Abstracts Law

Do International Investment Treaties Constrain Environmental Regulatory Space in an Increasingly Warming World?: Rajoittavatko kansainväliset investointisuojasopimukset ympäristösääntelyn liikkumavaraa lämpenevässä maailmassa?

by Carola Miller

The need to effectively regulate the environment is recognized globally, for example, under the Paris Agreement, states are obligated to formulate national policies to combat the adverse effects of climate change. However, states are increasingly facing the consequences of such regulation in investment arbitration, as these progressive environmental protection goals can lead to a multi-billion claim made by foreign investors. International investment law and the investor-state dispute settlement are currently going through a so-called “legitimacy crisis” as there has been criticism towards both its substantive and procedural levels. As a response to this imbalance, there has been a move towards trying to reestablish international investment law. The overall purpose of this thesis is to examine the conflicting dimension of the link between environmental and investment protection. The aim is therefore to examine the defects of the international investment treaty regime in relation to the sovereign right of states to regulate environmental concerns. This is done by examining frequently used substantive treaty provisions that protect foreign investment: expropriation, fair and equitable treatment (FET), most-favored-nation (MFN) and national treatment (NT). It then examines how investment tribunals have interpreted these provisions when a foreign investor has challenged environmental measures taken by the host state in investor-state arbitration. This thesis further examines whether new types of clauses introduced in international investment agreements in recent years have succeeded in balancing the rights of investors with the interest of states in regulating public issues such as the environment. These include environmental treaty language that clarifies that investment protection should not be implemented at the expense of public policy issues. This thesis finds that both the vaguely worded investment protection provisions in international investment agreements and the inconsistent practice of arbitral tribunals have created uncertainty about the extent of state liability. It therefore seems that international investment law is still in a formative stage with respect to public interest concerns such as environmental protection. These reforms may increase the interaction between international investment law and environmental protection. However, these measures are not sufficient as they do not reduce the likelihood of a state being sued in investor-state arbitration. Therefore, more radical reforms are needed in the future to address the negative impact of the investment regime on the environmental protection measures of states.