The twin transition depends on regulations and, therefore, the right of states to regulate, as well as the willingness of investors to commit capital to it, leading to tension between the right to regulate and protection of investment. Many examples of this tension arising from the green transition already exist, as the complex web of interests, technical difficulties and financial risks involved frequently lead to disputes between energy-sector investors and states, impacting the facilitation of the green transition. The conceptual problem identified here also applies to the digital transition, given its rapid pace and the highly regulated nature of the digital sphere. In this context, this post argues that conflating the right to regulate and the public interest in the resolution of investor-state disputes weakens the legitimacy of transition-motivated measures.

In the current debate over Investor-State Dispute Settlement (ISDS), a common view is that the right to regulate has been restricted too much by arbitral tribunals (Boute, 2012; Yu, 2025). This perspective is prevalent in the ISDS reform discussions, especially at the EU level (Philippe De Buck & Tanja Buzek, 2019). The underlying assumption is that regulatory actions of states are inherently in the public interest (Titi, 2014, p. 99; Beysulen Angin, 2025).

However, this assumption is imprecise. While it is tempting to conclude that any regulatory action taken by states automatically serves the public interest, legal frameworks should not automatically defer to it. The right to regulate and the public interest are related, yet distinct concepts (Beysulen Angin, 2025). The right to regulate is a procedural and sovereignty-based right: it describes a state's authority to legislate and enforce in the exercise of its sovereign functions (Titi, 2014, p. 33; Mitchell, 2023, p. 480). The public interest, conversely, is a substantive aim: it describes the actual objective that a particular measure does or does not pursue (‘Public Interest’, n.d.). States may exercise their right to regulate in ways that genuinely serve a public interest objective. They may also exercise that right for other, potentially illegitimate purposes (Goldberg et al., 2020, pp. 5111–5112), or for public interest objectives but in disproportionate ways (Técnicas Medioambientales Tecmed, S.A. v The United Mexican States, 2003).

Merging these two concepts weakens the legitimacy of the twin transition for a fundamental reason: it removes the necessity for accountability. When public interest is assumed rather than proven, it can create a chilling effect on the investments required for the transition. The presumption that any measure framed in climate or digital-transition terms automatically serves the public interest eliminates a layer of scrutiny that is itself in the public interest (Beysulen Angin, 2025).

If the twin-transition label is considered sufficient to immunise a measure from review, it risks becoming a shield for arbitrary state actions. This can erode trust in the transition itself; because if the label can be used to justify poorly reasoned or discriminatory policies, the genuine and science-based measures needed for the green and digital transitions lose their legal authority. These circumstances can also increase the perception of risk for investors, hindering efforts to attract investment to facilitate the twin transition.

The green transition has already given rise to a significant number of investor-state disputes and revealed that not all regulatory measures are equally well justified. In cases like Eiser v. Spain or Antin v. Spain, renewable subsidy regimes were redesigned or abolished in ways that radically changed the regulatory frameworks under which investments were made (Eiser Infrastructure Limited and Energía Solar Luxembourg SÀRL v Kingdom of Spain, 2017; Infrastructure Services and Energia Termosolar (formerly Antin) v Spain, 2018). While the state argued these changes were in the public interest objective of fiscal stability, the lack of a structured and well-communicated transition arguably led to a loss of investor confidence in the sector. Conversely, disputes surrounding the Dutch coal phase-out highlight the difficulty of balancing the public interest of decarbonisation with existing investment protections (RWE AG and RWE Eemshaven Holding II BV v Kingdom of the Netherlands, 2024; Uniper SE, Uniper Benelux Holding B.V. and Uniper Benelux N.V. v Kingdom of the Netherlands, 2023).

To the best of the author's knowledge, there are no concrete examples at the time of writing on the digital side of the twin transition. However, it is reasonable to expect that the same conceptual problem may arise (Kryvoi, 2026). As states increasingly regulate the digital sphere and the reliance on data grows (Kryvoi, 2026), digital-sector investors may face regulatory measures that materially impact their investments, similar to the energy sector.

Additionally, in the twin transition context, the public interest is itself plural, and sometimes antagonistic, encompassing many different aims, such as decarbonisation, energy security, digital infrastructure security, consumer affordability, and data protection, making matters more complex.

This is where structured and case-by-case scrutiny of the legitimacy of the exercise of the right to regulate becomes essential in investor-state disputes related to the twin transition (Beysulen Angin, 2025). The point is therefore not to choose between blind deference and cynical suspicion. It is rather to require a structured analysis of whether a given measure, in its specific circumstances, advances a legitimate public interest objective through means proportionate to that objective. This requires substantially examining the relationship between regulatory means and stated ends, refraining from issuing a blank cheque to state regulation, and avoiding the substitution of the adjudicators’ own policy judgments for those of the states (Henckels, 2015).

For the twin transition, the practical implications are clear. An explicit distinction between the right to regulate and the public interest protects well-designed transition measures by providing them with a legal basis under which they can be defended on their merits. It prevents measures that pursue other objectives from hiding behind transition language. It also provides investors, whose capital the transition depends upon, with reasonably predictable standards, which ultimately lower the cost of capital for green and digital infrastructure projects alike.

The twin transition will not be advanced by collapsing or conflating legal categories, but by sharpening them. Treating the right to regulate as automatically equivalent to the public interest may appear, at first glance, to insulate transition-related actions from legal challenge. In practice, it weakens them by allowing labels relating to the green or digital transition to be deployed in defence of measures that do not, on closer examination, serve those objectives. A clearer legal framework, one that recognises state regulatory autonomy while subjecting individual measures to structured substantive review, is in the interest of states, investors, and the twin transition itself.

Beysulen Angin, B. (2025). The Right to Regulate vs. Investment Protection: Unveiling the Causes of Imbalance and the Limits of Current Reform Efforts in International Investment Law. ICSID Review - Foreign Investment Law Journal,40(1), 11–41. https://doi.org/10.1093/icsidreview/siaf007

Boute, A. (2012). Combating Climate Change Through Investment Arbitration. Fordham International Law Journal,35(3), 613–664.

Eiser Infrastructure Limited and Energía Solar Luxembourg SÀRL v Kingdom of Spain, ARB/13/36 (ICSID 5 April 2017).

Goldberg, M. H., Marlon, J. R., Wang, X., & Leiserowitz, A. (2020). Oil and Gas Companies Invest in Legislators That Vote Against the Environment. Proceedings of the National Academy of Sciences of the United States of America, 117(10), 5111–5112.

Henckels, C. (2015). Proportionality and Deference in Investor-State Arbitration: Balancing Investment Protection and Regulatory Autonomy. Cambridge University Press.

Infrastructure Services and Energia Termosolar (Formerly Antin) v Spain, No. ARB/13/31 (ICSID 15 June 2018).

Kryvoi, Y. (2026, April 23). Technology-Based Disputes and Investment Treaty Arbitration. British Institute of International and Comparative Law. https://www.biicl.org/publications/technology-based-disputes-and-investment-treaty-arbitration?cookiesset=1&ts=1780051585

Mitchell, A. D. (2023). The Right to Regulate and the Interpretation of the WTO Agreement. Journal of International Economic Law, 26(3), 462–482. https://doi.org/10.1093/jiel/jgad024

Philippe De Buck & Tanja Buzek. (2019). Opinion of the European Economic and Social Committee on ‘Recommendation for a Council Decision authorising the opening of negotiations for a Convention establishing a multilateral court for the settlement of investment disputes’ ((COM(2017) 493 final) (2019/C 110/27)). Official Journal of the European Union.

Public Interest. (n.d.). In Collins Dictionary. Retrieved 8 August 2024, from https://www.collinsdictionary.com/dictionary/english/public-interest

RWE AG and RWE Eemshaven Holding II BV v Kingdom of the Netherlands, ARB/21/4 (ICSID 1 December 2024).

Técnicas Medioambientales Tecmed, S.A. v The United Mexican States, ARB (AF)/00/2 (ICSID 29 May 2003).

Titi, C. (2014). The Right to Regulate in International Investment Law. Nomos & Hart Publishing.

Uniper SE, Uniper Benelux Holding B.V. and Uniper Benelux N.V. v Kingdom of the Netherlands, ARB/21/22 (ICSID 17 March 2023).

Yu, C. (2025). Disentangling Legal Stability from Legitimate Expectations: Towards Greater Deference to Regulatory Changes in Renewable Energy Transition Policies in Investment Arbitration. World Trade Review, 24(1), 101–119.

By Berfu Beysulen-Angin, PhD researcher - Groningen Centre of Energy Law and Sustainability