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Foreign Investment and the Environment in International Law

Foreign Investment and the Environment in International Law

Author: Jorge E. Viñuales
Publisher: Cambridge University Press
ISBN: 9781107006386
Published In: September 2012
Format: Hardback , 480 pages
Jurisdiction: International ? Disclaimer:
Countri(es) stated herein are used as reference only

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Conflicts between foreign investment law and environmental law are becoming increasingly frequent. On the one hand, the rise of environmental regulation poses significant challenges to foreign investors in several industries. On the other, the surge in investment arbitration proceedings is making States aware of the important litigation risks that may result from the adoption of environmental regulation. This study of the relationship between these two areas of law adopts both a policy and a practical perspective. It identifies the major challenges facing States, foreign investors and their legal advisers as a result of the potential friction between investment law and environmental law and provides a detailed analysis of all the major legal issues on the basis of a comprehensive study of the jurisprudence from investment tribunals, human rights courts and bodies, the ICJ, the WTO, the ITLOS, the CJEU and other adjudication mechanisms.

• Provides a prospective analysis of the evolution of the interactions between environmental law and investment law

• Analysis of international jurisprudence goes beyond investment cases to cover cases decided by many different tribunals, courts and bodies, thus allowing readers to take into account a wider array of cases relevant to the topic

• Provides a balanced and reliable account of the current state of the law that avoids activism and disentangles 'hard' law from progressive development

List of abbreviations	xiv
Table of cases	xvii
Table of treaties	xxxiv
Introductory observations	1
Part I Setting the framework	7
1 Changing winds – three signs	9
1.1 The first sign – conceptual evolution	9
1.2 The second sign – integrating the environment into investment treaties	14
1.3 The third sign – the environment breaks into investment disputes	17
2 Conceptualising interactions	24
2.1 Foreign investment and the environment	24
2.2 Synergies	27
2.3 Conflicts	28
2.3.1 Basic definitions	28
2.3.2 Normative and legitimacy conflicts in theory	29
2.3.3 Normative and legitimacy conflicts in treaty practice	34
2.4 Levels and sectors	39
2.4.1 Levels	39
2.4.2 Sectors	39
3 Synergies – harnessing foreign investment to promote environmental protection	41
3.1 The form of synergies – environmental project finance and PPPs	42
3.1.1 Environmental project finance	42
3.1.2 Environmental PPPs	47
3.2 The substance of synergies – climate change and biodiversity as examples	50
3.2.1 Foreign investment in climate change initiatives	50
3.2.2 Foreign investment in biodiversity-related activities	54
4 Conflicts I – Soft control mechanisms	59
4.1 Standards of conduct	60
4.1.1 Direct standards affecting multinational enterprises	60
4.1.2 Indirect standards affecting financial intermediaries	65
4.2 Contractual approaches	67
4.2.1 Regulatory angle	68
4.2.2 Components of environmental contracts	69
4.3 Accountability mechanisms	71
4.3.1 Controlling companies – direct mechanisms	72
4.3.2 Controlling the controllers – indirect mechanisms	79
5 Conflicts II – adjudication mechanisms	83
5.1 The adjudication of environment-related disputes	83
5.2 Jurisdictional matters	86
5.2.1 Jurisdictional bases in investment arbitration	86
5.2.2 Environmental claims	89
5.2.3 Investments in accordance with (environmental) law	95
5.3 Applicable law	100
5.3.1 Preliminary observations	100
5.3.2 Choice of law and other indications	101
5.3.3 Relevance	108
5.4 Procedural matters	113
5.4.1 Role of non-disputing parties	113
5.4.2 Evidentiary issues	118
5.5 Damages	123
5.5.1 The irrelevance thesis	124
5.5.2 The police powers thesis	125
5.5.3 Middle grounds	126
Part II Normative conflicts	131
6 Normative priority in international law	133
6.1 Fragmentation as it concerns the relations between environmental and investment protection	134
6.2 Specific conflict norms	136
6.3 General conflict norms	140
6.3.1 Sequential application	140
6.3.2 Lex superior	141
6.3.3 Lex specialis	144
6.3.4 Lex posterior	146
6.3.5 Interpretation techniques	148
7 Foreign investment and the international regulation of freshwater	158
7.1 International regulation of freshwater – an analysis of collision points	158
7.1.1 Overview	158
7.1.2 The regulatory approach	160
7.1.3 The human rights approach	164
7.2 Decisions from adjudicatory and quasi-adjudicatory bodies	167
7.2.1 Overview	167
7.2.2 Water allocation	168
7.2.3 Pollution and depletion of water-bodies	171
7.2.4 Procedural requirements	175
7.2.5 Access to clean and affordable water	179
7.3 Assessing contemporary practice	182
7.3.1 Conceptual findings	182
7.3.2 Some practical problems	184
8 Foreign investment and the protection of biological and cultural diversity	189
8.1 The protection of biological and cultural diversity – an analysis of collision points	189
8.1.1 Overview	189
8.1.2 The regulatory approach	191
8.1.3 The human rights approach	197
8.2 Decisions from adjudicatory and quasi-adjudicatory bodies	198
8.2.1 Overview	198
8.2.2 Protected areas and species	198
8.2.3 Protection of minorities and indigenous peoples	204
8.2.4 Other environmental obligations	211
8.3 Assessing contemporary practice	214
8.3.1 Conceptual findings	215
8.3.2 Some practical problems	216
9 Foreign investment and the international regulation of dangerous substances and activities	222
9.1 The regulation of dangerous substances and activities – an analysis of collision points	222
9.1.1 Overview	222
9.1.2 The regulatory approach	225
9.1.3 The human rights approach	229
9.2 Decisions from adjudicatory and quasi-adjudicatory bodies	231
9.2.1 Overview	231
9.2.2 Administrative permits	232
9.2.3 Safety standards	236
9.2.4 Restriction of movement	239
9.2.5 Protection of the rights of individuals and minorities	242
9.3 Assessing contemporary practice	246
9.3.1 Conceptual findings	246
9.3.2 Some practical problems	247
10 Foreign investment and the climate change regime	253
10.1 Climate change policies – an analysis of collision points	253
10.1.1 Overview	253
10.1.2 The regulatory approach	254
10.1.3 The human rights approach	258
10.2 Decisions from adjudicatory and quasi-adjudicatory bodies	260
10.2.1 Overview	260
10.2.2 Cap-and-trade systems	261
10.2.3 Command-and-control regulation	265
10.2.4 Differentiation (subsidies and duties)	267
10.2.5 The use of a human rights approach	271
10.3 Assessing contemporary practice	273
10.3.1 Conceptual findings	273
10.3.2 Some practical problems	274
Part III Legitimacy conflicts	279
11 Normative priority between different legal systems	281
11.1 Legitimacy conflicts	281
11.2 Specific conflict norms	283
11.2.1 Types of specific conflict norms	283
11.2.2 Some illustrations	283
11.2.3 Effects	286
11.3 General conflict norms	287
11.3.1 Relations between domestic and international law	287
11.3.2 Conflicts of (domestic) laws	290
11.3.3 Regulatory powers as general conflict norms	291
12 Environmental measures and expropriation clauses	293
12.1 Three strands of cases	294
12.2 Direct environmental expropriation	295
12.3 Targeted environmental measures	297
12.3.1 Targeted measures v. general regulation	297
12.3.2 Targeted environmental measures amounting to an expropriation	299
12.3.3 Targeted environmental measures not amounting to an expropriation	301
12.4 Regulatory environmental measures	305
12.4.1 Rule or exception?	305
12.4.2 Reasons why environmental regulation rarely amounts to an expropriation	307
13 Environmental measures and non-discrimination standards	316
13.1 Non-discrimination in foreign investment law	317
13.1.1 Conceptual distinctions	317
13.1.2 The components of non-discrimination standards	318
13.2 Differentiation at various stages of the investment cycle	320
13.2.1 Green investment protectionism	320
13.2.2 Pre-establishment environmental differentiation	322
13.3 The concept of ‘like circumstances’ from an environmental perspective	324
13.3.1 ‘Like circumstances’ in trade and investment	324
13.3.2 ‘Like circumstances’ and the relevance of environmental considerations	327
13.4 The objective test of differential treatment	330
13.5 Justifying differential treatment of similar situations	332
13.5.1 Rule or exception?	332
13.5.2 The relevance of purpose	333
13.5.3 Justification clauses	333
13.5.4 Other justifying factors	335
14 Environmental measures, stability and due process	337
14.1 The protection of stability and environmental regulatory change	338
14.1.1 The legal anatomy of stability commitments	338
14.1.2 Stabilising clauses and environmental regulation	339
14.1.3 Legitimate expectations under the FET standard	350
14.2 Environmental regulatory change and due process	355
14.2.1 The link between due process and environmental regulatory change	355
14.2.2 Procedural fairness under FET clauses	357
14.2.3 Denial of justice	363
15 Defence arguments based on environmental considerations	366
15.1 The police powers doctrine	367
15.1.1 Sources	367
15.1.2 The use of the police powers doctrine to justify environmental measures	369
15.1.3 Specific assurances and environmental measures	371
15.1.4 Circumscribing the scope of specific assurances	374
15.2 The margin of appreciation doctrine	376
15.2.1 Sources	376
15.2.2 Applicability in the context of investment disputes	377
15.2.3 Margin of appreciation and police powers	379
15.3 Emergency and necessity clauses	381
15.3.1 Sources	381
15.3.2 Asserting the defence	383
15.3.3 Environmental justifications between emergency and necessity	384
15.3.4 Effects	389
Concluding observations	391
Bibliography	394
Index	40