Environmental Protection Clauses in Investment Treaties: Redundant or Necessary?
Published 5 October 2022
The structure of this paper is divided into three parts. First, select literature on environmental language in investment treaties will be reviewed in order to provide background on the function of regulatory carve-out provisions in investment treaties. This will illustrate that there is a degree of consensus that environmental carve-outs have been seen as provisions that can create greater regulatory space for host states. Second, an analysis of selected jurisprudence will be put forth as a counterpoint to the literature in showing that tribunals have interpreted a broad right to regulate for host states in the environmental sphere, even where there is no explicit environmental regulatory carve-out. In particular, the ICSID (International Centre for the Settlement of Investment Disputes) arbitration cases of Unglaube v Costa Rica and Santa Elena v Costa Rica, arbitrations under treaties with no environmental exceptions, will be compared with several investment disputes under NAFTA, which was one of the first treaties to include environmental carve-outs. This comparison shows that environmental carve-out provisions are not determinative in tribunals granting exceptions for state environmental regulatory action that impact foreign investments. The final segment of this paper concludes with a discussion on the implications of the jurisprudence, future proposed changes to environmental provisions in IITs, and possible explanations for the inclusion of environmental regulatory carve-outs in IITs, despite their limited effects on the jurisprudence.
This paper will be part of the TDM Special Issue on "International Investment Arbitration - Environmental Protection and Climate Change Issues". More information here www.transnational-dispute-management.com/news.asp?key=1893