International Investment

Abstract

This Chapter analyses the interplay between the international regime for the protection of Foreign Direct Investments (FDIs) and environmental protection. On the one hand, FDIs are and have been arguably deemed conducive to economic development and international cooperation globally, and especially in developing countries in need to attract capitals from developed countries. On the other hand, the international regime securing FDIs is increasingly put under scrutiny for its potential encroachment with sovereign States’ regulatory spaces to foster environmental protection. FDIs are specifically protected through International Investment Agreements (IIAs), which include both thousands of Bilateral Investment Treaties (BITs) and multilateral investment treaties (e.g., the Energy Charter Treaty). IIAs allow private foreign investors to bring a case against host States before an international Investor-State Dispute Settlement (ISDS) tribunals to obtain compensation in case of host States’ measures allegedly affecting, partly or fully, its foreign investment. In several instances, measures adopted by host States to pursue environmental protection domestically have been challenged before and appraised by ISDS tribunals against the potential encroachment on foreign investors’ vested rights enshrined in the relevant IIA. By looking at the origins and underlying objectives of the international investment regime, as well as existing landmark ISDS case law, this Chapter will unfold the most critical aspects of the FDI protection regime in terms of hampering action to protect natural resources by sovereign states domestically.

Keywords: Foreign direct investment, international investment law, international investment agreements, investor-state dispute settlement; expropriation, fair and equitable treatment, national treatment, most favored nation, environmental law

JEL Classification: K10, K30, K32, K33