Environmental Engineering Reference
In-Depth Information
(In)consistency between the IIA regime and sustainable development goals
As a result of tribunal rulings under NAFTA's Chapter 11 as well as the growing torrent
of litigation under various BITs, the emerging IIA regime has increasingly been charac-
terized by critics as a serious impediment to sustainable development. A frequent point
of departure for this critique is the asymmetric nature of the obligations IIAs respectively
impose on host states, home states and foreign investors. While such agreements invari-
ably impose on host states a broad range of legal responsibilities to investors, typically
they contain no correlative obligations on investors. Moreover, they are generally
silent with respect to obligations of the investor's home jurisdiction 'to ensure its nation-
als comply with standards of conduct in their operations abroad' (Newcombe, 2007,
p. 14).
It is also contended that the content and uncertainty surrounding the investor rights
that IIAs enshrine is inconsistent with sustainable development norms. The controversy
surrounding the content of these new rights is considered in more detail below. Regardless
of the ostensible intent underlying these provisions, however, few would dispute that the
ascendancy of the IIA regime has created considerable uncertainty with respect to the
ability of host states to address serious health, consumer and environmental concerns
without incurring liability to investors. This is underscored by the experience under
NAFTA where tribunals have enunciated interpretations of its national treatment, inter-
national minimum standard of treatment, and expropriation provisions that are much
broader (and hence more favorable to investors) than is generally accepted in interna-
tional law (Soloway, 2003, p. 5). Whether and to what extent this uncertainty has created
'regulatory chill' - causing governments to resile from enacting measures aimed at pro-
moting sustainable development - is a matter of considerable debate (Soloway, 2003;
Tollefson, 2003).
This uncertainty is compounded by the failure of most IIAs to address or de
ne how
investor rights are to be balanced against sustainable development considerations. A
recent analysis of over 71 BITs con
fi
rms that references to sustainable development prin-
ciples are the exception rather than the rule, even in non-binding, preambular language
(Newcombe, 2007, p. 65232). Moreover, most IIAs, including NAFTA's Chapter 11, are
silent with respect to the 'traditionally accepted prerogative of governments to protect
public health and the environment' (Tollefson, 2002a, p. 151), resulting in considerable
controversy over how and whether competing private and public interests are to be bal-
anced. This is in sharp contrast to the GATT, where Article XX explicitly provides a
justi
fi
catory basis for measures of this kind. A related source of uncertainty is whether
host governments can invoke the precautionary principle to uphold legal measures
against investors which it claims to have taken to protect legitimate public interests in
health, consumer safety or environmental protection (Newcombe, 2007, p. 32).
A third area of concern relates to the arbitral process itself. Here the critique is twofold:
that the tribunals that have jurisdiction over such disputes are poorly equipped and ill dis-
posed to address the complex 'public' nature of issues raised; and that the prevailing arbi-
tral processes lack transparency and openness in terms of access to documents, hearings
and public participation. While some steps have recently been taken to alleviate this per-
ceived 'democratic de
fi
cit', particularly in the NAFTA context, the tribunal competence
and public participation remain key issues for many critics of the emerging IIA regime
(Franck, 2005; Soloway, 2003, p. 5).
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