By Danielle Hoffman
In the midst of the Covid-19 pandemic, many countries party to international investment agreements (IIAs) imposed reactive measures restricting the export of masks and other medical equipment. As a result of these measures, masks and other medical equipment contractually arranged to be exported, were not. Accordingly, disgruntled investors, who incurred losses from their investment property not being exported as scheduled, claimed breaches of the contractual agreement they had in their IIAs. Unfortunately for the international investors, upon receiving their claims for breach of the IIA, the host countries invoked force majeure defenses on the basis of the Covid-19 pandemic constituting a force majeure event. Under common law, it would appear these investors would be stopped dead in their tracks without any remedy for their losses due to the valid invocation of a force majeure defense. However, recent academia suggests that a feasible alternative avenue for redress would be the bringing of a regulatory takings claim to an Investor State Dispute Settlement (“ISDS”) tribunal. If foreign investors were able to obtain a judgment from the ISDS for an unlawful regulatory taking, they would have a very powerful tool in their hands, as ISDS decisions are internationally enforceable. Accordingly, in recent months, heated debate surrounding the bringing of these claims to ISDS tribunals has been evolving.
On one side of this controversy, proponents argue the vulnerability of international investments to regulatory change justifies a need to compensate for losses incurred by foreign investors, and that the right to these types of claims provides an “invaluable safeguard for foreign investors,” which stimulates the global economy. Alternatively, opponents of these claims argue that the allowance of these claims would open the floodgates to a surge of ISDS cases with respect to Covid-related measures, which would result in overworking the ISDS tribunals and further, that requiring compensation for these takings may constrain regulation in lower-income countries and impede sustainable development goals.
Perhaps this debate is not as black and white as it may appear on the surface, and instead, there are a myriad of critical considerations that must come into play. For instance, if the latter of these arguments were ultimately to win, and Covid-related regulatory takings claims were not allowed to be brought to an ISDS tribunal, how would that affect foreign investors’ willingness to invest internationally? If the appeal of foreign investment decreases because investors are concerned that they are not protected, how will that impact the global economy? Even more importantly, where would that leave the legitimacy of the ISDS? Lastly, IIAs have remained an appealing option to assure foreign investors that they will be protected when engaging in business internationally. If foreign investors are unable to bring a grievance under their IIA to the ISDS tribunal, and instead, by the simple invocation of a force majeure defense they can be left to incur substantial losses due to the expropriation of their investment property, what will happen to the appeal of operating under an IIA?
 See Riddhi Joshi, Force Majeure Under the ILC Draft Articles on State Responsibility: Assessing its Viability Against COVID-19 Claims, American Society of International Law, (Sept. 17, 2020) https://www.asil.org/insights/volume/24/issue/24/force-majeure-under-ilc-draft-articles-state-responsibility-assessing.
 See Kate O’Keeffe, Liza Lin & Eva Xiao, China’s Export Restrictions Strand Medical Goods U.S. Needs to Fight Coronavirus, State Department Says, The Wall Street Journal (Apr. 16, 2020, 6:13 PM), https://www.wsj.com/articles/chinas-export-restrictions-strand-medical-goods-u-s-needs-to-fight-coronavirus-state-department-says-11587031203.
 See generally Joshi, supra note 1.
 See generally Lorenzo Cotula, Briefing 3: The Regulatory Taking Doctrine 1, International Institute for Environment & Development (2007), http://jstor.com/stable/resrep01404.
 See Jones Day, COVID-19 and Investment Treaties: Balancing the Protection of Public Health and Economic Interests (May 2020), https://www.jonesday.com/en/insights/2020/05/covid19-and-investment-treaties.
 Id.; see also UNCTAD, Investor-State Dispute Settlement Cases Pass the 1,000 Mark: Cases and Outcomes in 2019 (July 2020), https://unctad.org/system/files/official-document/diaepcbinf2020d6.pdf (predicting a surge in treaty-based investor state arbitration claims for compensation due to governments’ emergency measures).
 See Cotula, supra note 5.
 See generally Columbia Ctr. of Sustainable Investment, Primer: International Investment Treaties and Investor-State Dispute Settlement (May 31, 2019), http://ccsi.columbia.edu/2019/06/03/primer-international-investment-treaties-and-investor-state-dispute settlement/#:~:text=What%20is%20Investor%2DState%20Dispute,party%2Dpaid)%20private%20lawyers.