When the Democrats took back the White House in 2008, president Barack Obama's administration announced that it would take a fresh look at US bilateral investment treaties (BITs), the international agreements that provide legal protection for foreign investment flows. Over time, the Obama administration’s fresh look gave way to a searching gaze, and eventually a glazed stare, as the review process ran for almost three years before culminating in April 2012.

At the end of this protracted process, there were no major policy shifts. The Obama administration announced that the future US BITs should look more or less like the ones negotiated by their Republican predecessors, the Bush administration.

While the US has decided to toe the line and to negotiate new treaties on an old template, other countries have engaged in more radical policy shifts lately. Most notable has been Australia, which was jolted when foreign investors, including tobacco company Philip Morris and Chinese investors in Australia’s coal-fired power plants, announced that they would rely on BIT protections to challenge major new government policies.

Suddenly, the last word on strict new tobacco packaging laws or a clampdown on carbon emissions seemed to lie not with the Australian legislature or its courts, but with international arbitration tribunals tasked with deciding whether such policies contravene investment treaty commitments. It seems that few in Australia anticipated that innocuous-looking bilateral investment treaties would be used not merely to protect foreign investors against wholesale nationalisation or expropriation, but also to fend off undesirable regulatory measures imposed by governments on investors.

Having lost its innocence, Australia is now keen to curb these treaties and to trim back some of their more powerful protections. Other governments – including New Zealand’s – are also finding themselves caught up in a growing debate about how far such treaties should go in protecting foreign investment. In May 2012, a group of the country's professors and former judges signed an open letter expressing concern that BIT-type protections can tie the hands of legislators and erode the role of domestic courts in regulating FDI activity.

These incidents raise the question of why the outcome of the Obama administration’s policy review has been so muted. Part of the answer is that the US learned its own lessons much earlier than other countries.

Back in the late 1990s, foreign investors started using BIT-like protections in the North American Free Trade Agreement to challenge undesirable government policies. A series of potentially expensive legal claims by foreign investors led Canada, Mexico and the US to rethink how investment treaties are drafted and what they look should like. A series of reforms made by the Bush administration in 2004 closed off some of the most worrying legal loopholes, and angered business groups in the process.

While declining to engage in root-and-branch reforms – such as a ban on the use of international arbitration to resolve domestic policy disputes – the Obama administration has disappointed some of its progressive supporters. However, business and legal practitioners must feel as if they have dodged a bullet.

Luke Eric Peterson is the editor of InvestmentArbitrationReporter.com an online news service dedicated to foreign investment law and policy.