The chilling effect of indirect expropriation clauses on host states’ public policies: A call for a legislative response

Abstract

While International Investment Agreements (IIAs) can potentially contribute to host states’ development, the chilling effect of IIAs on host states’ public policies is the flip side of investment treaties. The lack of a clear statutory formulation of indirect expropriation and, hence, the interpretive loopholes in investor-state jurisprudence have caused unfavourable consequences attached to the application of IIAs on the protection and promotion of public welfare. This paper encourages states to revisit the formulation of their indirect expropriation clauses in line with the provided practical solutions, which allow states to have more policy space for their legitimate public policy actions without having their Foreign Direct Investment inflows decreased.