ISDS is not a threat to environmental protection

Arguments against ISDS are triggered by assumptions and careless readings of the outcomes of some ‘controversial’ cases. In these cases – some of which do not even have an outcome yet – investors brought a claim against governments to ISDS stemming from environmental measures. Therefore, according to these arguments, ISDS as a whole is therefore a threat to environmental protection.

These assumptions are, at best, ignorant – at worse, false.

Investment agreements provide commitment of two (or more) governments to accord treatment according to international law to investors from its treaty partner. When an investor alleged that this standard of protection has not been fulfilled, it has the right to submit a claim to ISDS.

The fact that this claim may also cover those stemming from an environmental measure does not mean that governments cannot regulate for environmental protection.

First, ISDS as a legal procedural mechanism does not define policy. It does not regulate the substance of environmental regulation governments can have and levels of environmental standards governments can impose.

Second, in no case will the government be required to change its policy since ISDS do not provide injunction as a remedy.

Third, as a matter of fact, the number of cases stemming from measure with environmental motives has been small.

Fourth, the claims typically do not concern legislative acts.

Most of the challenged measures are administrative in nature, for instance treatment under certain permits, licenses and contracts which gives specific right to investors. When a government has given a specific right under an administrative instrument to a foreign investor, such investor has the right to reasonably rely upon it. As a matter of legal principle, the same right goes to any other actors, including a domestic investor.

Fifth, case law suggests that when environmental concerns have been found justified,  and investment protection standards were fulfilled, claims against governments have not been successful. Tribunals have found that governments do not have to compensate investors for  measures with justified environmental concern. This includes measures which are, among others, non-discriminatory, transparent, does not violate a specific commitment given by the government, and which are supported by a certain degree of scientific evidence (see among others, Methanex v US, Glamis Gold v US, Chemtura v US, Emilio Agustin Maffezini v Spain, Saar Papier v Poland available on italaw.com).

The chosen description of a claim as ‘environmental’ is not a decisive factor to assess whether ISDS poses a threat to environmental protection. It is the content that matters. As in any system governed by the rule of law.