The Great Battle of Intellectual Property versus State Sovereignty – Is Philip Morris v Uruguay a Good Referee?

Abstract

Scholars have examined the ramifications of the recent arbitral award from the International Centre for Settlement of Investment Disputes (“ICSID”), Philip Morris v Uruguay, in the context of its implications for State sovereignty and the right to regulate. This award is also key in respect to developing the Fair and Equitable Treatment (“FET”) paradigm common in investment arbitrations, yet in recent discussions on the FET standard, Philip Morris v Uruguay has been only briefly mentioned and there nothing in the literature analyzing precisely this case and the trifold interaction between FET, the right to regulate, and intellectual property rights. With the recognition of the importance of intellectual property rights to innovation, development, and international harmony as well as the increasing entanglement of intellectual property with human rights, the resolution of disputes involving intellectual property rights is ever more crucial and nuanced. Given its flexible and international nature, investment arbitration has the potential to be an ideal avenue for resolving intellectual property disputes. The original intent of developing the field of investor-state arbitration was to help developing countries attract foreign capital. Due to the way in which the field of investment arbitration has progressed, these same developing countries, instead, are fearing that this system will either lead them into bankruptcy or undermine their sovereignty. When intellectual property is considered to be an important public policy tool in itself, the question becomes to what extent these rights take precedence over other factors such as public interest and a State’s sovereign rights. Philip Morris v Uruguay affirms that wealthy multinational corporations cannot always bully smaller countries. While this award is a significant step in reinforcing a State’s right to regulate in the public interest, this mere recognition is not sufficient to fully prevent the “regulatory chill” which has been resulted from numerous arbitral awards favoring investor’s rights. In the context of the newly emerging intellectual property investment arbitrations, particularly in the absence of a system of precedence, what is needed is a systematic and clear delineation on the nuances of the FET criterion.