Congratulations are in order for Yucong Wang, whose article ‘The Protection of Public Morals as an Exception to Indirect Expropriation: Opening the Floodgates to New, Eclectic Moral Crusades’ has been published in the Melbourne Journal of International Law.
The article is an analysis of the protection of public morals as a justifiable ground to indirect expropriation.
The intractable problem which bedevils international investment law is the uncertain scope of a host state’s power to enact regulations with respect to internal affairs without exposing itself to liability for any unintended expropriating effect on foreign investments. Host states’ interests in protecting ‘public health’, ‘safety’ and ‘environment’ are accepted in most modern bilateral and multilateral international investment agreements (‘IIAs’) as legitimate exceptional grounds for justifying regulatory measures that would otherwise constitute indirect expropriation. This list of exceptional grounds based on overarching public interest is not exhaustive. The protection of ‘public morals’ has been listed as another justifiable ground to indirect expropriation in a handful of recently concluded and draft IIAs, in parallel with the general exceptions practice under international trade law. This presents an obvious danger of further nebulous expansion of the justifications that states can assert to avoid liability for indirect expropriation. This is because the concept of public morals is abstract and can vary over time and across states and cultures. This article examines the feasibility of carving out the protection of ‘public morals’ as an exemption category for indirect expropriation and considers its use in investment arbitration. It is argued that the protection of public morals is a legitimate and feasible exemption category to include in new IIAs, provided that control mechanisms are in place in arbitral practice to avoid unconstrained regulatory actions that purportedly are in support of ever-varying and everwidening moral ‘crusades’. The proportionality principle is identified as a suitable control mechanism to shield foreign investors from impermissible morality-based protectionism.