Dr. Oisin Suttle:

I thank Deputy Howlin for the question. Nobody has ever denied that states have the right to regulate. One or two investment arbitration decisions may have dropped the ball on that and expressly said the legal regime has to be strictly maintained. However, every investment tribunal and this treaty recognise states have the right to regulate subject to the international law rights guaranteed to investors. One can do whatever one wants subject to the rights which are being created.

I refer to the point made by Dr. Ankersmit made the point at the start on the weight we should give to the language and it is a question of framing to a great extent. Framing can be important for lawyers because it gives a steer to those who have to interpret the hard rules but it only gives a steer and, ultimately, the interpretation is for the tribunal. When one considers the concrete details of the rights as set out in CETA, they do not give the freedom one might like. For example, CETA includes an annex on what constitutes indirect expropriation. These are situations where the state takes a step, through regulation or otherwise, not to seize the title to an investment but does something to adversely affect the value of the investment or the investors' right to use or transfer their investment, in a way that is equivalent to having the property seized from their point of view.

Forgive me for reading some legal text but I am a lawyer. The final paragraph of the annex states:

For greater certainty, except in the rare circumstance when the impact of a measure or series of measures is so severe in light of its purpose that it appears manifestly excessive, non-discriminatory measures of a Party that are designed and applied to protect legitimate public welfare objectives, such as health, safety and the environment, do not constitute indirect expropriations.

A quick read of that indicates it is a guarantee of the right to regulate.

In fact, it is not. The first half of that paragraph is an invitation to the Comprehensive Economic and Trade Agreement, CETA, tribunal to perform a proportionality analysis. It is an invitation to the CETA tribunal to ask, in light of the purpose of the measure and the goal one is pursuing, if the effect on the investor is manifestly excessive. It is weighing and balancing the public policy and the impact on the investor. This is the style of analysis that the European Court of Justice and the European Court of Human Rights do. It is a style of analysis, however, that directly engages with the trade-offs between the goals legislators pursue and their costs.

One can contrast that final paragraph of that annex to CETA with Article 5.5 of the Indian model for a bilateral investment treaty. This is essentially the text that Indian negotiators take into the room when they discuss a new investment treaty. The contrast is very easy. Article 5.5 simply is the second half of that paragraph of CETA. It states non-discriminatory regulatory measures will not constitute expropriations. CETA states if it is a non-discriminatory regulation, then a proportionality analysis should be performed. If it seems disproportionate, then it is expropriation. If it is not disproportionate, then it is fine.

That is a significant restriction on a state's power to regulate. It is explicitly mandated in the text. As was said, one is getting different people giving different views, however. How does one deal with that? As I said earlier, I cannot tell how this text will be interpreted. Ultimately, one is appointing, as yet, an unnamed group of jurists to decide for themselves what this text means and to do so largely in an unreviewable way. One is buying a pig in a poke. Sometimes one must do that. What one should ask, however, is does one really need a pig. If one needs a pig, then one has to take what is on offer. This is why my paper started where it does.

The key issue in coming at this is what exactly is the value for the State of adopting these rules. The economic evidence would state probably not very much. Many economists have tried to work out exactly what effect investment treaties have on investment flows. In fairness, more of them have said they probably have an effect than those who have said they do not. It is certainly not overwhelming. What we do not have is a clear sense of when they have a fan effect and in which sectors.

We think they are probably more likely to stimulate investment in mining and resource extraction. Those are not necessarily areas where we might want to stimulate investment. We are pretty sure they are more likely to stimulate investment in developing and developed countries. Again, Ireland may not be in line to get much of an economic benefit from this.

It has been suggested that most of the studies that show a big positive effect are driven by the fact that in the context of former Soviet states they had a positive effect. It might just be that bilateral investment treaties are a really good way to reassure investors in former Soviet countries that they are not going back to that system.

There is uncertainty. The key point is that one is trying to make a decision under conditions of uncertainty. No legal advice can resolve that. Ultimately, this will only be interpreted when the time comes. We need to consider what is the value of taking the risk. It is a big risk, a point no one can deny.