Abstract
In recent years, bilateral investment treaties have become one of the most important tools to stipulate economic cooperation and Integration. Most of Investment treaties allow foreign investors bring claims against host States through Investor-State Dispute Settlement (hereinafter “ISDS”). However, the determinacy, consistency, and predictability of arbitral decision-making might cause regulatory chill in host States. The investment dispute between Philip Morris, one of the world biggest tobacco company, and Australia illustrated the issue of indirect expropriation and its relationship to State’s right to regulate under a bilateral treaty. After the WHO Framework Convention on Tobacco Control (hereinafter “FCTC”) came into effect, Australia adopted Plain Packaging Act (hereinafter “TPPA”), recomended by FCTC guidelines, as the latest tobacco control measures. In response, Philip Morris initiated arbitration but the tribunal objected its claim in 2016. This article aims to analyze the extent of the regulatory space afforded to State in International Investment regime. The article first introduces legal status of FCTC and the background of Australia’s TPPA. Taking previous decisions in Investment arbitration awards as references, the article analyzes whether the adoption of TPPA violates Australia’s investment treaty obligations such as indirect expropriation as well as Fair and Equitable Treatment (hereinafter “FET”). In conclusion, the article reviews the recent development in ISDS and gives advices for State to avoid conflicts between investment protection and tobacco regulation.