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May 5, 2021<\/p>
States around the world have adopted measures in reaction to the unprecedented nature and scale of the COVID-19 pandemic to curb the spread of coronavirus, ensure healthcare systems are not overrun and, more recently, balance reviving the economy and keeping control of the virus. These wide-ranging and far-reaching measures are not without consequences, particularly on foreign investments.<\/p>
We highlight examples of measures that may have the potential \u2014 and for some have already started \u2014 to give rise to claims under investment treaties.<\/p>
Suspension of activities<\/strong><\/p> Many states have temporarily suspended the activities they deemed nonessential. Ukraine suspended all nonessential commerce.\u00a0 Italy shut down all businesses, save \u2018strategic\u2019 ones.\u00a0 South Africa closed bars, nightclubs and prohibited sale of alcohol.\u00a0 Others have taken measures to change the normal course of some activities. France postponed payment of water, gas or electricity bills and rents for small firms.\u00a0 Singapore suspended contractual obligations under a range of \u2018scheduled contracts\u2019.\u00a0 Russia adopted a law entitling the government to set maximum prices for drugs and medical devices.\u00a0 In South America, Peru adopted an emergency law suspending the collection of tolls on roads under concession to facilitate the transport of essential goods; which a road concessionaire has already branded as an \u201cunconstitutional measure.\u201d\u00a0 Two French airport operators threatened proceedings against Chile as a result of the closure of flight routes and additional sanitary measures in Santiago\u2019s international airport.<\/p> Restrictions on foreign investments in strategic areas<\/strong><\/p> The pandemic has also caused several states to restrict foreign investments. In France, a decree added \u201cbiotechnologies\u201d (possibly including research for COVID-19 vaccine) to the list of critical technologies where a foreign investment needs a prior government authorization.\u00a0 The US Committee on Foreign Investment was also given greater powers to limit foreign investments in the health and pharmaceutical sectors, as well as those that may threaten supply security.\u00a0 The UK is introducing the National Security and Investment Bill to expand the government\u2019s existing powers to review transactions concerning foreign control of national businesses in \u201csensitive\u201d sectors.<\/p> Nationalization of businesses or compelling them to manufacture specific goods<\/strong><\/p> To tackle the pandemic, some states have nationalized businesses. Spain, for example, nationalized all of its private hospitals and healthcare providers overnight, and their facilities were requisitioned for patients specifically suffering from COVID-19.\u00a0 The US government used its power under the Defense Production Act\u00a0 to compel companies (General Motors, General Electric, Medtronic and 3M among others) to manufacture medical items that were in short supply, such as personal protective equipment, ventilators and hospital beds.<\/p> Broader government intervention during state of chaos<\/strong><\/p> The chaos and disruption of the pandemic has sometimes been used as an opportunity to introduce drastic measures. Mexico adopted two energy policies that were said to be in response to the fall in energy demand caused by COVID-19.\u00a0 The policies have had the practical effect of curbing renewable energy production by suspending all testing on solar and wind farms, giving enhanced grid access to non-renewable electricity generators, and strengthening the Federal Electricity Commission\u2019s role in electricity planning. In response, several investors are reportedly considering bringing a claim against Mexico amid a doubt over the motive of these measures.\u00a0 Similarly, an investor brought an SCC arbitration against Moldova, accusing the state of using the pandemic to cancel its concessions to operate the country\u2019s main international airport. An SCC emergency tribunal has recently restrained the state from terminating the concession.<\/p> Next time we will tell you more about the actions investors can take to enforce their rights.<\/p> Jo Delaney<\/a>, Katia Finkel<\/a> and Katia Contos<\/a><\/p> globalarbitrationnews.com<\/p>","protected":false},"excerpt":{"rendered":"May 5, 2021States around the world have adopted measures in reaction to the unprecedented nature and scale of the COVID-19 pandemic to curb the spread of coronavirus, ensure healthcare systems are not overrun and, more recently, balance reviving the economy and keeping control of the virus. These wide-ranging and far-reaching measures are not without consequences,…