By: Pablo Urioste
Bilateral Investment Treaties (“BITs”) are agreements between two governments to afford certain protections to the investors of the other.[1] Designed to increase the flow of foreign direct investment, over two thousand such treaties are currently in force.[2] A key appeal of BITs is access to investor-state arbitration.[3] Arbitration offers impartial third parties a speedier process, concluding with effective award enforcement.[4] Therefore, BIT arbitration is a favored adjudication mechanism for investors deprived of the benefit of a bargain by a state.[5]
The rise of social media bans around the world may put the mechanism to the test, pitting the largest American companies against governments curtailing access in the name of public health.[6] For example, Australia recently amended its comprehensive social media law, effectively prohibiting service to minors under sixteen.[7] Meta, TikTok, YouTube, and other American companies collectively derive significant revenue from this segment, making the ban a direct hit to a core revenue segment.[8] While arbitration seems like an appealing path to recover these losses, key provisions that are common to BITs are likely to be substantive bars for American companies in winning arbitral awards.
The biggest obstacle social media companies will face is that BITs usually allow exceptions for governments to regulate in good faith.[9] In considering whether regulations are actionable under BITs, tribunals consider whether measures are reasonable, proportional, not arbitrary, nor discriminatory.[10] In the landmark case Philip Morris v. Uruguay,[11] the tribunal found that several tobacco regulations adopted by the Uruguayan government were not grounds for an arbitral award.[12] Rather, regulating tobacco consumption was a reasonable measure to protect human health.[13]
As that tribunal found scientific justification for the rules, here, the literature strongly suggests that social media addiction is dangerous for minors.[14] Indeed, the Australian government stresses that almost two-thirds of young Australians have viewed “extremely harmful” content on social media.[15] This is leading to teenagers developing addictions and declining mental health rates.[16] Parents are affected too, with 95% of them saying that managing their children’s social media use is a top concern.[17]
While scientific opinions on social media are not uniform, they are gathering speed towards a consensus: social media is harmful and public policy must address it.[18] When it comes to arbitration, it is unlikely that a tribunal would second-guess the specific policy choices Australia makes to curtail social media use.[19] Rather, the tribunal will likely conclude the measures are reasonable when they aim to mitigate the impact of social media on teen health, and calls for action are supported by academics.[20] Thus, social media companies are unlikely to impeach the science and justification of the exercise of police power in this context.[21]
From an arbitrariness process perspective, an illustrative case is Metalclad v. United Mexican States.[22] In that case, the tribunal agreed with the developer of a landfill project in Mexico that a local government had acted arbitrarily when it rescinded permits post-construction for shifting reasons.[23] Australia’s decade-long legislative process is the opposite of the arbitrary rulemaking that doomed Mexico in Metalclad.[24] Australia involved all stakeholders in the process, inviting industry groups to submit comments to Parliament.[25] The final text addressed key concerns and made policy recommendations accordingly.[26] Unlike the government’s sudden permit decline in Metalclad, the Australian bill’s final text includes a phased-out implementation allowing social media companies time to adjust.[27]
When it comes to proportionality, the law is narrowly tailored to a specific population overexposed to the risk of harm.[28] The text does not ban social media outright; it instead requires platforms to take reasonable steps to prevent minors under sixteen from accessing platforms.[29] It also provides carve-outs allowing minors to view certain content without logging in.[30] Nor does the law demonstrate any intent to discriminate against social media companies for their American origin.[31] While disparate impact may be evident given the majority American nationality of social media companies, disparate effect is relevant to the extent that the totality of factors shows discriminatory intent.[32]
Without successful investment treaty arbitration arguments, social media giants may lose their last avenue to challenge the measures and recover costs.[33] A special interest organization has already brought a challenge to the new under-sixteen amendment to Australia’s High Court.[34] Court watchers are skeptical of its prospects, citing similar measures that have withstood the Court’s scrutiny.[35] Similarly, even the risk calculus of bringing claims in the first place is unfavorable, as a loss in front of an arbitral tribunal can have major lateral consequences.[36] A loss in front of the tribunals at the critical junction might be the momentum global regulators need to enact their own restrictions.[37] In the future, platforms should engage with foreign policy makers, advocating for treaties that require freedom of expression protections or a tighter scientific nexus between regulation and outcomes.[38]
[1] See Investment Treaties, Int’l Ctr. for Settlement of Inv. Disps., https://icsid.worldbank.org/node/20271 [https://perma.cc/G85N-QPA6].
[2] See International Investment Agreements Navigator, U.N. Trade & Dev., https://investmentpolicy.unctad.org/international-investment-agreements [https://perma.cc/5RHF-CPLJ] (last visited Mar. 23, 2026) (listing all current 2243 investment treaties).
[3] See The Basics of Bilateral Investment Treaties, Sidley Austin LLP, https://www.sidley.com/en/services/global-arbitration-trade-and-advocacy/investment-treaty-arbitration/sub-pages/the-basics-of-bilateral-investment-treaties [https://perma.cc/66GC-L55E] (last visited Mar. 23, 2026).
[4] See Sheryl L. Axelrod, Why Arbitrate? Why Not? The Benefits of Arbitrating Commercial Disputes, Bus. L. Today (Aug. 29, 2025), https://www.americanbar.org/groups/business_law/resources/business-law-today/2025-august/why-arbitrate-why-not-benefits-arbitrating-commercial-dispute/ (on file with the American University Business Law Review).
[5] See Stephen E. Blythe, The Advantages of Investor-State Arbitration as a Dispute Resolution Mechanism in Bilateral Investment Treaties, 47 Int’l Law. 273, 276 (2013), https://scholar.smu.edu/cgi/viewcontent.cgi?article=1583&context=til [https://perma.cc/Y8V8-PMGM] (noting the remarkable growth of investor-state arbitration, with more than forty new cases yearly by 2013); Abby Cohen Smutty et al., Do BITs and Bytes Bite? Investment Treaty Arbitration for Technology Disputes, White & Case (July 26, 2022), https://www.whitecase.com/insight-our-thinking/do-bits-and-bytes-bite-investment-treaty-arbitration-technology-disputes [https://perma.cc/4VZN-J53M] (arguing BITs are becoming important instruments for tech companies facing a growing regulatory tide).
[6] See Sawdah Bhaimiya, Spain Becomes First Country in Europe to Ban Social Media for Under-16s, CNBC (Feb 3, 2026, at 09:27 ET), https://www.cnbc.com/2026/02/03/spain-teen-social-media-ban-tech-giants-australia.html [https://perma.cc/HM45-E7UX] (reporting that Spain and Australia have outright banned social media, while France is preparing to, and at least five other European nations are tightening rules for social media and minors).
[7] Id.
[8] See Maya Brown, Social Media Platforms Generate Billions in Annual Ad Revenue U.S. Youth, Harv. Sch. of Pub. Health (Dec. 27, 2023), https://hsph.harvard.edu/news/social-media-platforms-generate-billions-in-annual-ad-revenue-from-u-s-youth/ [https://perma.cc/69H7-D55V].
[9] See, e.g., Singapore – Australia Free Trade Agreement, Austl.-Sing., art 8.19, Feb. 17, 2003, 2257 U.N.T.S. 103 (providing that nothing within the treaty shall be construed to deny a party the right to adopt and enforce measures related to public health, morals, and individual privacy).
[10] See Philip Morris Brands Sàrl v. Oriental Republic of Uruguay, ICSID Case No. ARB/10/7, Award, ¶¶409-10 (July 8, 2016), https://www.italaw.com/sites/default/files/case-documents/italaw7417.pdf [https://perma.cc/33MM-JKNR].
[11] ICSID Case No. ARB/10/7, Award (July 8, 2016).
[12] Id. ¶¶ 2-3, 409-10 (explaining the regulations prohibited tobacco companies from marketing multiple variants of cigarettes and required that 80% of the packs be occupied by a health warning).
[13] Id. ¶¶ 291–93 (citing Restatement (Third) of Foreign Rels. of the U.S. § 712 cmt. g (A.L.I 1987)).
[14] See id. ¶¶300–01; Meyran Boniel-Nissim et al., A Focus on Adolescent Social Media Use and Gaming in Europe, Central Asia and Canada: Health Behaviour in School-aged Children International Report from the 2021/2022 Survey, World Health Org. vii [WHO] (2024), https://iris.who.int/items/b7538d5f-d9ba-455f-ae11-80b28a43c76a (on file with the American University Business Law Review) (concluding that addictive social media use is most prevalent with thirteen year old’s, and the rate of problematic use has significantly increased since 2021).
[15] The Hon. Michelle Rowland, Minister for Commc’ns, Online Safety Amendment (Social Media Minimum Age) Bill 2024 – Second Reading Speech (Nov. 21, 2024), https://minister.infrastructure.gov.au/rowland/speech/online-safety-amendment-social-media-minimum-age-bill-2024-second-reading-speech [https://perma.cc/VZ4R-P67H].
[16] See id.; Boniel-Nissim, supra note 13.
[17] Id.
[18] Boniel-Nissim, supra note 13, at 14.
[19] See Philip Morris, ICSID Case No. ARB/10/7, Award, ¶ ¶407-09 (finding that even if the science regarding cigarette branding did not conclusively correlate to tobacco use, it nonetheless was reasonable for the Uruguayan government to restrict packaging to lower consumption).
[20] See Env’t and Commc’ns Legis. Comm., Parliament of Austl., Online Safety Amendment (Social Media Minimum Age) Bill 2024 [Provisions] 2, 12 (2024), https://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Environment_and_Communications/SocialMediaMinimumAge/Report/Chapter_1_-_Introduction [https://perma.cc/Y5UQ-4A8A] [hereinafter Online Safety Amendment] (finding social media detriments substantially outweigh benefits and analogizing Australia’s social media ban to prior efforts to ban alcohol and cigarettes for minors); Tara C. Thiagaran et al., Protecting the Developing Mind in a Digital Age: A Global Imperative, 26 J. of Hum. Dev. & Capabilities 493, 500 (2025) (calling for a ban of teens on social media and analogizing to alcohol and tobacco laws).
[21] See id. ¶ 399 (“The responsibility for public health measures rests with the government and investment tribunals should pay great deference to governmental judgments of national needs in matters such as the protection of public health.”).
[22] ICSID Case No. ARB/97/1, Award (Aug. 30, 2000).
[23] Metalclad Corp. v. United Mexican States, ICSID Case No. ARB/97/1, Award, ¶¶ 90–93 (Aug. 30, 2000), https://www.italaw.com/sites/default/files/case-documents/ita0510.pdf [https://perma.cc/4JAV-F4AC].
[24] House of Representatives Select Comm. on Soc. Media & Online Safety, Parliament of Austl., Social Media and Online Safety 2 (2022), https://www.aph.gov.au/Parliamentary_Business/Committees/House/Former_Committees/Social_Media_and_Online_Safety/SocialMediaandSafety/Report [https://perma.cc/JE96-EPDJ].
[25] Online Safety Amendment, supra note 19, at 16. But see Metalclad, ICSID Case No. ARB/97/1 ¶ 92 (noting the local council pulled the permit following opposition from the local community).
[26] Online Safety Amendment, supra note 19, at 29-30; cf. Metalclad, ICSID Case No. ARB/97/1, Award ¶¶ 85-89 (describing how the Mexican government failed to reconcile inconsistent permitting rules when a conflict between state and federal policies became manifest).
[27] Online Safety Amendment, supra note 19, at 29; cf. Metalclad, ICSID Case No. ARB/97/1 ¶¶ 91-93 (condemning the post-construction permit denial with no opportunity to cure issues arising).
[28] Online Safety Amendment, supra note 19, at 2–3.
[29] Id. at 4.
[30] Id. at 5.
[31] See Online Safety Act of 2021 (Cth) pt I s 13 (Austl.) (defining social media service without reference to nationality); see also Philip Morris Brands Sàrl v. Oriental Republic of Uruguay, ICSID Case No. ARB/10/7, Award, ¶ 402 (July 8, 2016), https://www.italaw.com/sites/default/files/case-documents/italaw7417.pdf [https://perma.cc/5QXS-J339] (finding Uruguayan regulation was not arbitrary when it applied equally to domestic and foreign investors alike).
[32] See, e.g., Archer Daniels Midland Co. v. United Mexican States, ICSID Case No. ARB/04/5, Award, ¶ 207 (Nov. 21, 2007), https://www.italaw.com/sites/default/files/case-documents/ita0037_0.pdf [https://perma.cc/J5KC-VPQE] (“In the present case, both intent and effects of the Tax show the discriminatory nature of the measure.”) (emphasis added).
[33] See generally Huawei is Taking Sweden to Court After the Country Banned its 5G Products, Euronews (Jan. 31, 2022, at 18:19 GMT), https://www.euronews.com/next/2022/01/31/huawei-is-taking-sweden-to-court-after-the-country-banned-its-5g-products [https://perma.cc/8E7F-VNKC] (reporting arbitration was the last resort for Chinese tech company when Swedish government excluded it from certain projects and the courts upheld the decision); Brown, supra note 8.
[34] Our Case is for All Australians, Digit. Freedom Project, https://www.digitalfreedomproject.org.au/our-case [https://perma.cc/D9ZW-HYNG] (last visited Mar. 27, 2026).
[35] See Luke Beck, Two Teens Have Launched a High Court Challenge to the Under-16s Social Media Ban. Will it Make a Difference?, Monash U. (Dec. 9, 2025), https://www.monash.edu/law/research/centres/castancentre/public-events/news/2025/under-16-social-media-ban [https://perma.cc/TPZ3-GQJ2].
[36] See Eric Crosbie et al., Defending Strong Tobacco Packaging and Labelling Regulations in Uruguay: Transnational Tobacco control Network versus Philip Morris International 8-9 (2019) (arguing the Uruguay arbitral decision influenced global governments and advocacy nonprofits towards tobacco regulation).
[37] See id.
[38] See Mira Burri & Kholofelo Kugler, Regulatory Autonomy in Digital Trade Agreements, 27 J. of Int’l. Econ. L. 397, 400-01 (2024) (noting big tech companies are already pursuing similar trade policy protections for e-commerce and privacy).
