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Browsing by Subject "Fair and equitable treatment"

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  • Do International Investment Treaties Constrain Environmental Regulatory Space in an Increasingly Warming World? 
    Miller, Carola (2022)
    The need to effectively regulate the environment is recognized globally, for example, under the Paris Agreement, states are obligated to formulate national policies to combat the adverse effects of climate change. However, states are increasingly facing the consequences of such regulation in investment arbitration, as these progressive environmental protection goals can lead to a multi-billion claim made by foreign investors. International investment law and the investor-state dispute settlement are currently going through a so-called “legitimacy crisis” as there has been criticism towards both its substantive and procedural levels. As a response to this imbalance, there has been a move towards trying to reestablish international investment law. The overall purpose of this thesis is to examine the conflicting dimension of the link between environmental and investment protection. The aim is therefore to examine the defects of the international investment treaty regime in relation to the sovereign right of states to regulate environmental concerns. This is done by examining frequently used substantive treaty provisions that protect foreign investment: expropriation, fair and equitable treatment (FET), most-favored-nation (MFN) and national treatment (NT). It then examines how investment tribunals have interpreted these provisions when a foreign investor has challenged environmental measures taken by the host state in investor-state arbitration. This thesis further examines whether new types of clauses introduced in international investment agreements in recent years have succeeded in balancing the rights of investors with the interest of states in regulating public issues such as the environment. These include environmental treaty language that clarifies that investment protection should not be implemented at the expense of public policy issues. This thesis finds that both the vaguely worded investment protection provisions in international investment agreements and the inconsistent practice of arbitral tribunals have created uncertainty about the extent of state liability. It therefore seems that international investment law is still in a formative stage with respect to public interest concerns such as environmental protection. These reforms may increase the interaction between international investment law and environmental protection. However, these measures are not sufficient as they do not reduce the likelihood of a state being sued in investor-state arbitration. Therefore, more radical reforms are needed in the future to address the negative impact of the investment regime on the environmental protection measures of states.
  • The Environmental Aspects of the Energy Charter Treaty and their Significance in Litigation 
    Heinäsmäki, Aapo (2020)
    The Energy Charter Treaty (ECT) is a multilateral investment treaty with over 50 contracting parties that solely concerns the energy sector, which is of crucial importance in combatting climate change. Further, more investor claims have been brought forward under the ECT than under any other investment agreement, and some of the largest arbitral awards have been rendered under its auspices. These factors combined make the ECT a very significant instrument for the global climate as a whole. This paper is based on the premise that more and more countries would wish to cut back on their use of highly polluting fossil fuels to produce energy. However, it is often argued that the investment protection clauses, which are also included in the ECT, cause ‘regulatory chill’, meaning that states are wary of passing stricter regulations, as such measures might well result in investor-state dispute settlement proceedings. Therefore, it is plausible that the investment protection clauses of the ECT are in fact slowing down the transition from fossil fuels to renewable forms of energy, and various NGOs in fact view the ECT solely as a tool of the fossil fuel industry used for this purpose. In this paper, I challenge such simplified take on the ECT and argue that states are in fact able to pass stricter regulations to protect the environment without breaching their ECT obligations towards foreign investors, and further, also should do so. This paper can most readily be described as a doctrinal research, as it concerns specific treaty provisions and all the claims made within it can be traced back to formal legal sources. In particular, I have relied on the texts of the ECT framework, and various judicial decisions. Therefore, large parts of this paper are comprised of treaty interpretation and analogic reasoning. The precise questions to which I have sought answers using these methods are: 1) What are the environmental aspects of the ECT; 2) Can the ECT, in its current form, be interpreted and applied in an environmentally sustainable way, and if so, how this could be done; 3) Why the ECT should be interpreted and applied in such way; and 4) Does the ECT require amendments to its current text? It is well known that the ECT framework contains a plethora of environmental provisions, however, due to their soft formulation, they are often overlooked as it would be difficult to find a state to be in breach of them. According to the findings of this paper this is, however, erroneous. Based on the sheer volume of environmental provisions, and the great significance placed upon them within the Preamble of the ECT and European Energy Charter, I have developed a novel, more balanced, take on the object and purpose of the ECT, which places significance on both the protection of investments and environment, unlike the tribunals applying the ECT have thus far done. Furthermore, I have found that despite the soft formulation of the environmental provisions, a state may still rely on them when responding to investor claims. However, the degree to which a state can do so depends greatly on the claims made – the text of the ECT places little to no significance to environmental matters in cases of alleged expropriation, whereas on alleged breaches of e.g. the FET standard environmental matters may be of great significance. Additionally, the text of the ECT allows for a state to argue that measures to protect the environment fall under the allowed exceptions of the ECT. Having identified the various environmental aspects of the ECT, and developed techniques for responding states to utilise them, I have also discussed why the presented findings should be applied, and whether it would be enough. It is evident that matters such as sustainable development and protection of the environment are gaining foothold within the law both on national and international level. As the ECT is not situated in a void, these global trends should be considered when applying it. As the findings of this paper would encourage states to pass legitimate measures for the protection of the environment, there are relatively clear policy reasons as to why the application of the findings would be desirable. Many of the findings made in this paper were reached through teleological interpretation of the ECT. While such interpretative approach is perfectly valid, it would nevertheless be beneficial for the text of the ECT to be amended to explicitly incorporate the interpretations made within this paper. Amending a multilateral treaty such as the ECT is, however, difficult. Therefore, the findings of this paper can be of great importance for states wishing to pass measures to protect the environment, as they offer greater certainty of the legality of their actions towards foreign investors.
  • The Suitability of the Doctrine of Legitimate Expectations in International Investment Law : Energy Transition Perspective 
    Back, Joel (2021)
    Claims of breach of legitimate expectations have been widely used by investors in the energy sector. The protection of legitimate expectations is one of the core elements of the fair and equitable treatment obligation which is included in most investment treaties. The protection of expectations is an important function of investment treaties as investors make their investment decisions on the basis of calculations on the expected return, which is highly dependent of the laws in the state where the investment is made. In other words, returns of energy investments are directly linked to the stability and predictability of domestic laws. There is a need to protect investors against adverse state measures, as subsequent state conduct after that the investment decision has been made can cause substantial loses for the investors within the energy sector. However, at the same time, states need to implement measures that may affect investments in a detrimental manner to achieve certain energy policy goals. The energy sector and energy law are constantly developing due to changing circumstances. The current change is driven by the energy transition and the move towards a low-carbon economy. Environmental protection, human rights and renewable energy production are key issues of the energy transition. These issues are getting more and more attention in energy policies. Investment treaty provisions, and especially the FET standard, have usually been drafted in a vague manner which does not explicitly tell what the relationship is between investment protection and host state’s regulatory right. This has led to many different conceptions of the doctrine of legitimate expectations. These conceptions have usually either been overinclusive or underinclusive. This thesis suggests that most investment treaties should be interpreted in a balanced manner that considers both the interests of investors and host states. Therefore, a balancing approach where investors’ expectations are weighed against the host states’ right to regulate is needed. It is argued in this thesis that a conception on the protection of expectations should be based on the principles of legal certain and proportionality. A justification that is based on these two principles could be applied in a manner that is balanced and would not be over- or underinclusive. This principle-based approach would replace the doctrine of legitimate expectations. According to this approach legitimate expectations would only be an element that should be considered in the assessment on whether investors right to legal certainty has been breached, but legitimate expectations would not constitute a self-standing doctrine with direct legal effect. This thesis argues that a similar approach used in EU law should be applied in international investment disputes. In EU law the principle of legal certainty is just one principle that should be weighed against other core principles of the EU. Therefore, it is suggested that when assessing if investors’ expectations should be protected in specific circumstances, arbitral tribunals should use and weigh the international energy law principles against the principle of legal certainty when conducting a proportionality assessment. It is concluded that this principles based approach would be the most suitable conception for the protection of investors’ expectations as it would not be under- or overinclusive and it could be used in a flexible manner to changing circumstances in the energy market. This principle-based approach would be allowed under the current normative framework. However, it would be sensible to include in investment treaties that when considering if investors’ expectations should be protected, arbitral tribunals should rely on the principle of legal certainty, and conduct a proportionality assessment where all circumstances relating to the investment and the state measure are considered. As this thesis concerns the question of whether the current framework allows treaties to be interpreted in a balanced manner, the thesis will mainly rely on doctrinal research. In addition, by applying an inductive methodology this thesis will answer whether the doctrine has been conceptualized in a suitable manner in investment disputes.

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