Abstract

Throughout the development of International Investment Law (IIL), an implied and sometimes disguised politics of investment protection and host States' right to regulate for environmental measures can be noticed. The present IIL regime seems to be an outcome of this politics between developed and developing states. This hypothesis will be explored here, showing the chronological interplay between three broad concepts: development, investment protection, and environmental sustainability. Historically, development discourse progressed along with investment protection. Foreign investment used to seek protection under three Customary International Law (CIL) principles: Minimum Standard Treatment (MST), no expropriation without compensation, and diplomatic protection for settlement of disputes. In 1945-55, when colonies became independent, the developed States structured a ‘poverty-model’ under which they offered investments to the developing States and, in return, sought investment protection under CIL. This model experienced some challenges in the 1960s-80s because the developing States' sovereignty claim over their natural resources defied the CIL protection for investors. Realizing the ambiguities and uncertainties of CIL, developed States shifted to investment treaties to gain clear and enforceable investment protection.

Consequently, the former CIL principles of investment protection translated into several substantive rights in favour of investors, for example- National Treatment, Fair and Equitable Treatment (FET), Most-Favored Nations (MFN) clause, Umbrella clause, Hull formula for expropriation, delocalized arbitration. These protection principles were fully developed by the 1990 and put the developing States in an imbalanced position. Although the concept of environmental sustainability evolved independently, developed States, in the 1980s-90s, insisted on merging it with development discourse to obtain greater investment protection and, thereby, brought all (development, investment protection, environmental sustainability) within the concept of 'sustainable development.' Interestingly, the poverty-model established in post-Second World War got dominant in the 1992's Agenda for Sustainable Development, Millennium Development Goals (MDGs), and Sustainable Development Goals (SDGs). However, such inclusion worked in favour of the developing States in other ways. From the mid-1990s, International Investment Agreements (IIAs) started to adopt clauses relating to environmental protection in its preamble, general exceptions, and other clauses which started setting the host States' regulatory power towards a balancing level as opposed to investment protections. For example, while only 2% of the IIAs concluded in 1991 contain references to environmental protection, ten years later, that proportion augmented to 6%, then to 31% in 2011, and then 56% in 2020. Thus, the trends of adopting environmental protection clauses in IIAs are taking the host States towards a balance compared to the investment protections.

This paper will be part of the second 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