A Contractual Approach to Investor-State Regulatory Disputes

Abstract

In 2010, Philip Morris International filed a complaint against Uruguay alleging that certain regulations on cigarette packaging violated the bilateral investment treaty (BIT) between Uruguay and the company's home state of Switzerland. In its request for arbitration, Philip Morris claimed that the government's anti-smoking legislation decreased the value of the company's investments in the country in violation of Uruguay's obligation under the BIT to provide fair and equitable treatment to Swiss investors. Among other things, the legislation requires that eighty percent of the surface area of cigarette packaging be devoted to health warnings, and that the packaging include "graphic images ... to illustrate the adverse health effects of smoking." The arbitral tribunal in which the claim was filed recently determined that it had jurisdiction over at least some of Philip Morris's claims, and the arbitration is now proceeding on the merits.