The Customary Duty to Prevent Unabated Fossil Fuel Production: A Tipping Point for Energy Investment Arbitration?

Abstract

The customary duty to prevent unabated fossil fuel production serves as shorthand for the fundamental duty of each State under customary international law to exercise due diligence in the prevention of envi-ronmental harm through the initial approval and continuous monitoring of fossil fuel projects within its territory, requiring a State to perform environmental impact assessments and to determine appropriate preventive measures. The high risk of irreversible damage to unique and threatened systems beyond 1.5°C warming triggers a State’s due diligence. The necessary pathways to net zero emissions suggest that projects without abatement of life-cycle emissions fall short of diligent regulation. Implications for energy investment arbitration are explored where a host State implements its previously neglected duty. On jurisdiction or admissibility, a respondent may allege that an investment was void due to its failure to comply with domestic regulations or that those regulations were inconsistent with international law. On merits, whether the prevention principle is integrated in treaty interpretation or evidenced in applying the standard of fair and equitable treatment, energy firms may not legitimately expect a State not to fulfil its customary duty by adopting preventive measures, such as phase-out policies or mandatory abatement through carbon capture and storage.

Keywords: International law, investment arbitration, climate change, energy transition, prevention principle, due diligence