Over the past few years there have been many allegations that states abuse their police powers to escape their international obligations before foreign investors. In particular, it has been alleged that states initiate criminal proceedings in order to escape payment of compensation for expropriation, hamper arbitral hearings or punish foreign investors. This article attempts to find a solution to the problem of the abuse of police powers. Such a study is important, because the abuse of police powers can damage the whole international framework for protecting foreign investments.
The findings from this article provide evidence that there are many principles of international law that international arbitral tribunals have applied when dealing with criminal proceedings initiated by host states against foreign investors. This article draws a conclusion that the principles of international law can substantially prevent the abuse of police powers by states when dealing with foreign investors.
This article recommends that arbitral tribunals need to determine the intent of states initiating criminal proceedings against foreign investors. After arbitral tribunals determine that the states initiated criminal proceedings in good faith, they should balance the legitimate interests of the international investment protection regime and the arbitral proceedings against the rights of the host states to investigate crimes within their territories.Journal of International Arbitration