Investors, States, and Arbitrators in the Crosshairs of International Investment Law and Environmental Protection

Abstract

The global environmental disruption caused by human activity is firmly entrenched as a scientific fact. The present paper looks at the Investor-State Dispute Settlement (ISDS) system and inquires whether this is the most suitable transnational venue for resolving investment disputes that have an environmental component. This culminates essentially in whether arbitration is a legitimate forum and whether privately appointed arbitrators appropriately can resolve environmental-related disputes. These disputes are bound to increase in frequency because host-States are also partaking in global efforts to respond to environmental challenges. This paper makes several points. First, ISDS is the best equipped venue for addressing investment disputes that have an environmental or natural resources component. Second, the “regulatory chill” and the alleged “investor bias” arguments are unsubstantiated whereas, a balance must be struck between backlash, legitimacy, and workability. Third, ISDS will eventually and inevitably facilitate green-investors, while holding States accountable for green-undertakings, and therefore continue to effectively enforce the rule of law globally. Fourth, arbitrators must adapt to their role of handling disputes at the intersection of international investment law and environmental law; this means that a thorough thick rule of law must effectively be implemented. Fifth, International Investment Agreements (IIA s) should be reconsidered or interpreted in order to accommodate for investors’ obligations, as well as widening the scope of States’ regulatory powers. Finally, ISDS will only remain the best alternative if it sticks to its fundamental elements, in particular by utilizing the regime’s flexibility to allow counterclaims from host States. Only such reform-proposals that preserve and enhance the fundamental elements of international arbitration should be seriously considered.