India, health-related regulatory measures, and investment treaty arbitration—can police powers doctrine be a knight in shining armour?

ABSTRACT

The global trade and investment crumbled during the Covid-19 pandemic. Like any other state, India has adopted several strict regulatory measures to contain this global pandemic from spreading in this health emergency. These health-related regulatory measures such as national lockdown, close down of all business and trade activities except essential business activities, temporary closure of international borders, prohibition on exports, incentives to importers could potentially breach two most essential and frequently invoked provisions of any investment treaty, i.e. indirect expropriation and fair and equitable standard. Thus, it is expected that foreign investors will initiate several arbitration proceedings against India under investment treaties. This article analyses whether the police powers doctrine could offer India an effective defence to avoid paying bulky compensation. It further highlights that although the police powers rule is deeply rooted in international law, the arbitral tribunals differ on the doctrine’s content and scope. What if the police powers rule is absent in the applicable treaty? Can India still argue based on police powers? What if the measures adopted for containing Covid-19 are disproportionate to what the objectives aimed to achieve. The author has tried to analyse these pertinent issues and offer some practical solutions in this health turned economic emergency. © 2021 Thomson Reuters and Contributors.