The Enforcement of environmental norms in investment treaty arbitration

Introduction: The dense network of more than three thousand treaties for the protection of foreign investments, the majority of which confer rights directly upon non-state actors, is without an analogue in any other branch of international law. The most potent feature of the common investment treaty is the creation of a mechanism for the compulsory adjudication of investment disputes between a national of one of the contracting state parties and the contracting state party that is host to that national’s investment. The mechanism is international arbitration: an ad hoc tribunal is created to resolve the dispute and render an award in accordance with an existing set of arbitration rules and that award can be enforced in most countries of the world under a multilateral treaty regime for the recognition and enforcement of arbitral awards. The jurisprudence of these ad hoc tribunals is now vast and is supplemented by new awards on almost a weekly basis. The stakes are high in these cases not just in terms of the quantum of the compensation claimed by the protagonists – which often runs into billions of US dollars – but also in terms of the public interest. Decisions taken at the highest level of all three branches of constitutional power are frequently reviewed and sometimes condemned by the ad hoc tribunals established to hear these cases. The incentive for commercial actors that is created by this network of treaties is to characterise their disputes with public authorities as “investment disputes’ within the criteria designated by an investment treaty that is binding upon the state in question. This may entail, for instance, placing emphasis on certain rights in property as being central to the dispute (so as to discharge the requirement of having a covered investment under the treaty) or selecting an entity within a corporate group as the nominal investor (so as to ensure that the claimant meets the nationality requirements under the treaty). There is nothing inherently wrong with such a litigational strategy: the network of investment treaties has created the incentive and commercial actors cannot be criticised for being incentivised. Indeed the privileged position of investors within the global institutional framework for the settlement of disputes has been made possible only by the international community of states giving priority to investment and trade over and above other matters of international concern such as the environment.