International Investment Law and Climate Change: Reframing the ISDS Reform Agenda

Ongoing investment law reform processes take the investment treaty system as the starting point. While this can generate actionable reform options, it also entrenches ‘path dependency’ and forecloses space for more foundational questions. This article argues that, in the context of climate change, effective reform requires re-embedding debates within a policy space that places climate at its centre. The argument entails recognising: (i) climate change as a comprehensive ecological, economic and social challenge; (ii) the preferential nature of the protections investment treaties establish for foreign investment; and (iii) the structural misalignments that exist between this legal regime and climate action. It also involves interrogating the normative consid - erations invoked to justify investment protection treaties. The findings highlight the need to reorient collective reflection towards designing reforms that – rather than address narrowly defined concerns within the current system – develop a new system that can respond to 21st century challenges.


Introduction
The imperative to avert a climate catastrophe has prompted debates about the role of law in facilitating or constraining transitions towards low-carbon economies.As energy companies initiated investor-State arbitrations in response to fossil fuel phaseouts, public attention honed in on the global network of international treaties that protect foreign investment.This was amid concerns that the treaties' broad protections and the large amounts many arbitral tribunals have awarded to foreign investors could make it more difficult for governments to keep global warming below 1.5°C.1 Though framed in the distinctive vocabulary of international investment law, these concerns highlight broader questions about the ways in which the law allocates the costs of public action and affects societies' ability to confront climate change.
Ongoing initiatives to reform investment protection treaties and investor-State dispute settlement (ISDS) are yet to do justice to these questions.The United Nations Commission on International Trade Law (UNCITRAL)'s Working Group III on Investor-State Dispute Settlement Reform has documented many governments' concerns about international arrangements for settling disputes between foreign investors and States.2But it has provided Cotula Journal of World Investment & Trade 24 (2023) 766-791 limited opportunities for meaningful discussion of climate issues, partly owing to the procedural focus of its mandate.
More generally, explorations of reform options tend to take the investment treaty system as the starting point, with reform proposals addressing specific issues related to substantive provisions or procedural aspects.This approach helps anchor discussions to existing policies and generate actionable ways forward.But it also entrenches 'path dependency' , as historical legacies disproportionately shape future trajectories; and it tends to produce piecemeal reforms that rarely alter the fundamentals.3 In other words, taking the current system as the starting point forecloses space for more foundational questions about ultimate policy objectives and the most effective means for pursuing them, and about the normative values that should guide decisions on reconciling or prioritising different objectives.4 Can economic growth and ecological integrity really be reconciled?5 What types of investments should be promoted, what obstacles constrain them, and what policies are needed to overcome them?6In the context of the necessary and necessarily disruptive efforts to readjust economies to climate change, who is most vulnerable and deserving of policy support, and who should bear the costs of climate action?7 To help reposition the debate around these more foundational questions, this article makes the case for shifting the start-point of reform explorations towards a deeper understanding of the climate challenge and its implications for investment policy.This argument involves recognising the complexities of climate change as a comprehensive ecological, economic and social problem (Section 2); the preferential nature of the legal protections that the prevailing model of international investment law establishes for foreign investment (Section 3); and the structural misalignments that exist between this legal regime and climate policy (Section 4).It also involves interrogating and fundamentally challenging the normative considerations commonly invoked to justify investment protection treaties (Section 5).The findings highlight the need to reorient collective reflection towards designing reforms that -rather than address narrowly defined concerns within the current system -develop a new system that can respond to 21st century challenges (Section 6).

Climate Change: A Comprehensive Ecological, Economic and Social Problem
While debates rage on about the need for ambitious climate action, it is increasingly clear that we are running out of time.The Intergovernmental Panel on Climate Change (IPCC) -the United Nations body for assessing climate science -has highlighted, with extraordinarily high levels of scientific consensus, that anthropogenic greenhouse gas emissions are already causing global warming and changes in the climate system, including 'weather and climate extremes in every region across the globe' .8Evidence shows that climate change is destroying habitats, species and biodiversity, with human activities 'threaten[ing] more species with global extinction now than ever before' .9This scientific consensus about the growing human-induced pressures on nature resonates with evidence from diverse systems of knowledge, including indigenous knowledge from around the world, which have also documented rapid ecological change.10The Paris Agreement set the objective of limiting the temperature increase to 'well below' 2°C above pre-industrial levels and of pursuing efforts to limit it to 1.5°C, recognising that achieving the 1.5°C goal would 'significantly reduce the risks and impacts of climate change' .11Positions vary on the most effective strategies for meeting these targets: from approaches that place technological innovation at their centre, to more fundamental economic reorganisation addressing the deeper-level drivers of harmful production and consumption.But there is broad scientific consensus that rapid, comprehensive action is necessary.
Commenting on the energy sector, for example -a main contributor of greenhouse gas emissions, and as such a decisive sector for climate actionthe International Energy Agency noted that meeting the 1.5°C target calls for 'nothing less than a complete transformation of how we produce, transport and consume energy' .12Besides reducing energy consumption, this involves phasing out coal-fired power plants, first in richer countries then globally, and reorienting energy sources from fossil fuels to renewables, with energy scenarios consistent with 1.5°C requiring no investments in new oil and gas fields.13While several governments have taken steps to reduce greenhouse gas emissions, the IPCC noted that keeping global warming below 1.5°C or even 2°C requires further 'deep and sustainable emission reductions' within a short period of time.14Climate change also brings to the fore complex distributive problems within and across countries.15Inequalities between States affect both historical responsibilities for climate harm and contemporary levels of greenhouse gas emissions, as many low and middle-income countries have contributed little to climate change but stand to be most affected by it.

Investment Protection Treaties as a Preferential Legal Regime
Investment law is a highly specialised field of international law.At root, however, it rests on foundational legal concepts, such as property and contract, that work to stabilise expectations in the face of regulatory change.24Commonly found across diverse legal regimes, these concepts provide the basis of economic organisation: as Julia Dehm noted, even the monetary value of assets is not a 'pregiven fact' resulting from market forces alone; it is also a function of the legal affirmation, protection and enforcement of rights over those assets.25 In investment law, property and contract underpin the rules of customary international law and the extensive network of treaties protecting foreign investment.Relative to other legal arrangements, international investment law establishes exacting standards of protection for property and contract, creating a preferential regime for foreign investment.By defining substantive rules and dispute settlement procedures, investment treaties influence the protection of corporate property against the exercise of public authority.The treaties determine, for example, whether the impact of public action on protected rights or expectations is such that it must be accompanied by payment of compensation.
To be clear, investment treaties protect investment, rather than property, and the two notions overlap but do not coincide.26Investment can take many forms, including arrangements outside property relations.It is a dynamic concept connected to running a business enterprise and usually involves capital contributions, a duration, risk taking and the aim of generating returns.27That said, the historical development of capitalist economies and the rise of enterprise as source and storage of wealth have made property also a dynamic notion.28While a static concept of property emphasises holding assets, a more dynamic notion centres on expectations and revenue generating potential, as reflected in the proposition, attributed to Jeremy Bentham, that '[p]roperty is nothing more than the basis of a certain expectation ' .29 Crystallised in the Latin brocard pacta sunt servanda, sanctity of contract also interrogates future expectations and the relationship between private and public interests.That a contract is binding between the parties is a cardinal principle of private law.30International law applies a variant of this principle to relations between States, as regards the binding nature of treaties.31In international investment law, sanctity of contract cuts across private and public-law dimensions, requiring States to honour their contractual obligations towards foreign investors.
Sanctity of contract featured prominently in the early days of international investment law, when business lawyers invoked it to resist newly independent countries' efforts to renegotiate petroleum and mining concessions.32Investor-State arbitrations over the years have cemented sanctity of contract as a foundational principle of investment law.33  include concession contracts in their lists of protected assets and many treaties require States to honour their contractual obligations towards nationals of the other State(s).34 Protecting foreign investors' expectations is at the centre of the investment treaty regime.This is not only because arbitral tribunals have interpreted certain treaty provisions -particularly those on 'fair and equitable treatment' -as protecting the 'legitimate expectations' that foreign investors had when they made the investment, which subsequent regulatory changes could frustrate.35It is also, in more general terms, because expectations underpin the very notions of property and contract, enabling businesses to manage risk and secure projected returns on capital.36 In reconciling competing needs for legal stability and change, legal systems usually qualify the protection of expectations.Constitutional property clauses typically enable compressions of property for regulation, taxation and expropriation purposes, if the measures meet certain conditions.Similarly, national laws typically qualify sanctity of contract with other rules, such as those concerning force majeure or fundamental changes of circumstances.
Legal systems strike diverse balances between multiple public and private interests, reflecting different juristic approaches and political circumstances.37In addition, broad notions such as property refer to diverse realities: when applied to a family home, property intersects with basic rights, such as the right to housing; while in connection with large-scale commercial assets, it raises issues more closely related to the organisation of business activities.38National legal regimes for different kinds of property rights may vary, owing to sectoral regulation in areas such as housing, agrarian relations or corporate governance.
Beyond their considerably diverse formulations, investment treaties advance a distinctive conception of property protection and sanctity of contract, which sets them apart from other legal regimes.The treaties are primarily concerned with protecting one set of commercial operators -foreign investors.They establish protections for these actors' assets, beyond the arrangements available under national law or international human rights law.39 After high-profile arbitrations prompted a public backlash against the investment treaty regime, legislators in some jurisdictions sought reassurances that the treaties should not give foreign investors 'greater rights' than those available to domestic operators.40But there is substantial evidence for the preferential nature of the system, including different outcomes in domestic court cases and investor-State arbitrations on the same dispute, and arbitral tribunals explicitly affirming that investment protection treaties subject public action to more stringent parameters of scrutiny than other legal regimes.41 Much debate about the preferential nature of investment treaties' protections has focused on investor-State arbitration, which creates 'a parallel regime "for foreign investors", designed to function as a more effective substitute for domestic courts' .42Unlike human rights treaties, which typically require claimants to first pursue domestic litigation, investment protection treaties usually enable foreign investors to access international arbitration directly.In investment treaty arbitration, the arbitral tribunal's jurisdiction is based on a treaty with the stated objective of protecting foreign investment.This structurally deprioritises other considerations that are, at best, framed as exceptions or qualifiers to the investment protection standards; meanwhile, investor obligations clauses remain rare in the investment treaty landscape.43 Procedural rules in domestic legal systems typically protect third parties whose rights or interests may be at stake in the dispute -for example, through the right to intervene in the proceeding.44 On the other hand, international investment law is primarily concerned with the binary relationship between an investor and a State; scope for third parties to intervene in arbitral proceedings is confined to one-off submissions subject to the tribunal's discretion.45 Widely ratified multilateral treaties facilitate the enforcement of pecuniary awards, enabling foreign investors to collect damages more easily than would be possible with a court judgment.46 The preferential nature of the investment treaty regime is not limited to procedures.It also stems from a distinctive approach to substantive standards.Because legal protections vary extensively across national jurisdictions and international legal regimes, a comprehensive review is beyond the scope of this exploration.Broadly speaking, however, preferential treatment for foreign investment tends to arise from differences in overall approaches for balancing public and private interests, in applicable substantive rules and in legal remedies, including damages awarded.
Consider the protection of property against expropriation.Under international law, this protection applies not only to direct transfers of ownership but also to regulatory measures affecting an investment to such an extent that it must be deemed to have been expropriated.47Many domestic legal regimes also require compensation for regulatory takings and regional human rights courts have found interferences with property that fell short of direct expropriation to violate right-to-property clauses.48However, investment protection treaties provide guarantees that 'are typically more robust than their domestic analogues' .49 For example, regional human rights courts have adopted deferential approaches when reviewing State conduct, such as through the 'margin of appreciation' doctrine developed by the European Court of Human Rights.And in its extensive right-to-property jurisprudence, the European Court has required States to strike an overall 'fair balance' between public and private interests when establishing whether compensation is due and on what terms.50 Comparable efforts to piece together competing interests are reflected in many national constitutions, which can require consideration of factors besides market value when calculating compensation.The Constitution of South Africa, for example, requires payment of 'just and equitable compensation' , which must involve 'an equitable balance between the public interest and the interests of those affected, having regard to all relevant circumstances' .These include the asset's market value, but also its current use, the history of its acquisition and use, and the purpose of the expropriation.51 On the other hand, arbitral tribunals have been reluctant to apply deferential approaches such as the margin of appreciation doctrine when interpreting investment protection treaties.52 The expropriation clauses typically found in those treaties make no reference to striking an overall fair balance; rather, they require States to individually meet specific conditions and pay foreign Cotula Journal of World Investment & Trade 24 (2023) 766-791 investors prompt, adequate and effective compensation, with adequacy typically determined by the asset's full market value.53 Such differences in approach have practical implications.For example, human rights jurisprudence admits that public-purpose interventions affecting whole economic sectors could involve lower compensation amounts for the individual properties impacted, so long as compensation is reasonably related to market value and public action strikes a fair balance between public and private interests.54  In addition, most investment protection treaties do not specify how to calculate damages if the State violates the treaty.Arbitral tribunals have applied the general international law principle whereby States must 'wipe out all the consequences' of their unlawful conduct.56Many tribunals have interpreted this as requiring the State to pay investors the cash flow they would have earned had the measure not been implemented, which can result in very large amounts.57 Because of these substantive, procedural and remedial specificities, invest ment protection treaties have enabled foreign investors to obtain compensation in circumstances where damages might not have been available under national law, or in amounts that exceed the damages they would have received through national or human rights courts.58 When discussing the interface between investment law and climate action, then, the issue is not whether, in general, foreign investors should receive compensation or access remedy, but about them doing so based on special terms.Over the years, concerns about the reach of investment protection rules have prompted shifts in treaty drafting, including more qualified language on indirect expropriation and other treaty standards, and environmental exceptions; though developments in the arbitral jurisprudence have highlighted the limited effectiveness of such textual changes.59

Investment Protection and Climate Policy
There are structural misalignments between climate policy and the investment treaty system.While investment treaties protect all covered foreign investments and do not differentiate between high and low-carbon activities, certain investments, such as investments in new oil and gas fields, are climate-harmful.And while keeping temperature increases within the Paris Agreement targets requires systemic measures to regulate, restrict or phase out climate-obsolete activities, the investment treaty system is fundamentally about protecting business in the face of public action, potentially increasing the cost of climate response.60Even without arbitral proceedings, legal protections may affect negotiating power between States and business, and ultimately negotiating outcomes, with States adjusting policy approaches or offering higher compensation to avoid expensive legal claims.61As the IPCC noted, this can constrain space for environmental action, with measures shelved or delayed, in full or in part.62Documented instances of climate-related 'regulatory chill' highlight concerns about investor claims hindering the most progressive countries' ambitions to end oil and gas exploration, including members of the Beyond Oil and Gas Alliance (BOGA).63And although these initial reports illustrate how investment protection treaties can stymie climate policy in high-income countries, the adverse effects may be felt even more acutely in low and middle-income countries.This is because public finances may be under greater pressure and the protection of foreign investment often hinges on older treaties -particularly those negotiated between global-North and global-South States -that tend to make less provision for social and environmental policy objectives.64 Concerns about investment protection and environmental action are not new: many investor-State disputes over the years have originated from measures to mitigate the environmental impacts of economic activities.But climate change fundamentally alters the terms of these debates, raising systemic issues to be confronted within a short period of time.The magnitude of the economic transformations required, the very large sums invested in fossil fuels worldwide, the aggregate scale of potential investor claims and the narrow time window available for public action create an unprecedented challenge in investment treaty policy.65 Compared to other policy areas, climate change also presents specificities deriving from the existence of an extensive body of international climate law.Emerging jurisprudence indicates that States also have obligations to reduce greenhouse gas emissions under international human rights law.66While there is no direct inconsistency between these and investment protection rules, tensions can arise in their practical application.
The Paris Agreement requires States parties to 'prepare' , 'maintain' and 'account for' Nationally Determined Contributions to reduce greenhouse gas emissions, and to increase their climate ambition over time.67Meeting these contributions may require phasing out emission-intensive activities such as Explicit references to climate-related arguments in investor-State arbitration have been few and far between,74 and features of the investment treaty system make it more difficult to properly consider climate issues.Climate change is inherently a global challenge, with international climate instruments identifying it as a 'common concern of humankind' .75 This makes it a shared interest of all States and humanity as a whole: adverse impacts affect everybody, albeit differently, and responses require collective action, though developing and developed countries have 'common but differentiated responsibilities' .76 In practice, climate struggles often happen at the grassroots and climate issues are embedded in seemingly more localised disputes -for example, where activists mobilised to protect fragile ecosystems that naturally absorb carbon.77 These local-to-global dimensions highlight misalignments with the framing of ISDS.Investors bring claims against a State, and the terms of the dispute are framed by the legal arguments developed by the investor and the State.But a global concern is at stake, which has no direct representation in the proceedings.There are no clear mechanisms, in the current system, to avoid dispute settlement outcomes that are counterproductive from a global climate perspective, for example if the investor and the State reach an amicable settlement that involves withdrawing the climate measure, in full or in part.Normative Considerations Misalignments between climate policy and the legal regime protecting foreign investment raise questions about the normative considerations that would justify the regime's continued application in its current form.Debates about investment treaties' rationale are longstanding and need not be repeated here.Very succinctly, 'consequentialist' arguments justify the treaties based on their reputed positive consequences, particularly in the form of cross-border investment and economic growth.As regards climate change, these arguments highlight the positive role investment protection treaties would play in promoting the renewable energy investments needed to support the low-carbon transition.78 This normative justification is undermined by the inconclusive evidence on whether investment treaties promote investment.79Some evidence suggests the treaties are particularly valued in the extractive industry sectors, where the large sunk costs and the long timeframes businesses need to recover costs and generate returns make investments more vulnerable to opportunistic State conduct.80Oil and gas was a key sector in the historical emergence of international investment law.81But the extractive industries also present opportunities to set protections through contracts.Climate change requires moving away from fossil fuels, rather than promoting new investments in them.Meanwhile, the factual fabric of renewable energy arbitrations points to financial incentives as More fundamentally, the rule-of-law argument sidesteps questions about what considerations would justify granting foreign investors a treatment that goes beyond the protections available in many national jurisdictions and international human rights law.The investment treaty regime reflects a distinctive approach to piecing together multiple private and public interests, with foreign investors' expectations placed at centre-stage.Many critiques of the investment treaty regime uphold rule-of-law principles but advocate for the law to embody a different balance of interests.
Climate action raises wider normative questions about how to distribute the costs of public measures within societies.For public policy has long allowed or even encouraged coal-generated electricity; but for States to reduce greenhouse gas emissions, this approach would require a rethink.In these situations, should restrictions or phaseouts be accompanied by any transition relief, and if so to whom?This question is not specific to international investment law; it is, as David Gaukrodger remarked, 'ubiquitous throughout the domestic and international policy landscape.'87 The 'legal transitions' literature provides food for thought on such normative questions, having long explored whether, under what circumstances and on what terms States should offset losses resulting from socially desirable legal change, such as through compensation payments.88Scholarly writings in fields such as normative philosophy, legal theory and law and economics offer diverse perspectives, partly reflecting different assumptions about the role of the State and the nature of public action.Some authors argue that legal transitions are inherently dangerous because they unsettle established relations and regulators can abuse their power; as such, legal transitions should be minimised, so private actors can organically adjust their activities, and accompanied by compensation where they do occur.89With regard to climate change, however, there is little doubt that deliberate public action -including, in many contexts, regulatory change -is necessary and many states have already taken steps in this direction.In addition, the need for legal safeguards and compensatory arrangements does not, in itself, justify a preferential regime for any one set of actors.
A body of opinion in the legal transitions literature -including research in the law and economics tradition -holds that regulatory change should not be accompanied by transition relief such as compensation.This is partly because the expectation of compensation can create perverse incentives for private actors to overinvest in obsolete activities.90Conversely, if there is no expectation of compensation, businesses are incentivised to adjust their behaviour and even anticipate regulatory changes.This aspect resonates with investment treaty reform debates, particularly because jurisprudential approaches tying damages to the cash flow the venture would have generated over its entire life cycle can shift climate risk from businesses to public authorities.91 Considering the relation between climate change and social inequalities adds further complexities.Though framed in neutral technical language, the investment treaty regime is deeply connected to the distribution of wealth and power.92This includes relations between States: as already noted, the structure of the global network of investment treaties -with many older treaties concluded between global-North and global-South States, through negotiations often shaped by unequal bargaining power -means that countries in the global South face more stringent regulatory discipline.
In addition, the investment treaty regime centres the relationship between an investor and a State, but real-life socio-economic processes typically connect complex webs of actors.In a coal phaseout, for example, investment protection treaties would offer remedy to international capital invested in coal power plants.But they would not provide relief to the workers employed in the industry, the small-scale domestic businesses supplying goods and services to it, and many other actors who may be more vulnerable to the impacts of climate action -for example, if job loss destroys a family's livelihood.93 As public finances are finite, a system that offers large compensation payments to one set of actors could divert resources from relief for other actors, such as social protection or professional requalification for workers in industries that become obsolete.By selectively providing rights and remedies for foreign investors, the investment treaty regime can compound social inequalities in the face of climate change.
This succinct exploration challenges prevailing justifications for the current model of investment protection in the context of climate change.If policy makers were to design international investment law today, and in the light of the climate challenge, there would be little policy rationale for moulding it in its current form.Addressing the misalignments between climate policy and the investment treaty system requires a step-change in reforming international investment law.

6
From Analysis to Action Climate change is not just another policy issue to consider alongside many others; nor is it an environmental issue alone.Rather, it is a comprehensive global challenge with integrated ecological, social and economic dimensions.Confronting this challenge requires realigning all areas of public policy, including investment law, with climate goals.There are structural misalignments between investment protection treaties and climate policy.This includes broad notions of foreign investment that, by not differentiating between high and low-carbon activities, protect climate-harmful investments; a prevalent focus on investment protections, against inconclusive evidence on the effectiveness of these protections in promoting investments needed for the energy transition; standards of treatment that, by protecting foreign investors' expectations based on historical representations and longer-term business prospects, tend to shift climate risk from businesses to States and reduce policy space for climate action; and misalignments between the investor-State framing of investment dispute settlement and the recognition of climate change as a 'common concern of humankind' .
By protecting one set of interests in complex socio-economic transitions, the investment treaty regime can also compound the inequalities within, between and across States, with which climate change is intertwined, raising 93 On this point, see also Brauch (n 7).
Downloaded from Brill.com 07/28/2024 01:33:57PM via Open Access.This is an open access article distributed under the terms of the CC BY 4.0 license.https://creativecommons.org/licenses/by/4.0/questions about 'just transition' and 'common but differentiated responsibilities' .And while international climate negotiators discuss how to finance remedying the climate impacts that adaptation alone cannot address,94 particularly in low and middle-income countries, investment protection treaties channel compensation payments to the fossil fuel businesses responsible for climate harm -in contrast with the spirit of the 'polluter pays' principle.
Careful analysis of the existing system of investment protection treaties in the light of climate change can inform decisions on how to deal with the many treaties currently in force, with proposals ranging from climate change carve-outs,95 to coordinated treaty termination.96But designing a system fit for the climate challenge requires thinking anew and taking climate imperatives, rather than existing investment treaty approaches, as the starting point.And if analysis centres climate change, it calls for a fundamental rethink that goes beyond currently available multilateral reform talks, such as in the context of UNCITRAL Working Group III.
Investment protection treaties as currently conceived are only one possible form that a body of international law on foreign investment can take.There is scope to reimagine international investment law along different lines, starting from the overarching policy goals pursued (such as the transition to low-carbon economies); the specific types of investment to promote and regulate (for example, in renewable energy); the empirically documented obstacles that constrain those investments; and the policy responses needed to overcome those obstacles.97 This raises technical questions about harnessing empirical evidence on most pressing constraints and effective responses, and about developing new treaty models that can align investment with climate policy.While this task is help overcome or bypass the constrained parameters of available investment treaty reform processes.
International investment law is a decentralised system primarily based on bilateral and regional treaties.But effective, rapid responses need collective thinking and coordinated action.Addressing these technical and political questions, then, requires nurturing multilateral spaces where States and non-State actors can explore options beyond the confines of existing reform processes.102It calls for multilateral policy making to complement the procedural mandate of UNCITRAL Working Group III with a more holistic perspective on deepening and accelerating reform.This broader approach may enable considering a wider range of interests beyond the investor-State dyad, and the intersections with other rules of international law.While global problems require global responses, regional processes can offer important contributions, for example at the pan-African level.There is also a compelling case for coordinating investment treaty reform with climate diplomacy and addressing investment treaty issues in United Nations climate talks.The climate challenge requires re-embedding discussions about investment treaties within a policy space that places climate at centre stage.
16 Beyond inter-State 2018).See also Report of the Special Rapporteur on the Rights of Indigenous Peoples: Victoria Tauli Corpuz, 'Impacts of Climate Change and Climate Finance on Indigenous Peoples' Rights' (1 November 2017) UN Doc A/HRC/36/46, paras 22-24 <https://daccess -ods.un.org/tmp/5840244.29321289.html>accessed26 July 2023.relations, the IPCC found that '[t]he 10% of households with the highest per capita emissions contribute a disproportionately large share of global household "greenhouse gas" emissions' .17Low-income, racialised and politically marginalised communities have often suffered the greatest impacts of fossil fuel extraction, in the form of land dispossession, pollution and health 16 See Harro van Asselt, 'Breaking a Taboo: Fossil Fuels at COP26' (EJIL:Talk!, 26 November 2021) <www.ejiltalk.org/breaking-a-taboo-fossil-fuels-at-cop26/>accessed 26 July 2023.Olabisi D Akinkugbe and Adebayo Majekolagbe, 'International Investment Law and Downloaded from Brill.com 07/28/2024 01:33:57PM via Open Access.This is an open access article distributed under the terms of the CC BY 4.0 license.https://creativecommons.org/licenses/by/4.0/ Investment treaties typically lasting impacts on the notion of property.See particularly Brenna Bhandar, Colonial Lives of Property: Law, Land and Racial Regimes of Ownership (Duke UP 2018); K-Sue Park, 'The History Wars and Property Law: Conquest and Slavery as Foundational to the Field' (2022) 131 Yale LJ 1062.
29 Jeremy Bentham, Theory of Legislation (Etienne Dumont ed, Charles Milneb Atkinson tr, OUP 1914) 145.Arbitral tribunals applying international investment law have typically favoured such dynamic notions of property; see eg Methanex Corporation v United States of America, UNCITRAL, Final Award of the Tribunal on Jurisdiction and Merits (3 August 2005) para IVD.17.30 See eg UNIDROIT Principles on International Commercial Contracts (2016) art 1.3.For a discussion of 'sanctity of contracts' and its limits under private law, see eg Stephen Waddams, Sanctity of Contracts in a Secular Age: Equity, Fairness and Enrichment (CUP 2019).31 Vienna Convention on the Law of Treaties (signed 23 May 1969, entered into force 27 January 1980) 1155 UNTS 331 (VCLT) art 26.32 Juan Carlos Boue, 'Much More than a Footnote (or Three): Frank C Hendryx and an Untold Story of Petroleum Concessions and the Genesis of ICSID' (2022) 13 JIDS 1. 33 See eg Libyan American Oil Company v Government of the Libyan Arab Republic, Award (12 April 1977); Texaco Overseas Petroleum Company (TOPCO) and California Asiatic Oil Company v The Government of Libyan Arab Republic, Award (19 January 1977); The Government of the State of Kuwait v The American Independent Oil Company (Aminoil), Final Award (24 March 1982) 1033.For a discussion, see Nagla Nassar, Sanctity of Contracts Revisited: A Study in the Theory and Practice of Long-Term International Commercial Transactions (Martinus Nijhoff 1995); Jason Webb Yackee, 'Pacta Sunt Servanda and State Promises to Foreign Investors Before Bilateral Investment Treaties: Myth and Reality' (2009) 32(5) Fordham Intl L J 1550; Jean Ho, 'International Law's Opportunities for Investor Accountability' in Jean Ho and Mavluda Sattorova (eds), Investors' International Law (Hart 2021) 13-44, especially 17, 33-37.Downloaded from Brill.com 07/28/2024 01:33:57PM via Open Access.This is an open access article distributed under the terms of the CC BY 4.0 license.https://creativecommons.org/licenses/by/4.0/Cotula Journal of World Investment & Trade 24 (2023) 766-791 On the other hand, arbitral tribunals have ruled out the possibility that States may discount compensation in large-scale redistributive reforms, as investment protection treaties entitle investors to market-value compensation 'independently … of the number and aim of the expropriations done' .55Tribunal held that customary international law could require less than full compensation for large-scale nationalisations, although the members of the Tribunal disagreed on the meaning and implications of this statement.The Tribunal went on to decide the case on the basis of an applicable treaty and ordered payment of full compensation.
53 On this issue, see eg Toni Marzal, 'Quantum (In)Justice: Rethinking the Calculation of Compensation and Damages in ISDS' (2021) 22 JWIT 249.54 See for example Lithgow and others v United Kingdom (ECtHR, 24 June1986) Series A no 1, para 121.In Scordino v Italy (ECtHR, 29 March 2006) Series A no 1, Grand Chamber Judgment, the European Court of Human Rights held that 'in many cases … only full compensation can be regarded as reasonably related to the value of the property' but the right to property 'does not … guarantee a right to full compensation in all circumstances' and 'legitimate objectives in the "public interest" … may call for less than reimbursement of the full market value' (paras 95-97).The Court ultimately found that a rule setting compensation at 50% of market value, further reduced by 40% if the owner provided no 'voluntary' agreement to the expropriation, and a further 20% tax deduction, in the absence of specific public interests to justify these terms, constituted a 'disproportionate and excessive burden' for owners and thus a violation of the right to property (ibid paras 101-04).55 Bernardus Henricus Funnekotter and others v Republic of Zimbabwe, ICSID Case No ARB/05/6, Award (22 April 2009) para 124.However, in Ina Corporation v The Government of the Islamic Republic of Iran, Iran-US Claims Tribunal, Award (13 August 1985) 378, the an expropriatory environmental measure also excluded that the nature of the public purpose could justify lower compensation; see Compañía del Desarrollo de Santa Elena, SA v Republic of Costa Rica, ICSID Case No ARB/96/1, Final Award (17 February 2000) paras 71-72.Downloaded from Brill.com 07/28/2024 01:33:57PM via Open Access.This is an open access article distributed under the terms of the CC BY 4.0 license.https://creativecommons.org/licenses/by/4.0/ Downloaded from Brill.com 07/28/2024 01:33:57PM via Open Access.This is an open access article distributed under the terms of the CC BY 4.0 license.https://creativecommons.org/licenses/by/4.0/