Tag Archives: Environment

ISDS in support of climate change mitigation

Environment concept. Glass globe lying on green leaf surfaceThe challenges and future of ISDS was discussed at length recently in Warsaw at an international event organized by Lewiatan Court of Arbitration.

One of the topics addressed was how the investment protection regime can contribute to a better environment. SCC Secretary General Annette Magnusson, who have spoken and written on this topic on several occasions before, addressed the audience on the need for visionary treaty terms in future treaties.

-  If we can combine treaty terms that truly reflect the role played by private investments for a better environment, and the existing enforcement mechanisms of international arbitration, I believe true progress for the environment could be achieved on a global level, Annette Magnusson said.

The full speech is available here.

Read more about ISDS and sustainable development:

Environment Needs Visionary Treaty Drafting

Climate Change Justice Calls for Enhanced Legal Regimes

Investment Law Reform and Sustainable Development

Case Summary No. 5

GlamisGold

The ISDS blog continues with another case which reflects the interplay between international investment law and environmental protection. This was a central issue in our fifth case, Glamis Gold Ltd. v. the United States of America. The summary is prepared based on the facts as described in the award rendered in June 2009.

The investor was planning to mine gold in California through open-pit mining techniques. California adopted several measures, among others requiring the investor to conduct complete backfilling of the pits for environmental protection reasons.

The new measure did not impede the development of the mining project, however, according to the investor, it impacted the level of anticipated profits. The investor claimed, among others, that the measure constituted an expropriation of its investment.

After conducting a thorough analysis, the tribunal found that the project still had a great value even after the extra costs caused by California’s backfilling requirements. Therefore, in the tribunal’s view, the measure did not cause a sufficient economic impact to constitute an expropriation. The tribunal dismissed all claims by the investor and ordered the investor to pay two-third of the arbitration costs.

The tribunal accepted at least three amicus curiae in this case, one by a coalition of non-governmental organization, one by a business association and one by the locally-based tribe whose sacred sites were affected by the proposed mining project.

 

Seminar report: ISDS – A Way Forward

AndrinaSeminariumImage2red3BloggThe SCC, in cooperation with the Association of International Arbitration and Brussels Diplomatic Academy of Vrije Universiteit Brussels organized a seminar, ISDS: Away Forward in Brussels, on 27 May 2015. The speakers were arbitration practitioners from Sweden, Belgium and France, including SCC Legal Counsels and representatives from the International Bar Association Subcommittee on Investment Arbitration. Read the full programme here.

The historical background of ISDS was explained, and how the mechanism was established under the ICSID Convention as a response to inefficient diplomatic protection to foreign investors. The discussion continued with the currently-debated issue, ISDS and environmental protection. SCC presented research findings that the number of ISDS cases where investors brought a claim because of environmental regulation is small. The findings from these cases support a conclusion that arbitral tribunals have not questioned the power of government to regulate for environmental protection.

In addition, some procedural aspects of ISDS were addressed, particularly transparency and public participation. The speakers emphasized that this is in fact not a new development, as tribunals have supported transparency and public participation to an increasing extent in the past decade. A new procedural development of ISDS, emergency arbitrator, was also discussed.

A speaker reminded that when discussing reform of the system, public opinion should always be taken into account.  It is important to ensure that the democratic values are preserved. The International Bar Association (IBA) is working on a project to bring together opinions from different stakeholders in ISDS. The ambition is to address the criticisms surrounding ISDS and to propose improvements of the system, when needed.

IBA has also recently published a statement, addressing facts of ISDS.

The dynamic and forward-looking discussion from the participants were much appreciated. More discussions will follow ahead to preserve the rule of law and ISDS.

Case Summary No. 4

The interplay between investment law regime and environmental protection has surfaced as an interesting issue in ISDS. Therefore, we chose Methanex Corp v. the United States of America for our fourth case.  The summary is prepared based on the facts as described in the award rendered in August 2005.

The investor was a producer of methanol, a key component in the production of MTBE, a gasoline constituent. The measure at issue did not directly regulate methanol business, but concerned the ban of the use of MTBE in gasoline in California due to environmental and public health reasons.

The investor argued that the ban took away its market share in California as it no longer could sell methanol to MTBE producers. This measure, according to the investor, was tantamount to expropriation.

In introducing the ban, the government relied on a scientific report which concluded that gasoline produced with MTBE posed a significant risk of drinking water contamination when it leaked from underground tanker and pipelines.

The tribunal in the ensuing arbitration found that the legislative process in California leading to the ban had been transparent, subject to due process and based on scientific report which was subjected to a peer review.

Further, the tribunal concluded that the ban was a non-discriminatory regulation for public purpose. As such, it did not constitute an expropriation and therefore non-compensable.

In conclusion, the claim by the investor was dismissed in its entirety.

It is also worth noting that the tribunal allowed submissions of amicus curiae from two organizations since, in the view of the tribunal, there was undoubtedly public interest in this arbitration.