Planet Before Profit:
How to Reform International Investment Law
and Protect Climate Policy
Theo Albert
International and European Law University of Amsterdam
Abstract
This paper will show the negative effect that the current international investment law system has on climate policy and explore and assess different methods to reform it. Currently, international investment law strongly discourages states from pursuing climate policy.
Investor-protection clauses in investment treaties mean that foreign investors can sue states in an international tribunal if state actions damage their investments. Due to the fact that many public interest policies may have this effect, including regulating carbon emissions, states can find themselves faced with million dollar claims against them. In a time when the climate crisis is demanding bold state actions, the current system of international investment law needs to be reformed. This necessity leads to the research question: What is the best method for reforming international investment law in order to protect climate policy? There are several methods by which this could be done. This paper will present four methods: human rights law, environmental treaties, shared responsibility principle and expropriation
redefining. All of the methods will be critiqued and assessed, both in terms of legal soundness and political viability.
Index
Introduction - 4
International Investment Law - 5 International Investment Law and Climate - 8
Human Rights Law - 10 Critiques - 14 Assessment - 16 Climate Obligations - 18 Critiques - 20 Assessment - 21 Shared Responsibility - 22 Critiques - 27 Assessment -28 Expropriation Redefinition - 29 Critiques - 30 Assessment – 33 Conclusion - 33
Introduction
Since the second half of the 20th century, the world has seen the creation and rise of bilateral
investment treaties (BITs), agreements between states which set rules for how they treat the investments of each other’s nationals.1 From the first BIT signed in 1959 until 1990, 470
treaties were created. From 1990 to 2012, that number skyrocketed to 2857 treaties.2 With
this substantial rise in BITs, the number of investor-state disputes involving these treaties naturally increased as well. In 1998 only 14 investor state dispute tribunals had occurred but in 2005 that number increased to 219.3 The vast majority of these disputes are settled by the
International Centre for Settlement of Investment Disputes (ICSID), which includes an independent panel of judges to be used for arbitration.4 A common critique of the
international investment law system is that it provides an avenue for multinational companies to push back against state policies that may not be in their interest5, leading to a reduction in
the ability of states to pursue policies of public interest. Although reversing state policy through specific action is rarely prescribed by the ICSID, they often award massive compensation to investors in the form of damages equal to the loss in investment by the investor party. In many cases, such as SD Myers v Canada and Occidental v Ecuador, this leads to the state reversing the policy to avoid paying. It is also easy to assume that states, particularly those with limited funds, will altogether avoid policies which put them in conflict with multinational companies. One such policy that is of particular concern is environmental policy. The growing precedent set by the ICSID in cases such as Metalclad Corportation v Mexico and Azurix Corp v Argentina is that even if a state is trying to pursue environmental goals, policies can still be found unlawful if they damage investments. This becomes particularly impactful when one looks at the policies needed to avert the worst of climate change. According to the IPCC report released in 2018, in order to keep global warming below 1.5 °C compared to pre-industrial levels, “systemic change” is needed in the energy, agriculture, infrastructure and industries.6 This can only occur through massive state
involvement, such as CO2 emission restrictions or banning certain fossil fuels,7 which will
1 Dolzer, Rudolf and Schreuer, Christoph, Principles of International Investment Law (Oxford, 2008), 1.
2Lejour, Arjan & Salfi, Maria, The Regional Impact of Bilateral Investment Treaties (CPB Netherlands Bureau for Economic Policy
Analysis, 2015), 1.
3Investor-State Disputes Arising From Investment Treaties: A Review (UNCTAD, 2010), 4.
4 ICSID Convention (ICSID, 1966).
5 Profiting from Injustice (Transnational Institute, 2012). 6 IPCC Report (UN, 2018), 323.
likely lead to some diminishing of investments. The damages that states would have to pay in the current international investment law system would likely deter such actions.
This paper aims to assess what changes can be made to the international investment law system in order to reduce the chance of it hindering the potential to implement climate
policies. The changes to be assessed are human rights conceptualisation, emphasis on climate obligations, adopting the shared responsibility conceptualisation and narrowing the definition of expropriation. Critiques of each option will be included as well as a general assessment of each methods viability.
International Investment law
8International investment law is a loosely defined collection of legal sources that dictate international trade and investor-state relations, specifically related to the transaction of capital. Much of what is currently understood to be the history, foundations and practice of international investment law can be found in Principles of International Investment Law by Rudolf Dolzer and Christoph Schreuer.9 Dolzer and Schreuer were two of the first law
academics to write a comprehensive summary of the legal concept and its implementation. As highlighted in this text, one of the core principles of international investment law is investment protection, which is the principle that foreign investment should not be impaired, at least not significantly, by state policy. This principle heralds back to the first known record of international investment law in a statement by John Adams in 1792, which stated that:
“There is no principle of the law of nations more firmly established than that which entitles the property of strangers within the jurisdiction of another country in friendship with their own to the protection of its sovereign by all efforts in his power.”10
8 Albert, Theodore, A Marxist Analysis of investor-state disputes in international investment law and potential positive changes (AUC,
2018).
9 Dolzer, Rudolf and Schreuer, Christoph, Principles of International Investment Law (Oxford, 2008) 10 Dolzer, Rudolf and Schreuer, Christoph, Principles of International Investment Law (Oxford, 2008), 1.
Much of investment protection is created by bilateral investment treaties (BITs) which are binding agreements between states to protect the investments of each other’s companies.11 In
addition to these treaties, investment protection is also secured by international minimum standard of treatment, a customary piece of international investment law.12 In general, this
custom sets out a minimum level of protection for foreign nationals’ investment in a state. Specifically, it requires a form of compensation for the seizure of property by the state. When an investor makes a claim that a BIT or international minimum standard of treatment is violated, it opens up an investor-state dispute. These disputes create the case law for much of international investment law and have become the focal point for much of the critique of it.
While judges in investor-state disputes do not have the authority to reverse any state policy, they can grant considerable damages to investors. Currently, disputes between states and investors that fall within international investment law are arbitrated in an almost identical way to private law within a common law system. A state action which reduces or destroys an investor’s investment is considered a breach and appropriate damages or specific
performance are rewarded.13 Much of the current legal dynamics of international investment
law spawn from the precedent created by the Chorzów Factory case presented to the
Permanent Court of International Justice in 1928.14 This case originates from post-World War
I when Germany transferred sovereignty of Upper Silesia to Poland. After this agreement several German companies, one being the Chorzów Factory, were seized by the Polish government. This caused Germany to sue on the basis that their investment had been unlawfully diminished by the Polish state.15 After a lengthy adjudication process, the court
sided with Germany and set the precedent that a breach must result in “restitution in kind or, if this is not possible, payment of a sum corresponding to the value which a restitution in kind would bear”.16 In addition, the court also found that this is only applicable if it is based on an “unjust” or illegal action by the breaching state.17 The precedent that was set after the
Chorzów Factory case was later codified into Article 31 of the Responsibility of States for Internationally Wrongful Acts 2001, produced by the International Law Commissions, as follows:
11 Dolzer, Rudolf and Schreuer, Christoph, Principles of International Investment Law (Oxford, 2008), 25.
12 Mussi, Adriana Sanchez. (n.d). International Minimum Standard of Treatment (Doctoral dissertation, 2008). University of Georgetown. 6 13 Singh, Balbir. Compensation under international investment law arbitration. (Faculty of Law: University of Oslo, 2017), 1.
14 Singh, Balbir. Compensation under international investment law arbitration. (Faculty of Law: University of Oslo, 2017), 7. 15 Chorzów Factory Case (Permanent Court of International Justice, 1927).
16 Singh, Balbir. Compensation under international investment law arbitration. (Faculty of Law: University of Oslo, 2017), 8. 17 Singh, Balbir. Compensation under international investment law arbitration. (Faculty of Law: University of Oslo, 2017), 9.
“1. The responsible State is under an obligation to make full reparation for the injury caused by the internationally wrongful act.
2. Injury includes any damage, whether material or moral, caused by the internationally wrongful act of the State.”18
While this system makes sense in theory, the primary problem with the compensation model arises with the valuation system in the arbitration. Simply put, there is no commonly held system for how damages should be calculated. According to legal scholar Joshua B Simmons, judges are confronted with “complex and divergent calculations of damages, which they may be ill equipped to reconcile”.19 Although most investor-state disputes are resolved by the International Centre for Settlement of Investment Disputes (ICSID), different judges have accepted different methods of valuation. Issues related to this inconsistency of approach were highlighted in a 2010 report by the United Nations Conference on Trade and Development.20
One such issue was that the definition of “investment” had several different deviations in international law due to different court decisions around the world.21 For example, in the case
of Malaysian Historical Salvors v Malaysisa the ICSID found that “contributions of a cultural and historical nature” should not be considered as investment. In the same year, the ICSID preceding over Phoenix v Czech Republic came to the opposite conclusion.22 This and
several other deviations lead to the UNCTD determining that there was a “trend of diverging – and sometimes conflicting – awards.”23
An important aspect to note about investment treaties is that many include “public interest” or “general interest” clauses. These clauses, which are typically present in a Bilateral Investment Treaty, permit expropriation of investments if it serves a “public interest”. An example of this clause can be seen in Article 13(1)(a) of the Energy Charter Treaty, which states that expropriation is permitted if it is “for a purpose which is in the public interest”.24 Another example can be found in Article 1110 of NAFTA, which states in
18 Reponsibility of States for Internationally Wrongful Acts (International Law Commissions, 2001), Art 31.
19 Simmons, Joshua B. (2012). Valuation in Investor-State Arbitration: Toward A More Exact Science (Berkeley Journal of International
Law, 2012), 196.
20 Investor-State Disputes Arising From Investment Treaties: A Review (UNCTAD, 2010). 21 Investor-State Disputes Arising From Investment Treaties: A Review (UNCTAD, 2010), 4. 22 Investor-State Disputes Arising From Investment Treaties: A Review (UNCTAD, 2010), 4. 23 Investor-State Disputes Arising From Investment Treaties: A Review (UNCTAD, 2010), 12.
part that “No party may directly or indirectly nationalize or expropriate an investment of an investor of another party…except for public purposes”.25 Another important document that
highlights a “public interest” norm is the General Agreement on Tariffs and Trade (GATT). The GATT is a multilateral trade agreement that focuses on international trade law. While not specifically focused on regulating international investment law, it does highlight general principles of international law that are relevant. Specifically, Article XX of the GATT lists several exemptions to the rules of the treaty based on public interest.26 On the surface, these
clauses could be read as including environmental protection as a public interest. However, it is important to note that the public interest clause is always listed as one of several
requirements of an exception, all of which have to be meet. For example, for the exception under Article 1110 of NAFTA to be permitted, the expropriation must also be “on a non-discriminatory basis”, “in accordance with due process of law” and “on payment of
compensation”.27 All of these additional requirements limit the utility of the clause for states to use in investor-state disputes.
International investment law and climate
While international investment law certainly serves a purpose in promoting investment and protecting investors, investor-state disputes could potentially inhibit climate protection. The primary way in which this can occur is through investors claiming that climate policies damaged their investments. This then could lead to the State being sued in an investor-state tribunal for breaching an investment treaty. While this has yet to occur after a state enacted a climate policy, it has happened many times after a state enacted a policy to protect the environment or general welfare. The same legal argument that investors used in those cases could also stand in future investor-state disputes related to climate policy. There are several investor-state disputes cases which involve this, including Phillip Morris v Uruguay and Australia, Piero Foresti v South Africa and CMS v Argentina. One case that particularly exemplifies the issue is the 2009 investor-state arbitration of Vattenfall v Germany.
25 North American Free Trade Agreement (1994), Art 1110. 26 General Agreement on Tariffs and Trade (1947), Art XX. 27 North American Free Trade Agreement (1994), Art 1110.
The dispute occurred when Germany imposed restrictions on Vattenfall’s nuclear power plant in Hamburg relating to limiting its environmental impact on the Elbe River.28 Vattenfall
claimed that the restrictions would cause a loss in investment by making the plant impractical and uneconomical, alleging in turn that Germany violated the Energy Charter Treaty.29 The
Energy Charter Treaty is a multilateral investment treaty that has been ratified by both Sweden and Germany. Part III of the Energy Charter Treaty provides protections for the investments of nationals of member states.30 Specifically Article 13 protects against
expropriation without compensation and Article 10(1) requires fair and equitable treatment. Additionally, Article 26 of the treaty gives investors the right to submit disputes to
international arbitration instead of a national court.31 Vattenfall asked for a €1.4 billion
compensation and the dispute was filed with the International Centre for Settlement of Investment Disputes (ICSID).32 Eventually, the case was settled out of court. The exact
details of the settlement are unknown but the International Institute for Sustainable Development (IISD) stated that the environmental restrictions were “watered down”.33
Cases like Vattenfall v. Germany showcase a potentially dangerous precedent for the future of climate protection. What if Germany had been attempting to prevent climate change by placing restrictions on Vattenfall’s CO2 emissions? This would damage the investments of Vattenfall so they could plausibly claim that their protections under Energy Charter treaty were breached. While certain exemptions exist, like the beforementioned public interest clauses, if these are not met then Vattenfall would have a solid claim for damages. This can prevent climate policy from being enacted in two way. First is simply that if states lose investor-state disputes they would have to pay damages, some getting to incredibly high levels. States having less capital reduces their ability to pursue large scale environmental projects and CO2 reductions, which may be costly. Second is what Kyla Tienhaara, an environmental science and law scholar, describes as the “regulatory chill”.34 Although no
state has admitted this the threat of litigation may make states reverse their environmental policy out of fear of having to pay substantial damages, as can be seen in the Vattenfall v
28 Bernasconi, Nathalie, Background Paper on Vattenfall v Germany Arbitration (International Institute for Sustainable Development,
2009), 1.
29 Bernasconi, Nathalie, Background Paper on Vattenfall v Germany Arbitration (International Institute for Sustainable Development,
2009), 2.
30 The Energy Charter Treaty (With Incorporated Trade Amendment) and Related Documents (1991). Part III. 31 The Energy Charter Treaty (With Incorporated Trade Amendment) and Related Documents (1991). Art 26.
32Bernasconi, Nathalie & Hoffmann, Rhea Tamara, The German Nuclear Phase-Out Put to the Test in International Investment Arbitration?
Background to the new dispute Vattenfall v Germany (International Institute for Sustainable Development, 2012). 4.
33 Bernasconi, Nathalie & Hoffmann, Rhea Tamara, The German Nuclear Phase-Out Put to the Test in International Investment
Arbitration? Background to the new dispute Vattenfall v Germany (International Institute for Sustainable Development, 2012). 4.
Germany case. Additionally, the potential costs of the arbitration process can be significant. A 2010 report by the United Nations Conference on Trade and Development (UNCTAD) stated that “costs involved in investor-state arbitration have skyrocketed in recent years”.35
The Organisation for Economic Co-operation and Development (OECD) found that the legal cost of investor-state arbitration is over $8 million and can go up to $30 million.36 While for
wealth states this may be negligible, poorer states may find the arbitration costs too much to risk. It is also possible that these outcomes can deter future environmental policies from being enacted in the first place. Therefore, even claims that do not have a legitimate standing and would not be accepted by an investor-state tribunal could work as a climate policy deterrent.
The current international investment law landscape presents a difficult obstacle for states that hope to enact climate policies and for climate activists trying to push states to enact climate policies. Nevertheless, there are several potential avenues for reforming the system that could mitigate this obstacle. The rest of this paper will seek to access these strategies and determine what climate-minded actors should be pushing for.
Human rights law approach
One way in which environmental regulation can be protected from investment law
obligations is through human rights law. Currently there is a wealth of human rights treaties that create binding obligations on states including, but not limited to, the Universal
Declaration of Human Rights, the International Covenant on Civil and Political Rights
(ICCPR) and the International Covenant on Economic, Social and Cultural Rights (ICESCR). The human rights approach to international investment law reform would require arguing that pre-existing human rights law supersedes any obligations on a state required by a bilateral investment treaty. Additionally, there would have to be an incorporation of climate protection
35 Investor-State Disputes: Prevention and Alternatives to Arbitration (UNCTAD, 2010) 16. 36 Investor-State Dispute Settlement. Public Consultation: 16 May – 23 July 2012 (OECD, 2012), 19.
into human rights law or a reinterpretation of current international investment law to cover human rights. If both these requirements are met then a state that wishes to pursue a climate policy that may damage a foreign investor’s investments could argue that the human rights obligation to do so takes precedent over the investor protection obligation.
The case for human rights obligations superseding international investment obligations is based on strong legal precedent and argumentation. Barnali Choudhury, a law professor from McGill University, argued that there exists a harmonising approach for certain human rights obligations to take precedent over investment treaty obligations. According to Choudhury, there are two human rights norms that can trump bilateral investment treaty obligations.37
The first is jus cogens norms, to which no degradations are allowed. However, it is unlikely that environmental protection could be included in this category. According to precedent set by the ICTY in the Prosecutor v Furundzija case, jus cogens norms are likely restricted to violations such as torture, slavery and genocide.38 The second category of human rights
norms that could supersede international investment law is state obligations under the Charter of the United Nations. According to the UN Charter itself, obligations under the UN Charter supersede all other obligations. Article 56 of the UN Charter compels states to “pledge themselves to take joint and separate action in cooperation with the Organization for the achievement of the purposes set forth in Article 55”. One such purpose is described in Article 55(c) as the promotion of “universal respect for, and observance of, human rights …”39
Furthermore, in the Namibia Case, the court found that state actions that denied human rights were a “flagrant violation of the principles and purposes of the Charter”.40 This clearly sets
precedent that bilateral investment treaty obligations that require a state to breach its human rights obligations must be void.
Although it’s straightforward to establish that human rights obligations under the UN charter supersede obligations under bilateral investment treaties, it is more difficult and controversial to establish that environmental protection is encompassed by this. Pointedly, Choudhury does not attempt to incorporate environmental protection into his harmonisation analysis. Whether or not the state has a human rights obligation to protect the environment, or at least
37 Choudhury, Barnali. Exception Provisions as a Gateway to Incorporating Human Rights Issues Into International Investment Agreements
(Society of International Economic Law, 2010), 10.
38 Prosecutor v. Furundžija (International Criminal Tribunal for the Former Yugoslavia), 121 International Law Reports 213 (2002). 39 The Charter of the United Nations, Art 55(c) & 56.
not harm the environment, is a contentious issue which many scholars dispute. However, it is possible to argue that the human rights described in Article 55(c) do include environmental protection. Jorge E Viñuales, a professor of law at Cambridge, outlined several legal
arguments for how environmental protection could be considered under the scope of human rights in an article for The Frontiers of Human Rights.41 While the article focuses primarily on the legality of extraterritorial action to protect human rights, several arguments about linking human rights to environmental protection are applicable. According to Viñuales, in order for environmental protection to be under the scope of human rights, a “link”
requirement must be met.42 This link must connect three elements. First there must be a link
between an “act or omission of a state” and “environmental degradation”. Then there must be a link between “environmental degradation” and “serious and direct harm to the
individual”.43
There are criteria issues that arise from this “link” requirement. The first is the issue of responsibility and the second is the issue of specificity. The issue of responsibility is whether or not the state must have responsibility for preventing, or not causing, the environmental degradation that breaches human rights. According to Viñuales, this means that a state must have jurisdiction over the area or people where environmental damage caused human rights breaches. While it is undisputed that states have responsibility for protecting the human rights of their own citizens and people within their territory, it becomes more difficult when
discussing the human rights of non-citizens outside their territory. While this issue may not be important for many environmental issues it is certainly relevant when concerning
environmental issues of an extraterritorial nature, a key example being climate change. The following hypothetical can demonstrate the dilemma:
State A and State B have both ratified a Bilateral Investment Treaty that provides protection for the investments of each other’s nationals under the ICSID Convention. An investor, who is a national of State A, sets open a coal factory in State B. Citing the CO2 emissions caused by burning coal, the effect this will have in contributing to climate change and how climate change will breach human rights, State B decides to ban coal. They state that their obligation to protect human rights transcends their treaty obligations. However, the investor argues that
41 Bhuta, Nehal. The Frontiers of Human Rights (Oxford, 2016) 42 Bhuta, Nehal. The Frontiers of Human Rights (Oxford, 2016), 53. 43 Bhuta, Nehal. The Frontiers of Human Rights (Oxford, 2016), 53.
because climate change is an exterritorial issue State B does not have responsibility or jurisdiction, making there no human rights obligation and therefore their investment obligations stand.
Even though the argument presented by State B is strong, there are potential avenues to counter it. In an article on the subject of human rights and state responsibility, Professor Alan Boyle makes three arguments for why a state has responsibility for damages to the
environment that have transboundary harm.44 Firstly, it is undisputed law that jurisdiction can
go beyond state territory in situations of military occupation or cross-border action, therefore this may extend to transboundary environmental harm. Secondly, Boyle cites environmental treaties such as the Aarhus Convention on Access to Information, Public Participation in Decision-making and Access to Justice in Environmental Matters as ones that affirm the jurisdiction of states for environmental harm outside their territories. Finally, it would be a violation of the prohibition on discrimination, declared in several human rights treaties, to treat individuals differently in different states.
Overall, the issue of responsibility and jurisdiction creates a formidable hurdle for states trying to argue that they have an obligation to prevent environmental damage that causes human rights violations. While this would not affect the outcome of investor-state cases where the potential environmental damage is internal, it would significantly affect cases where the damage is transboundary. Nevertheless, there are several arguments that state defendants can make in favour of state responsibility for transboundary human rights violations.
In regards to the issue of specificity, the main continuous issue is how to determine whether individual human rights were breached by the environmental degradation. Jurisprudence provides several cases in which the court determined that the environmental degradation did not specifically effect individuals enough to count as a human rights breach. One pertinent example is the case of Athanassoglou v. Switzerland. During this case the claimants were local residents of Beznau, Switzerland and argued that the continuation of a nuclear plant in their area infringed on their human rights under Articles 1 and 6 of the ECHR as they were not able to submit a complaint to the court about potential environmental damages.45 However,
44 Boyle, Alan. Human Rights and the Environment: Where Next (European Journal of International Law, 20-3, 2012). 45 European Convention on Human Rights.
the court ruled that while it may be the case that the plant could cause environmental damage, the link to “serious and direct harm to the individual” was lacking. In its findings, the court stated “The applicants in their pleadings … were alleging not so much a specific and
imminent danger in their personal regard as a general danger in relation to all nuclear power plants; and many of the grounds they relied on related to safety, environmental and technical features inherent in the use of nuclear energy”.46 A similar result was also seen in the case of
Kyrtatos v Greece. In this case the claimant argued that the construction of buildings in a swamp in Greece would damage the local environment. The Claimant further argued that this would be an infringement of Article 8 of the ECHR which provides the right to home and family life.47 However, while the court confirmed that environmental damage would occur, it
argued that this would not be a violation of Article 8 as it did not specifically affect the claimants rights under Article 8. According to the court: “[n]either Article 8 nor any of the other Articles of the Convention are specifically designed to provide general protection of the environment as such; to that effect, other international instruments and domestic legislation are more pertinent”. Both pieces of jurisprudence show that the link requirement between environmental damage and “serious and direct harm to the individual” must achieve a high standard of specificity.
Critiques
There are several critiques that can be levelled at using human rights to protect climate policy in investor-state disputes. The first is that it would require a restructuring of the role and jurisdiction of investor-state dispute arbitrators. Currently, the international investment law consensus is that human rights are not under the jurisdiction of investor-state dispute
tribunals. For example, Article 25 of the ICSID convention states that “the jurisdiction of the Centre shall extend to any legal dispute arising directly out of an investment”.48 There is no
mention of human rights or any additional obligations of the state outside of the relevant investment treaty. This consensus is also backed up by precedent. During the case of Biloune v Ghana, Biloune claimed that Ghana had breached human rights obligations as well as
46 Case of Athanassoglou and Others v Switzerland, Judgment (European Court of Human Rights, 2000), 21. 47 European Convention on Human Rights. Art 8
inventor protection obligations by detaining him for two weeks without charge.49 The case
was taken to the United Nations Commission on International Trade Law (UNCITRAL) which is an investor-state tribunal. Article 15(2) of the UNCITRAL convention states that “any dispute between the foreign investor and the Government in respect of an approved enterprise…may be submitted to arbitration”.50 Despite the broad definition of jurisdiction in
Article 15(2), the Tribunal found that it could not rule over human rights claims. In its judgment the Tribunal stated that it “lacks jurisdiction to address, as an independent cause of action, a claim of violation of human rights”.51 While this case showcases a different type of
involvement of human rights in investor-state disputes than this paper focuses on, involving potential breaches of investors’ human rights instead of States’ human rights obligations, several experts in the field concur that most arbitrators do not consider human rights part of the investor-state dispute process. Investor-state dispute arbitrators Guillermo Aruilar Alvarez and William W Park have written that “Arbitrators do not normally see themselves as guardians of the public interest”.52 Furthermore, Professor Sebastian Perry, who edits a
review paper on investment arbitration, has written that “most arbitrators are experts in anything but human rights law”.53 Changing jurisdiction of investor-state tribunals would
require one of two actions to occur. First, a reconceptualization of how arbitrators perceive the scope of Articles such as 25 of the ICSID or 15(2) of UNCITRAL. Second, implementing jurisdiction clauses in investment treaties that specifically include jurisdiction over human rights. Either of these options would be dramatic changes from the current system and would require substantial political investment.
The specificity requirement could create a difficult hurdle for states attempting to use the argument that human rights violations caused by environmental damage could be a defence against investor claims. Investor-state dispute cases are often about massive investments, going up to values in the millions, if not billions, of dollars and assets that can cover large sections of industries. This makes it very difficult to pinpoint a “serious and direct harm to
49 Biloune v Ghana (UNCITRAL, 1989).
50 United Nations Convention on International Trade Law (UN, 1966). Art 15(2) 51 Biloune v Ghana (UNCITRAL, 1989), 188.
52 Park, W. and Alvarez, G, The New Face of Investment Arbitration: NAFTA Chapter 11 (The Yale Journal of International Law, 28, 2003)
394.
the individual” caused by a potential environmental damage, which is needed to meet the requirement. The cases of Athanassoglou v. Switzerland and Kyrtatos v Greece show that many tribunals utilize this requirement strictly. The specificity requirement is even more difficult to meet when the potential environmental damage is the contribution to climate change. By its very nature, climate change is a global issue that could arguably affect everyone on earth. Due to this international nature, pinpointing how that would specifically affect the individual becomes almost impossible, particularly with the strict precedent created by the
beforementioned cases. Furthermore, the same reasoning applies to determining which actors specifically breached human rights. As climate change cannot occur without multiple states and multinational corporations emitting high levels of CO2, it becomes difficult to determine which state would be breaching human rights. This makes it difficult for a state to claim that it has climate obligations based on human rights obligations. Any state wanting to use the human rights obligation claim in an investor-state dispute related to climate change would have to find a concrete way to tie climate change to specific breaches of human rights. This is a difficult task that would require the conceptualisation of a completely new kind of legal argumentation.
Human rights law approach assessment
Attaching environmental protection to human rights is a sound way to promote
environmental exemptions in investor-state cases. By arguing that environmental protection is needed to fulfil human rights obligations, a strong case can be put forward for these protections to supersede investor obligations. Human rights are a well-established part of international law with substantial jurisprudence, allowing a defending state to pull from a wealth of prior judgements to make their case. This strategy is not without its pitfalls, but these pitfalls are not impossible to overcome. Expanding the jurisdiction of the investor-state tribunals may be a substantial change but strategies to do so have a strong basis in law and have already been discussed positively in international investment law discourse. Article 31(3)(c) of the Vienna Convention on the Law of Treaties (VCLT) states that “There shall be taken into account, together with context…any relevant rules of international law applicable in the relations between the parties.”54 This provision in a widely signed international treaty
could form the backbone of argumentation that investor-state dispute tribunals should have jurisdiction over human rights matters if they are relevant to the dispute. Professor Yannick Radi claims that Article 31(3)(c) of the VCLT provides a framework for systemic integration, a process whereby different parts of international law come to conformity in order to reduce the risk of clashes.55
Using systemic integration based on Article 31(3)(c) to integrate human rights law into international investment law has been described positively by Professor Radi. According to Radi, international investment tribunals often turn to general international law during their proceedings. Generally speaking this is often to cover gaps of uncertainty left in investment treaties.56 Radi accepts that this method of systemic integration in international investment
law has not been used to integration human rights into investor-state disputes.57 However,
Radi claims that the use of systemic integration in these cases shows that the potential to use it with human rights law exists. According to Radi, “systemic integration is … an option for international investment arbitration in order to introduce into judicial reasoning … human rights norms of international law.”58
Additionally, including human rights clauses in investment treaties is also a plausible path for including human rights in investor-state disputes. There already exists precedent for clauses being included in investment treaties due to public pressure. As will be discussed in detail later in this paper, CAFTA included provisions on indirect expropriation which differed from provisions in NAFTA in order to narrow the definition. What is important to note is that these provisions were included after years of negotiation with strong objection to the deal from environmental groups.59 While the signing of the agreement could be seen as a failure for
environmental groups, it is important to note that the indirect expropriation adjustments were made to appease the groups.60 Many environmentalists are still not happy with CAFTA,
claiming that it did not go far enough to protect environmental policy, but the negotiation
55 Radi, Yannick, Realizing Human Rights in Investment Treaty Arbitration: A Perspective from within the International Investment Law
Toolbox (North Carolina Journal of International Law and Commercial Regulation, 37-4, 2012), 1129.
56 Radi, Yannick, Realizing Human Rights in Investment Treaty Arbitration: A Perspective from within the International Investment Law
Toolbox (North Carolina Journal of International Law and Commercial Regulation, 37-4, 2012) 1130
57 Radi, Yannick, Realizing Human Rights in Investment Treaty Arbitration: A Perspective from within the International Investment Law
Toolbox (North Carolina Journal of International Law and Commercial Regulation, 37-4, 2012) 1131
58 Radi, Yannick, Realizing Human Rights in Investment Treaty Arbitration: A Perspective from within the International Investment Law
Toolbox (North Carolina Journal of International Law and Commercial Regulation, 37-4, 2012) 1132
59 Hunt, Nathaniel Hemmerick, One Step Forward, Two Steps Back: The Central American Free Trade Agreement and the Environment
(Georgia Journal of International and Comparative Law, 35-3, 2007) 546.
60 Hunt, Nathaniel Hemmerick, One Step Forward, Two Steps Back: The Central American Free Trade Agreement and the Environment,
process at least shows that there is significant political power in environmental activism. The model of negotiation for environmental protections in CAFTA could be used as an example for how to push states into implementing human rights clauses in future agreements. While public pressure may not succeed entirely, even moderate successes show that it is a
worthwhile pursuit.
The specificity requirement makes it difficult to tie human rights to climate change, but argumentation does exist to do so. It is true that the traditional way of determining human rights breaches does not apply in climate related cases. Normally it would have to be determined how a specific actor breached a specific person or peoples human rights. In this case neither can be determined. However, what can be determined is whether a state breached their duties of protection. Professor Derek Bell explains this conceptualisation of human rights in a paper on the subject. According to Bell, the traditional way of determining human rights breaches can be described as “demand side”.61 For example if X shoots Y, X meets the
demand side criteria for breaching Y’s human right to life, based on the fact that there is an exact causality between Y’s human right being deprived and X’s action. However, Bell argues that another way of determining human rights breaches could be the “supply side” criteria. This approach would focus more on the positive obligations of the state rather than the human right deprivation itself. If it is accepted that climate change does cause human rights breaches, then individual duties can be assigned to states. Using this method,
determining if a human rights breach occurred would involve assessing if a state failed in its duties, rather than if a person or peoples right was deprived. This conceptualisation could help bypass the specificity requirement and make it easier for state to claim that their human rights obligations necessitate them pursuing climate policies.
Climate treaty obligations
Another avenue to explore is how a state’s climate obligations may compel it to take actions which damage assets of investors. This aspect has been relatively ignored by legal scholars and climate activists trying to present arguments for how the potential detrimental effects of international investment law on climate policy can be mitigated. The most well-known
climate treaty is the 2015 Paris Agreement. This treaty, signed by virtually all states, was the international community’s response to the ongoing climate change crisis. The cornerstone of the treaty was the binding obligation in Article 2 to keep global average temperature “well below 2°C” rise from pre-industrial levels.62 According Article 3, in order to achieve this
every party must set their own CO2 emissions reduction goals relative to their economic development.63 While the treaty does not compel states to take specific actions, when ratified
it obliges states to fulfil the targets that they set. This obligation is legally binding and recent case law has cemented this.
The existence of binding climate obligations on states stemming from climate treaties can be seen in the 2015 case of Urgenda Foundation v. State of the Netherlands. During the case Urgenda and 900 Dutch citizens sued the Netherlands for breaching its obligations to reduce CO2 emissions in order to protect its citizens from climate change.64 The Court ruled in
favour of the claimants and ordered the Netherlands to reduce its CO2 emissions by at least 25% (compared to 1990) by 2020. This decision was later upheld by the Court of Appeals in 2018. According to the Court, the Netherlands had violated Articles 2 and 8 of the ECHR because climate change would result “in the serious risk that the current generation of citizens will be confronted with loss of life and/or a disruption of family life”.65 The 25%
figure is based on necessary CO2 limits detailed in the IPCC report. While the IPCC report did not have a binding nature on states, according to the Court it
“confirms the fact that at least a 25-40% reduction of CO2 emissions as of 2020 is required to prevent dangerous climate change”.66 Additionally, the Court of Appeals stated that the
Netherlands has an obligation under international law to fulfil its Paris agreement obligations. The Court of Appeals determined that the Netherlands “committed with the signing of the Paris Agreement”, to keep global warming “well below 2C”.67 Additionally, the Court
rejected the State’s argument the 25% reduction is only for countries as a whole and not specifically them. The Court stated that because the Netherlands is a wealthy country they have no excuse to set their emissions reductions lower than the average needed.68
62 Paris Agreement (UN, 2015) Art 2. 63 Paris Agreement (UN, 2015) Art 3.
64 Urgenda Foundation v The Netherlands (Hague Court of Appeal, 2018).
65 Mayer, Benoit, The State of The Netherlands v Urgenda Foundation: Ruling of the Court of Appeal of The Hague (Transnational
Environmental law, 8-1, 2019) 173.
66 Urgenda Foundation v The Netherlands (Hague Court of Appeal, 2018) Art 51. 67 Urgenda Foundation v The Netherlands (Hague Court of Appeal, 2018) Art 44. 68 Urgenda Foundation v The Netherlands (Hague Court of Appeal, 2018) Art 60
Furthermore, the Court also dismissed the state’s argument that because the effects of climate change are unknown you cannot charge hold a state accountable for what only might happen. In reaction to this argument, the Court brought up the precautionary principle, which it described as “a generally accepted principle in international law”.69 The precautionary
principle compels a state to act in a way that avoids abuses that, while not necessarily
inevitable, are “highly probable”.70 Describing this principle, the United Nations Framework
Convention on Climate Change stated that “Where there are threats of serious irreversible damage, lack of full scientific certainty should not be used as a reason for postponing such (preventative) measures”.71 The principle was also referenced in the case of Tatar vs
Romania in 2009 in relation to environmental safety standards.72 The Urgenda v The
Netherlands case serves as an example of how climate change treaties, such as the Paris Agreement, and can create binding obligations on states.
The same climate obligations that bound the Netherlands in the Urgenda v The Netherlands case could be used to a state’s advantage in an investor-state dispute related to climate. For example, suppose an investor presented a sound case to the court that its investments were damaged by the actions of the state. However, what if those actions were necessary for a state to fulfil its climate obligations under that Paris Agreement or another international climate treaty? In this case the state would justifiably refer to the Urgenda v The Netherlands case in order to demonstrate that it has an international legal obligation to deter climate change.
Critiques
The main critique of using the climate treaty approach to protect climate policy in investor-state disputes is much the same as the critique against the human rights approach. That critique is that investor-state arbitrators do not usually see climate obligations as part of their jurisdiction. The precedent set by Biloune v Ghana and the assessment by Guillermo Aruilar Alvarez and William W Park that “Arbitrators do not normally see themselves as guardians of the public interest” still applied in this context. Again, in order to implement climate
69 Urgenda Foundation v The Netherlands (Hague Court of Appeal, 2018) Art 63. 70 Urgenda Foundation v The Netherlands (Hague Court of Appeal, 2018) Art 63. 71 United Nations Framework Convention on Climate change (UN, 1992) Art 3(3).
treaties into investor-state arbitration there would need to be a substantial shift in tribunal jurisdiction, either through reconceptualization or new climate clauses in investment treaties.
Another critique is that accepting this line of argumentation gives too much leeway for abusive state actions. Many international climate treaties do not specifically tell states what actions they must take, only that they must reduce their climate emissions. For example, the Paris Agreement outlines different ways in which states should cooperate, record and develop in Articles 4, 7, 9, 10, 11 and 13. However, in relation to actual reduction of climate
emissions, the treaty only says that they must be reduced. Article 4(2) states “Each Party shall prepare, communicate and maintain successive nationally determined contributions that it intends to achieve. Parties shall pursue domestic mitigation measures, with the aim of achieving the objectives of such contributions.” The broadness of the obligation is intentional in order to provide states with many options for reducing their emissions based on context and preference. However, this could also allow states to take a broad variety of actions that damage investments while claiming that they are pursuing an environmental goal. If this grows to the extent of abuse, where states are misleading the tribunal about their
environmental intensions and are actually pursuing protectionist goals, the system could be delegitimised. This could lead to decreases in investments by companies due to fear of unfair treatment or a dismissal of legitimate state environmental aims in investor-state disputes.
Climate treaty approach assessment
Overall, using climate treaties to argue for a climate policy exemption in international
investment law is one of the soundest approaches. With new climate treaties such as the Paris Agreement being enacted and growing support for CO2 emission reduction policies,73 there
seems to be growing political pressure to support and expand climate treaties. Furthermore, the climate treaty approach would not require any new treaties being enacted as there is already the treaty framework needed. Cases like Urgenda v Netherlands show that there exists precedent that these treaties create binding obligations on states. These obligations should and can be considered in investor-state arbitration.
73 Stokes, Bruce, Wike, Richard & Carle, Jill, Public Support for Action on Climate Change (Pew Research Center, 2015), accessed from:
The argument against the jurisdiction critique is that same as the one used for the human rights approach. Systemic integration could work in the same way international investment law utilises general principles of international law to cover gaps in investment treaties, which is the same way it could potentially be used to integrate in human rights obligations. The novel critique, that considering climate treaties in investor-state disputes could lead to abusive state actions, has its own fair reasoning. There is a significant possibility that states could use the broad leeway given by climate treaties to pursue abusive actions that unjustly damage investors profits. However, this is unlikely to be a widespread issue due to two reasons. First, the state would still have to prove in an investor-state tribunal that its actions were made in legitimate pursuit of meeting climate obligations. As with any assessment of breach, the intent and the effect may be looked at, both of which would have to meet the standard of the tribunal. Second, states have an incentive outside of international investment law to protect investors’ investments. At the end of the day, most states desire outside investment and creating a hostile environment for investors would reduce that.
Shared responsibility
Another avenue for reforming investor-state disputes to be more accommodating to
environmental policies is the concept of “shared responsibility”. Shared responsibility refers to multiple actors being responsibly for an obligation or a violation in international law. There are four main features that define shared responsibility in international law, as
described in a paper by professors André Nollkaemper and Dov Jacobs.74 First, the existence
of “multiple actors”, either “states”, “international organizations”, “multinational
corporations” or “individuals”. Second, the “responsibility of (said) actors” for the harmful outcome. Third, the lack of “individual causation” for the harmful outcome, meaning that no one actor is solely responsible. Fourth, the responsibility for the outcome is “distributed to them separately, rather than resting on them collectively”. The authors illustrate this
distinction by comparing responsibility that the EU would have for an outcome as opposed to the responsibility shared by EU members separately for an outcome.
74 Nollkaemper, André & Jacobs, Dov, Shared Responsibility in International Law: A Conceptual Framework (Michigan Journal of
Nollkaemper and Jacobs make a point of stating that there are several cases in which shared responsibility has been utilised in international law. One well known example is the Corfu Channel case. In the case Albania was accused of failing to warn the UK about the presence of mines and Yugoslavia was accused of planting the mines. Both were accused of
responsibility for the wrongful outcome due to both breaching their duties under international law.75 It should be noted that Nolkaemper and Jacobs’ article almost entirely focuses on
disputes between states in regards to a harmful outcome that has already occurred. This is quite different from investor-state disputes where the harmful outcome has possibly not occurred yet. However, shared responsibility in the context of international investment
disputes has been looked at in a paper by professor Stephan W Schill.76 Schill’s paper focuses
on the difficulties in protecting the public interest in international investment cases.
According to Schill, this stems from the difficultly in determining who is responsible for the public interest in a particular situation. Four actors are involved who all could plausibly have responsibility: the arbitrators, the host state, the home state of the investor and the investor itself. Schill describes the resulting conflict as “the irresponsibility carousel”.77 Each actor
can reasonably push their own narrative for why they are not responsible and that others are responsible for the public interest in investor-state disputes. Arbitrators may argue that their role is to apply the governing law and it is the state parties’ responsibility to include detailed public interest protections in trade deals. Additionally, host states may argue that that they are compelled not to include public interest protections because they may be in fierce
competition to gain investment. In this view, it would be the home states responsibility to regulate outward investment. Furthermore, home state may argue that public interest is an internal matter and the protection of it is the responsibility of the host state. Finally, while not mentioned explicitly by Schill, investors may argue that their sole responsibility is the
interest of their shareholders and protecting the public interest is the responsibility of states.
In order to stop the “irresponsibility carousel” Schill proposes using the idea of shared responsibility. 78 Instead of a new treaty, this would involve creating a new conceptual
75 Nollkaemper, André & Jacobs, Dov, Shared Responsibility in International Law: A Conceptual Framework (Michigan Journal of
International Law, 34-2, 2013) 379.
76 Schill, Stephan W., ‘Shared Responsibility’: Stopping the Irresponsibility Carousel for the Protection of Public Interests in International
Investment Law (2017). In August Reinisch et al (eds), International Law and ...: Select Proceedings of the European Society of International Law (Oxford:Hart Publishing, 2016).
77 Schill, Stephan W., ‘Shared Responsibility’: Stopping the Irresponsibility Carousel for the Protection of Public Interests in International
Investment Law (2017). In August Reinisch et al (eds), International Law and ...: Select Proceedings of the European Society of International Law (Oxford:Hart Publishing, 2016), 164.
78 Schill, Stephan W., ‘Shared Responsibility’: Stopping the Irresponsibility Carousel for the Protection of Public Interests in International
Investment Law (2017). In August Reinisch et al (eds), International Law and ...: Select Proceedings of the European Society of International Law (Oxford:Hart Publishing, 2016), 166.
approach for dealing with issues of public interest in investor-state disputes. In the context of investor-state disputes, shared responsibility would act as a starting point in which all actors are responsible for the public good. With this conceptualisation, all actors are under an
obligation to protect the public interest and must make actions to do so. Of course, difficulties then arise as to the extent to which actors are responsible for the public interest and the extent to which they are obligated to take actions to protect it. However, Schill points to the EU constitutional laws’ conceptualisation of shared responsibility as an example of how this can be implemented.79 This system can be described as a “composite structure” in which there is
autonomy of actors (EU member states) but with mutual dependence. This creates what Professor Piet Echhout calls “limited and shared” jurisdiction where actors have their own jurisdiction over its rules and mandates but this jurisdiction is moderated to an extent to protect the shared norms of the actors.80 Schill argues that if implemented into international
investment law, shared responsibility could compel actors to assist one another in the protection of public interests. He gives the examples of home states concluding public interest friendly investment treaties or arbitrators adopting soft law instruments that give more weight to public interest clauses.81 These options could prove to be significant in
protecting the public interest in investor-state disputes.
While the aforementioned papers are interesting analyses in their own right, what interests me the most is the potential to implement the shared responsibility concept into investor-state disputes which involve climate policy. While the dynamics may be different, Schill’s
conceptualisation of shared responsibility could still be used in this new context. In order to illustrate this, an analysis of the 1998 Myers v Canada case is useful. The investor-state dispute arose after the Canadian government banned the export of PCB wastes from Canada to the United States citing environmental concerns.82 Particularly, Canada claimed that it
would be more environmentally safe to develop its own disposal method of PCBs than to continue to export the waste to the US for disposal. According to scientific data, PCBs are probable human carcinogens and are toxic to fish.83 In reaction to this the American company
79 Schill, Stephan W., ‘Shared Responsibility’: Stopping the Irresponsibility Carousel for the Protection of Public Interests in International
Investment Law (2017). In Reinisch, August et al (eds), International Law and ...: Select Proceedings of the European Society of International Law (Oxford:Hart Publishing, 2016) 167.
80 Eeckhout, Piet, Human Rights and the Autonomy of EU Law: Pluralism or Integration? (Oxford University Press, 2013) 4.
81 Schill, Stephan W., ‘Shared Responsibility’: Stopping the Irresponsibility Carousel for the Protection of Public Interests in International
Investment Law (2017). In August Reinisch et al (eds), International Law and ...: Select Proceedings of the European Society of International Law (Oxford:Hart Publishing, 2016), 169.
82 S.D. Myers Inc v Government of Canada (1998).
83 PCBs: Related Regulations. (Government of Canada, 2017). Accessed from:
Myers, which created and disposed of PCBs, sued Canada and alleged that they had breached investor protection obligations under NAFTA.84 During the ensuing arbitration, Canada
defended the ban by arguing that protecting the environment is in the public interest and that this should be protected from investment claims. Particularly they cited Article 1106 of NAFTA which stated:
“States have the right to establish high levels of environmental protection. They are not obliged to compromise their standards merely to satisfy the political or economic interests of other states;”85
However, the tribunal found that environmental concerns did not justify the damages to Myer’s investment by the Canada ban.86 The reasoning of the court was that the ban was
discriminatory towards the American company which is a violation of Article 1102(1) of NAFTA, which states:
“Each Party shall accord to investors of another Party treatment no less favorable than it accords, in like circumstances, to its own investors, with respect to the establishment, acquisition, expansion, management, conduct, operation, and sale or other disposition of investments.”87
The tribunal decided Canada had breached this Article due to the effect and intent of the ban. The effect was that the ban by Canada damaged the profits of Myers, which was undisputed. However, the tribunal also found that Canada had the intent of providing better treatment for its nationals than foreign nationals. This is based on lobbying from Canadian competitors of Myers for the ban which the court found as basis for a “protectionist intent”.88 Additionally,
the court could not find any environmental reason for the ban, stating that the environment could still be protected by less evasive measures, namely setting standards for the US for PCB disposal.89 In the final judgement the tribunal awarded damages to Myers for their loss
of investment.
84 S.D. Myers Inc v Government of Canada (ICSID, 1998). 85 North American Free Trade Agreement (1994), Art 1106.
86 S.D. Myers Inc v Government of Canada: Partial Award (ICSID, 1998). Para 256 87 North American Free Trade Agreement (1994), Art 1102(1).
88 S.D. Myers Inc v Government of Canada: Partial Award (ICSID, 1998). Para 251 & 254. 89 S.D. Myers Inc v Government of Canada: Partial Award (ICSID, 1998). Para 192
While the reasoning is sound on the surface, a paper on the case by Brian Trevor Hodges showcases glaring omissions.90 One of these omissions that sticks out is the lack of regard for
Canada’s climate obligations.91 While the tribunal acknowledged that Canada had the right to
pursue environmental protections it ignored the fact that Canada had an obligation to pursue environmental protections, many of which are detailed in the Rio Declaration. Hodges states that this distinction may have been very profound in the case for several reasons.92 Firstly,
Principle 3 of the Rio declaration obligates member states to develop their own
environmental protection mechanisms.93 The tribunal’s insistence that Canada should have
just required the US to have high standards of PCB disposal is contradictory to this protocol. Secondly, Principle 15 states that the “precautionary principle” should be used to prevent potential environmental damage.94 The tribunal’s claim that Canada should have pursued
other measures ignores the fact that the most reliable option would be been to pursue waste management internally.95 Finally, Principle 14 says that states should avoid the transfer of
“substances that cause severe environmental degradation” to other states.96 Clearly,
exporting PCBs to the US would have been a violation of this restriction, a fact the tribunal also ignored.
It is not known why the tribunal failed to mention Canada’s environmental obligations as the matter was not brought up in its judgement. However, Schill’s “irresponsibility carousel” analysis could be an explanation. It is possible that the tribunal decided that its role was to interpret the rules of the relevant bilateral investment treaty, not to comment on separate obligations of the host state. The tribunal may have reasoned this by considering matters of environmental obligations the responsibility of the home and host states and they should have included it in treaty if they wanted it to be a factor. Similarly, Canada may argue that it was compelled to sign the treaty due to the need for investment and the US may argue that Canada agreed to the treaty so it cannot be at fault. Finally, Myers may simply argue that environmental obligations are binding on states, not state’s nationals, therefore the Rio declaration does not apply to them.
90 Hodges, Brian Trevor, Where the Grass is Always Greener: Foreign Investor Actions Against Envrionmental Regulations Under
NAFTA’s Chapter11, SD Myers Inc v Canada (Georgetown International Environmental Law Review, 14-2, 2001)
91 Hodges, Brian Trevor, Where the Grass is Always Greener: Foreign Investor Actions Against Envrionmental Regulations Under
NAFTA’s Chapter11, SD Myers Inc v Canada (Georgetown International Environmental Law Review, 14-2, 2001) 397.
92 Hodges, Brian Trevor, Where the Grass is Always Greener: Foreign Investor Actions Against Envrionmental Regulations Under
NAFTA’s Chapter11, SD Myers Inc v Canada (Georgetown International Environmental Law Review, 14-2, 2001) 395.
93 Rio Declaration (UNCED, 1992), Principle 3. 94 Rio Declaration (UNCED, 1992), Principle 15. 96 Rio Declaration (UNCED, 1992), Principle 14.
Looking at the same case but with the added conceptualisation of shared responsibility tells a different story. In this case all of the actors – Myers, Canada, the US and the tribunal – would all share some responsibility for protecting the environment as a public good. If this were the case, the tribunal’s decision would likely be very different. Canada could be held responsible for its failure to include environmental protections in NAFTA, as well as maintaining its obligation to protect the environment. The US could be held to the same responsibilities, even though the environmental violation would not have happened in its territory.97 The
tribunal would have a responsibility to consider relevant climate obligations in its decision, regardless of the text of NAFTA. Finally, Myers would be responsible for assisting Canada in fulfilling its environmental obligations. With all these factors considered, it is likely the case would have found that the banning of PCB exports was not a violation of NAFTA.
If it is accepted that shared responsibility is applicable in the Myers vs Canada case, there is no reason why it would not also be applicable in an investor-state dispute involving climate policy. In this conceptualisation all the relevant actors would be considered responsible for international climate obligations. Therefore, if a case came to the tribunal with an investor alleging that a state’s climate policy damaged their investment, the tribunal would likely give more weight to the shared climate obligations. All in all, this would increase the likelihood that these disputes do not result in outcomes that weaken climate policy.
Critiques
While the upsides of the shared responsibility model are significant, the conceptualisation would not be without its downsides. Firstly, there would likely be a monumental difficulty in getting states to agree to this model. Using the shared responsibility model in this way would dramatically change the global system of state sovereignty. States would not only have their own climate obligations but be responsible for other actors’ climate obligations as well. Considering that states are already hesitant about having binding climate obligations as the system stands now, it is difficult to see a scenario in which they would consent to more obligations. Due to the state-centric nature of international law, lack of consent would be a deal breaker. Secondly, applying shared responsibility in this way could result in a lot of
