Litigation cost asymmetries among governments and investors could hinder the ability of governments to exercise their legitimate rights to regulate and enforce their laws. A foreign investor facing government measures that adversely affect the investor’s business interests might submit an arbitration claim, arguing that the host country violated provisions of an international investment agreement (IIA). If the investor enjoys litigation cost advantages over the host country, that country will be inclined to settle regardless of the merits of the claim. Investors, realizing that they enjoy such cost advantages, could choose to weaponize their right to arbitration and bargain over the contested measure in the shadow of investment arbitration. In these cases, investment arbitration imposes an unwarranted regulatory chill on countries, which exceeds the substantial obligations derived from their IIAs. These arbitration claims, referred to here as Strategic Arbitrations Against Public Policies (STRAPPs), resemble so-called “SLAPPs”—Strategic Lawsuits Against Public Participation—which are usually filed by large corporations against social activists who call for regulations that adversely affect the corporations’ interests. The use of international investment arbitration to “STRAPP down” various measures is examined here in three different contexts: criminal investigations; health policies against tobacco products; and tax and antitrust policies. Drawing from the experience with SLAPPs, the deleterious effects of STRAPPs could be avoided by dismissing arbitration claims against well-defined types of measures unless the claimant can show evidence of damages and arbitrary or discriminatory treatment, while awarding governments punitive damages caused by the arbitration in such cases.

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