Abstract

The interplay between the protection of the environment and the protection of foreign investments has been controversial since the beginning of the early-2000s. Although the tension between the protection of the environment and the rights of foreign investors continues, the precautionary principle’s role in this context remains mostly unexplored. The precautionary principle in its most basic sense prioritizes taking action in cases where there is scientific uncertainty regarding an activity’s effects on the environment. As investments often involve elements concerning the environment, the precautionary principle may play diverse roles in the settlement of investor-state disputes. This article examines when and how the precautionary principle may be applied in investment arbitration and the possible implications of its application for states and investors. It focuses on procedural implications of the precautionary principle on burden of proof and analyzes possible expropriation and fair and equitable treatment claims whereby the precautionary principle may come into play. This article also explores the significance of the precautionary principle for states in terms of regulatory chill, counterclaims and circumstances precluding wrongfulness. Finally, it deals with the possible ramifications of the precautionary principle’s application on the determination of the amount of compensation by investment arbitration tribunals. This article adopts the view that the precautionary principle may be significant in terms of the environmental aspects of investor-state disputes.

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