeguards for States to be able to enact measures in the public interest without attracting liability under investment treaties.

Investor-State arbitration tribunals appear to be alive to these concerns. On 8 July 2016, a tribunal (constituted by Professor Piero Bernardini, Mr Gary Born and Judge James Crawford) convened pursuant to the Switzerland-Uruguay Bilateral Investment Treaty (‘BIT’) delivered an award which, by majority, upheld the legality of two tobacco-control measures enacted by the Uruguayan government for the purpose of protecting public health. The award contains an extensive analysis of the interaction between States’ regulatory powers to enact laws in the public interest and States’ obligations to protect and promote foreign investment within their territory. This post will focus on two aspects of the award that considered this interaction: the claim pursuant to Article 5 of the BIT (expropriation) and the claim pursuant to Article 3(2) (fair and equitable treatment or FET).

The challenged measures

The claim, brought by the Philip Morris group of tobacco companies against Uruguay, challenged two legislative measures. First, the claimants challenged a law that mandated a ‘single presentation requirement’ on cigarette packaging, such that different packaging or variants of cigarettes were prohibited.

Secondly, the claimants challenged a law that mandated an increase in the size of health warnings on cigarette packaging from 50 to 80% of the lower part of each of the main sides of a cigarette package (‘the 80/80 requirement’). As the the amicus brief submitted by the WHO and Framework Convention on Tobacco Control (‘FCTC’) Secretariat noted, large graphic and text health warnings are increasingly common on tobacco packaging globally and a number of States have enacted (or are considering enacting) laws with the aim of preventing misleading tobacco packaging, as is required of States parties to the FCTC (including Uruguay).

Expropriation and ‘police powers’

The claimants argued that the single presentation requirement and the 80/80 requirement constituted an indirect expropriation of the claimants’ brand assets, including intellectual property and good will associated with the brand variants, contrary to Article 5(1) of the BIT. In response, Uruguay contended that the measures could not be considered expropriatory on various grounds. Relevantly, Uruguay contended that the challenged measures were a legitimate exercise of its “police power” to protect public health.

The Tribunal unanimously rejected the claim that the challenged measures were expropriatory. In addition to concluding that the measures did not deprive the claimants of their investment, the Tribunal also considered that the challenged measures were not expropriatory on the basis that the measures were a “valid exercise of the State’s police powers, with the consequence of defeating the claim for expropriation” (at [287]). By “police powers”, the tribunal was referring to States’ powers to enact bona fide, non-discriminatory measures for the protection of public welfare (including public health). The tribunal considered that the measures were bona fide, for the purpose of protecting the public health, were non-discriminatory and were proportionate to the objective pursued (at [305]).

Article 5(1) of the BIT does not expressly refer to the police power of States, nor is it referred to elsewhere in the treaty text. However, the Tribunal considered that Article 5(1) must be interpreted in accordance with Article 31(3)(c) of the Vienna Convention on the Law of Treaties (‘VCLT’), such that the provision must be interpreted in light of customary international law as a “relevant rule of international law applicable to the relations between the parties”. The tribunal considered that the police power of States was reflected in customary international law and applied to the expropriation analysis accordingly.

In addition to offering an affirmation of the applicability of the police powers of States to indirect expropriation claims under BITs, the award is notable insofar as it explicitly articulates the basis on which it has invoked the police power using the applicable principles of treaty interpretation under the VCLT. This approach is consistent with another tribunal in Saluka v Czech Republic, which similarly considered that the expropriation article in the applicable BIT imported into the treaty the customary international law notion of “police powers”, also relying on Article 31(3)(c). The citation and reliance on the VCLT is welcome, as while the invocation of the police power at the point of interpreting the expropriation provision in the BIT is a common (although not universal) approach, tribunals have not consistently articulated the basis on which the police power applies.

While each case turns on its own facts and is not binding on subsequent tribunals, the award is the latest in a number of decisions that suggest that expropriation provisions in BITs, properly interpreted, accommodate the “police powers” of States even absent explicit treaty language to that effect. 

Fair an Equitable Treatment and ‘regulatory power in the public interest’

The claimants further argued that the measures were unfair and inequitable on the basis that the measures were arbitrary (insofar as they failed to serve a public purpose but caused substantial harm), undermined the claimants’ legitimate expectations, and destroyed the stability of the legal framework in which the claimants invested. Uruguay again emphasised that the measures were bona fide measures enacted in a non-discriminatory manner that were logically connected to the objective of protecting public health. The majority of the tribunal noted that whether a particular treatment is fair and equitable will depend on the circumstances of a particular case, and focussed its analysis on the principles of arbitrariness, legitimate expectations, and stability.

In rejecting the argument that the challenged measures were arbitrary, the majority of the tribunal instead concluded the measures were reasonable, not discriminatory or disproportionate and were enacted in good faith. In doing so, the majority of the tribunal considered that the “margin of appreciation” as developed in the jurisprudence of the European Court of Human Rights applied equally in disputes arising under BITs, and that tribunals “should pay great deference to governmental judgments of national needs” (at [399]). Similarly with respect to legitimate expectations and stability, the tribunal accepted that neither concept affected “the State’s rights to exercise its sovereign authority to legislate and to adapt its legal system to changing circumstances” (at [422]). In particular, changes to general legislation were not prevented by the FET standard if they did not “exceed the exercise of the host State’s normal regulatory power in pursuance of a public interest” and did not modify the legal framework relied upon by an investor outside of “an acceptable margin of change” (at [423]). In the absence of any specific undertakings by the host State, the tribunal concluded there could be no legitimate expectation that the regulatory environment would not change; indeed, the expectation “could only have been of progressively more stringent regulation” (at [430]). Nor could the challenged measures be said to modify the legal framework beyond an acceptable margin of change. The FET standard, in the majority’s view, was not a “guarantee that nothing should be done by the host State for the first time” (at [433]).

Arbitrator Gary Born dissented, rejecting the applicability of the margin of appreciation in the BIT context and considering that the single presentation requirement breached the FET standard as it was arbitrary, irrational and did “not bear even a minimal relationship to the legislative policy objective cited by Uruguay for the requirement”. He reiterated, however, that his conclusions were “not in any way a comment on the sovereign authority of Uruguay (or any other state) to safeguard its population’s health or safety”, such measures being “within the regulatory sovereignty of Uruguay”. Substantial deference to this regulatory sovereignty was required, but was “not a substitute for reasoned analysis” of whether the measures satisfied a minimum level of rationality and proportionality between the regulatory measure and the public interest objective.

In contrast to the (relatively) more settled jurisprudence on “police powers” in an indirect expropriation context, consideration of the extent to which the FET standard limits States’ regulatory powers to enact laws in pursuit of public interest objectives is less developed and less consistent. This perhaps reflects a broader lack of consensus as to the precise content of the FET standard. In addition to the different conclusions reached by the majority and dissenting arbitrators, the unsettled status of the issue is reflected in the varying language adopted by the tribunal to describe States’ regulatory powers within the FET analysis, using expressions such as “sovereign power”, “sovereign authority to legislate”, “normal regulatory power in the pursuance of a public interest” and “regulatory sovereignty” interchangeably. Notably, the tribunal did not use the language of the “police power” in the FET analysis, notwithstanding that much of the majority’s conclusion that underpinned the police power analysis (that the measures were non-discriminatory, proportionate and in pursuit of a public welfare objective) also underpinned the finding that the measures were “reasonable” for the purposes of the FET analysis.

More broadly, the differing views between the majority and the dissent as to the relevance of the “margin of appreciation” and deference to the regulatory powers of States (and the extent of any such deference) reveals an affirmation of States’ regulatory powers in principle, but a remaining uncertainty as to their relevance and scope in their application to the FET standard. The award therefore highlights that the ongoing debate as to the impact of investment treaties on States’ regulatory powers has shifted in emphasis from expropriation to the FET standard.

  [via EJIL: Talk!]